Venture Capitalists Could Burst Indian Online Bubble

12 April 2007

MUMBAI: Purchases by venture capitalists of Indian online and mobile phone start-ups could result in a repeat of the turn-of the century local dotcom crash, warn sceptics.

During 2006, venture capitalists struck thirty deals in the Indian mobile and online sectors, with a total value of $200 million (£101m; €149m). This compares with a total of just seven deals, valued at $36m, in 2005.

A further $13m has already been spent in 2007, according to Indian venture capitalist research specialists Venture Intelligence.

Rahul Khanna, director of Clearstone Ventures argues that venture capitalists are looking to invest in businesses which mimic successful operators in the west.

As such, he said, they are "pouring money into similar ventures (in India) which are viewed as relatively 'safe'."

Arun Natarajan, founder and CEO of Venture Intelligence, said: "There is no denying that there are bubbles forming in certain sectors.

"These just inflate valuation and trigger a wave where no one can really make money. No doubt they will get burnt in India too."

Data sourced from The Times of India; additional content by WARC staff