General News

California’s tech ties to India are about to get a boost

He’s a vegetarian, practices yoga and tweets selfies.

Narendra Modi is so California.

But the Indian prime minister is looking for more than superficial connections when he visits Silicon Valley this month in the first trip by an Indian leader to California in more than three decades.

In a two-day swing, Modi hopes to enjoy the warm embrace of a U.S. high-tech industry that already has strong connections with India and a thriving diaspora community that generally embraces his swaggering style.

The California trip will come on the heels of an address to the United Nations General Assembly in New York.

Facebook founder Mark Zuckerberg announced Sunday that he would host Modi for a town hall-style event at the company’s Menlo Park, Calif., headquarters to “discuss how communities can work together to address social and economic challenges.” Zuckerberg invited Facebook users to post questions, generating more than 22,000 comments in less than 12 hours.

The California-India connection is important to Modi as he tries to drum up more investment in his country, which currently posts the sharpest growth rates of any major economy. As China and other emerging markets slump, Modi, who took office 16 months ago, is seeking to position India as a new hub for manufacturing and the digital industry, vowing to sweep away bureaucratic spiderwebs that have long disheartened foreign investors.

 

The visit also marks the 64-year-old Modi’s ongoing effort to rewrite his relationship with the U.S., which once barred him from the country over concerns about his human rights record. To court Silicon Valley, Modi is not only relying on the region’s existing ties with Mumbai and Bangalore – India’s financial center and high-tech hub, respectively – but also appealing directly to Indian immigrants who are generally supportive of his optimistic, pro-business message.

Few world leaders could pack even one major U.S. sports arena, as Modi did in a speech at Madison Square Garden last year, but he’s expected to do so again Sept. 27 in San Jose. An Indian American group organizing a “community reception” for Modi at the 19,000-seat SAP Center says that more than 45,000 people have sought free tickets.

Modi is also expected to meet with other tech companies including Adobe Systems Inc., whose Chief Executive Shantanu Narayen was born in India, and attend events with Indian American entrepreneurs and social investors. Nearly 3 million people of Indian origin live in the U.S., according to estimates.

For Modi, “it’s a very well thought effort to capitalize on the connection he has with the diaspora and involve them at a point in time when India is perceived to be on a positive track in terms of governance,” said Subimal Bhattacharjee, a cyberspace policy analyst and former India head of General Dynamics, the U.S. defense contractor.

India already has a deep bench of high-tech workers who run the back-office systems of many U.S. tech companies. Modi aides said he is also due to visit the electric car maker Tesla’s facilities in Palo Alto to highlight his plans to develop clean energy.

Analysts say the greater potential for India’s economy – and U.S. investment – is in software innovation.

“We are seeing more and more companies in India become product companies rather than services companies,” said Ajay Chopra, general partner at Trinity Ventures, a venture capital group in Menlo Park.

Silicon Valley money has followed. The Indian restaurant-finder app Zomato, backed by Menlo Park-based Sequoia Capital, recently bought the restaurant review site Urbanspoon for about $60 million in one of the largest-ever U.S. acquisitions by an Indian start-up.

Nitin Pai, co-founder of the Takshashila Foundation, an independent think tank in Bangalore, said that so much of the city’s tech economy is tied to the American West Coast that “when it’s a public holiday in the U.S., you can feel the traffic here is lighter.”

Modi’s challenge is to turn those shared connections into a driver of economic development. He has launched an ambitious series of initiatives called “Digital India,” which aims to expand Internet access, boost electronics manufacturing and develop apps to improve the delivery of government services.

Of India’s 1.25 billion people, about 10% have decent Internet connections, while 40% have only basic connectivity. While U.S. technology hardware companies like Cisco Systems Inc. maintain back offices in India, few have manufacturing plants here – something Modi wants to change in order to create jobs for the 1 million young Indians who enter the work force each month.

Modi pushed his open-for-business message when he hosted President Obama in New Delhi in January, and his government has lifted some limitations on foreign investment.

But when India’s finance minister, Arun Jaitley, visited the U.S. in June, he heard longstanding complaints about his country’s thorny tax codes regime, volatile court system and often shoddy infrastructure. After scaring overseas investors by saying it would seek to collect billions in retroactive capital gains taxes, the government backed off the plan earlier this month.

