America ventures into India
America ventures into India
by Andrea Orr
Updated 06:29 PM EST, Oct-12-2006
The Deal.com
'India's Silicon Valley' is the common label for that country's burgeoning high-tech industry, but American venture capitalists often forget that investing in Bangalore is not the same as investing in San Jose, Calif.
During the Investing in India conference hosted by International Business Forum in San Francisco this week, venture capitalists described India as a market full of promising young Internet and wireless technologies that often lacks the physical infrastructure and the management expertise needed to turn a good concept into a sound business.
As a culture that has traditionally put a high premium on education but focused primarily on educating engineers, India now finds itself with a severe shortage of business-minded middle managers, they said.
Sumant Mandal, managing director of Clearstone Venture Partners, described it as a 'scarcity of middle management,' while Kleiner Perkins Caufield & Byers partner Ajit Nazre said that Indian startups often had the wherewithal to write the code to make an Internet service work, but not the skills to package that service and sell it to consumers.
'A big problem for consumer-focused Internet companies is that they don't have good product managers,' Nazre said.
While U.S. investors needed to be mindful of this shortcoming, Nazre said it also presents an opportunity.
'Training is an area where a lot of investment can go,' he said. 'A company like Infosys [Technologies Ltd.] hires 25,000 people in a year and has to ask how does it train all of those people.
'That is just one company in one sector,' Nazre adds. 'Multiply that by all the companies in all the different industries that are hiring.'
The panelists pointed to several common mistakes made by U.S. venture capitalists, including: installing Western managers instead of nurturing those within the country; failing to educate Indian managers in the Western style of corporate democracy; and presuming young Indian managers can be gotten cheaply.
Mandal said salaries for talented middle managers in India are rising quickly and workers increasingly are expecting stock-option packages.
Despite the temptations of importing U.S. executives with M.B.As to India, VCs with experience in the country described that strategy as problematic, even if the person in question is an Indian citizen returning after a few years abroad. The business culture within India is evolving so rapidly, said Mandal, that he often preferred hiring novice workers within the country, who showed potential, to importing more experienced managers.
Foreign VCs too often view India's investment opportunities as analogous to those in Silicon Valley and overlook the diversity of opportunities in all industries, which include physical infrastructure, real estate, retail, textiles and automobiles, the panelists said.
Data from the Delhi research group Evalueserve Inc. shows that private equity investing in information technology has fallen as a percentage of overall deals — to 23.18% in the first half of 2006, from 49.1% in 2003 and 65.5% in 2000. The biggest increase was in the manufacturing sector, which comprised 10.3% of all investments in the first half of this year, up from just 1.8% in 2003.
Canaan Partners, which was an early investor in the U.S. online dating service Match.com LP eight years ago, recently sought a similar investment in India and discovered major differences in the culture as well as the physical infrastructure.
Canaan found the equivalent to an online dating site in India was an online matrimonial site, a high-tech version to the matchmakers who have long arranged marriages in the country.
But after it invested in the BharatMatrimony.com Pvt. Ltd. earlier this year, it realized that it had to do more just to get the average Indian in front of a computer terminal.
'The infrastructure is very simple,' said Deepak Kamra, a general partner at Canaan. 'A room with three cubicles with computer terminals.
'We realized that as much as the Indian people need education and wireless access, they need love and marriage first,' he added.
by Andrea Orr
Updated 06:29 PM EST, Oct-12-2006
The Deal.com
'India's Silicon Valley' is the common label for that country's burgeoning high-tech industry, but American venture capitalists often forget that investing in Bangalore is not the same as investing in San Jose, Calif.
During the Investing in India conference hosted by International Business Forum in San Francisco this week, venture capitalists described India as a market full of promising young Internet and wireless technologies that often lacks the physical infrastructure and the management expertise needed to turn a good concept into a sound business.
As a culture that has traditionally put a high premium on education but focused primarily on educating engineers, India now finds itself with a severe shortage of business-minded middle managers, they said.
Sumant Mandal, managing director of Clearstone Venture Partners, described it as a 'scarcity of middle management,' while Kleiner Perkins Caufield & Byers partner Ajit Nazre said that Indian startups often had the wherewithal to write the code to make an Internet service work, but not the skills to package that service and sell it to consumers.
'A big problem for consumer-focused Internet companies is that they don't have good product managers,' Nazre said.
While U.S. investors needed to be mindful of this shortcoming, Nazre said it also presents an opportunity.
'Training is an area where a lot of investment can go,' he said. 'A company like Infosys [Technologies Ltd.] hires 25,000 people in a year and has to ask how does it train all of those people.
'That is just one company in one sector,' Nazre adds. 'Multiply that by all the companies in all the different industries that are hiring.'
The panelists pointed to several common mistakes made by U.S. venture capitalists, including: installing Western managers instead of nurturing those within the country; failing to educate Indian managers in the Western style of corporate democracy; and presuming young Indian managers can be gotten cheaply.
Mandal said salaries for talented middle managers in India are rising quickly and workers increasingly are expecting stock-option packages.
Despite the temptations of importing U.S. executives with M.B.As to India, VCs with experience in the country described that strategy as problematic, even if the person in question is an Indian citizen returning after a few years abroad. The business culture within India is evolving so rapidly, said Mandal, that he often preferred hiring novice workers within the country, who showed potential, to importing more experienced managers.
Foreign VCs too often view India's investment opportunities as analogous to those in Silicon Valley and overlook the diversity of opportunities in all industries, which include physical infrastructure, real estate, retail, textiles and automobiles, the panelists said.
Data from the Delhi research group Evalueserve Inc. shows that private equity investing in information technology has fallen as a percentage of overall deals — to 23.18% in the first half of 2006, from 49.1% in 2003 and 65.5% in 2000. The biggest increase was in the manufacturing sector, which comprised 10.3% of all investments in the first half of this year, up from just 1.8% in 2003.
Canaan Partners, which was an early investor in the U.S. online dating service Match.com LP eight years ago, recently sought a similar investment in India and discovered major differences in the culture as well as the physical infrastructure.
Canaan found the equivalent to an online dating site in India was an online matrimonial site, a high-tech version to the matchmakers who have long arranged marriages in the country.
But after it invested in the BharatMatrimony.com Pvt. Ltd. earlier this year, it realized that it had to do more just to get the average Indian in front of a computer terminal.
'The infrastructure is very simple,' said Deepak Kamra, a general partner at Canaan. 'A room with three cubicles with computer terminals.
'We realized that as much as the Indian people need education and wireless access, they need love and marriage first,' he added.
posted by Mahesh Shetty at 5:10 AM
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