Venture Capitalist Industry in India

Posted by Abbas ||

July 24, 2007 ||

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India’s IT industry is booming and venture capitalists around the world will certainly want to ride this huge wave of high risk, high returns investment. The absence of organized venture capital industry till late 1997 and early 1998 promoted venture capitalist activities in private sector, after which Indian government announced policies and guidelines for venture capital funds.

India is one of the top 5 destinations for investment for venture capitalists around the world. India has the second most number of English speaking technical and scientific resources. Some of the management and engineering institutes are known globally for its centre of excellence and we are continually producing high calibre man power to support the exponential economic growth.

This is the ideal time for the Venture Capitalist to invest in India and get the best returns in the early stage of technology and entrepreneurial boom. Lot of Venture Capitalist (Sequoia Capital, Ernst & Young, etc…) have entered the Indian markets and we have also seen good number of Indian investors (Mentor-Partners, iLabs, JumpStartup, etc…) investing in new ideas and concepts.

Ernst & Young is one of the biggest venture capital companies. In the Venture Capital report for the year end 2006 Ernst & Young stated that the investments hit US$31.3 billion high and only 7% of the total figure was invested in China and India combined. The report also states “Indian early-stage investment is in comeback mode, with the formation of new India-dedicated venture capital funds and an increasing focus among foreign venture capitalists on defining their India strategies. A new emphasis on IP driven products among Indian entrepreneurs and investors, along with announcements by Intel, Cisco, and Microsoft of significant development plans in India, suggest that the country is poised for a new wave of innovation.” It also states that India has an edge over china in terms of intellectual property protection which is more robust in India.

Venture Intelligence reported said “Venture Capital firms invested into 92 companies and exited 14 investments in India during 2006.” Electric car maker “Reva” raised US$20 Million which was the largest of the year, 28% other investments were in the bracket of US$5-10million and 26% of the investments was in US$2-5 million bracket. Sequoia Capital was the most active investor during the year 2006 and projecting to continuing the investment at a higher pace in the year 2007.