March - 2001 - issue > Cover Feature

What are the objectives of the IVCA?
The main objective of the IVCA is to help replicate in India the VC ecosystem of Silicon Valley, in order to make it more efficient for ideas, entrepreneurs, advisors and investors to come together, thus increasing the pace of venture creation. In this, the IVCA is emulating NASSCOM, which helped to provide a focus for the software industry in India, brought together all the companies in the nascent industry, helped define requirements and worked with the government to create a supportive framework of policies and procedures.

Describe the functions of the IVCA?
The IVCA has undertaken several tasks: First, it is working closely with the SEBI (the Securities and Exchange Board of India), the nodal government agency for the VC industry and other government departments, to educate beginning entrepreneurs and to help create a policies and procedures framework to support and encourage the growth of the VC industry in India. This, in turn, would help increase the pace of venture creation. This kind of interaction is already fairly well developed and has begun to have a profound impact with substantially beneficial changes already made by the government over the last 12 months. L.K. Singhvi, senior director of the SEBI, is on the IVCA's executive council, and I, as the IVCA president, sit on the newly formed SEBI advisory committee, which is chaired by Kanwal Rekhi.


Second, the IVCA functions as a node for the VC ecosystem in India, which includes all VC funds, intermediaries, consulting companies, lawyers, accountants, etc., so that we can discuss the issues, promote networking and generally help build a vibrant environment for investment.


Third, the IVCA has taken on the responsibility of establishing and maintaining a comprehensive information database covering total investments made by VCs in India, the kinds of sectors funded, the number of companies assisted, etc.
Fourth, the IVCA has begun to organize major events and conferences, by itself and in conjunction with other industry groups, to create awareness about VC, educate entrepreneurs on the various aspects of VC, create a marketplace in which VCs and entrepreneurs may interact, etc.


Fifth, the IVCA is undertaking the creation of content that would go toward introducing programs on entrepreneurship at leading educational institutions in India.


Finally, the IVCA has opened dialogue with similar bodies overseas, and later in the year will undertake a promotional program in the US and other countries to educate investors there about the vast array of investment possibilities in India.

How many active VCs does India have?
There are approximately 50 VC firms currently active in India.

What are the biggest challenges facing VCs in India?
There are several challenges. Venture capital is still a nascent industry in India. Although the SEBI is now reasonably well informed about what the VC industry needs to flourish, other government departments need to catch up. In addition, a large number of entrepreneurs still do not understand the VC process and will need education.


The stock exchanges are also beginning to become viable exit points, but M&A activity is still in its early stages and needs to develop viable exit opportunities.

What are the most exciting sectors and companies that VCs
are finding attractive in India?
Most VC investments today are going into the IT sector, business process outsourcing and other IT-enabled services, telecom and media. Biotechnology and pharmaceuticals will now also find favor.

How big was the VC market in India during 2000?
VC investments in India during 2000 were close to US $1 billion. The coming year should see the commitment of VC funds increasing substantially as the IT industry, particularly the software segment, continues its growth and the telecom industry accelerates deregulation.

What changes do you envision happening in the VC
scenario in India during 2001?
There is a tremendous vibrancy in the media, and infrastructure creation is finding favor. The government has promised continuing reform, and all the relevant legislation so far has been making good on that promise. All this points to enormous possibilities for this sector and tremendous opportunities for superior returns over the next few years.