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Topic : The Future of Venture Capital
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Are Venture capitalists backing out on Indian start ups?

Created by : Veena Gupta, Analyst, Blackstone Group  | 07 28 2009 10:44:30 +0000
Industry : Financial servicesFunctional Area : VC funding(Entrepreneurship)
Keywords : entrepreneurs vc start up venture capitalists indian start ups backing out.
Activity:  287 views;  last activity : 07 06 2010 20:18:09 +0000

Are Indian start ups in trouble, with the recession hitting as hard as possible it might have closed many of the doors to Budding Entrepreneurs from all over the country, Its not the same situation in other countries like US where there is investment is seen from the start and with higher risk there is higher returns also but in India it is different where most of the investment is done by themselves and friends and relatives. so what do you think are Venture capitalists backing out on Indian start ups?

  
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The satyam scam, case of subhiksha etc and strict regulations are hindering vc growth in India. Also there have been huge cashing of pe investments recently taking advantage of the recent market conditions. things are not looking fine in the short term.

But with a huge pool of entrepreneurial talent India is still a good option of VC investors . Till recently they were concentrating on sectors like IT, ITES, real estate etc which offered huge growth potential and now, like jyothi sir said they just need to be more careful about due diligence evaluation. About them shying away from first round financing it is more due to the overall economic conditions rather than anything particular to India. Also usually during  seed stage technology related business only attract funds due to the huge risk associated. The growth rate of India coupled with requirements will add  areas like manufacturing, retail, construction, healthcare, power etc soon to investment verticals.

Also there are efforts to legalize the limited liability partnership structure instead of treating vc as trusts.  (regarding limited liability if already changed, someone please update )  

 
By Padmanabhan R, Articled / Audit assistant, Finance student  07 28 2009 17:39:42 +0000
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Most start-up entrepreneurs, as a result, dive into their own pockets or banks, or draw funds from family and friends.


Seed capital for a new business has not come of age in India, they added.

The concept of seed capital does not exist in India, there are a few funds which have come up of late, but it is minuscule compared to the need and potential.
By ravindra shrivastava, Information Systems(MIS)-Manager, iifs pvt ltd  | 03 30 2010 04:44:11 +0000

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Many of the entrepreneurs who are out there are finding it difficult to find investors for their project as Indian venture capital investors are not investing in Indian start ups and are not at all taking risk, so interms of protecting their investment they are only funding firms which are already on the run or on the half way through and which need money to make expanision and other things. So VC's are investing where their investments are safe and not where there is too much of risk. And would like to know what others think on this issue..
By Veena Gupta, Analyst, Blackstone Group  | 07 28 2009 10:50:33 +0000
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I completely agree to Jyoti...

I believe that the venture capital funds will not take out the investments, but they will surely be cautious in investing, the will be conservative now while investing in the Real Estate of IT firms as pointed out by Jyoti...

May be the funding has slowed down, but the indian start up companies are having good value and so it will continue to attract the venture capital funds...
By Japan Shah, H.O.D, Oxford School of Management  | 07 28 2009 11:33:30 +0000
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I dont think that Venture capitalists are backing out on Indian start ups, as there was nearly more than 700 million dollars invested in 2008 as compared to some 800 million in 2007, but one can understand why there was less investment this time around and can come down recession as a conclusion. so it is not that they are backing out but are very careful interms of where they are investing their money and are always on a safer side, as most of the funding goes for this IT related projects.
By Jyoti Rath, Sr. Associate, Barclays  | 07 28 2009 11:03:11 +0000
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