March - 2001 - issue > Cover Feature

But he has seen enough of high-tech business in India to know it won't be easy. He was a co-founder and director of Hinditron (one of the first IT companies in India) and Digital Equipment Corp, India. He is currently on the board of Integratechsoft, Schiller Healthcare, Boston Management Consultants and LINC Software. He is a past president of the Manufacturer's Association of Information Technology, an apex body for the Indian hardware industry. In some sense he has seen it all when it comes to IT and entrepreneurship in India.


But his current gig, as a member of the management team of Infinity Technology Investments, involves tackling the challenging intricacies of India's nascent venture capital industry. He offers his candid views on uncertain future of venture funding in India.

What have been the biggest challenges you have faced as a VC in India?
In India, the availability of “good deals” in the technology area is a very big challenge for VCs. What you find are many Internet players that have a scalability issue because of infrastructure limitations. Fundamentally, what happened is, we didn't get to enjoy the “dot-com bubble.” Whether it is right or wrong, the US enjoyed it, and many people made money. Because of scalability problems in India today there is a missing link in liquidity creation. And there are not a whole lot of choices of public markets. What's more, acquirers are in hiding.

Why did so many VCs fund so many dot-coms when the market clearly did not exist?
The investment in dot-coms was a result of two things: general euphoria and a hard mindset. The situation was fueled by the arrival of VC money that wasn't “smart.” Many assumed that they could duplicate the US model in India, but this is a very immature market in many senses - in terms of the Internet phenomenon, the financial community, and a lack of PC penetration.

What are the most exciting sectors and companies you are finding in India?
At this point, telecom software, B2B in financial services, embedded software, appliance and rural connectivity are exciting sectors for Infinity. So far we have funded 16 companies.

What kind of RoIs are you looking for?
That's a million dollar question. We are happy with a 30-50 percent internal rate of return (IRR), mainly because exits come in the long term.

And what are the responsibilities of a VC?
The main responsibility of a VC is to build value in companies. This is why financial engineering or the “finding a bigger fool theory” does not work in the long run.