Indian VCs losing interest in web/mobile sector?

April 23, 2008
By sinha

Eat this – In Q1 2008, the PE investments in India surpassed that of China!!.

The country witnessed private equity investments to the tune of four billion dollars in the first three months of this year – out of which ~ 30% investment accounted for infrastructure and real estate sector.

In Q1 2008, infrastructure and real estate accounted for 30% of PE investments. Energy, telecom, media/entertainment, financial services, and manufacturing followed. Between them, these six sectors mentioned here accounted for 90% of all PE investments over the last three months.

Basic areas like infrastructure, real estate, energy, telecom get the largest share of investments; following by second order needs like financial services, logistics and manufacturing. Media/entertainment, Internet, retail/consumer are perhaps third order needs, in a country like India.

About $ 5billion of new funds have been announced in April so far, of which around 70% of the dedicated money is for real estate/infrastructure. Some of the other money is sector agnostic, like Azim Premji’s newly announced $1billion fund.

At the same time, lot of PE deals have fallen apart in the recent times (Kshitij Advisory Services, which formed a strategic JV with CapitaL, JV between Pantaloon Retail India and kidswear brand Gini & Jony etc) – more so because of the US recession fear and the general market sentiments.

Well, the investment slowdown is not just the India story, but is a US-wide phenomena too and investments in start-ups fell 5% to $7.1 billion during the first qtr of 2008, compared to the year-ago quarter.

What’s happening in India?

Essentially, when there are slowdown fears, VCs will start investing in “safe” sectors like real estate and infrastructure instead of “where-is-the-business-model”, i.e. web/mobile sector. Case in point: Google-backed Erasmic recently invested in Kaati zone (food outlet).

Look at the positive side of the entire story – the investment is happening in areas that matter the most, i.e. infrastructure, energy and telecom; followed by manufacturing and then web/mobile – which in my opinion is a healthy sign.

What do you think? Do we need a “Google” kind of story in India – a story which makes everybody else take note of Indian web/mobile story?

Share your opinion.

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8 Responses to “ Indian VCs losing interest in web/mobile sector? ”

  1. Abhishek Goyal on April 23, 2008 at 7:06 pm

    “Google-backed Erasmic recently invested in Kaati zone (food outlet)”

    recently???

  2. Ashish on April 23, 2008 at 9:57 pm

    Abhishek -I believe the investment was announced 2 months back.. “recently” is a little “relative term” here!

  3. [...] of money that’s available to fund startups. For example, that private equity funds invested over $ 3.3 billion in just the first 3 calendar months of the current year. That VCs are always looking [...]

  4. Online Advertising Pune on April 24, 2008 at 11:35 am

    Internet startups are very different from other sectors , especially in India where more than half our population still doesn’t use it.VC’s must look at WEB startups who have a global approach with their business.

  5. bhadra on April 24, 2008 at 1:16 pm

    “the investment is happening in areas that matter the most, i.e. infrastructure, energy and telecom; followed by manufacturing and then web/mobile – which in my opinion is a healthy sign”

    Agree 100% but whether this is due to slowdown effect..i really doubt. i think VC guys following pure common sense approach “put money where u find incremental traction” and this days all this six sector have turbulence growth, so no wonder why VC will miss the bus…

    bhadra

  6. Priya on April 24, 2008 at 1:50 pm

    real estate alone saw investments to the tune of $2.6 bn, here is a chart of all realty investments
    http://india.dalalstreet.biz/earningsnews/2008/04/private-equity-in-real-estate.html

    so when india is ready with basic infrastructure, new kids will come with innovation and build new things making it a better marketplace than what it is today

  7. Shikha Gupta on September 2, 2008 at 6:49 pm

    We see a lot of investment happening in infrastructure, real estate.. what kind of investment can go behind a web2.0 business model and what returns do such Investment provide or VC expects

  8. [...] Azim Premji too started his own $1bn fund, and Infosys’s co-founder, NS Raghavan quit the firm as joint MD, now runs Nadathur Investments. [...]

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