'Be at the right place at the right time'

BANGALORE, INDIA: Mergers and acquisitions (M&As) have never been Indian start-ups' cup of tea. The product start-up space in India has seen relatively very few high profile exits.

And this was the focus of a panel discussion,  'Why Aren't There no Major M&As in Start-up Space in India', organized here today as part of the two-day NASSCOM Product Conclave and Expo 2009.

While raising his points in the panel discussion, Sudhir Sethi, founder &CMD, IDG Ventures, said that M&A market, though slow, is set to grow continuously in the next two-three years.

“M&As happen to give investors an exit and for return of investments. There have been 25 VC based exits in India in 2008," he said.

"M&As happen to fill gaps in technology, expertise and market reach. However, Indian M&A marketplace is still virgin. That is why valuations and expectations for a company are very high compared to other countries. So, as and when the market matures, we will see a form of standardization in valuation setting in," added Sethi.

However, is being a niche market the only issue that is bogging product start-ups in India from going for M&A?

"Indian product start-ups have to face challenges such as choosing the right technology, acquiring customers, funding and growing portfolio of patents (IPR). We see a lot of local M&As happening today in India," said Shouvick Mukherjee, VP & CEO, Yahoo! India R&D.

S Raghunathan, professor, corporate strategy and policy, IIM Bangalore pointed to a study to establish his point. "In a study it was found that entrepreneurship happens for two main reasons. First, it happens based on mere necessity and second it happens based on opportunity."

So what is to be done to avail this opportunity?

"The mantra is to be at the right place at the right time to take up the opportunity," observed P V Gopalakrishnan, entrepreneur, ex-director technical and partner of Alpha X-Ray Technologies. The start-up, which was later acquired by Philips, is into the healthcare space.

"Healthcare was a growing industry and a niche space then. Moreover, rural market was a large untapped market too. For us M&A was always a strategy to go global. We never tried to tread upon any big company, but only complimented them. So when the product matured, Philips came up and today it is present in Middle East, China and Latin American markets," Gopalakrishnan added.

The panel agreed that the best way to position a start-up in the M&A market is to collaborate and develop partnerships than relationships, develop domain expertise, be a niche product developer, funding and position oneself so as to gain visibility.