Technology, Venture Capital, Private Equity

Perspectives from an Indian VC

Your friendly neighbourhood VC

Posted by Arun Uday on May 10, 2007

I hope to write a little bit in future posts on some of the changes that are taking place in the VC world and how VCs and VC models are evolving in response to those changes. In this post, I’d like to talk a little on the location of portfolio companies that VCs like to fund.
I remember the first time I heard the term “Venture Capitalist” was nearly a decade back on a TV channel that was dedicated to technology (which has since gone bust), which telecast a talk show featuring Ajit Balakrishnan of Rediff.com. He was talking about the importance of an eco system and how KPCB, which he described as the pre-eminent VC firm had a motto that read – “We don’t fund companies which are more than an hour’s drive away from our office.” Then, at some point, that motto for most VC firms became “We don’t fund companies to which we can’t fly down to in a couple of hours.” And the latest we have, partners tarveling across the globe to sniff out interesting opportunities – think KPCB’s Ajit Nazare, who was an active investor in Infoedge. Personally, I feel, proximity to portfolio companies helps. Modern communication technologies notwithstanding, there’s nothing to beat a face to face meeting or direct personal interaction.
However, having said that, I guess there are a few things that have happened, which have led to VCs going beyond the hallowed precincts of Sand Hill Road and “venturing” into newer geographies (India and China being the most prominent ones). The most obvious one is that VCs are following the old principle of any business, which is to be where the market is. Blockbuster hits like Baidu and Focus Media in China or Bharti Telecom in India, which were all built with VC/PE money, demonstrate the potential of such emerging technology hotbeds as India/China. Apart from that, there are few other things, which are also leading to the globalization of the VC industry.

  • Competition in domestic markets: With more and larger funds getting raised all the time,  competition for “good” deals in traditional markets such as US has been increasing with every passing day.
  • Offshore phenomenon: With offshoring going mainstream to the extent of even startups wanting to embrace it, VCs have no option but to also globalize their operations in order to support their portfolio companies
  • Supplementary ingredients: The other two key components of an entreprenurial ecosystem viz. – entreprenurs willing to take risks and qualified mentors to hand hold them are now becoming more available in these emerging markets. Hence, it was only a question of time that the third component – risk capital would find its way here too.

So, if you are an entrepreneur in a place like India, you shouldn’t be complaining. If you have a credible business case for your venture, capital is available in plenty. If anything, we need to draw inspiration from the likes of an Infy, which was built in an era where venture capital was an unknown phrase in Indian business parlance.

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