TiE plans to revive early stage funding

In its continuing efforts to keep the entrepreneurial fire burning bright in India, The Indus Entrepreneurs (TiE) is taking up the raging issue of drying up of early stage venture funding in India.

This group of successful technology entrepreneurs from the subcontinent in the Silicon Valley, who have been playing angel investors in start-up companies and enabling technology businesses in the subcontinent, are planning to take up the issue with US-based VC funds to revive the initial funding for Indian technology firms.

Said Sridar Iyengar, president, Global Board of Trustees, TiE: "It is true that initial funding for companies is drying up in India as elsewhere. There are few VC firms who are looking at funding companies in their infancy and this is causing problems for companies in kick-starting their plans. We at TiE are taking up the issue with US-based venture capital firms and will try to revive early stage funding for Indian firms."

In the recent past, initial funding has dried up for start-ups as private equity and venture capital firms have increasingly looked at mature companies to invest in.

Said a VC investor: "One of the reasons this shift has taken place is that the VC firms found it increasingly difficult to get a good exit from start-up companies. These VC firms were looking at companies which can scale up and give them healthy returns as well, which small firms could not match."

An indication of this is that in the latest quarter, 17 companies in India raised investments of $10 million or more.

Investments were spread out across sectors ranging from manufacturing to pharmaceuticals to engineering and construction services. Late stage investments continued to dominate with as many as 13 investments during the quarter going into publicly-listed companies.

Added Iyengar: "The Indian IT scenario is on strong footing and mergers and acquisitions are likely to be more prevalent in the near future. However, entrepreneurs must realise that there is no going back to dotcom valuations."