Is India finally ready to produce some world-shaking Web companies? It certainly has the raw talent. And increasingly it has the capital. Accel is the latest VC fund to focus on the sub-continent. It absorbed Indian VC firm Erasmic, and is relaunching it as the Accel India Venture Fund.
One of Erasmic’s investors is Google. The fund does seed-stage investing inside India, and will continue to do so under Accel’s ownership. (Four Erasmic partners will keep running the show).
Accel India will reportedly raise a $60 million fund this quarter. Which may not sound like much, but it is six times bigger than Erasmic’s current $10 million fund. And, remember, this will be earmarked for seed investments, in India. A dollar goes a lot further there.
Accel has been around since 1983, but didn’t create its first non-U.S. fund until 2001 (focusing on Europe and Israel). It entered China in 2005 through a partnership with IDG. And now it is going after India.
Will Accel find the next Facebook in India? Probably not (It is an investor in the original Facebook here in the U.S., by the way). But it gets to dip its toes into one of the fastest-growing economies in the world. If it can find a couple startups to shake up India alone, it will have been worth the investment.
Having done business in India for a couple of years I wish Accel luck.
Here’s my takeaway from India:
1) Extremely intelligent culture.
2) Work ethic much greater than many other cultures I’ve done business with.
3) Loyalty is pathetic. Perhaps because it’s the wild west days for India.
4) Due to such chaos in the market there are many con men. (true in every market but India is something else).
Best way to make returns in India is for private equity investing into infrastructure.
btw- the dollar no longer goes that far in India. As a matter of fact many of the Indian outsourcing companies rather get paid in Euros and engineering costs are WAY UP.
India does have some talent in their software fields! http://blabtech.blogspot.com
the interesting thing is that they not just have the raw talent and start to get the capital but they also have one of the largest markets world wide.
Hmmm whats also interesting to note is the current portfolio companies of erasmic will benefit from this investment
I work with many different Indian teams and I have to agree with @curator…. payroll is still lower (but not nearly as low as many still think) but almost everything else – rent, utilities, software, computers etc. are no discount.
I think there is a lot has stifled some creativity in India and I will be excited to see these shackles shed and true entrepreneurialism take root.
As for web concerned, you cant expect better profitability in india. Websites is an industry where manpower required to design and engineer is least, while manpower being the trump card of India. Only back end of coding can be outsourced to india.
I believe we need more angels in India than VCs. And, its better if angels come from US with big pockets.
Someone (VCs/Angels) needs to take a risk while being patient and provide grooming to the budding enterpreneurs and transforming their raw idea into successful business.
Take 10 cool ideas (6 established business models, 4 new ones), invest $250K each and see what happens. Even if one clicks, you have made the money.
There is a dearth of good seed stage investment funds in India. Infact most of the VC’s are into PE style investments funding existing large media companies( tee vee) or into infrastructure, realty and bricknmortar businesses. The opportunity to make relatively risk free returns(compared to high technology or Web 2.0) at 30-100% in these businesses is basically soaking up all available capital in the country. Most of us web 2.0 entrepreneurs are into bootstrapping our businesses due to low quantum of investment or un-favorable terms on offer.
@antje: The dollar still goes very far in India compared to say Bay Area. For 500K USD(if not 250K USD) you get same bang for buck from an Indian startup as say 3M USD in US. The cost of bandwidth, local datacenter services is perhaps the only thing that costs more in India.
@Curator: In India web 2.0 startups have been known to work with zero percent attrition for long periods. As long as founders don’t shortchange the employees for equity(my advice: double the equity for employees compared to Bay Area since much less venture investment is required) and salary. Paradoxically: you pay more salary than established large companies in India due to higher risk and un-certain payoff, indians haven’t seen millionaires out of startup employees yet.
-Tarun
The news is good, however what Indian Startups Arena really need is bridging gap between startup players and funding bodies more than just one large fund.
http://www.indi...ndian-startups/
India needs to encourage it’s youth in to entrepreneurship through enterprise. Focus the minds of its youthful population on how to scale up home grown ideas and provide amazing role models for youth aspire towards. Projects like Jagriti Yatra http://www.jagritiyatra.com/ that are trying to ignite that spirit of entrepreneurship are already heading in the right direction and I think with strong angel and VC commitment we’ll start to see some amazing tech startups coming out of India.
If you look at the SMS social networking space there are a number of them already. SMSGupShup, a service similar to Twitter with over seven million users is huge and many other examples can already be cited. But which ones of these will be able to scale out of their niche on to the global stage is the question.
KB
[VOTE] Wise or Waste? Accel to raise multi-million dollar fund for Indian startups: http://snurl.com/36f8s [www_thriveorfail_com]
Gr8 to see that TC is covering more of India nowadays. I’m sure India is going to rock the industry with some cool products & companies but more than the online market, its the mobile market thats gonna do wonders here.
India will soon be the center of attraction for mobile related products. There is massive depth in the market. We add 8 million new mobile users every month, higher than the total users in many saturated markets. A projected 600 million users by 2011! Indian telcos will be MNCs cos they know how to operate in ARPUs as low as $7/month.
Mobile phones will be the first device offering internet experience to millions of people in India. I think we missed the broadband wave & jumped directly into the mobile one!
