`NVP eyeing consumer Internet, OPD firms'
NVP to orchestrate a strategy that would help Indo-US technological partnership, Promod Haque tells Prerna K Mishra.india Updated: Feb 21, 2006 13:19 IST
A few days before Promod Haque's present visit to India, he got a call from a Congressman. And this time, it was to talk neither for nor against outsourcing. He wanted to know how US could engage with India for the next phase of technological innovation. So from now on, the Managing Partner of Norwest Venture Partners (NVP) is not just the carrier of cash but has a bigger mandate to orchestrate a strategy that would help Indo-US technological partnership ride the next wave of innovation, he told Prerna KMishra on the sidelines of Nasscom 2006.
Agreed that the political pressures against the Indian outsourcing story seem to have waned in the US. But, why this sudden change of heart about technological partnership with India?
There are many parameters that are at play which make the partnership seem as the most logical thing to do in the chang ing technological landscape. One look at the competition from China, Eastern and Central Europe and other Asian players, and one knows that the low end jobs may easily migrate to any of these countries in the short-term. Indians will need to and are already migrating to the higher end of the technical chain where innovation will drive newer markets. This is inevitable for them to maintain the lifestyle triggered by the low end IT and ITES services boom. And the US needs Indian help to keep on the forefront of the next technological wave.They have the funds but India has the relevant brainpower.
But why not China, why India?
In a way, US does not want to offer the leadership of the next technological wave to China on a platter. In a way, it fears that if it does not move fast, China may do it on its own with funds from anywhere and everywhere. But with India, the comfort level to incubate such partnership is unmatched. Both countries are successful democracies, share a language, have a fairly well laid-out intellectual property regime and have worked together for a very long time now. It would be an ideal marriage of conveyance.
Is your investment portfolio and interest in India getting any bigger?
We have primarily focused on hybrid companies based in the US and doing most of their development from India. But in the past six months we have been looking at direct investments in companies headquartered here. We have some $200 million invested here in 20-odd companies so far. The focus is basically on two areas consumer internet space and outbound product development (OPD) companies. According to the industry estimates, the OPD market which comprises companies that develop products for other companies, will offer an opportunity of $10 billion by 2010.
After a long phase of lukewarm response from fund carriers, the consumer internet space seems to be resurrecting.Any particular reason?
The Indian internet landscape is exactly where the Chinese market was five years ago -- A burgeoning middle class, an aggressive broadband rollout, incremental increase in PC and mobile penetration. So the time is ripe for venture capital to flow back into portals and online businesses that have a proven business model. We are also armed with more experience to recognise a rogue company when we see one. It is matter of evolution, the Indian market is just right for the consumer internet space and that is why we decided to join hands with Reliance and TV18 for Yatra. We expect to close a few more deals in the next couple of months.
How different will the OPD companies be from the current captives doing product development for their US or European parents out of India?
The OPD is of huge strategic importance for the Indian IT space. What we did so far was more under the services umbrella as in testing verification and product upgradation in bits and pieces. But the natural progression for the Indian product development firms will be development of their own Made in India products.
You have talked about encouraging some of the ventures you have invested in to list with the Indian bourses. What makes the Indian stock market attractive?
Many of the smaller players are finding it difficult to meet the compliance standards set in the US due to the Sarbanes Oxley Act. For companies that have just started to get profitable, it is killing to spare those extra $2 million or more dollars for compliance.
That is why we could see many companies looking at the Indian bourses. But, here my only suggestion to the Indian regulators would be that getting more discipline into the market is one thing but framing laws for over-regulation can stifle a healthy market. I know the regulator is framing new rules to get more discipline the markets here. But that is where it should end as it must not lead to overregulation as has been the case with Sarbanes Oxley.