Actionable Insights into the World of Indian Startups

It has been a long time since I have blogged and I felt the urge to write about the e-commerce frenzy in the startup world as I am starting to see irrational behavior set in to the market.   I have been watching in awe as the next baby products or handicrafts startup in India is raising huge amounts of venture investment at crazy valuations  Are these valuations really justified or is this some sort of greater fools phenomenon?

I have thought a lot about this space and while I believe that in the real long-term e-commerce will be a very large category, I do not believe that given the current state of the market the feeding frenzy that has started may be justified.    It sure feels like a hype cycle has started with the startup focused media focusing >70% of their energy on this category.  Let us look at the fundamentals and realities of this market closely:

Read the rest of this entry »

I meet a lot of young bright people in India that have an idea and want to be part of the startup lifestyle.   A lot of them come to me for advisory roles or to be a sounding board.  The number of teams I meet that I get excited about are just so few and far in between.   I am sure VCs who see a lot more startups than I do probably feel the same way and hence the high rejection rate of startups that don’t make the cut for funding – about 99% in India.   This got me started to think about what are the things that I personally believe that are the secret ingredients of an exciting startup that VCs want to fund.  Before I address these topics let us make sure we understand the term Venture Capital.

Read the rest of this entry »

When I moved back to India in 2004, I was mainly following my heart.  I wanted to go back to my roots and build compelling companies and work with bright people.   After spending 5 years in India I think it is time for a reality check.   My first 2 years in India don’t count as real startup work.  I was here on an expat gig for my Valley employer and I was using the opportunity to learn how to operate in India where I had never worked.   My next gig Zimbra was an interesting well fed valley startup with big name VCs and a rockstar team.    Now that I am starting to engage with the Indian startup scene to do an all Indian startup, I have started to learn some really important lessons about the business of startups in India.

Facts: (based on data from Dow Jones VentureWire)

1. In 2008, the amount invested in Indian startups was US$945million while US startups enjoyed investments of US$30 billion (30X Indian investments)
2. In Q1 2009, the amount invested in Indian startups was US$100M down from US$142M last year
3. Of the US$100M invested in India in Q1 2009, US$89M was invested in IT companies
4. 13 rounds of investments closed in Q1 2009 in India while in the US 477 rounds closed in the same quarter
5. The median size of a round in Q1 2009 in India was US$4.24M while in the US was US$5.5M

From the data I can summarize the following:

Read the rest of this entry »