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Venture Capital in India: Ashish Gupta (Part 1)

Posted on Wednesday, Oct 14th 2009

Dr. Ashish Gupta is a co-founder of Helion and serves on the boards of Gridstone Research, Jivox, Kirusa, MuSigma, Naukri.com, and SMS Gupshup. He has co-founded Tavant Technologies and Junglee. His investments include Daksh (IBM), Odesk, Obongo (AOL), Speedera (Akamai), MakeMyTrip, Merittrac (Manipal Group), and Kaboodle (Hearst). Ashish is a Kauffman Fellow and holds a Ph.D. in computer science from Stanford University and a bachelor’s degree from IIT Kanpur, where he was awarded the President’s Gold Medal. He has written several patents, publications, and a book published by MIT Press.

SM: Ashish, to start could you give us a macro picture of what you have seen in the Indian venture market from 2005 to 2009?

AG: There are several things that are working. The number of people who are willing to be entrepreneurs and who have a very mature view of how to build companies as opposed to inexperienced entrepreneurs has increased. The entire ecosystem to support entrepreneurs has improved, although it is nothing like the Valley. That is not even a fair comparison because the Valley has a different value system.

Another interesting piece which is working is consumer demand. It has not only continued to speed up: What we see as a downturn is probably more of a consolidation phase as far as India is concerned. After the consolidation, growth will continue unabated. Clearly, some sectors are not going to be qualified as such. Real estate prices were way out of the ballpark, so that is not consolidation but rather correction. Consumer demand, however, went through a period of consolidation.

SM: Even on the real estate side consumer demand continues?

AG: It has gone back up. Pricing has readjusted, but demand has gone back up. The other thing that has worked reasonably well is the view that investors themselves are taking off that business. I think that all of us have learned a lesson in seeing where deals were overpriced. If you ask me to look back to 2005 until now and say whether the investor group is more mature, more committed, and better equipped, I would say absolutely yes. Was there misbehavior in the middle? Yes. Most of us will get punished for that misbehavior, but net/net is it an evolution in the right direction.

SM: I see two kinds of entrepreneurs working in the Indian ecosystem. One is the kind who goes back and forth between India and the US, and the other is the resident entrepreneur. Can you separate those two groups? Is there as much of an exodus from the Valley back to India as the press makes it out to be?

AG: From the perspective of returnees becoming entrepreneurs, those numbers are not very high. Starting product companies out of India is a mammoth task. I know several who tried to return to India and start a company, and they all returned to the US. A lot of the people who go back to India from the Valley are steeped in a product-building culture. A few who have returned and done well have morphed their companies into hands-and- feet-on-the-street kinds of companies. But there are not enough of those examples for me to tell you that there is a return exodus.

Most of the people who are relocating are returning to mid-level management positions inside of large companies. That, in my knowledge, defines the bulk of people going back. They are expats going back to Cisco, Intel, and IBM. That makes a lot of sense. When you want to go back, you want an institution over your head.

We are also beginning to see a fair number of people who are coming back to work for smaller companies. That is the number that is meaningfully accelerated, particularly over the past year. Is the exodus increasing? Compared to theplast five years? Yes, but for large and mid-tier companies, not to start companies. The romantic notion that hoards of entrepreneurs are returning to start companies is not something that I have seen.

SM: What about the category of entrepreneurs who are working in the Valley but leveraging India in a big way?

AG: You are probably talking to the wrong person in that regard. I have always been a skeptic of startups having engineering outsourced to India. Often what is saved in cost is paid for in time to market. It works with companies that have a founder class there who understands what product is being built without specs and who can complete it with the same intensity as opposed to trying to hiring someone there.

In that context, the number of people who are leveraging India to get stuff done, I think, has marginally gone down. Even the people who were doing it before were often doing it to get extension-type work done.

This segment is part 1 in the series : Venture Capital in India: Ashish Gupta
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useful thoughts Sramana and Ashish. awaiting later parts…

Kashyap Thursday, October 15, 2009 at 1:09 AM PT

VCs are project/industry development oriented but PROFIT oriented. Though I have a very good project but I could not get the VCs support. If I get a little support I could make my unit as one of the True MNC from India. Thanks.

Jayaram Tamilselvan Thursday, October 15, 2009 at 10:34 AM PT

Good thoughts. look forward to the next part. Some people who return just find it very difficult to get funding from Indian investors.It would be great if you could highlight the differences in expectations between Indian VCs and Valley VCs.

deval Thursday, October 15, 2009 at 11:01 AM PT

[…] Gupta, a noted VC from India and a dear frend, is sharing his insights on Indian startup ecosystem with Sramana Mitra.I highly recommend this interview to […]

Insights from an Indian VC « Raja Jasti’s Blog - Renaissance Thinking Friday, October 16, 2009 at 11:04 AM PT

Great insights, looking forward remaining parts as well.

Bharath Monday, October 19, 2009 at 2:29 AM PT

I am from India, and was a ebay (USA) seller till few years back, used to sell worldwide from India. But soon I realized that if I want to grow I must have my own website. I stopped selling on Ebay & launched my own website. I have about 60% customers from abroad.

In last two years of operation I am selling goods worth more than 50 lacs rupees yearly, with a very small team, operating from by house, & was profitable in first 4 months of starting.

I think the market in India is quite mature now & find consumers accepting online purchases from India. But am surprised why groups like Amazon are not announcing their India plans.

When I look at initiative from Indian Groups like Future Bazaar, Reliance, Siffy, Indiatimes, I see they have not done their basics right. Their is complete lack of leadership, vision & competence in them.

When I see back, we started with a two member team & had very little money to invest in stock & software, but I think we made it as we did a lot of thinking to get the basics right, selecting the product offering, customer satisfaction, website design, etc. Today we have a cult following, our customers vouching for us in forums & blogs & have won majority of them through referrals.

On the VC front I would say the biggest hindrance you guys put forward in the need of Business Plan. Atleast for companies who have implemented their ideas & have built into small working & profitable model & need investment to scale up the size, the Business Plan part should not be required. Instead have your team sit with the entrepreneurs & understand the business before deciding to invest.

I think India is the right place now for major ecommerce initiative but there is just lack of good talent receiving the capital backup.

A word for Sramana Mitra if possible drop me a email, I wish to show you the work we have done & amaze you.

SA Tuesday, January 26, 2010 at 3:57 AM PT

If I were you, I would not bother with VC money, and continue to build organically, preserving full ownership. You should post your URL here so that everyone can take a look at your site. Congratulations!

Sramana Mitra Tuesday, January 26, 2010 at 12:26 PM PT