”They haven’t done anything to impress people here that they are serious about the reforms,” said Kanwal Rekhi, a pioneer among Indian immigrant entrepreneurs in the U.S. in the early 1990s. “There’s a more welcoming tone, but there’s no substance yet.

“They should have the red carpet rolled out [for U.S. businesses], which I don’t see. We want to hear, ‘Here’s the set of rules we want you to play under,’ rather than this random set of rules coming from left field and right field.”

Last month, scores of U.S. university professors urged Silicon Valley executives to exercise caution in dealing with Modi because of accusations in India that he is pursuing an agenda biased in favor of the Hindu majority. Before he became prime minister, the U.S. denied him a visa for nearly a decade over allegations that he did not intervene to stop religious riots that killed at least 1,000 people, mainly minority Muslims, while he was chief executive of Gujarat state in 2002.

Experts say that after much talk of renewing the relationship, Modi “has to be much more specific and clear” about what India offers to U.S. companies, said Homa Bahrami, senior lecturer at UC Berkeley’s Haas School of Business.

“In the last 10-15 years, there has been a huge amount of investment in India, and today we have a critical mass of Indian entrepreneurs in Silicon Valley and indigenous tech companies in India,” Bahrami said. “I would say that’s a great foundation one can build upon.”

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Harnessing two worlds: From India to the United States

According to the India Startup Report 2014, there were 3,100 startups in India in 2014. By 2020, the number is expected to rise to 11,500. In a study by Inventus Capital Partners, the average deal size for a consumer technology company in India last year was three times more than the year before ($5.6 million in 2013 vs. $17 million in 2014).

Why is India the next big startup hotbed? A variety of reasons: evolving technology, availability of funds and a growing economy.

In addition to the reasons above that make Indian startups ripe for success, they are also taking advantage of the positive effects of globalization.

Globalization is continuing to break down boundaries, especially for Indian companies looking to enter the U.S. market. India is undeniably the world’s fastest growing startup ecosystem. As globalization makes the United States market more accessible and this sharp uptick in Indian startups intersect, innovation and entrepreneurism can prosper and grow in both worlds.

Globalization makes harnessing the two very different worlds of India and the United States not only possible but an attractive business proposition. How? Here are three factors:

Tools and Technology

New tools and technologies help to make up the modern office space. High-speed Internet allows for collaborative applications to facilitate a virtual workplace that allows team members to stay productive from anywhere in the world, at anytime. Google Docs, Skype, Trello, Git, Invision, and Amazon AWS are just a few of the applications making this possible. The ability to network beyond the walls of a single physical office and ultimately, a single market, provides a company with a great amount of flexibility.

Indian startups partnering with ventures overseas are more popular than ever. The cost of expanding to new markets is typically too big for a new startup to handle on its own. The best option is partnering with another company that is already there. For U.S. companies, this also gives them a way to enter India’s lucrative startup space. Thanks to new tools and technologies, talking face-to-face online or giving a presentation to potential partners who live on the other side of the world is as easy as knocking on a neighbor’s door.

Diverse Talent Pool

Breaking down the barriers of distance and physical office spaces has allowed Indian startups to access talent from anywhere in the world. Recently, Punit Soni, chief product officer at India’s largest online marketplace, Flipkart, stated that he was looking to attract global talent for the company. With a physically unrestricted, worldwide talent pool, companies like Flipkart can greatly expand their pool of candidates, making it easier to recruit top talent. A global talent pool also increases the chances of finding people who not only share the same vision for the business, but also bring with them the passion and skills required to elevate a company to its highest level.

Companies in India can tap into the same resources that Silicon Valley based startups have been hiring from (think: Stanford grads with computer science degrees). With a diverse team comes diverse perspectives, which allow for expansion and healthy growth of both a company and its ideas. And a company should strive to be as diverse as its users.

International Investors

Just as startups are crossing borders, so are angel investors and VCs. U.S. investors are flooding money into India’s startup ecosystem. According to Forbes, the U.S is India’s number one foreign investor and supporter with more than 11,000 deals. Even more recently, Silicon Valley VC Walden International stated that they plan to increase investments in India, particularly in technology and hardware startups. U.S. investors see tremendous potential in Indian startups.

