Executive Summary

As per our survey, the typical venture fund operating in India had a corpus of under $25m or between $50-75m. However, in the first six months of 2000-2001 it had made an investment of less than $5m and planned to make a matching investment in the remaining half of the year. Typically, the fund was interested in IT and internet related companies, with a minimum targeted investment of $250-750K at the startup, 1st or 2nd growth stage. Maximum investment could go up to $5m and second round of funding could be considered on merit. IRR of between 30-45% would be ideal, with an average length of investment being 3-4 years. While the whole country could be considered for investing in, the southern and western regions were preferred.

The typical fund preferred to be contacted by email though there was no bar on any other mode of contact. It would like to be contacted directly by the entrepreneur or through professional references but was not keen on a dealflow facilitator. Minimum information required would be a 3-5 page concept paper/executive summary or a 10-15 page mini business plan. The entire business plan should not exceed 25 pages. Generally outside consultants would not be employed for due diligence though sometimes they could be, if the fund is in peak work flow mode. On an average, due diligence could take around 4 weeks to complete. More than half of the cases, where due diligence is conducted, get funded by the VC; but up to 3 months are taken between first contact and the actual funding. Generally more than 40 proposals are received every month but only about 10 (2% of the total received) get funded in a whole year! Usually, an IPO is the preferred exit strategy though any other strategy could be chosen depending upon ground realities.

There was a feeling that good quality deals could be sourced in India through networking and industry forums besides active interest being taken by the VC investees. It was further felt that collection, analysis and dissemination of information on the VC industry would be of help to the VCs and that they would not be against participating in surveys about the Indian VC industry.