Dotcoms the favorite for VCs

By agencies   |   Monday, 28 August 2006, 07:00 Hrs
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MUMBAI: If trends of the past few months are anything to go by, dotcoms are enjoying a second coming in India after their historic rise and crash in 2001.

In the last few months, dotcoms have become one of the most popular investment opportunities for venture capital (VC) firms. . “Dotcoms are here to stay. There will be failures. But unlike the last time, there will also be survivors,” CEO Sandeep Murthy, explaining the sudden rush for dotcoms, Financial Express today said.

“Earlier, the India focus was mainly for services. Now it’s shifting to India as a market,” says Rajesh Jain, the Internet entrepreneur who sold Indiaworld to for over $ 100 million and triggered the dotcom boom in India in 1999. The market has seen an investment of $44 million across 15 deals in the first six months of 2006. The trend, it is believed, started in 2005 with $9.5 million invested across four deals, the paper said.

What might ensure the success of the dotcom ventures this time around is the Internet user base in India that has grown from the erstwhile 1-2 million to a sizeable 40-50 million. At least 20 million of them are active Internet users. In the first six months of this year, online and mobile services firms attracted 33 percent of the total VC deals, the highest in any one space. The online play also has synergies with the mobile revolution in India, making it more attractive for investors, note industry analysts.

“Mobile internet is a strong opportunity, with handsets becoming as capable, if not more powerful than PCs,” says Jain. One of the largest investments in the mobile and Internet space was $18 million investment in People Interactive (I) Pvt Ltd. The group owns the popular matrimonial portal and its subsidiary MAUJ, which provides mobile content services. Another example of the synergy between the two sectors is Kleiner Perkins’ investment in a mobile payment services firm, Paymate, and in a travel portal, He is working to build business by allowing customers on the travel portal to pay using their mobile phones, the paper said.

On the other hand, online investments also synergize well with existing offline investments. As in the case of Sequoia Capital, an investor in and Royal Orchid Hotels. The dual services help the portal get preferential inventory with the hotel chain.

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