I came across this post today by Mark Sherman of Battery Ventures …
“Shaadi meets Match.com”: Dating, Flirting, and Marrying between US VC firms and the Indian VC Market
It has some nice points (and data) about the state of VC activity in India today (albeit from a US perspective).
I particularly liked Mark Sherman’s “most important elements” for funding Indian entrepreneurs:
- A long term commitment to India with personnel (frequent trips or local presence), budget, and process.
- A global network of customer relationships and strategic partnerships, primarily coming from current and past portfolio company investments.
- A network of entrepreneurs who could act as domain or functional advisors to the company or potentially fill positions as the company scales.
- A network of LPs, banking relationships, and corporate development relationships to advise the company on private placements, IPOs, and M&A.
- A deep portfolio and numerous consultant and professional services relationships on which to draw best practices benchmarks and information around customer acquisition, sales, channel, traffic acquisition, marketing, development, engineering, supplier relationship management, manufacturing, etc.
A feature on “Investing in Japan” in yesterday’s Wall Street Journal (Dec 14, ’06, Pg 6) caught my eye with a very powerful and compelling graphic of the size of the economy.
It had a map of Japan with different regions and a comparison of their GDPs with different countries (See scanned map here).
The graphic immediately brought to mind a point I have made several times before about the indifference that most people have about Japan. In spite of the economic ascendancy of China and India (which is no doubt relentless and will continue for a long time), Japan remains the world’s second largest economy ($4.7 trillion in ’05 vs. $2.2 trillion for China*) and a showcase of leading-edge technology in mobile communications, displays, new materials and more recently solar and alternative energy (see Shin’s recent comment on my post about parking lot solar panels).
So it is surprising that not more people pay attention to what is happening there in terms of technology and innovation.
What drives this apathy?
No doubt distance is a barrier – but more than that, it may be a business culture that is still notoriously difficult to understand (in terms of decision-making and process) and formal behaviour that is inscrutable to most observers. I will shut up at this point as no doubt my good friend Shin will have something to say on this…(Shin, feel free to rip me apart if I am out of touch…)
Having said that, things are changing…In the last few years that I began visiting Japan once again (after a hiatus of almost five years), I have met VCs like Shin and Mori (who sound more like Silicon Valley than anywhere in Japan), have seen shoe-shine boys outside Tokyo station and have consistently found things cheaper than in London (not to mention the Japan-only models of products which are a style apart)
And slowly but steadily, more and more gaijins seem to be paying attention to what is going on in the country. I will certainly be watching for many years to come.
* Although on a PPP basis, China at $8.8 trillion is more than double Japan at $4.0 trillion; India is a shade below at $3.66 trillion
We managed to pull it off!
Phenomenal event yesterday. 100+ attendees and some great insights and experiences that were shared by the speakers. I am in the process of putting up the slides on the server (hopefully before end of tomorrow).
We had Richard Laing, Chief Executive of the CDC Group speaking from an LP perspective on opportunities and challenges in PE/VC in India. Harpal Singh Randhawa, CEO of GEM reflected on his experience of investing in India over the last 15 years and Jonathan Blake, Senior Partner at SJ Berwin addressed some of the structural issues around setting up an India fund.
Earlier, I set the backdrop to the evening with a few slides (here:India – At Inflection Point) on how the country is at an inflection point.
All in all, a fitting start to the formal launch of the India Venture Capital Interest Group (India VCIG) and hopefully we will be able to maintain the high standard of the event and build on the momentum that has been generated.
P.S. My pick of the quotes:
“The only antidote to poverty is the generation of wealth”.
Fingers crossed…we are going live with India VCIG today with our first formal event on “India: Opportunities and Challenges in Private Equity and Venture Capital“.
More on this tomorrow.
Louis Turner of Asia Pacific Technology Network co-hosted a seminar with Chatham House last week on ““The Venture Capital scene in India and China“.
I was on the panel with Matt Rothman, Managing Partner of Hemisphere Capital, Sumit K Majumdar, Professor of Technology Strategy, University of Texas at Dallas and William Gillespie, Director and International Counsel, Tiger Capital Partners.
I shared some slides (here: APTN India China slides) at the beginning of the session focusing on Investments in India and highlighting the key differences between India and China.
Some of the points that came up during the discussion were:
- A direct comparison between India and China does not make much sense as India is probably a decade behind China (see e.g. this chart from IBEF )
- In China, there are now signs of IP-based investments happening (see e.g. Verisilicon)
- In India, this is yet to happen and most of the money is still going into private equity deals and PIPEs
- Exit environment and clarity on regulatory issues are two of India’s strong points
- However, in both these economies, seed-stage funding is almost non-existent
The funding gap at seed-stage is something I worry about a lot. It is not just a matter of financial resources either – there is a dire need for mentoring skills, advice and experienced managers who know how to scale businesses and expand across geographies. In India, an effort has been made in this direction by the Band of Angels. This is welcome but probably not enough.
We are yet to see experienced managers from large enterprises or those who have worked in start-ups/tech companies abroad making the transition to start-ups in India. Hopefully the situation will change before long.
I am not personally aware of any angel network in China but I am almost certain that it exists – at least at an informal level. In the next few months, I will try and find out more about this.
Close on the heels of worries about an over-heating VC market in India, I read this news report about venture capital investments in China doubling over the three month period of Apr – Jun ’06 compared to a year earlier.
Jamie Paton, 3i’s Partner in Hong Kong is quoted in the excerpt as saying that “the report underlines how China’s venture-capital market has continued to mature…”.
That may be so but it has got to a stage where I find even the most ardent cheerleaders of investment in China sounding words of caution.
Then I came across this link to China Venture Capital Semi Annual Forum. There is now a China Venture Capital Annual Forum, a China Venture Capital Semi Annual Forum and a China Venture Capital Silicon Valley Forum – Signs of an over-heated market or just plain brilliant marketing by Gavin Ni*?!
* I first met Gavin last year through David Zhang at W I Harper. David simply told me that I must meet this guy who is the most networked person in the Chinese VC scene. He was so right – Gavin is not just very good at what he does, he also exemplifies the new generation of entrepreneurs coming out of China – most of them starting with just an idea and a dream…