According to Inventus Capital Partners, by 2020, nearly half (45%) of India will be online. To investors, that represents more than 610 million consumers and users.

Investments come from the other direction as well. Rajan Anandan, the managing director of Google India, was deemed India’s most “prolific angel investor.” The Stanford grad, who is now based in India, has a portfolio of more than 40 investments all over the world, including in the United States.

Globalization has no doubt played and continues to play a major role in breaking down boundaries between India and the United States. India-based companies, like InMobi and the well-established Infosys, have crossed borders and successfully disrupted their industries in both India and the United States – a task that seemed impossible even just five years ago is now within reach. And as the barriers come down, Indian startups are prospering and growing, bringing innovation and entrepreneurism to new markets, including the United States.

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Tech VC Talkback: Part II

Watch our second webinar featuring Inventus Capital VCs Manu Rekhi and John Dougery, and moderated by Brian Solomon of Forbes..

Upcoming Event: Talkback with Top Tech VCs & Andrea Chang, LA Times

invite-pre
Inventus VCs Manu Rekhi and John Dougery will be speaking during an upcoming live webinar with moderator Andrea Chang of the LA Times, about global entrepreneurship and funding. They’ll be on-camera, taking written questions from viewers in roundtable fashion. Topics:

  • The current and future of the tech startup investment landscape
  • Investment tips for entrepreneurs
  • Top startups to watch out for in 2015
  • The rise of venture capital in India

The event takes place on Thursday, March 12, 2015 at 4PM PT. If interested in attending, please RSVP directly here: http://bit.ly/TechVCTalkback

In Search of The Elusive Billion

By Sanghamitra Manda for Fortune India

A pioneer startup support programme is aiming to take four Indian firms to the Unicorn Club.

Bangalore-based mobile marketing company ZipDial (known for its offerings that don’t depend on expensive data connections) ensured that Indian startups began the new year on a high. On Jan. 20, it became Twitter’s first Indian acquisition. The deal, estimated to be valued between $30 million and $40 million (Rs 190 crore and Rs 250 crore), will enable the microblogging site to grow its user base in emerging markets, where smartphone and Internet penetration is low.

The acquisition marks another chapter in the nascent comingof-age story of Indian startups on the global stage. Only last year, Facebook acquired Little Eye Labs (it develops performance analysis and monitoring tools for Android apps), Google bought cybersecurity firm Impermium, and Yahoo snapped up Bookpad, in the same space as Google Docs and Crocodoc.

While such deals validate the quality of Indian tech startups, they are nowhere close to commanding the fairy-tale valuations of, say, WhatsApp or Snapchat. Even when Indian firms have managed to break into the Unicorn Club (billion-dollar valuation triggered by venture capital funding before an IPO), they have typically been confined to the e-commerce or consumer tech space: The Wall Street Journal lists four Indian companies on its Unicorn list, led by usual suspects Flipkart ($10 billion), Snapdeal ($2 billion), and Olacabs ($1 billion), with mobile advertising company InMobi ($1 billion) the only businessto-business (B2B) or enterprisetechnology player.

That skew could soon end as a handful of Indian B2B startups prepares to expand in the U.S. market. The road map has been laid by TiE Silicon Valley (TiE SV, the Valley chapter of The Indus Entrepreneurs, a global not-for-profit organisation that nurtures startups) in partnership with the Indian Angel Network (IAN), a totally different program than the so called nation 21 safe $100 cash borrowed. Their programme, called Billion Dollar Babies (B$B), kicked off in January, and the first class making the cut includes Seclore, Sokrati, Vinculum, and Druva—all of which consider the U.S. a strategic market. They were chosen based on traction at home, track record of having done business abroad, and venture funding till date (see table).

B$B is the first institutionalised effort to handhold young Indian companies in the U.S. So far, the biggest hurdles most of them have faced are cultural differences and difficulty in nailing the productmarket fit. B$B will focus on those areas, says Venktesh Shukla, president of TiE SV. It will help the companies get a soft landing by connecting them with mentors/ advisors, potential customers, and venture capitalists. To build familiarity with the Valley culture, one co-founder from each startup will be stationed in the U.S. till the programme concludes. Success will be measured by revenue growth rate, and early achievement will be assessed by engagement with U.S. customers, clear demonstration of productmarket fit, and the ability to attract and hire talent.

