Venture Capital Fund - How to Enter India
India is rapidly becoming the new darling of the global venture capital market. For the manager of a venture capital fund, how to enter India and its rapidly developing market is of major interest.
India is a booming giant about to burst on the world scene in a way that was hardly envisioned a few decades ago. It has caught the interest of the global venture capital industry that has been making major venture capital investments in the country in the last few years. To the manager of a venture capital fund, how to enter India is a major concern. There are some factors that make the Indian economy a bit different than the major markets of the United States and Europe.
One of the major factors in India is the vast culture differences. These must be fully understood and taken into consideration in any major venture. In many other emerging economies, the cultural differences are handled by investing in partnerships with local entrepreneurs or fund managers. The local element deals with the cultural issues and the foreign investor provides the global vision and management expertise. This is a bit difficult in India. The country does not have a strong entrepreneurial background, and much of the wealth is controlled by families and has been passed down from generation to generation.
These family entrepreneurs have a bit of distrust for most financial institutions and therefore cooperation with foreign fund managers is not always easy. Despite this handicap, the market is still booming as the great potential of the Indian marketplace is realized. Of the major venture capital investments in India, almost a third are going to start ups, which is a remarkably high figure. A full 50% of venture capital is being directed toward technology, telecommunications, and media.
One area that the Indians are very experienced in and manage quite well is real estate. There is a long tradition of real estate ventures and the locals are really on top of this market. There own system and expertise in this area is such that they do not often seek, nor rarely welcome venture capital excursions into it. Real estate investment has been left mostly to private equity investors. Many major corporations are pouring investment into India also. There is still plenty of room for venture capital, however.
What is happening in the venture capital market in India is an indication of the global nature of the venture capital market especially in the areas of technology and telecommunications. Many of the ventures in India have involved adapting the internet connectivity to Indian cultural needs. Venture capital funds from Silicon Valley, long reluctant to look beyond their own region for opportunity, are eyeballing India very seriously today.