Fund raising plans of IT start-ups turn awry on rising rupee
Facebook Twitter google+ RSS Feed

Fund raising plans of IT start-ups turn awry on rising rupee

Printer Print Email Email
Bangalore: The rising rupee is forcing dollar-funded Indian IT start-ups to redraw their fund-raising plans. The venture capital community has turned apprehensive that the returns on its investments may come down.

The currency appreciation has increased the capital required for starting a business in India. The rising cost (in rupees) of employees, building space and infrastructure has only made matters worse.

"It is adding negativity to the process," said Kiran Konduri, CEO and founder of Four Interactive, a Bangalore-based start-up that manages Asklaila, a local search engine.

Many Indian IT start-ups raise money in dollars and invest in rupees. Every $1 million raised by an Indian firm was translating into Rs 4.4 crore a year ago; it now fetches Rs 3.9 crore ? a gap of Rs 50 lakh. This, coupled with the increase in costs, is increasing the capital requirement for starting a business.

"If I invest $10 million in a company, now suddenly I am missing Rs 5 crore. So the amount of money to make the company profitable in dollar terms will go up, and correspondingly my return will fall," said Ashish Gupta, Founding Managing Partner, Helion Ventures.

"Because of the US downturn, the India market will become even more heated and salary growth will be higher. And when the dollar weakens further, it will negatively impact the venture returns,"he added.

Industry analysts are of the opinion than the strong rupee will increase the amount of money available to India.

This would basically affect the start-up firms, who need huge investments till they reach break-even. However, this may not affect the inflow of venture capital to the country, since fund-raising companies are not driven by short-term objectives, industry sources said.

Experts say the Indian firms, depending on their market and focus geographies, need to be cautious while converting the dollar funds into rupees. If the rupee appreciation continues unabated, this may further eat away a portion of the fund if they wait longer in converting the dollars into rupees.

Experts on SiliconIndia
Santhosh  K
Sr. Soft. Engg.
Oracle India
Nehal Vyas
Sr. Team Lead
Cyberoam Tech.
Rani Malli
Sr. Director
Philips
Sr. Executive
ISB
Vijay Balkrishna Konduskar
Business Consultant
Imans Web Tech
Dr L P  Sharma
Technical Director
NIC
Reena Khanna
Founder
Solitaireworld
Dellas  Asse
sys-network admin
Computer Station
Write your comment now
Submit Reset
SPOTLIGHT