Volume 14, Number 1 Article by Vinay Deshpande March, 2002
A Fresh Look at IT Entrepreneurship in India :
The initial euphoria over the success of Indian software services companies is over. The slowdown in the economy and the dotcom bust have reacquainted us with ground realities. Most investors and VCs are, understandably, overcautious about new investments. It is time to take a fresh look at Indian venture capital availability vis-à-vis Indian IT entrepreneurship.
Meanwhile, the success of many Indian entrepreneurs abroad, in the IT products and solutions market, has not gone unnoticed and the emergence of a new class of start-up companies has brought a whiff of fresh air to Indian IT entrepreneurship. Although such start-ups do not yet form a new trend, it is important to encourage their formation through a well-crafted strategy. Unfortunately, the VC community in India has by and large stayed away from such enterprises, despite their success. This is all the more puzzling, says Vinay Deshpande of Encore Software, because many of them have affiliations with VC firms in the US, who have vast experience in funding product companies. This may be because most of the VC firms in India lack the ability to judge the technical soundness and viability of a proposed product idea or they may still be hurting from the dotcom bust. However, calculated risks must be taken, in the true nature of venture capital, by having experienced technology entrepreneurs among their partners. They can then also mentor the investee companies. A recent study reveals the potential for the much-neglected hardware segment of the Indian IT industry, as well.
VCs, taking an innovative approach, should survey worldwide trends and markets, identify niche products and seek applications from interested potential entrepreneurs. Business-plan contests and funding of consortiums of existing small and medium enterprises to develop a specific product or set of products, are other ways to further this goal.
The domestic market has come of age now and globalisation has resulted in Indian products competing with international products in the domestic market, on quality and price. Indian IT products can leverage their success in the local market to enter international markets. This effort can be made easier with the assistance of the VC community.
Reprint No 02106d