VALERIE ROZYCKI Wagoner, founder and CEO of ZipDial, believes the overseas thrust is timely. While scaling up startups remains an inexact science, the presence of a virtuous cycle driven by two complementary factors—a large addressable market and the availability of funding to support growth—is considered key. E-commerce ventures like Flipkart and Snapdeal have drawn sustenance from this cycle. But for B2B companies, the domestic market alone cannot support exponential growth. “They must go global,” says Wagoner.

Lofty valuations also require generous VC funding. “You need VC money to outrun the competition and acquire market share,” says Wagoner, you also need a huge credit card and you will need some credit cards login instructions by ccbank as well to manage it. “That could be difficult to achieve at home.” Wagoner says Indian consumers are not connected enough to guarantee viral growth without user adoption and serious investment in marketing. “[Scaling up] requires big spend, but only a few investors will fund private companies in India,” she adds.

The U.S. market is ideal as sentiment around startups is booming there after a lull following the dotcom bust and the 2008 crisis. According to the National Venture Capital Association and PricewaterhouseCoopers, venture capitalists put as much as $48.3 billion into U.S. startups in 2014—a record of sorts since 2000, when investors poured $105 billion into closely held companies.

As a result, valuations are skyrocketing across Silicon Valley. For instance, mobiledriven ride-sharing service Uber more than doubled its billing in 2014, ending the year with a valuation of $41.2 billion. Data storage company Box went public in January and its market capitalisation has since surged to $2.7 billion, about 12% higher than the valuation at which investors TPG Growth and Coatue Management bought into the company last July.

Several experts feel the Valley is in a bubble, but the easy-money environment is ideal for startups from India, where funding remains relatively anaemic. A recent study by Nasscom and management consulting firm Zinnov found that software product startups have received funding worth $2.3 billion in India since 2010.

Saurabh Srivastava, India co-chair of B$B, stresses the importance of timing. “Ten years ago, this exercise would have been too early, as the services sector held sway at the time,” says the IT entrepreneur-turned-VC. (Srivastava is co-founder of IAN, the Delhi-NCR chapter of TiE, and Nasscom, the IT industry body.) But the ecosystem has matured and nearly 90% of the startups have moved away from that segment, he says.

“Indian companies that can leverage their skills to develop products for the U.S. are the [real] value creators,” says cloud computing and information security consultant L.S. Subramanian, also the founder of Mumbai-based management consulting firm NISE. “Infosys, HCL, Wipro, and TCS demonstrated this in the first wave of the ICT revolution. Indian startups must adopt the same approach if they want to grow fast and raise big money,” he adds.

It helps that the chosen four are no rookies and can plug into the existing ecosystem of U.S.- facing Indian companies. “[Some] companies have been selling to business customers in the U.S. for more than a decade, and that knowledge will be extremely useful now,” says Manu Rekhi, partner at Inventus Capital Partners, a crossborder VC firm and part of B$B. To add muscle to the programme, Rekhi has reached out to peers at Accel Partners and Helion Venture Partners. Interestingly, all three VC firms are invested in one startup or the other chosen for B$B. If these firms manage to reach $1 billion market value with effective handholding from their investors, it will not only ensure good exits but may also kick off a strategic trend leading to better success rates for Indian startups and, consequently, more funding from global investors.

MEANWHILE, the billiondollar goal has drawn its share of sniggers. “Even in India, big corporate houses or institutional clients are not convinced that home-grown startups can churn out global-standard products,” says a Delhi-based education entrepreneur who didn’t wish to be named. “VCs are only eager to find a safe haven to park their money. Without big customers and big funding, valuations of these companies may dwindle.”

Co-chair B.V. Jagadeesh says VC sentiment is often affected by the lack of a strong exit market, especially for product/ tech startups, but the scenario is changing. “Indian companies just need to invest enough time to build great products—they shouldn’t be in a hurry to exit.”