As for doing business in India, its one big country with 25 odd states & by normal standards (language, area, culture etc) should have been 25 different countries! But still its one & thats the charm of it. It would be hard for an MNC to setup shop & hope to understand Indian audience that easily unless with an Indian partner.
There was new startup event conducted in IIT Campus – Delhi last week. It was for startups and i was able to see many VC / Angels there. They have showcased about 12 to 15 companies and in which 4 to 5 companies did decent products. so what i think is venture funding is already in full swing in India and i will only increase.
http://www.indiashines.com
The Indian and Chinese markets are proving the most optimistic outlook for investment in the long term. Whether or not a culture of innovation can be developed from a very much industry based country is the pivotal factor to these early stage returns.
The overall PE market in India is flooded with capital currently, I would be looking at these sort of VC opportunities IF I could get the allocation!!
I am reacting to Curator’s comment above.
I have dabbled as an Angel investor in India having built and sold a company in the Valley a little over 10 yrs back. I now split my time in India and in the Valley.
Within the limitations that come with every generalization – I have the following experience on this issue. Indians are good, fun people. But Indian college students are anything but creative. And creativity is the one thing you need for a venture bet that produces the next big thing. Please, I am not trying to flame people, and as I said, generalizations have their limitations. But within that, I believe the above to be true.
The one thing Indian youth had going for them a decade back was work ethic. That has taken a trashing in the last decade. The following anecdote captures this reality. On my desk is teh resume of an engineer who is 6 years out of college. This young man has worked for 5 different companies. Two companies I had backed – one in Baglaore and the other in Pune – couldn’t get a thing done with the revolving door nature of the workforce. They folded India operations and moved to the US. When all is said and done, I don’t think India operations offer any cost advantage. The downside is an amateur workforce.
One CEO told me that in interviews all Indian engineers “want to work on latest technology so they are constly learning new things.” Most often cited reason for leaving a company is “I didn’t have opportunity to learn and grow.” While that sounds like a commendable outlook, there is a way to abuse that notion and I think that’s what is happening. Three months on the same technology and our bright engineer gets bored and some fool across the street offers to double his salary, so he leaves.
Lastly, quality of work is pathetic. Sorry, there is no other word for it. Indians who have never left the shores just do NOT know Web design or any design for that matter. There would be value if the US-trained expert could quickly train these people and then build something. But you guessed it, the moment this person feels he is trained, he quits. The entrepreneur is constantly spinning their wheels.
Call it Wild West, call it Chaos. Fact is the only ingredient of interest is the large consumer base. While that is reasons to build businesses in India, it’s not the raw material for entrepreneurship.
I have worked many years in US and did two startups in the last five years. The thing I hate the most in India (no pun) is poor attitude towards employers. The 6 yr experienced would have changed at least 10 jobs in his career. Its too difficult to hire anyone. Real estate costs are sky scrapping. Its ~2$/sft per month which is comparable to real estate rates in US. Engineers cost less but you need to have at least 2-3 engineers to match the output.
Deadlines do not exist. They come and leave and are least bothered about the upcoming deadline. “I have my daughter waiting for me. ” Pressurize a bit and do not be surprised that he is absorbed by your competitor.
Be happy if you get notice period of one week. Multiply 10x if you are running a BPO.
Chaos or opportunity, it’s up to the entrepreneur to navigate. The significant market size will always be compelling and it’s not just India, but Asia.
agree with indianinsivalley …. as much as i love this place, 15 years now, it is a joke, and i say that with love in my heart. i touch the feet of the few companies who have made it, wipro, infosys, biocon, et al, they are truly world class geniuses … but .. the next level, not only in tech but many other industries, plus infrastructure, oh my god.
flavor of the month, of the year, of the decade, but soooooooooooooo much work to be done. not helped by complacency.
” Will Accel find the next Facebook in India? Probably not ”
And..what makes you an authentic source for predictions like this asshole? You are a fucking failure yourself and laid-off ass.
Ladies and gentlemen, meet me, a representative of the other India, the stuff that does not get media coverage. If you hadn’t noticed, I am foul-mouthed, inarticulate, unable to spell, arrogant, pompous and worthless. In a nutshell, a fool in his own class on the international stage.
OK, it is refreshing to note the perspectives of IndianInSiValley, GregoryLent and Anil Gupta. It has become a joke in my company that the CEO decided 2 years back to start an engineering center in India. I go there every 6 months and it’s always a brand new team. In November 2007 we launched a major “rentention strategy” program which cost us a few hundred K. Results? when I visited earlier this month there was not even one person who I met in November stil lworking for that company. All 21 people had been recycled.
Not only is infrastructure bad, it appears to be getting worse. I have not seen any meaningful improvement in Bangalore or Bumbai, two cities I visit often. I am pushing to close Indian operations completely. A few million $ down the drain, I don’t think we have anything to show for it.
Why doesn’t MSM (Main Stream Media) cover any of this?
My favorite story from building a tech team in India: Our database admin really screwed up a project once and his direct manager had a meeting with him. The manager politely pointed out a list of major blunders and why they shouldn’t occur again. The dba asked to take a smoking break, went out and SMS’d his resignation. I am told Resignation-by-SMS is quite in vogue – ask any employee to improve quality of work and you can expect an RBS.
I am thinking of writing a book on my experience. Many employees have taken time off for “death of a grandparent” more than 10 times in the same year. If it weren’t this costly, it would be downright funny.