Passage to India"
Three VCs at Woodside Fund just got back from a five-day trip
to India. This was not one of those delegations of U.S. VCs who trundle
around Asia in a tour bus that might as well have a sign saying "Rich
White Guys on Board." No, Woodside was keeping it real. The unofficial
guide through New Delhi and Bangalore was Ashish Gupta, a Woodside
venture partner who has founded two startups in India and has several
contacts there. His fellow travelers were John Occhipinti and Tom
Shields. Deal Flow spoke with them today to find out what's up on
March 15, 2005
By Justin Hibbard and Sarah Lacy
First of all, they confirmed a lot what Rahul Bhasin, a VC at Baring
Private Equity Partners India in New Delhi, told us last week. Namely,
entrepreneurialism still isn't as widespread in India as in the
U.S. "The younger talent coming out of the universities are
more disposed to work for large multinationals," Occhipinti
says. That said, these guys spoke with technologists at some large
multinationals in India (e.g. Sun Microsystems and Oracle) who are
getting the bug to go out on their own. Entrepreneurial types in
India have been encouraged by some recent high-profile acquisitions,
such as eBay's $50 million purchase of Indian auction site Baazee.com
The Woodside trio also confirmed what BusinessWeek writers Pete
Engardio and Bruce Einhorn wrote in this week's cover story: large
multinationals aren't just farming out manufacturing and service
jobs to India; they're farming out product development, too. That
could stoke India's entrepreneurial fires. "As people in multinationals
start doing real innovation, they're going to want to spin out and
do that on their own," Shields says.
If so, India may produce more product companies. So far, service
companies like Wipro and Infosys have been India's big success stories.
But already, a business model that combines products and services
is emerging in India. Take business software, for example. In the
U.S., companies pay twice for software: first they shell out to
a software company for a license fee, and then they pay about ten
times that amount to consultants who customize the software. Many
Indian consultancies now combine those steps and reduce the software-to-service
price ratio from 1:10 to about 1:2. Rather than customizing applications
from, say, SAP, they simply tailor their own home-grown software
to customers' needs.
Not that India isn't still turning out interesting service companies.
Case in point: Gupta hipped us to MeritTrac, a 4.5-year-old Bangalore-based
startup that helps companies assess candidates for recruitment.
The company is currently in the market to raise some VC. Though
it makes only about US$2 million in annual revenue, potential investors
are valuing it at up to four times that amount. Seems there's generous
money to be had if more cubicle dwellers are willing to take the