The tough phase of lack of funds for entrepreneurs continues as the economy forces venture capital firms to spend more money with longtime holdings. This makes it tougher for startup firms to get a mind share of venture funds. The 2009 Global Survey states that most VC firms are willing to invest only in fewer companies, while only 13% of them plan to invest in larger number of companies. We discuss the individual investment strategies with Intel Capital’s Director Sarayu Srinivasan. She tells us about how exciting she feels the Indian market still is and how she makes the right calls when it comes to investment in companies. She also discusses role of investors in start ups. Here is an interview with her -
1) Could you share your views on the Indian internet and mobile startup scene in India?
Mobility and the internet have been key priorities for us in India with Wimax an important area of focus worldwide. Companies offering mobility solutions not only help propagate basic communications and portability in emerging markets, but are, more broadly, solving fundamental inefficiencies and providing hither to unknown accessibility, actually developing new markets and fresh paradigms. These technologies are playing a key role in shaping and defining life in emerging markets so obviously they are very important.
2) What are the internet and mobile startups that Intel has invested in India?
Some of the investments we’ve made in these spaces recently include IndiaMART (B2B ecommerce marketplace), Yatra (online travel portal), and One97 Communications (VAS platform). Earlier investments include Sharekhan, Rediff and India Infoline.
3) What in your view are the key elements for a startup to raise VC money in today’s times?
First of all, each situation is going to be different and influenced by many variables. Sectors fall in and out of favor; pain points vary in scope, degree & urgency; the developmental stage of a company dictates resources needed; and the markets themselves set hurdles and benchmarks. Additionally the bandwidth of investors is an important variable. All of this will have an impact on the way money will flow. In general, today the bar is higher for an early stage company to raise money. A company that may have gotten funding a year ago may now find, particularly in the absence of a revenue stream, that there is less enthusiasm and more to prove to gun shy investors that are tending to their own wounded flocks. Faced with the prospect of drawn out exits and a less forgiving business environment, an investor may want risk mitigation in the form of revenue or concrete commitments of such, accelerated growth plans, solid & visible financial and operational controls, and shrewd all-weather teams that have the ability to both adapt and cut bait quickly. A good company, however, will be able to raise capital.
4) Has the recession affected your long term view of the Indian market?
I continue to believe that India is an incredibly exciting market and still presents one of the best investing opportunities in the world. The downturn simply floats the strongest companies to the top faster. As cliché as it sounds, these times are truly golden opportunities for the most nimble companies. Companies that can cost effectively invest in innovation through the downturn will emerge on the other side stronger and better positioned to address the new market realities. I believe India is a fertile breeding ground for such companies as Indians are not only great innovators but have an innate ability to adjust to prevailing realities, to live on a shoestring, to retrench and transform as the environment dictates. The survival instinct is very strong. I am constantly amazed at this resourcefulness and resilience, and surprised we don’t talk about this more in our industry. It is certainly a stark contrast to the way we operate in the US where pulling the credit card may very well be sending the company to the brink of collapse. In India if a company needs to cut back from five to two, they will make do with two somehow, thank you.
Institutionally, I believe that we are comparatively better positioned and have a better understanding of this region – we’ve seen this manifest of late as fellow investors look to reduce their commitments in the geo or pull out completely. Obviously there is a recognition that the path to exit is not as clear cut as before but our unique ability to hold and continue to support our portfolio in the mid to long term puts us in a strong position.
5) What are the various sectors that you find lucrative in the indian space?
Personally I have a soft spot for all types of analytics companies. Consumer internet, mobility and cleantech/renewable energy also figure high up on the list.
As an organization in India we are interested in a variety of technology sectors that have strategic relevance to Intel amongst which we have prioritized the education, greentech/cleantech, mobility/WiMax and consumer internet spaces.
6) As a VC what are the value additions that you bring to the startups you work with?
Intel’s value proposition is unique. We differ from a traditional venture or private equity shop in a number of ways. First, we have institutionalized the notion of company building. We can create instant scale for our portfolio companies through programs such as our ITDS (Intel Technology Days) where we can facilitate revenue and cooperation opportunities between the portfolio and customers en masse. Second, we have unparalleled global presence with local reach, know-how and customer access. Third, our technology talent and expertise is basically an extension of resources for our portfolio. Fourth, we can hold; we can support our best companies through cyclical events financially and otherwise. We have the ability to be true partners without the pressure to do a quick flip.
On an individual basis, I am very seriously committed to the success of my entrepreneurs and companies. I view the relationship with my entrepreneurs as one that is beyond business – they are family and I share the passion – their victories and losses are mine too. I often tell my companies that while I am not on their pay rolls as an operating executive, I strive to deliver like one.