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India’s top venture capital funds predict what will rule in 2011.

Alok Mittal
Managing Director, Canaan Partners

Looking back at 2010
Last year has been good for entrepreneurs and investors. We invested a lot on the internet; and e-commerce is finally taking of. I think that’s a big hit, not just for e-commerce businesses, but even for online advertising because e-commerce gives rise to more such advertising. The other notable thing that happened in the year 2010 was that venture investors started seeing exits. For example, public market exits like MakeMyTrip or SKS Microfinance or private exits like Dr Lal Pathlabs. Finally, there is some proof that venture investing works in India and that’s a big endorsement that will allow more money to be invested in India now. This is good news for entrepreneurs.

Opportunities in 2011
I hope this year will be equally positive. There are a bunch of companies in the exit pipeline. If the markets don’t fall through the crack, we should see many more positives stories about venture investing being successful in India. In terms of sectors, 3G should lead to a lot of internet adoptions that should drive a lot of consumption of content on mobile phones. So, that will be one area for investment.

We are also looking forward to social and commercial objectives. People should also start feeling more comfortable with the mix of the two. Hopefully, the MFI issues will get resolved and people will know how to deal with it. That will set the stage for other such businesses so that the bottom of the pyramid starts drawing more and more commercial capital and achieves the scale that they need to.

Canaan Partners’s look-out for 2011
Our objective remains relatively stable over time. In venture investing, the typical time to exit is four to six years, so we don’t really look at economic cycles. Last year the Sensex was up, but one never knows what the Sensex will read, say, six years from now. So, our objectives remain constant—to be behind an entrepreneur where we see good market opportunity. Looking at sectors, e-commerce is one area which has started showing traction so we will continue to look at that. The other focal areas are 3G and MFI. We also look forward to the opening up of the broader bottom-of-the-pyramid investing space in 2011.

A word of caution
Entrepreneurs need to look out for a bubble. If the bubble looks great only in the short term, it never works in the long run. So, entrepreneurs should stay focused on building businesses which will be great value generators over the next five to six years. They should not look at only what’s going to happen in the next six months from a value creation standpoint.

Investment scenario 2011
You will see us doing more early-stage investments in 2011. We have been operational for four to five years, so some of the investments that we made in the earlier part of our existence here are beginning to mature now. We have more than five companies now that are all generating over Rs.100 crore in revenue. So, with them, we will start looking for some exit options now. We believe we have a portfolio which is well-balanced with both early-stage companies and those which will mature soon.

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2011, Alok Mittal, Anand Lunia, Canaan Partners, Indian Angel Network, Indo U.S. Ventures, Lumis Partners, Sandeep Sinha, Saurabh Srivastava, Seedfund, Vani Kola, VC