The Year Ahead: What's Hot in India?

VC investment in India has been rising steadily after a steep decline in 2000-'01.  But most of the ~ $1B invested in Indian tech companies in 2005 has been late-stage private equity or buyout money, although there were some notable early or mid-stage deals as well, such as MakeMyTrip.com, an online travel site, by Softbank Asia Infrastructure Fund and Nevis Networks, a LAN Security Systems developer, by us at BlueRun and NEA.

What's looking promising in India in 2006?

• Consumer Internet: Internet and PC penetration remains low in India, but growth rates are encouraging.  A landrush is on to copy successful US or China based internet companies; this approach was tried - and failed - in the boom of '99-'00.  I predict that the interesting Indian internet businesses will be hybrid businesses, combining a variety of communication assets, not just the Internet; and these businesses will address needs unique to the Indian market rather than being mere copycats of Western models.
• Mobile Value Added Services: Value-added services (VAS), such as ringtones and ringback tones, are big sources of revenue to Indian wireless carriers.  Practically everywhere else, including the US, Korea and Europe, startups have managed to grow big by getting a significant chunk of this revenue.  In India, however, the VAS provider market is fragmented and the carriers reluctant to share the pie and hence encourage innovation.  It's time that some brave souls in India banded together to replicate the success of global players in the VAS ecosystem like WiderThan (a BlueRun portfolio company).
• Component Manufacturers for ODMs/OEMs: India is (finally!) getting significant high-tech manufacturing investment from big players like Nokia, Foxconn, and AMD.  The plants these ODMs and OEMs set up should source components locally, if possible, and that creates an opportunity for innovative low-cost component suppliers.
• Fabless Semiconductor Companies: Big companies like TI and Intel have nurtured a technical talent pool in India in their 15+ years of local operation.  We are likely to see startups that partner world-class chip architects who depart these companies with business managers who understand the likely markets in North America and Europe.  Often, at least some of the team members will have spent part of their careers in Silicon Valley.
• Clean Technology: India's growing hunger for energy, its problems with pollution and waste management, and the domestic research base in electrochemistry, photovoltaics and efficient power generation provide fertile soil for clean technology startups.
• Software: The staple of the Indian tech boom.  My bet is that as the large number of relatively undifferentiated offshore development companies consolidate, among the survivors will be companies that translate market knowledge gained by working with their customers into software products or services that can form the foundation of a scalable business.

Comments

[VeerChand Bothra]

The Indian market is ripe for innovation in the VAS segment. With tariffs and ARPUs falling, there is nowhere else to look but at VAS.

Related: Things to watch out for in the New Year.
http://www.mobilepundit.com/2005/12/30/things-to-watch-out-for-in-the-new-year/

Veer.

[neeraj]

just wanted to mention that your post has been picked up at SlashIndia.

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[Ashish Tomar]

Well from my position in Nokia as a Technology Strategist and new concept development, in last couple of years I have come across some very interesting Semiconductor Companies in India.

I would love to see a paragraph or two on the current state of clean technology companies in India.

Cheers
Ashish Tomar