Most places that I go these days, talk veers around the rapidly overheating Indian VC market.
In case of China, people have been saying this for at least a couple of years…and yet money and funds continue to pour in at record pace. People have been talking of a “wall of money” and increasing valuations but investor interest (especially from overseas) remains as strong as ever.
Now, India appears to be heading in the same direction. Alok Aggarwal of Evalueserve put out a report titled, “Is the Venture Capital Market in India Getting Overheated?” The report estimated that upto $4.4 billion may be raised in the coming months to invest over the next 4-5 years. Alok adjusts this number on a PPP basis to come up with an equivalent $22bn of investments in the US (I disagree with a straight PPP conversion but the point remains that a LOT of money will find its way in).
Alok (from Canaan Partners) wrote in his blog that: ”While my own estimates are on a lower side, what is undeniable is that more money than ever before will be available to early stage companies. I guess this is good news for entrepreneurs….” and added, “The real metric of success is how many of these VCs make money in the Indian market, so hold on to the toasts just a wee bit longer… “
Cannot agree more. But for once, I would like to err on the side of optimism. I think a comparison with the situation pre-01 is tempting but inaccurate.
For one, the economy has undergone structural changes which I feel makes it more robust this time around than, seven or eight years ago,
Two, the ingredients of true explosion in innovation are finally coming together – with large home-grown talent, coupled with people who have experience of working and building companies globally as well as in a rapidly expanding domestic market. When you add capital to the mix, it makes for a potent combination.
Although there is a degree of exuberance in the market, the fundamentals are strong and when you consider the fact that venture is a long-term business, there is no reason why the money pouring in cannot get a healthy return in terms of multiple, 10 years out as the funds begin to unwind.
I believe that a window has opened in this market – and it may not stay that way for long but of course there are still many hidden gems” waiting to be discovered…the future looks bright.
September 7th, 2006
Posted by
Shantanu |
China, India, Venture Capital in Asia |
2 comments
Hong Kong, 30th Aug ‘06
Safa Rashtchy started the conference this morning by sharing his insights on Asian markets and how to be successful in this region. I found the presentation to be more oriented towards China than the rest of Asia. I made the point later on that it would be unwise to ignore India when it comes to consumer uptake of digital content.
I mentioned that half the Indian population is less than 25 years old, consumer spending makes up 67% of GDP (second only to US in the world) and discretionary spending on digital content is already visible in e.g. the $2-$3 that mobile subscribers spend on ring-tones. Keep Reading…
August 30th, 2006
Posted by
Shantanu |
Emerging Markets, Venture Capital in Asia |
one comment
Hong Kong, 29th Aug:
Arrived bleary-eyed this morning from London and then straight to the Conference venue…not disappointed. Good agenda, a number of exciting companies and some good panel discussions.
*****
Some observations from the company presentations:
- PowerPoint is the bane of our times…and sadly there is a woeful lack of coaching on making good presentations. Way too much content on some slides and pitches. I recommend everyone reads Guy Kawasaki’s “The 10/20/30 Rule of PowerPoint”. (Note to myself: re-read it)
- Had a flash-back of the pre-bubble days during one of the presentations…”Beta roll-out – Q3 ’07; IPO – end of ’07”…I am not making this up.
- Noticed that a lot of companies were not really about fundamental innovation or disruption but were aiming to create value by innovation in process(es) or dis-intermediating complex delivery channels – nothing wrong with that…the markets that are being addressed in these business models are so large and fast-growing that enormous value will be generated even though there is no “text-book” innovation happening. Case in point: Focus Media; Also see one of my earlier posts on this: “Globalization = Copying a Successful Business Model?”
- Startling statistic (at least to me): 77m broadband subscribers in China (60% of online population) and still only 8% penetrated.
Keep Reading…
August 29th, 2006
Posted by
Shantanu |
Venture Capital in Asia |
no comments
I am pretty sure that this is not a complete list but it is interesting nevertheless. Below are names of some very well-known VCs who formally declared their intent to invest in Asia in the last twelve months.
This move towards investing beyond the “2-hour drive” periphery signals a profound change – whose ramifications will continue to be felt for years. Yet, I find it odd that there are not more people commenting on it.
More remarkable than the impressive list of names is the conspicuous absence of European VCs from the list.
In April ’06, the EVCA did a survey of European VC firms that showed almost half (47%) had no activity at all in Asia (either via portfolio companies or through direct investments).
Why are European VCs so cool/cautious on Asia?
Partly it could be that Asia is still viewed as a “supplier of good or services or (an) outsourcing region” and European investors see neither market opportunity nor any signs of innovation happening there (they are wrong on both counts, of course).
As I was searching for some answers, I came across this gem (buried deep under news archive on Walden International’s website)
It was written in Feb ’01, I guess weeks before the markets began to wobble. It mentioned a few reasons why US VCs were not keen on Asia (this was then). Some of those points resonate in Europe today (excerpts).
1. Distance
“Distance is one key factor keeping the creme de la creme of Silicon Valley VCs from setting up offices overseas. …Sequoia Capital founder Don Valentine said: “In 30 years we haven’t convinced ourselves to set up a presence in Boston. It’s a very difficult business to be good at consistently over a long period of time, and it requires a lot of thoughtful and integrated decision-making….”We make enough mistakes on investments we make here (in Silicon Valley), that we’re not comfortable we can (be successful) 3,000 miles away, never mind 8,000 miles away.”
Keep Reading…
August 17th, 2006
Posted by
Shantanu |
Europe and Asia, Venture Capital in Asia, Venture Capital in Europe, Venture Capital in US |
one comment
A Jan ‘06 newsarticle – “The Valley: from Afar” - from Red Herring which maintains that even in the age of globalization, Silicon Valley has lost little of its cachet.
July 6th, 2006
Posted by
Shantanu |
Globalization, Venture Capital, Venture Capital in Asia, Venture Capital in Europe |
no comments
