Kamla Bhatt

Alok Mittal of Canaan Partners India  answered some questions that we had in mind. Some of these questions came from our readers.

You can also listen to a podcast interview with Alok.

Alok’s answers are in blue.

Q&A With Alok Mittal

Things have been quiet from Canaan India after the BharatMatrimomy investment.  What is keeping you busy these days? Are you seeing a lot of business plans? Are you seeing more new companies or start-ups now, when compared to a few months ago?

We are constantly in the process of looking for new investments, and continue to see close to fifty new proposals every month – we are in the process of evaluating them, and are in advanced stages of diligence on some of them. We continue to focus on early stage companies with an IT bias – Internet, wireless, software, telecom, KPO… The pace of startups has increased recently, and that will translate into deal flow maybe 6-12 months from now. We are also seeing more and more interest in Indian startup opportunities from offshore talent, and that is something which will also help pick up the pace.

What new areas you are looking to invest these days? Mobile market is hot in India . What kinds of companies are you looking for in this space? VAS is the low hanging fruit for the moment.

On the mobile front, we are looking for new business models and platform plays. A lot of VAS plays have got funded over past 12 months or so, and we have had an opportunity to look at some of them. Going forward, we believe that the value add in the entire chain will be the key – that is what will drive higher value realization and sustainability. We believe that such value add will arise out of either a different consumer model, such as establishing one’s own brand, or captive strengths on technology and/or content. The businesses we are looking at now are ones that have strengths in at least one of these areas.

What stage? Early or multi-stage?

We are very much focused on early stage businesses. These would include seed stage businesses which might only have a plan, pre-revenue businesses with some customer validation but no revenues, or businesses which have their first few million of revenues and continue to grow at a fast pace.

Are you looking to expand Canaan’s presence in India , and expand to other cities, like Bangalore ?

Canaan currently has offices in Gurgaon in India . We do see investment opportunities across cities, including Bangalore and Mumbai. As we make our next few investments, we will look at augmenting our team. However, at this point, we have no plans to open new offices.

How much of VC and private equity money was invested in India last year?

India saw 329 venture capital and private-equity investments worth a total of $5.9 billion — more than double the tally for 2005 — with some 60% coming from foreign players, according to researcher Venture Intelligence India. Venture capital would be a relatively small percentage of this. However, venture capital tends to be more stable in its inflow due to long holding periods and fund deployment cycles. In that sense, 2006 could be termed as a year of venture capital revival in India .

Where do you think valuations are headed?

India is definitely getting to be a more competitive market for early stage capital. Entrepreneurs are beginning to get a fair value for the innovation and effort that they are putting in to build companies. At the same time, the key opportunity for venture firms is in ensuring that they attract not just the highest price-seeking entrepreneurs, but those who believe in a partnership approach to building companies. With over 20 years of top quality venture experience, and an integrated partnership model, our focus at Canaan has been to ensure that entrepreneurs understand our role in helping them build companies. This, in my view, is the foundation for building successful partnerships.

Do you think this upward trend of VC investment is sustainable giving the lack of an ecosystem or ecosystems in India ? Too much money chasing too few deals has become the standard way of describing the Indian VC scene. What do you have to say about that? Any thoughts and suggestions?

The success of VC investments lies not in making an investment, but in building and realizing value out of those investments. That is what will distinguish great companies from the mediocre. And that is what we aspire to replicate in India . I think that availability of capital will expand deal flow. Also, compared to more mature markets, India has more blue-ocean opportunities today, and that might help sustain the momentum till such time that the ecosystem catches up. At Canaan, we believe in keeping the bar high on all investments, be it in US or India , and then making sure that we bring to bear our integrated partnership model to deliver maximum value to entrepreneurs.

Why did you want to work with a venture capital company?

A lot of people tell me (and in fact, I tell a lot of people!) that it’s a great time to be an entrepreneur in India – large opportunities exist, and access to capital is better than ever. What excites me is the potential of enabling multiple entrepreneurs to stretch and realize their aspirations. Entrepreneurial interactions are perhaps the most energetic and enthusiastic ones, and personally that is very invigorating. This reflects not just in my role at Canaan Partners, but also other entrepreneurial forums such as Band of Angels India and TiE.