Start-Ups in India, Tenacity May Trump Underlying Technology

Anita Raghavan reported on the front page of the business section in today’s New York Times that,”…[u]ntil now the Indian start-up market has been more about great execution than cutting-edge technology.

“‘In Silicon Valley, the general investment thesis for a technology investor tends to be around how strong a company’s underlying technology is and how defensible it will be over time,’ Will Poole, Unitus Seed’s co-founder [a venture capital fund started out of Seattle that invests in Indian companies], explained later. ‘Very rarely does a venture capital investor invest in an operating business that does not have an intellectual property moat.’

“In emerging markets like India, however, ‘you can build very large and profitable businesses on an operating basis without having a fundamental or long-term technological advantage because you are building in greenfield areas with little or no competition,’ he said.”

Today’s article noted that, “Last year was a heady one for venture investing in India; investments rose 61 percent, to $1.9 billion, from $1.2 billion in 2014, according to Venture Intelligence, a Chennai-based company that tracks Indian venture activity. About $95 million of the total represented investments and co-investments in the social impact space by traditional V.C.s and specialist firms like Unitus Seed.

“Most of the capital flowing into India comes from offshoots of American venture firms. This has led to a generation of homegrown versions of United States companies like Flipkart, the Amazon of India, getting funded.”

The Times article added that, “But that may be changing. Speaking in Bangalore last summer, Chamath Palihapitiya, the founder of the Palo Alto-based venture fund now known as Social Capital, said he would like ‘to put a billion dollars to work in the next 10 years here, plus or minus.’

“Yet he told the crowd of entrepreneurs that the kinds of start-ups he would be investing in were companies that were ‘so unique and unexplainable in a Harvard Business case to a bunch of Americans.'”

Recall also that The Wall Street Journal reported last month that, ” “Lured by a flood of venture-capital funding, relatively inexpensive labor and the size of the potential market in the world’s second-most-populous country, entrepreneurs and technology workers with Indian roots have been coming home in increasing numbers.”

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