Anand Sridharan (Bessemer) on the Indian Internet:
At $25-30 million ad revenues and $150-200 million e-commerce revenues (gross), the India internet market is clearly a small market today. There is also no doubt on the direction and that this would eventually become significant. The main question is how soon?
There is no shortage of compelling content/applications (travel, stock-trading, jobs, shopping sites have been around), though regional language content can still be strengthened. In my view, access is the main bottleneck. Drawing lessons from two notable Indian success stories cable TV and cellphones heres what Id like to see over the next 1-2 years in the internet access space:
Far higher competition: Currently cable-operators and PSU telcos dominate the last mileI am all for violent competition between cable TV, satellite TV, fixed line incumbents, ISPs and wireless operators.
Multiple access technologies: Think of what CDMA did to GSM (ignore the regulatory back-door entry part). I am bullish on Wimax, as that can break the last-mile gridlock.
Shift in mindset from PC-price to entry-cost & monthly charges: what we need is a mindset and marketing change, to pay Rs. 1000 unfront, and Rs. 500/month for PC + internet.
PCs in education: Middle class parents will buy a PC, if they think their kids life prospects will improve because of thisOnce the PC enters the home (using education as an excuse), both kids and parents will explore and discover new applications (including some not-so-clean ones!).
Once home-internet-access is fixed, usage should follow.
Sumant Mandal of Clearstone Ventures:
There is approximately $1 billion that’s been raised for investment in private companies in India. I’m not quite sure how much of that is going to go towards IT or services businesses that are IT enabled, but I can say for sure that a vast majority of that money will go into existing and later-stage businesses. There is little or no real VC money available in India. Companies that are receiving money in India are either spin outs from existing large businesses (an example being GECIS, which is a spin out of GE), captive units or second tier outsourcing providers that may lack the size or scale to compete with giants like Wipro and Infosys and want the private equity money to grow through rollup and acquisitions. In the early-stage investing business, there are a few small funds that are local to India but have not done too many deals.
So there’s a big hole in venture money for start-ups in the way we recognize them here in the U.S. (early stage, pre-product or pre-revenue companies), and a majority of the private equity is going into late stage businesses. There is quite a bit of competition for later-stage businesses as there are very few that have strong management teams and international aspirations. Funds that are active in India for later-stage investments are General Atlantic, Warburg Pincus, TPG, Carlyle and some local players like Chryscapital. We [Clearstone] would fit in the early-stage investing mold. For early-stage investing, there are either companies that are developing IT products that are internationally relevant (technologies that are servicing the North American or European markets but are built using Indian talent) or companies that are creating services targeted at the Indian consumer, where there is potential for hyper growth. Connectivity (mobile and broadband), content and enabling electronic commerce are good areas in India today.
Sramana Mitra: “some viable Internet businesses are getting built in India, and they are getting attention from the top rung of US VCs. After all, as far as consumer markets go, in the next decade, India will emerge as one of the top ones.”
TECH TALK India Internet and Mobile+T