WNS Global Service said Wednesday that it will buy Marketics Technologies for $65 million, improving the Indian business process outsourcing company’s analytics services.

WNS will pay $30 million for the Bangalore-based firm when the deal closes in three months, and an additional earn-out payment of up to $35 million over a 12-month period.

"This acquisition will enhance our knowledge services leadership, help us penetrate new consumer-centric industries, and move us further up the value chain in our service offering,” WNS Group CEO Neeraj Bhargava said in a statement.

Founded in 2003 by tech professionals, Marketics attracted serial entrepreneur K. Ganesh as an investor and board member in 2005. Marketics counts Fortune 50 companies among its clients and delivers marketing analytics systems that aim to increase its clients’ profitability and return on marketing investments.

For WNS, a back office services company that started life in Mumbai as an offshore support provider for customers of British Airways, the acquisition of Marketics will add to its services in market research, business and financial research, and analytics.

Adding Expertise

The Marketics acquisition also will add expertise in industries such as consumer goods, retail, media, and entertainment to WNS’ existing talents in the travel, banking, financial services, and insurance industries.

In July 2006, WNS was the first Indian business process outsourcing (BPO) company to list on the New York Stock Exchange, raising $224 million.

According to a report by the research firm GlobalSourcingNow, the global knowledge process outsourcing (KPO) industry is expected to reach revenues of $17 billion by 2010, of which $12 billion would be outsourced to India. Apart from India, countries such as Russia, China, the CzechRepublic, Ireland, and Israel are also expected to contribute to the KPO industry.

The numbers help explain why WNS needs a company like Marketics. Low-end outsourcing services such as call center staffing and even some back-office work such as payroll outsourcing are expected to grow to 26 percent by 2010, according to GlobalSourcingNow.

Qualcomm has awarded Indian software services giant Tata Consultancy Services (TCS) a $100,000 grant from its BREW application funding program.

BREW (binary runtime environment for wireless) is a technology for wireless applications development, device configuration, and game development. Qualcomm has developed BREW, as well as the CDMA (code division multiple access) standard for the telecommunications industry, along with other advanced wireless technologies,

Qualcomm’s funding program challenged developers to create the most innovative BREW public service application in one of five areas: healthcare, education, public safety, governance, and the environment. TCS emerged as the grand prizewinner.

Led by Arun Pande, TCS’ head of advanced technology and applications, the application development team will demonstrate how CDMA networks can help provide specific and useful advice to farmers and spread the benefits of technology deep into rural India at an affordable cost.

For the grand prize, Qualcomm will also apply additional funds to put TCS’ proposal into action through a new or existing wireless project.

Wireless Soil Helpers

As cell phones begin to reach India’s hinterland, they’re being used not just for communication but also to enhance people’s quality of life.

“India virtually redefines the cell phone, extending it from a mere voice device to a multi-function, media-rich ubiquitous personal productivity and entertainment tool,” said Sridhar Pai, who runs the Bangalore-based research firm Tonse Telecom. “In rural areas, it will also be used as an access point for healthcare and education.”

That in fact is what TCS plans to develop. One system under development will use soil sensors to monitor moisture content and salinity. The data will be transferred to a central server via a mobile phone so the data is linked to a particular farmer. Experts can then access specific data and advise the farmer on the kinds of crops that are ideally suited to his or her patch of land.

“This will increase productivity, something that’s lacking today because farmers have little access to experts,” said Mr. Pande.

Another BREW application being developed relates to weather forecasting for farmers. Once again, a GPS-based system will assist a remote expert in giving accurate advice about sowing and related activities.

Pesticide Advice

A third application aims for the appropriate and minimum use of pesticides. Farmers will take pictures of crops and transmit them to an expert who has the above data. The correct dosage of pesticides can then be prescribed.

“Farmers use pesticides indiscriminately today and that’s leading to soil degradation,” lamented Mr. Pande. He hopes the new systems will help farmers bring their farmland back to health. He’s optimistic about using technology to solve earthy problems. “The wireless revolution will change the way India’s farms are run,” he said.

Other winners of the Qualcomm grant were:

·          Indonesia’s Bandung Institute of Technology, where Ph.D. student Ria L. Moedomo will build an application process and analyze poultry sales and distribution process to track and combat avian flu.

·          Beijing’s InfoQuick SinoVoice Speech Technology, where CEO Lenny Zhang and his team are building an application called Sbikit. It uses text-to-speech and automatic speech recognition technologies to assist visually impaired people communicate.

