I can’t but help think that we are missing out on creating a deep-rooted start-up culture in India because we do not have the first two stages of the investing pipeline: angels, and first round investing. In the Indian context, angels should typically invest 1-2 cr ($200-400K) to give enough money for the company to get started and through to the early product prototype. First round investing (typically by a venture firm) should be between Rs 5-15 cr ($1-3 million) for products focused on the Indian market.
What we do have are plenty of Indian funds willing to invest Rs 25-100 crore ($5-20 million) – ideally into companies that are profitable and looking for growth capital. At this stage, the company is expected to be profitable.
The net result is, as someone put it to me: VCs in India act like PEs (Private equity funds), and PEs act like banks!
So, is there a way out from this? I’ll outline an idea tomorrow.