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Start-ups still hot for VCs

They all test his patience as delegates ask him same questions again. While the capital carrier gives every one an ear, the message remains the same.

business Updated: Jan 27, 2006 12:35 IST

Have VCs lost interest in Indian start-ups? Most seem to be inclined more towards later stage funding or to enter as private equity?
Where are the start-ups with viable ideas. Will someone bring them to me? The VC funding in India has gone up from mere $50 million in 2002-03 to $1 billion in 2003-04 to $2 billion this year. Nearly 12 per cent of this has gone into early stage funding and the rest has gone as private equity in hotel, infrastructure and the likes. Start-ups are still hot but there is obviously a disconnect between the ones carrying the fund and those who are seeking it for saleable ideas.

And what would a saleable idea be?
It has to be self-sustaining, should be compelling enough for us to say yes to, must have an intellectual barrier where there won’t be hundreds of ‘me toos’ following in tow. And above all, it has to address a huge market.

DoesIndia still hold promise and lure for VCs abroad?
There are some thirteen big funds that have shown major interest in India and intend to pump nearly $10 billion into ventures here. So destination India is hot but obviously they will flow only into ventures that can differentiate themselves on basis of their novelty and merit. At Newpath we are bullish about India and have already opened our new office at Bangalore.

How much of the NewPath I has been invested and where do you plan to invest the second one?
We have already invested three-fourth of the first fund. And we haven’t exited any of those yet. The second fund will be $250 million and we intend to launch it next year.

The average investment will be in the ballpark of $5 million to $15 million, depending on the stage of the funding. For the second fund we plan to expand our theme from telecom semiconductor, network security to software companies that are on the ground in India.

Obviously the ones with a value proposition as compared to plain vanilla companies will find favour. There are areas like legal and knowledge process outsourcing or retail that seem very promising. We are also clearly focused on cross-border investments that leverage India’s cost effective talent and high growth emerging market.

What is your message for start-ups in India?
Don’t pursue an idea thinking how you will cash it 2 or 3 years down the line. Don’t spend too much time on crap. Get hold of that good idea and build a business towards it, if it’s sexy, fund carriers will come looking for you.

First Published: Dec 17, 2005 00:07 IST