·          San Francisco-based BeWell Mobile Technology is building Asthma Assistant and Diabetes Assistant applications. The patient engagement software can be adapted to a broad range of uses for health, wellness, education, research, preventive care, and chronic disease management.

Hindustan Semiconductor Manufacturing (HSMC), a consortium founded by a group of overseas Indians led by Devendra Verma, said it will invest over $4 billion to set up a semiconductor-manufacturing plant in India now that the Indian government has announced its chip policy.

The company has been in stealth mode for several months. Its partner in the joint venture will be one of the top five chip companies in the world, said Mr. Verma, and a firm announcement will come in a few weeks’ time. He declined to name the mystery partner.

Last week, the Indian government announced its long-awaited chip policy, saying it would pick up 20 percent of capital expenditures for manufacturing facilities, if the minimum investment by companies totals $550 million (see India Reveals Chip Policy).

The policy will help India become more competitive with other emerging countries like China in the battle for chip-manufacturing plants.

Negotiations are also on with Indian state governments, several of which are eager to have a chip fabrication facility, or “fab,” that can catapult them into becoming a top manufacturing region in India.

On top of the Indian government’s 20 percent subsidy, state governments can decide on a further subsidy in the form of cheap land, water, and electricity, all of which can bring down the infrastructure cost and make the plant more competitive.

Huge Potential

Raj Khare, chairman of the Bangalore-based India Semiconductor Association (ISA) and a vociferous advocate of manufacturing plants in India, believes that apart from multinational companies, large Indian conglomerates may decide to invest in fabs too because of the huge domestic market potential.

A study by the analyst firm Frost & Sullivan in February 2006 said the Indian electronics industry will grow to $360 billion by 2015, with the chip sector worth $35 billion to $40 billion.

Currently, India has only a couple of government-owned fabs that cater to the defense sector. The big sales numbers, coupled with attractive incentives to start operations, will soon attract a lot of investors, said Mr. Khare. At least two more semiconductor manufacturing facilities are expected to be announced in the next few weeks, he added.

“We will see investment coming in not just for chip manufacturing, but also in the entire electronics ecosystem,” said Poornima Shenoy, president of the ISA.

According to Mr. Khare, a manufacturing base in India will greatly help the 100-plus chip design firms in the country to bring out their own products, simply because testing and packaging will be available not only nearby but also at Indian prices.

India has about 125 companies doing design, including multinationals, domestic companies such as Wipro and Sasken, and a handful of Silicon Valley startups with Indian research and development centers.

In 2005, giant multinationals like Texas Instruments, Intel, Cypress, Infineon, and STMicroelectronics comprised about 70 percent of the total semiconductor design industry in India. Approximately 30 percent was produced by home-grown companies, noted the research firm iSuppli. All of them stand to benefit if nearby manufacturing becomes possible.

“So far we were after the low-hanging fruit of design,” said Mr. Khare. “Now we’re gearing up to compete with the best in the world. We’re ready to join the big boys.”

A year-long wait for the Indian government’s semiconductor policy finally ended Thursday.

Dayanidhi Maran, federal minister for IT and telecommunications, announced that the government would pick up 20 percent of the capital expenditures for manufacturing facilities—if the minimum investment by aspiring companies totals $550 million.

The sum seems small, however. The minimum investment that the country’s first private sector fabrication facility, SemIndia, envisages is $3 billion. Known as the Special Incentive Package Scheme, the initiative aims to attract investments for setting up semiconductor-manufacturing plants and allied industries.

The policy has not yet been described in detail, but the Indian government has outlined the broad contours. Details about specific monetary incentives will come in another two weeks’ time. Broad acceptance of the suggestions made by the India Semiconductor Association (ISA), however, has unleashed a wave of optimism in the local industry.

“We are very excited that the semiconductor policy has been announced, and I am sure that it will send the right signals to those who have been waiting to make further investments in India,” said Raj Khare, president of the ISA.

According to the policy document, participating companies will have to set up manufacturing units in special economic zones (SEZ) to qualify for extra tax incentives and tax holidays. The subsidies will come in the form of tax breaks and interest-free loans.

“The policy announcement will give a major fillip to high-tech manufacturing in the country, which can become a significant contributor to the Indian economy,” said SemIndia CEO Vinod Agarwal. SemIndia has proposed building a fab near Hyderabad, the capital of the southern state of Andhra Pradesh.