Asked whether Indian startups have the patience to hold on and grow in a mature market like the U.S., most startup founders refused to comment. Alok Kejriwal, the founder of Games2win who has already Go global if you want to accelerate your valuation. You need VC money to outrun the competition, but only a few investors will fund private companies in India. ZipDial Valerie Wagoner, founder and CEO What do Indian B2B startups need to break into the Unicorn Club? logged two successful exits, feels there’s no right or wrong time to exit. “It’s almost like asking ‘What’s the right age to get married?’ No one knows! What matters is being there [when opportunity strikes] and not want to time anything. Leave that to destiny and market forces,” he says.

Here’s an example that’s fast becoming a case study on the futility of trying to time the market. Phanindra Sama, co-founder and former CEO of bus-ticket aggregator redBus, sold the company to the ibiboGroup—the India arm of South African media conglomerate Naspers—for a reported $101 million. But the sale was described by many as “too early”. (Fortune India contacted Sama via e-mail but got no response.)

Sramana Mitra, a Valley-based strategy consultant and founder of virtual incubator 1M/1M, drives home the real pain points in the redBus case. VCs today are interested only in scale and growth rate, she says. To get a billiondollar valuation, a startup has to tick both these boxes. “redBus raised around $10 million in venture capital and was doing around $10 million in revenue seven years into its lifespan. But it wasn’t growing fast enough, and the VCs ran out of patience. It wouldn’t have achieved a $1 billion valuation in a long time because of its slow growth rate,” Mitra argues. She adds that startups like Druva have a far better chance of achieving the mark as they are growing revenue at a faster clip.

As of now, B$B has not announced a time frame to assess the first class, adding to the scepticism. But Rekhi says TiE SV will invest as much time as it takes to make an impact. “Our goal is to bring out the full potential of Indian entrepreneurs,” he says. “If Israel and China can do it, why can’t India?”

As VC cash pours into India, buyout firms head for exits

Naspers Ltd., the South African internet services firm, had just acquired Manu Rekhi’s India bus ticketing serviceredBus.in, in a $120 million transaction that, amid a din of billion-dollar deals in India over the past 24 months, might have gone unnoticed on this side of the world.

Rekhi, partner at Inventus Capital Partners, the venture capital firm that backed redbus, however, was looking at a problem: $20 million of the exit capital set to come his way was being placed into escrow. Such are the regulations surrounding finance in M&A in India, and, in part thanks to the re-election of Narendra Modi, the nation’s popular prime minister, they are likely to be abolished, reduced to a single-digit escrow percentage more commonplace in American deals. If Modi doesn’t do away with it soon, Rekhi said he’ll impress his point upon the PM himself, when he and other investors meet with government officials to talk about India’s tax code (he said he’ll be joined by the U.S. Bar Association, as well as American VCs).

It is perplexing to listen to Rekhi describe India’s regulatory approach to business — “a top-down nanny state” — and his outlook: “the best is yet to come.”

Still, Rekhi, and a great deal of other VC investors appear to share a similar sentiment, and it comes as Indian markets are soaring, fueled by Modi’s commitment to draw more global capital into his emerging economy, and sparked again by plummeting fuel costs as of late.

Modi’s prolific Twitter account serves as a testament to his dedication to his country — it is far more active, and conveys more emotion than the standard PR-office driven accounts of U.S. politicians. He regularly singles out countrymen (and women) for business and academic achievement, aims to console those affected by national tragedies, calls for Indian infrastructure development — even posts photographs with Internet luminaries likeFacebook Inc.CEO Mark Zuckerberg. And, similar to the U.S. initial public offerings market, India’s economy appears to celebrate youth at a time when startups and relatively young companies are seeing valuations soar.

But even as Modi’s ascension to power appears to invite overseas funds into the country, private equity firms are pulling back. After years of leveraged buyout shops putting more capital to work in India, some are turning to exits, having helped beef up emerging markets companies across a variety of sectors over recent years. While some of the reasons stem from peculiarities of the country’s markets, others are just plain business judgments.

ONE AREA private equity firms have been particularly active is on the healthcare front — although, at a time when more companies are being prepped for exits, these assets are often being readied for an IPO.

HealthCare Global Enterprises Ltd., the Indian cancer care company generating around $200 million in annual revenue, is expected to hire bankers and debut on public markets there in 2015, The Deal previously reported. Backers includeTemasek Holdings Pte. Ltd.

