Two somewhat different points of view. My views follow.
Someone called Mike writes on Techdirt:
The one thing that seems the most interesting to me, however, is the fact that a good number of the companies presenting at the conference are all bootstrapped to this stage. While it's likely that some of them will score large buckets of [VC money], it's good to see at least some startups realize that starting up a company doesn't mean "get VC first." Of course, this may have been out of necessity. Many of these companies were born during the past few years when trying to raise money from VCs was a complete waste of time. The question, though, is whether or not things remain this way, or if the VCs are starting to turn their attention back to earlier stage companies again?
And Jeff Nolan responds:
First of all, the amount of venture capital that has been invested in the last couple of years has been substantial and growing by any measure, so the idea that a startup raising financing is "a complete waste of time" is factually inaccurate. What has happened is that we have reverted to a demand-driven financing environment which simply requires a company to demonstrate that they are fundable, which in many cases requires them to bootstrap early development.
Let me add my two bits worth about early-stage VC in Asia.
In Singapore, where I am based, early-stage venture capital is non-existent. Variety of reasons:
- Investors are risk-averse.
- There really aren't that many potential Googles out there in Singapore and the rest of South East Asia.
- Investors see a bunch of lower-risk but still fairly high-return opportunities outside traditional technology-based, Silicon Valley-type investing.
So truly innovative technology start-ups have had to bootstrap or tap angels, grow for a few years and only then consider approaching professional investors. I myself am working with a couple of companies that fall into this category.
In India, early stage VCs are slowly making their presence felt. I get the feeling that early stage VCs in India are primarily corporate VC arms. People like Intel Capital and Analog Devices have been there for quite some time. Others like Nokia and Cisco are now entering the market.
Established non-corporate/standalone "VCs" in India have so far been late-stage private equity players and not early stage VCs of the Kleiner Perkins or Sequoia variety.
A lot of money has gone into growth stories and I believe buyouts will slowly become a part of the scene as well. This isn't really about risk-averseness. It's about making "easy" money (in quotes because, well, is it ever that easy?!) by investing in less risky, later-stage ventures that still manage high IRRs because of India's booming growth in areas such as BPO and IT.
Another factor might be that, due to India's cost structure, a technology start-up in India would not be able to absorb the type of capital investment that Western VCs are typically used to making. A million dollars in India goes a long way. And the same VC can't sit around evaluating and making hundreds of $50K investments. It just doesn't work.
Now that early-stage VCs are (re)entering India, I'm curious to learn what kinds of companies are actually funded by them, at what stage and at what valuation.
In China, where my knowledge really isn't that deep, both early-stage VCs and late-stage PEs are making investments, and have been doing so for some time. In some areas, the market has been heating up, particularly in the Internet and wireless sectors. Steven White at INSEAD has done a formidable amount of research on VC in China. This paper from INSEAD Knowledge is one example.
Looking back up at this post, I've really rambled away from the original topic! Well, as long as it's useful to at least a few readers...
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