Lobbying Hard

Ever since a joint study conducted by the ISA and Frost & Sullivan in February 2006 pointed out that chip consumption in India would rise from $2.8 billion in 2005 to about $36 billion by 2015, the semiconductor industry has been lobbying hard to convince the government that it makes sense to manufacture those chips within the country rather than import them.

“If this takes off, the semiconductor industry will be one of the largest job creators in India,” said Mr. Khare. “We believe manufacturing will create 3.6 million direct jobs and another 5.6 million related jobs. Having a fab in India will complete the loop that semiconductor design and testing companies had started rolling out rapidly over the last decade.”

Mr. Maran believes the Indian market can easily absorb production from two or three fabs. “We expect foreign direct investment of $10 billion coming into the country for semiconductor and allied manufacturing,” he said.

SemIndia investors are pleased with the new policy. Bob Kondamoori, a managing partner at Sandalwood Partners, a venture capital firm that has committed $10 million to the proposed fab, points out that the venture capital community had been waiting for a “focused policy with the right package of incentives, and this progressive policy will motivate many more investors like us to look at India as an attractive investment destination in this space.”

He thinks the time is right for India to ramp up its chip manufacturing.

“With growing consumption of IT and consumer electronics, India is now ready for semiconductor production,” he said in a statement. “The policy will also give a boost to the fabless industry in India as it will enable prototyping and market testing for new products.”

Competing with China and Taiwan

Not everyone is convinced, however, that India really needs to spend such huge sums on manufacturing when its Asian neighbors, Taiwan and China, are already way ahead in the game and can supply extremely low-cost chips.

“I think we should build on our strengths, which are in design and testing, and leave manufacturing to those who are most efficient at it,” said Vinod Dham, a Silicon Valley-based venture capitalist. His firm, NewPath Ventures, has invested in design startups such as InSilica, Montalvo, and Telsima.

Others doubt if the infrastructure will ever match a fab’s needs: a clean and plentiful supply of water, lots and lots of power, and an efficient supply chain that requires good roads, airports, and seaports.

At the ISA-organized Vision Summit in Hyderabad two weeks ago, the chief minister of that state promised to put the government machinery behind making the SemIndia project a success.

Whether the fab will succeed or not will depend upon whether there is sufficient demand for the chips it produces.

More questions will probably spring up over the next few days: Will AMD, the Sunnyvale, California-based semiconductor company, commit to buying a certain number of chips in addition to supplying its technology to SemIndia? Will Intel finally bite the manufacturing bullet in India? Are some dark horses waiting in the wings for just such a policy before they jump into the fray?

New Enterprise Associates said Monday that it will expand the venture firm’s operations in India.

NEA (India) will invest about $200 million over the next two or three years in technology firms. A full-time vice president, Ben Mathias, will be based in Bangalore to identify mid- to late-stage deals across several tech sectors.

The India expansion is in line with Menlo Park, California-based NEA’s strategic plans to develop a presence in the emerging markets of India and China.

“We have been selectively investing in India for many years and believe the country offers an attractive environment for venture investing,” said NEA Managing General Partner Peter Barris in a statement.

NEA has already invested in some Indian and Indo-United States cross-border companies such as Sasken, Telsima, Nevis Networks, Protostar, InSilica, and GlobalLogic.

The firm also recently announced that NEA 12, NEA’s most recent fund, became a 20 percent stakeholder and one of the largest investors in NEA-IndoUS Ventures, a venture capital fund focusing on early-stage technology companies that share roots in both India and the U.S. For early-stage investments, NEA will rely on opportunities through NEA-IndoUS Ventures.

Looking for a Teammate

NEA’s U.S.-based team, which includes Mark Perry, Ravi Viswanathan, and Krishna Kolluri, will consult with Mr. Mathias to identify opportunities that deliver innovative technologies to address India’s urban and rural market needs.

Mr. Mathias said that the firm was also looking for a venture partner in India to join the team later this year. Such a partner would be a successful entrepreneur who would be willing to join the boards of portfolio firms and devote time to them.

She or he may even help sign some deals and personally invest in the companies. “This model has worked very well for us in the U.S., and we have no doubt it will in India too,” said Mr. Mathias.

Many myths about India’s proposed $3-billion semiconductor fabrication unit, or fab, were demolished Monday at the India Semiconductor Association’s India Vision Summit in the southern city of Hyderabad.

