VC funding set to be billion dollar baby in 2008: ET

VC funding set to be billion dollar baby in 2008

The year 2008 is slated to be an interesting year for entrepreneurs and venture capitalists alike. With a mobile subscriber population of over 200 million and a growing internet penetration base, growing middle class and over 70 million TV and satellite homes, entrepreneurs are coming up with innovative ideas and VCs are not stopping short of funding them. In 2007, VC funding in start-ups in India just stopped short of $900 million. In 2008, the VC industry is slated to become worth over $1 billion. And interestingly, it will not be run-of-the-mill IT services. In fact, in a distinct shift, VCs will shy away from investing in IT outsourcing and BPO start-ups due to the rise in value of the rupee. Hottest areas for tech start-ups in 2008

Sector %
Mobile Data Services 13
Online Education 12
E-commerce/M-commerce 12
Online Financial Services 11
Digital Entertainment 11
Gaming 8
Local language internet 8
Search(Web/Local) 7
Ad Networks 6
Enterprise Technology 5
Social Networking 4
Online Travel 3
BPO/KPO 1
Others 1

However, consumer businesses revolving around online education, personal gaming, mobile advertising and payments businesses will gain momentum, thanks to the great Indian middle class. Tax breaks to IT and BPO companies are ending in 2009. Unless that gets revived in the Budget this year, VC investments in the tech outsourcing start-ups will decline. “However, investments in high-end KPO kind of services like analytics, research and legal outsourcing will continue to see traction. But dollar-driven businesses will surely see a decline of VC interest,” says Alok Mittal of Canaan Partners, which is focusing on investing in innovative consumer-driven businesses.

In respect of outsourcing, domain-driven services will attract VC interest, feel experts. Travel, online matrimony and job site market is saturated but some interesting ideas in these areas are sure to attract the VC eyeballs. Retail may also gain momentum when FDI regulations get relaxed. The sector will see greater VC funding. Another interesting trend will be seeing a few teams from top tech companies getting together to start their own venture funds. In terms of mobile VAS sector, the traditional ringtone and caller tune business is passé. GPRS and 3G services companies will gain momentum. But funding in top traditional VAS companies will continue. Digital entertainment and fantasy gaming will also entice investors. Findings of a poll conducted by VentureWoods, an Indian VC networking site (Figures in %) .


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