In October,Warburg Pincus LLC, a regular investor in India, invested inLaurus Labs Ltd., which develops drugs and nutraceuticals, Before that,Kohlberg Kravis Roberts & Co. LP took on a minority stake in Gland Pharma Ltd., valued at about $200 million and at the time billed as the biggest PE deal in India’s healthcare space. The sponsor did not respond to requests for comment.

A common characteristic of India’s pre-IPO healthcare deals is an abundance of minority stakeholders, a characteristic that turns off many sponsors, especially in a market half a world away.

At a time when buyout targets are scarce, India’s current regulations make it cumbersome for foreign LBO shops to do little more than pick up minority stakes — which likely accounts for some sponsors’ reluctance to dive into the region as they have in some other emerging markets, like China, according to one person familiar with the industry.

“The unwillingness of most promoters in privately held firms in India to sell controlling stakes in their companies, coupled with the fact that the majority of companies in India are family-owned, has left private equity investors in a crowded space with very few deals to deploy their cash at very expensive valuations,” said Venkat Pasupuleti, co-manager of the Dalton India Fund at Dalton Investments LLC.

And PE investors seeking digital assets run up against strategic competitors looking to make investments, and able to wield famous brands before awed entrepreneurs.

In late November,Rupert Murdoch‘s News Corp. — which owns Dow Jones, the Wall Street Journal and recently acquired Realtor.com operator Move Inc. — put $30 million intoElara Holdings Inc., operator of property portal PropTiger.com. News Corp.’s online deal in the U.S. set it back $950 million by comparison — and even though the company holds only a minority position, it amounts to a 25% stake, which is a lot more than $30 million will buy your company that processed $1 billion in transactions in the frothy U.S. venture market.

Amazon.com Inc., which has bought into everything from daily deals to robot warehouse workers in the U.S., is also taking a gamble on Indian startups. The company is nearing a deal to buy Rocket Internet GmbH-backed retailer Jabong.com in a deal that could surpass $1 billion in valuation, Indian website VCcircle.com reported last month, and, in October, bought QwikCilver Solutions, a gift card company based in India.

Then there’sMoody’s Corp.which was allowed in 2013 to take a stake in a ratings agency. Several sources described India’s debt markets as developing, but increasingly attractive to foreign investors.

ONE U.S. PRIVATE EQUITY firm with plans to develop its role as a lender and asset manager is KKR, which earlier this year revealed plans to provide lending to companies in India at a conference in Mumbai.KKR’s method — reflecting its strategy in the U.S., where it has also provided debt for big LBOs — could become more popular with other sponsors.

Still, 2014 isn’t going to be a banner year for PE investment in India — then again, it comes in the wake of years of a plunging rupee, and slower-than-expected GDP growth that has locked some LBO shops into their portfolio companies longer than they would ordinarily anticipate. So perhaps it’s no wonder that PE is heading for the exits.

The Wall Street Journal recently noted that PE firms, including3i Group plc,Providence Equity Partners LLC,General Atlantic LLCand others are lining up or completing profitable stake sales.

Add Carlyle Group LP to that list. The firm has made several successful exits, includingTirumala Milk Products Ltd.— reportedly producing a 3 times cash multiple on the $85 million the PE firm invested in 2010 — network security firmCyberoam Technologies Pvt. Ltd., andRepco Home Finance Ltd.Those deals were all in 2014, although the sponsor declined to answer questions about its ongoing commitment to the region. Since 2000, according to a source, the private equity firm has spent more than $1 billion on India deals. No different than other U.S. PE firms looking to put capital to work in the healthcare sector, Carlyle found an opportunity — in India, of course, not America — in 2013, taking a stake in hospital Global Health.

Carlyle isn’t the only U.S. shop looking to reap exits in a rising market: according to a recent Reuters report, Bain Capital LLC‘s planned sale of a piece of Hero MotoCorp Ltd., India’s leading scooter and motorcycle maker, attracted enough interest that it unloaded most of its stock, bagging $400 million in the process.

“For three years, private equity investing in India continued and increased,” said Arun Gore, president and CEO of Gray Ghost Ventures, a regular investor in India. “The market is very richly valued at this time.”