It turns out that SemIndia’s plant will not unfold in the way a traditional fab would; instead a new model is being worked out to suit India’s domestic needs.

One plan is to acquire fabs globally, operate them in their original locations initially, but move them into India over a period of a few years.

None of the acquisitions are likely to be in cutting-edge plants. Since the focus is the domestic Indian market, the target fabs are most likely to be those manufacturing chips of 90 to 130 nanometers. These chips go into cell phones, set-top boxes, TV sets, and Internet access equipment such as DSL modems.

“That’s the sweet spot for SemIndia,” said Bob Kondamoori, managing director of the venture capital firm Sandalwood Partners. His firm has invested $10 million to buy a 5 percent stake in SemIndia, the same as Flextronics.

“We need to have multiple fabs,” said Ajay Marathe, who will join as COO of SemIndia next week.

Mr. Marathe is currently president of AMD India. AMD has committed to technology transfer and has also promised to pick up equity in SemIndia.

“The extent of their participation will be known after the semiconductor policy is announced,” said SemIndia CEO Vinod Agarwal. That announcement is expected by the end of the month. The industry hopes the government will subsidize the plant to the extent of 25 percent.

Splitting Tasks

SemIndia plans to have a bunch of subsidiaries carrying out specific tasks. The FabCity project, for instance, will ensure that the 1,200 acres of land allotted by the government are developed and utilized to the optimum level.

Another subsidiary, SemIndia Systems, will undertake design-related work for chips that may—in the long run—be manufactured at the SemIndia plant. For starters, SemIndia has bought a big stake, of an unknown value, in the Bangalore-based chip design firm Xalted.

SemIndia Systems thus starts out with 100 design engineers whose first task is to design and build the systems integration component for DSL modems. The components of these modems will be manufactured at Flextronics’ plant in nearby Chennai but will be branded and sold by SemIndia to the state-owned telephone company Bharat Sanchar Nigam Ltd (BSNL).

SemIndia has recently been hiring high-profile professionals, an indication that the project is definitely taking off despite delays in the policy announcement.

Apart from Mr. Marathe, BV Naidu—until recently director of the Software Technology Parks of India of two southern states of Karnataka and Andhra Pradesh—has joined as managing director of SemIndia Systems.

MindTree Consulting, an Indian IT services company that offers software development, chip design, IT maintenance, SAP implementation, and a host of other services, will raise $70 million by listing on India’s National Stock Exchange and the Bombay Stock Exchange.

Some of the funds raised by the Bangalore-based company will go toward prepayment of debt, some toward building new development centers in other locations in India, while a portion will fund an acquisition.

Ashok Soota, chairman of MindTree, said at a press conference Saturday that his company had signed a term sheet to acquire an integrated circuit design firm, but that MindTree was conducting due diligence. He declined to divulge the name of the company.

MindTree has made two acquisitions in the past. In 2004, it bought the software division of ASAP, an SAP implementation and product company. In 2005, MindTree purchased Linc Software Services.“We will use M&A much more aggressively than we have in the past,” said Mr. Soota. “Acquisitions will play a larger part in our growth from now on.”

Scrappy SurvivorThe company plans to add a new service line to its portfolio every year and create new intellectual property in R&D services, a rapidly growing business for Indian IT companies.

MindTree became the first midsize software company in India to reach the $100-million revenue mark in 2006. Founded in 2000 by senior professionals from Wipro, Lucent Technologies, and Cambridge Technologies, the company now employs over 4,000 people.

The company’s survival seemed in doubt early in its history. Most of MindTree’s initial customers were Internet companies, but several shut down in the wake of the dot-com bust, just a year after MindTree had signed them.

In today’s high-growth market, it’s easy to forget how the company barely managed to keep its workforce on the payroll. Unlike larger IT firms such as Wipro and Infosys, MindTree tapped the local Indian market early on, and over 5 percent of its revenues are now drawn from within India.

Technology spending by the Indian media and entertainment industry will grow to $300 million by 2010, at a compound annual growth rate of 32 percent, according to a report released Friday.

In its report, Springboard Research found an increasing trend among Indian media and entertainment (M&E) companies to focus on technology products specific to their industry. The vast majority of companies surveyed said they have either invested or plan to invest the largest portion of their IT budget on industry-specific technology.

Another 47 percent said their largest IT investment was for technology tailored toward the M&E industry.

