Sramana Mitra wrote to me saying that Forbes has requested her to write a series on Entrepreneurship / Innovation in India, and she was keen to get more inputs from me and Emergic’s readers. Here is a discussion on her blog about the theme.

My thoughts:

• Entrepreneurship is happening in India, but there isn’t enough of it and there isn’t enough of capital being invested into early-stage companies.
• There are two issues: lack of angel funding (whatever little was there has now almost dried up) and lack of the first-round funding. Ventures need about Rs 1-5 crore to get started, and about Rs 5-15 crore in first-round funding. Most VC funds in India are either not investing in tech-focused cos. or need to invest $5 million (Rs 25 crore) given their fund size and the commitments they can make. India needs smaller funds with smaller overheads, with more operationally focused partners to mentor and guide early-stage companies.
• The digital opportunities in the Internet and mobile space both have challenges. The Internet cos. are dependent entirely on advertising (which has stagnated) and the mobile cos. are hamstrung by low revenue shares from mobile operator payouts.
• I continue to believe that the big opportunity in India is in building direct-to-consumer cos. in the mobile space, but this requires courage and capital.
• Also, exits in India are few and far between. M&A needs to be part of the process and that is simply not happening in India.
• Result: we have lots of small companies (since one can start) but few achieve scale. That is what needs to change.