VCs predict $2 bn investment in India

BANGALORE: The post-lunch session of the two-day ‘E-biz India 2001’ on

Friday, commenced with a glowing tribute to late Nasscom president Dewang Mehta

by the Large and Medium Industries Minister R V Deshpande.

The main highlights of the second day of the conference were the VCs

predicting investments worth $2 billion in India within the next couple of

years. However, this also underlined the fact that VCs were lately becoming

choosy in investing their capital in start-ups with most taking six months and

more to come to a decision.

Addressing the gathering, Deshpande saw the slowdown in a different light and

said the temporary slowdown was a welcome change since it would throw up a stiff

challenge for our industries to look beyond the US market.

Announcing the government’s decision to set up the first ever state venture

fund unit, he said the government plans to give a major thrust on infrastructure

development in the districts. The aim will be to spread IT in every nook and

corner of the Karnataka, he added.

Expressing optimism over the adoption of deregulation measures by September

by the state government, the Minister said that a unique policy on optic fiber

cables had been chalked out and proposals for setting up sector and

location-specific parks in the districts are being scrutinized by the

government.

Delivering a keynote address on ‘trusted identity for e-business,’

Verisign Inc managing director (Asia Pacific) Arthur Chang said, with market

capitalization going down by 60 per cent globally, trust developments and

security were becoming a major area of concern.

Elaborating on the Web site lifecycle, he suggested roadmaps on building

sites to serve a business and stressed on domain names as the gateway to e-com.

He also explained the values of domain names and provided tips on what

constitutes a good domain name. The session also touched upon the importance of

sign of trust on the Internet, choice of tools for electronic credentials and

the role of digital certificates.

The highlights of the second day and one of the most important and hilarious

sessions was Venture Capital: Picking the Winner. Walden International (India),

general partner, Sudhir Sethi said the present market scenario was proving to be

interesting for venture capitalists.

According to him, one of the major reasons for the drastic fall in the market

was the wrong chemistry of teams, while the other reasons included the adverse

environment and lack of technology. However, he was optimistic of the future and

said that he expected investments worth $2 billion in India within the next

couple of years.

With regard to the criteria adopted by VCs for funding any new venture, he

said they were increasingly looking at the right team with proper experience.

Elaborating on this point, Sudhir said that about $20 million - $50 million and

a minimum of four years experience was a must to build a foundation for a global

company. But the team should be looked at from an entrepreneur’s angle too, he

added.

According to him, a tech firm could expect high returns only if it went

global since the Indian market alone was too miniscule to bring in high returns

for the investment. This apart, VCs were also adopting a critical view on the

manner in which business and revenue models that can sustain critical

development market worldwide.

In short VCs were posing tough questions like pace of monetisations of the
company, the value attached for building a product or service and the quality of

customers being targeted. This apart, VCs were also curious to know the profile

of investors coming in for the third and fourth round.

Passion Fund managing director, Mahesh Murthy spoke on "The Death of

Indian Venture and its Rebirth". He presented the audience with what he

called "Sweet 16 commandments". His advise was clear: VCs must not

indulge in ‘fashionable investments" and be as careful as far as possible

while investing capital.

He also had words of wisdom for aspiring entrepreneurs, "See if your

company can be marketed by word of mouth, look out if you can break even in one

year and prove to the VCs that you can do without their funding. The VCs will

then flock to fund your business."

Infinity Ventures’ principal investor Bharti Jacob concluded the session by

presenting a case study of Etravels Technologies. The stress was more than

obvious: VCs need to seek the right people, the right team, products and

technology, marketing skills, financial structure and a good measure of luck,

before investing capital.