“One of the key ways for IT vendors to gain traction in this industry is to market the M&E industry-specific benefits that they can provide,” said Nilotpal Chakravrti, a market analyst for Springboard Research, in a statement.

One of the factors driving IT spending is the need for Indian M&E firms to reach new markets and focus on systems that better manage and deliver their content. IT is viewed as a way to help M&E firms achieve these two business goals and deliver their content more efficiently within the Indian subcontinent.

“Many Indian M&E firms are looking at investments in technology as a way to more effectively deliver their content to new audiences, especially cities and towns outside of the major metropolitan areas,” said Mr. Chakravarti.

IBM a Major Influence

Springboard also found that software represents the largest spending component for Indian M&E firms, followed by hardware and IT services. IT services are the fastest growth area of the market.

Local IT vendors are still viewed as the primary external influences in this industry, with IBM the only multinational vendor of note to gain a significant number of mentions as a primary influence.

The M&E industry globally is undergoing a rapid change, thanks to the Internet and digital media. Technology advancements are viewed as both a challenge and an opportunity, leading to a significant increase in IT investment across the industry.

Media and content companies in India are readying for an Internet TV boom, while others are investing in delivering content on mobile phones. Still other companies are pumping money into ventures to provide streaming video and Bollywood movies across the Internet.

Sony Ericsson said it plans to manufacture mobile phones in India through manufacturing agreements with Flextronics and Foxconn, the company’s global outsourcing manufacturing partners.

With an eye on the local market, the initial focus will be to manufacture basic color phones and mid-level music phones. The phones will offer unique features for the Indian market, such as local content and customized keypads.

With a GSM (global system for mobile communications) subscriber base of 105.4 million, India is one of the fastest growing mobile markets in the world and offers a big opportunity to GSM phone provider Sony Ericsson.

The joint venture between Japan’s Sony and Sweden’s Ericsson is currently the No. 3 phone provider in India, behind Finland’s Nokia and Schaumburg, Illinois-based Motorola.

“Local manufacturing in India will result in improved cost efficiencies and enable us to offer attractive products at even more competitive price points,” said Miles Flint, president of Sony Ericsson, in a statement.

Dayanidhi Maran, India’s federal minister for communications and information technology, said at a press conference in Chennai that the decision to manufacture in India “is a reflection of India’s potential as a manufacturing hub of international standards.”

Business Triples

Mr. Flint said Sony Ericsson’s business had tripled last year. “India is vitally important for us. It is the fastest growing telecom market in the world,” he said. He noted that the company had a portfolio of 45 to 50 phones, all of which would be introduced in India. He also told reporters that an R&D center in India was under “careful consideration.”

With the number of mobile phone subscribers growing by over 6 million every month, phone manufacturers are choosing not to ignore the market. In the past year, several companies have set up plants near Chennai, a southern city that is rapidly becoming a manufacturing hub for high-tech electronic equipment.

Among them are Nokia and Motorola. Nokia’s manufacturing facility, located nearby the plant where Sony Ericsson’s phones will be made, went into production in January 2006 and shipped 20 million phones as of November. While Sony Ericsson did not reveal any numbers, a few million handsets are the least one can expect every month.

On his maiden visit to India, Accenture CEO William Green told reporters in Bangalore on Monday that the consulting giant would continue to hire new employees in all geographies this year, but that the numbers would be highest in India.

At the end of the fiscal year, which falls in August, the Indian operations will have added at least 8,000 new employees to take the figure from the current 27,000 to a new high of 35,000, surpassing for the first time the number of employees in the United States.

“Twenty years ago, when we first came to India [as Arthur Andersen], this was an outpost,” Mr. Green said. “Today, it is the flagship of our global delivery network.”

In Asia, Accenture also has 8,000 employees in the Philippines and about 14,000 in China, said Basilio Rueda, senior managing director of Accenture’s global delivery network. The company is looking at Vietnam as the next destination to hire smart people, he added.

Mr. Green said that global outsourcing demand continues to be a strong trend as companies look to improve their quality and service by cutting costs. “There’s more work to be done than we can take on,” he said. He sees strong demand from Japan, growing interest from Europe, and no sign of a slowdown in the U.S.

After the tech meltdown in 2002 and the rise of Indian offshore software services firms such as Infosys, Wipro, and TCS (Tata Consultancy Services), Accenture has ramped up its back-office operations from India to take advantage of the wage arbitrage opportunities that a lower-cost workforce can bring to the table.

