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A Great Fund Strategy

Posted on Sunday, Oct 16th 2005

Oak Investment Partners has set up a $200 Million venture fund to focus on the retail boom in India. Veteran retail investor Jerry Gallagher visited India and was astounded by the revenue per square feet in the Malls and Stores. He came back and convinced his partners to commit capital.

Many of my VC friends have asked me about opportunities in the Indian Market. Unfortunately, these are tech investors, and they glaze over, when I tell them that the Indian market opportunity is elsewhere … in consumer brands, in ready-to-wear apparel and accessories, in restaurants and cafes, in movies, in prepared food …

“But software?” they ask. Well, India is not an enterprise software market, except with a few exceptions. There is some SME opportunity in software, but by and large, India’s technology absorption will come from consumer markets. Here are two technology-leveraged concept arbitrages that would work:

Netflix: There is hardly any good access to foreign films, but Indians love movies. Challenge will be the mail network which is not great.

Pixar: India has great stories to tell, and many that are very animation-friendly. A great animation studio with cutting edge technology, sophisticated story-telling and creative capabilities would do well. Challenge will be to take this outside of Bollywood sensitivities, and cut out the 7 songs per film that Bollywood typically injects.

As for Gallagher, his investment thesis is on the money!

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[…] I wrote an article last October about Netflix being a ripe Concept Arbitrage opportunity for India. Netflix itself has been going gangbusters, with 2006 revenues charted to hit $1 Billion. A PwC study forecasts: “Online subscription rentals, including DVD-by-mail and broadband delivery services, will grow from virtually nothing in 2002 to $3.62 billion in 2010, compared with the then-estimated $6.18 billion in-store rental market. “ […]

Sramana Mitra on Strategy » Blog Archive » Concept Arbitrage: Netflix Friday, June 23, 2006 at 8:35 PM PT

[…] manufacturing that will keep the Indian economy rolling and create jobs for the non-tech locals. (Sramana Mitra’s thoughts on where VCs should invest in […]

GigaOM » Growing pains for India Inc Sunday, March 11, 2007 at 5:01 PM PT

I would say its a whole cycle…right from conception to manufacturing and selling, where retailers etc come is just a part of it.what do these software do…make life easier for banks,manufacturers,retailers etc.I totally agree with your view point Sramana.

Pawan Sahay Thursday, March 15, 2007 at 10:53 AM PT

[…] is an interesting post by Sramana Mitra about India being a hotspot for non-IT related VC investments. As observed by Sramana India is not […]

Random Thoughts of a Maverick » Where VCs can invest in India Thursday, March 22, 2007 at 11:27 AM PT

Netflix clone has already been funded..It got Rs. 10 crore (approx $2.5mil)..Apart from the unreliable mail system, the cable system is also a problem. The local cable guy can show the newly released movie on local channel within days. The print is pirated and the screen is half full with advertisements but it remains to be seen whether people are willing to pay and wait for a DVD for better quality movies.

Gaurav Chawla Friday, March 23, 2007 at 2:07 AM PT

Ah, Its seventymm and it got $7 mil.

Gaurav Chawla Friday, March 23, 2007 at 2:14 AM PT

[…] Around the same time, I also wrote my popular Concept Arbitrage series, which led up to the widely read Venture Capital in India article. In these, I explored what kinds of deals have been getting funded, and why. Consumer Internet turned out to be a big trend from last year, for India, while non-tech sectors like retail and real estate are also big money-making opportunities. In fact, I highlighted the retail trend in my piece about Oak Investment Partners’ India Retail Fund. […]

Entrepreneurship in India « Startup Dunia - Indian startups and Entrepreneurship Thursday, April 5, 2007 at 9:31 AM PT