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Venture Capitalists in India need to identify the right companies, very few Indian VC's on Forbes list

Monday, 5 May 2014 - 3:31am IST | Place: Bangalore | Agency: dna

Though Indian American venture capitalists have been doing well and have been a constant feature on the Forbes annual list of 100 best investors in the world, very few Indian VCs sitting out of India have ever made to the list. Last year, Flipkart's investor was the only Indian from India on the list.

So, what's wrong?

"The problem is not so much with the nationalities as much it is with the markets. India has not been able to produce companies like WhatsApp, Twitter. Hence, till there are such companies, there will be no such VCs," explains Kunal Walia, managing partner, Khetal Advisors.

In fact, 11 Indian American venture capitalists (VCs) and investors feature in the latest Forbes list of best investors in the world. Called the 'Midas List', it takes into account investments the investors have made in startups that have struck gold.

The 'Midas List' has been topped by Jim Goetz, partner at firm Sequoia Capital who was the only institutional backer in messaging service WhatsApp. Goetz's combined $60 million in three rounds to support WhatsApp "epitomises the Midas touch", and WhatsApp's $19 billion price tag in an announced sale to Facebook means Sequoia's sitting on $3 billion in Facebook stock.

Among the Indian-Americans on the list is Aneel Bhusri,ranked 17, co-chief executive officer, Workday - a cloud-based financials and human resources software firm.

On the 22nd spot is Wharton School graduate Deven Parekh, managing director of Insight Venture Partners. The 44-year old debuts high on the Midas List this year, thanks to an early 2009 investment in Twitter as well as investments in microblogging platform Tumblr and personalised magazine Flipboard.

According to Sharad Sharma of iSPIRT, Indian VCs have to identify the right company and take the risk to back it in order to be successful. For instance, InMobi, which today is rated highly successful has no Indian investor making an investment in the company. In fact, a company like Zoho has still not able to find any Indian VC showing faith in it so far.

"This shows somewhere down the line we lack somewhere. Of course, companies like Flipkart, Myntra have shown the door, but there are many out there who are equally brilliant," remarks Sharma.

The Indian startup ecosystem is still evolving and by no stretch is it a perfect evolution. "We have seen a rush of investor money, and subsequent stretches of drought. So, I would say that VCs in India are still concerned with the lack of exit opportunities," says Ravi Narayan, director, MS Ventures India.

Moreover, startups in India are more focused on late-stage investments because in comparison with the Silicon Valley, they tend to be focused less on innovation and more on application development and efficient delivery models, which take less time to develop into the revenue generating phase.

"We need to understand that due to the lack of adequate infrastructure, several ideas fail to take off in the early stages and this affects the overall pipeline of startups that reach the funding stage. We need to do more to provide hand-holding support for innovators," says Narayan.

However, Indian companies like Flipkart, Makemytrip, Myntra are getting there and "hopefully in a year or two we might see billion dollar exits."

The list of Indian-Americans on the list are Promod Haque ranked 27, Navin Chaddha (30), Neeraj Agrawal (37), Sameer Gandhi (41), Asheem Chandna (55), Venky Ganesan (57), Vinod Khosla (63), Salil Deshpande (67) and Gaurav Garg (86)

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