By Kalpana Shah
Google’s style is usually to pay huge dollops for the startups it finds interesting. In India, though, it has chosen to take an indirect route.
IndiaThe Mountain View, California-based search engine giant is contributing an undisclosed amount to Seedfund, a $10-million to $15-million fund that had its first closing in November 2006, according to sources.
Both Google and Seedfund declined to confirm the investment. “I am not in a position to comment at this point,” said Samir Sood, Google’s man in India who looks after investments.
IndiaSeedfund is committed to investing in very early-stage startups in India, especially innovative companies that primarily serve the Indian market.
IndiaThe Google decision may be unusual for the company, but it’s a smart option at this point in India. Google has its own R&D team in India to offer local systems for the emerging market, but their success depends upon how rapidly and effectively they are adopted.
IndiaThe reality is that India’s Internet market is not yet mature, with only 40 million users going online by the end of 2006, according to the Internet and Mobile Association of India.
IndiaMobile phone subscribers now number 150 million, but average revenue per user is still low at about $5 per month. Startups targeting either market are still not quite as mature as the companies in which Google typically invests.
Google has shown a healthy appetite for attractive opportunities on its home turf. In October 2006, it bought the video-sharing site YouTube for a record $1.65 billion.
Google’s shopping list has been long: wiki technology developer JotSpot, mobile startup Android, web analytics company Urchin Software, text message service Dodgeball, and search personalization sites Kaltix and Applied Semantics.
In China, Google has invested in Xunlei Network Technology to compete better with the leading local search engine, Baidu.com, in which Google also owns a stake.
ChinaHeavy Hitters
If Google has chosen to hitch a ride on Seedfund, it has some great co-passengers. Fellow investors include Motorola Ventures, Silicon Valley Bank, Sierra Ventures, Mayfield Fund, and India-based Reliance Capital and Edelwiess.
Individuals who have invested in the fund include successful Silicon Valley entrepreneurs Kanwal Rekhi, K.B. Chandrasekhar, B.V. Jagadeesh, and Sridar Iyengar.
Silicon Valley“There is a dire need for a true early-stage fund in India,” Seedfund managing partner Pravin Gandhi said in a statement in November. “Entrepreneurs need a lot of support after they start and before they scale up to a size where they can attract a larger VC’s attention. We exist to plug that gap.”
IndiaSeedfund managing partners Mr. Gandhi and Bharati Jacob have run Infinity Ventures, a profitable early-stage fund when the term was not fashionable in India. Another partner, Mahesh Murthy, is a successful entrepreneur and venture capitalist.
India“At the seed stage, teams with big ideas need less money and more mentoring from people who have an entrepreneurial background,” Mr. Murthy said when the fund launched just two months ago. Given the names who have invested in his fund, he seems to be on the right track.