But Mr. Green said the focus this year will return to Accenture’s lucrative consultancy business. “We want to re-energize this business,” he said. “We see that it is this unique strength of ours that is difficult [for competitors] to replicate. And we see tons of opportunities to drive this business out of India.”

Despite the announcement, shares of Accenture fell $0.14 to $36.39 in recent trading.

Homegrown Growth vs. Imported

India’s homegrown software giants have been growing at 30 percent a year for the last few years and have understood the need to offer high-value services such as consulting. Other global competitors of Accenture are also active in India.

IBM, Accenture’s closest competitor, had 53,000 employees in India as of December 2006. In June of last year, IBM declared it would invest $6 billion in India over three years to increase outsourcing services and client management from the country (see IBM Invests $6B in India).

EDS, another competitor, has chosen the inorganic route to growth by acquiring software services firm MphasiS in April 2006 (see EDS Offers $380M for MphasiS).

When asked about Accenture’s investment plans for India, Mr. Green made an oblique reference to IBM, saying: “Companies make statements giving happy numbers, but who knows what they are actually doing on the ground. We don’t calculate such figures. However, we do spend a billion dollars every year in training our people and on R&D.”

DGB Microsystems has received a first round of funding from Clearstone Venture Partners and Sidbi Venture Capital to help the Indian mobile phone technology company expand its reach globally.

Clearstone contributed $5 million while Sidbi forked out $3.5 million in the $8.5-million early-stage round.

Bangalore-based DBG is targeting a growing market. India is adding more than 6 million new subscribers to its mobile base every month. Still, there are only 150 million mobile phone owners in a land of a billion people. The long tail of this market is still truly long.

Global handset manufacturers such as Nokia, Motorola, Samsung, Elcoteq, LG, and others have already set up, or are in the process of setting up manufacturing plants for mobile phones to cater to a huge and explosive Indian market.

DGB is a rare end-to-end mobile phone company in India, however, offering design-to-manufacture services to handset companies.

For nearly two years since its inception in March 2004, the promoter-funded company has worked to build its mobile technology, including a system-on-a-chip (SOC) and a software framework for both second and third generation (2G and 3G) phones.

Targeting Demographics

The company is focusing on the booming Indian market for mobile phones, especially the newly blooming rural, semi-urban, and low-income urban segments of the population.

“We will provide feature-rich and high-quality products at extremely competitive prices,” said DGB CEO Suresh Dholakia.

DGB has followed a global strategy. Its centers in Bangalore and Chennai, India focus on R&D, sales, and marketing for the Indian market. Another center in Korea focuses on the design of the phones.

A factory in China operated by another company manufactures the designs. The China center ensures quality control at the plant. DBG’s offices in the United States function as the sales, marketing, and customer support arm for wireless carriers in the Americas.

“Clearstone’s endeavor is to promote businesses such as DGB that are poised to take India into category leadership positions in the world,” Sumant Mandal, managing director of Clearstone Venture Partners, said in a statement Wednesday.

So far, DBG has only signed one customer, but won’t name it. The new funds will likely go to finance manufacturing that DGB will undertake on behalf of that customer in India.

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.

The 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.

Seedfund is committed to investing in very early-stage startups in India, especially innovative companies that primarily serve the Indian market.

The 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.

The 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.

Mobile 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.

Heavy 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.

“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.”

Seedfund 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.

A new early-stage India-focused fund that has been over a year in the making is now seeing the light of day.

Launching NEA-IndoUS Ventures in Bangalore on Monday, Vinod Dham, executive managing director of the fund, said the time is right to invest in Indian startups.

“The genie is out of the Indian bag and can’t be put back in,” he said dramatically, referring to the spirit of entrepreneurship sweeping the nation.

New Enterprise Associates, the Silicon Valley-based venture fund that raised $250 billion last year, has invested tens of millions in the partnership (see NEA to Invest $150M in India). Mr. Dham would not reveal the exact figures, citing legal restrictions.

Confident that such a fund is needed in early-stage capital-starved India, Managing Director Vani Kola moved from the Valley to Bangalore six months ago. Ms. Kola has been an entrepreneur in the United States, having established the technology firms Certus and RightWorks.

Obopay and Minekey Funded

NEA-IndoUS announced two investments without revealing the size of the deals.

Mobile payments company Obopay, set up in 2005 in the U.S., will use the funds to start up its India operations. With a subscriber base of 150 million that is growing by more than 6 million subscribers each month, the opportunity for any mobile payments company that promises ease and safety of transactions is tremendous.