That could be part of the reason private equity is having such a time trying to put money to work. Another similarity between India’s deal scene and the U.S.’ is the regularity with which sponsors, for a variety of reasons tethered to a lower Ebitda multiple threshold for M&A, are having a difficult time investing in a market now besieged with strategic investors.

Where PE isn’t getting elbowed aside by the corporate players ranging from Amazon to Moody’s they’re running into hedge funds.Tiger Global Management LLC teamed with Warburg Pincus and VC backers to fund Indian auto sales website CarTrade.com in October. The month prior, Tiger backedQuikR, a classifieds service in India, with $60 million, and the month before that, Hike, a mobile messaging service, with $65 million.

IN GENERAL, BALLOONING valuations are making U.S. venture investors look downright stingy. And the market is likely to heat up even more in the coming years. India’s online economy could one day — soon, some say — dwarf that of America’s.

“Think China, 20 years ago,” said Vivek Wadhwa, a prominent Silicon Valley academic and regular blogger on tech. “That is where India is today. India is about to add half a billion Internet users over the next three to five years as smartphones become cheap as cellphones.”

Digital startups — freed of the shackles of fuddy-duddy family ownership and complex capital structures — will reap the benefits of a burgeoning online economy. It’s starting already. About a year ago, Flipkart Online Services Pvt. Ltd., the Indian online delivery service, was valued at a seemingly paltry $1.6 billion. A year later, it would raise far more than that, shocking industry onlookers.

That was when the company took on about $500 million in funding, across the balance of 2013, a batch of cash only reserved for Silicon Valley’s “honor roll.”

In 2014, Flipkart, has raised more money than even Uber Inc., or at least that’s the case as of Dec. 1 (Uber is reportedly currently in the midst of a mind-boggling convertible debt fundraising, and, simultaneously, a separate equity round). Packing on more than $1.8 billion in capital as its valuation has soared to the $10 billion mark, Flipkart’s cash haul for the year makes the $1.2 billion Uber raised across the first 11 months of the year look like a weak poker raise.

Taking Wadhwa’s comments into account, along with India’s population of 1.25 billion, one might understand how the “next Amazon” might not be found on this side of the world. Of course, it isn’t necessarily Flipkart, and India’s premier business family is making a bet on a different company — albeit, at a very high valuation.

Tata Sons Ltd.chairman emeritus Ratan Tata took a stake of less than 1% inSnapdeal.com, another Indian e-commerce site, in a deal reported in November. The septuagenarian billionaire’s stake in the company is worth just a few million dollars, but it valuesSnapdeal, which has raised hundreds of millions in private funding — at up to $2 billion.

INVESTORS HAVE BEEN burned here in the past. Modi’s challenge, for now, is putting a prettier face on a country with a reputation for rulebooks as difficult to navigate as its roads. Looking at China’s astronomical development over the past decade, it is almost hard to fathom that in 2007, before India’s currency plummeted against the dollar, the pace of PE investment outpaced that of even China. A KPMG LLPreport put PE dollars spent in India at more than $17 billion in 2007; China, just $11.5 billion. A separate Bain & Co. report, from April of this year, highlights another point of pain for LBO shops; the $6.8 billion in exits expected for PE firms in 2013 wasn’t much of an increase and more than half the capital put to work in 2005 was not fully exited. Until PE gets the returns it needs, it may not have the justification to spend more with its limited partners.

In the time since, of course, China’s markets have attracted billions more in foreign capital, headlines and prestige. If India is indeed going to produce an equivalent of Jack Ma’sAlibaba.com Corp., that company hasn’t come to light yet — or, at least, its valuation is in a downright-reasonable single-digit-billions range. So while LBO shops are readying offerings and selling high, VCs feel India’s second go-round could be shaping up just now, with Modi’s re-election. They both can’t be right.

“Investors got all fired up a decade ago,” said Michael Jackson, a partner withMangrove Capital Partners, another regular VC investor in the region, “and then were disillusioned by slow progress.”

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What drew Inventus to redBus, Cbazaar and Savaari: The Parag Dhol interview

Flush with a second fund of US $106 million, and plans to place bigger bets on Indian startups, Inventus (India) Advisors MD Parag Dhol sat down for a conversation with YourStory to share insights

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