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Watch out for Institutional Investors

Thomas Hyland
Co-Founder & Partner- Aspada Investment Advisors
Friday, July 26, 2013
Thomas Hyland
Venture Capital Ecosystem in India
Although there is a vibrant venture capital ecosystem in India, the market we invest in is vastly understood both by equity as well as debt and working capital providers. Much of the early stage investment money in India is directed at technology, e-Commerce or mobile, and there are very few institutional providers of capital at a Series A (i.e., $1-3 million) in our spaces, although quite a few that can provide growth capital once our companies reach the point of requiring a Series B or later rounds of funding.


We do see a trend of more funds and domestic family offices pushing down market into our space, which we view as positive not only for entrepreneurs but also for the sector more broadly as significantly more money is needed to help develop the early stage ecosystem across sectors.

Focus

Our view is that in order to support businesses in our sectors, a different style of venture capital than what is commonly found in Silicon Valley is necessary within the Indian context. For one, we cannot take lots of small bets in the hopes that one might become the next Google and make up for the write-offs in the portfolio that have flamed out. That strategy may work in certain technology sectors, but it won't work in logistics and secondary hospital chains in Tier II cities. Second, the exit time horizons need to be somewhat longer as the unit economics can take a longer time to play out. Although all our companies utilize sophisticated technologies as part of their operations (i.e., patient monitoring and truck routing) we tend not to focus on models that derive a significant portion on their revenues from high technology. Instead, we generally focus more on highly scalable 'nuts & bolts' models within the SME segment.


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