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Everthing ventured, nothing gained...

Neha Kapoor

MUMBAI, May 6

THE Indian IT boom has come and gone leaving in its wake dried up coffers which once over flowed with money pumped into funding a string of `hot ideas'.

Ventures have gone bust and people have lost money. Where the past couple of years saw a lot of opportunistic venture capital (VC) firms mushrooming in the country, the situation has now reached the other extreme. Over cautious VCs have clamped up and ar e `rethinking' their investment strategies.

``Everybody has lost money and now is reacting even more unwisely; by refusing to fund anything,'' according to Mr Mahesh Murthy of the Angel Investor Firm, Passion Fund.

``The days of easy money are over. This is true for both ventures and venture capital firms. In the US alone the number of VC firms has decreased by a third in the last eight months. A lot of Indian firms are still in the market trying to close their sec ond rounds. And the less said about the ventures the better,'' said Mr Manoj Agarwal, Partner ePowerN, a venture catalyst firm.

In retrospect, many VCs agree, though reluctantly, to having made mistakes ranging from funding opportunists with business plans as opposed to experienced people who saw new business opportunities and rushing to fork out funds to blindly replicating US m odels in India.

So, where to from here? ``The pendulum has swung to the other extreme. Today most VCs are lost on what to invest in -- service models are out; IT is out; call centers and remote services are out,; broadband is out; genomics is in but nobody understands i t," said Mr Agarwal.

According to Mr Sanjaya Kulkarni, Managing Director, India Direct Equity Advisors Pvt Ltd, ``in India there are very few VCs in the early stage investment and most of the investment is in the later stage. Also, investments are skewed towards services are a rather than technology and product areas. This is consistent with the Indian IT industry which is well known for its services. The Indian scene has to evolve substantially over the next few years.''

``I think it will be another 12 months for people to risk being entrepreneurs again and also to realise the type of models and businesses they want to back,'' according to Mr Agarwal.

The need of the hour is maturity on part of the VCs in terms of evaluating ideas and investments, managing and nurturing organisations and adding value to investments beyond lip service.

``People are gradually going back to the old school of business and investing where greater attention is paid to due diligence. Also, VC will need to look at the macro scene i.e. companies that are more global in potential rather than domestic,'' said Mr Raj Duggar, Director, WestBridge Capital Advisors. ``It's time to raise the bar still higher.''