The news is bound to cheer up many ambitious and ideating Indians. Increasing tensions for the Indian economy, from raging inflation to high cost of bank loans for new business outfits, setting up a business has become more expensive than ever. Surprisingly, many leading Indian venture capitalists are coming to the rescue and they are focussing on sponsoring new and emerging businesses with investments below one million dollars as opposed to several millions earlier.
Says Alok Mittal, managing director, Cannan Partners, “Many venture capitalists are looking to invest lower sums of money into businesses, however still about 80 per cent of venture capitalists invest close to $ 5 million in ventures. Investments below $ 1 million is new in India and usually VCs would invest for four to six years.” Recently an Indian led US based LPO, Techlit Solutions received $ 1 million from a host of investors. Says Neal Gupta, CFO, Techlit Solutions, “We are planning to utilise the money in innovating our technology and confident of getting 20 times return in the next three years.”
In July 2007, an online education portal, Vienova Technology, received half a million dollars from a group of renowned investors that run by the name of Indian Angel Network. Says Parikshit Jain, the entrepreneur behind this venture, “With big VCs willing to put their money in new companies, it has thrown open a world of opportunities for aspiring entrepreneurs who are sitting on bright ideas.”
Excel Capital Ventures, a US based VC Company recently invested less than $ 1 million in an outsourcing firm, and is expecting returns to start flowing in within five years. Says Avinash Singh, managing director, Excel Capital Ventures, “When you invest relatively small sums of money into companies, the opportunity for returns is very high.” Though IT is the biggest segment in VC funding, says Mittal, it is not merely restricted to this. MobileNXT Teleservices a mobile retail chain in March 2006 received close to $ 1 million as funding.
Says Vijay Menon, CEO Mobile Nxt, “We received funding at the start-up stage when we had not even set up a single retail shop.”
Similarly, Priyanka in Bangalore had a very interesting idea, wherein she tied up with many restaurants to deliver food at people's doorstep, and received Rs 50 lakh as investment. Priyanka says, “The investment helped my company Hungry Zone tie up with over 425 restaurants in Bangalore and more are in the pipeline. Also there are plans of entering other cities in India.”
On what basis do VCs zero down upon ventures to invest in? Saurabh Srivastav, chairman Indian Venture Capital Association explains, “The team is critical for the success of the business and we will see whether they will be able to pull of the business or not.” Mittal adds, “Possible competitors and market size are closely looked at.”