Minekey, the second company in the NEA-IndoUS portfolio, was incubated at one of India’s elite engineering institutes, IIT Kharagpur. The company has worked on innovations in the search and personalization field and is currently conducting trials with some leading publishers in the U.S.

Joining NEA-IndoUS in Bangalore is Managing Director Kumar Shiralagi, who until recently was head of Intel’s investments in technology and services in India. Bhaskar Menon, a venture partner, has joined the firm to focus on emerging BPO/KPO (business process outsourcing/knowledge process outsourcing) opportunities.

NEA IndoUS Ventures plans to invest in consumer-led growth areas relating to technology and IT services as well as global BPO/KPO opportunities.

NEA-IndoUS Ventures will operate from Bangalore and Silicon Valley. The fund is among a group of new funds that want to participate in a booming Indian market for goods, services, and technology.

Despite the fact that broadband penetration in India is abysmally low at 3 million connections, Internet companies are making early moves to hook potential customers.

Star Group’s local Internet portal Indya.com, owned by Rupert Murdoch’s News Corp., has launched a digital entertainment store with News Corp.’s IGN and its Direct2Drive Service from which users can download video content.

Much of the content was originally telecast over channels under the Star TV brand. Titles include popular soaps, talent contests, and celebrity chat shows.

Under the download-to-own model, single episodes are currently available for free. But additional episodes are priced at $0.99 and up. Indya.com is in negotiations with other content providers to bring Indian documentaries, current affairs updates, films, and music online.

Recapping the Soaps

Exclusive recap episodes, which chronicle an entire week’s events in one 45-minute episode, will also be available for the top serials. Recap episodes will be available the same week they air on television, and more shows will be added soon.

The service is available worldwide and is targeted primarily at South Asian audiences in the United States, United Kingdom, Canada, and Southeast Asia.

After Bollywood awoke to the huge, lucrative market for its films among the Indian diaspora across the world, it’s now the turn for Internet companies to tap them. Last December, the new media arm of Rajshri Films, a well-established film production company, launched Rajshri.com (see Multimedia Indian Wedding).

The web site offered for download a new film that was released simultaneously in the theaters. Subsequently, the site has been well stocked with a mix of old and new films, downloadable at different prices and even in video-streaming form.

Publicly listed companies in India that have received private equity in the recent past are growing faster than their peers that don’t have PE funding.

This was borne out in a study released Tuesday by Venture Intelligence, a Chennai-based research firm that tracks funds in India.

The study set out to measure the economic impact of private equity and venture capital on the Indian economy. It found that sales at publicly listed PE-backed companies grew 22.9 percent between 2000 and 2005, compared to 10 percent at non-PE-backed listed firms.

Somewhere in between, at 15.8 percent, were the Nifty Index companies. Nifty is a set of companies listed on India’s National Stock Exchange.

With growth also came better-paid employees. Thus, wages at publicly listed PE-backed companies grew 32 percent over the period under study, compared to just 6 percent at non-PE-backed listed firms and 16 percent at Nifty Index companies.

The survey revealed that about 96 percent of top executives at PE- or VC-backed firms believe that without the financing, their companies would not have existed or would have registered slower growth.

Outsourcing Snapshot

The study provides a snapshot of how PE/VC backed companies dominate the list of top companies in the rapidly growing business process outsourcing (BPO) sector.

The report features case studies of three successful PE/VC-backed companies—Spectramind (BPO), Arch Pharmalabs (pharmaceuticals), and Bharti-Airtel (telecommunications services) —showing how these organizations benefited from PE/VC investments and the lessons learned in the process.

“The common thread that emerges from the study is that PE or VC investment, when chosen and leveraged well, can help Indian companies innovate, create new businesses, and accelerate growth in several ways that add significant value to the Indian economy,” said Venture Intelligence CEO Arun Natarajan.

The study complements two other recent reports from the United States. The first study, released in November 2006, found that over the past 15 years, immigrants have started 25 percent of U.S. venture-backed public companies, boasting a market capitalization of more than $500 billion.

The second study, released earlier this month, found that the percentage of startups founded by immigrants in Silicon Valley grew to 50 percent in 2005. According to this study, Indians founded more engineering and technology companies in the U.S. in the past decade than immigrants from the United Kingdom, China, Taiwan, and Japan combined, creating 26 percent of all immigrant-founded companies.