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Technology businesses lead with consumer services close up on their heels in eyeing the Indian VC funding pie: Helion survey

14th Oct 2010
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  • Technology businesses and consumer services space stand first and second respectively amidst increasing Indian entrepreneurial activity across multiple sectors
  • Bangalore catching up with Mumbai as a hot breeding ground for entrepreneurs in consumer services, says study
  • Entrepreneurs seeking direct, quicker channels to gain VC funding
  • Metros still the stronghold of entrepreneurial activity, but smaller towns are gaining momentum

Bangalore, October 14, 2010: The Consumer services environment in India is witnessing high entrepreneurial activity while the internet and mobile business environment continues to be hot with entrepreneurs, according to a survey on new business ideas between 2006 and 2009. The survey was conducted by Helion Advisors, a multi-stage, India-focused venture fund with $350 million under management. While technology businesses are still the mainstay among entrepreneurs; as much as 29% of business ideas came from the consumer services space, while 27% came from the internet and mobile industry. The survey mapped entrepreneurial activity across various cities in India to reveal sectors and locations that will steer the emergence of new ventures.

The survey included over 1500 business ideas evaluated by Helion Advisors between 2006 and 2009. The sectors in which the ideas were segregated include internet / mobile VAS services, IT services, product and enterprise software, consumer services, BPO/KPO and a composite group comprising energy, manufacturing, infrastructure, logistics and real estate. The composite group, involving large capital and longer turnaround time, contributed to 17% of the total idea pool.

“This survey shows a clear indication of emerging sectors that are vying for the venture capital pie. We always knew there are good ideas out there in every sector, but the survey busts the notion that technology and internet / mobile businesses alone is driving entrepreneurial activity in the country. A higher number of entrepreneurs and from multiple sectors, reveal a more mature market, thus, helping investors with greater avenues to identify and engage with” says Mr. Sanjeev Aggarwal, Managing Director, Helion Advisors.

While a bulk of the ideas sought pre-revenue or early-stage (0-2 years) funding, one in every four ideas between the years 2006 - 2009 sought mid-stage (2-5 years) or late stage (over 5 years) funding.

Entrepreneurs seeking direct, quicker channels to gain VC funding

A whopping 70% of ideas were channeled either directly or through informal forums. This is a clear deviation from the earlier practice of engaging with investment bankers in the evaluation process. “Easy accessibility to VCs has probably contributed to an increase in the idea flow”, adds Mr. Aggarwal.

Metros still the stronghold of entrepreneurial activity, but smaller towns are gaining momentum

One in every six ideas originated from smaller cities and towns including Vadodara, Kochi, Vellore and Patna. And for sectors like BPO / KPO and Internet / VAS services, more than 20% of the business ideas came in from outside of the Top 10 locations. Among the metros, Bangalore leads the pack with 23%, spread mainly across Internet / Mobile VAS, Technology and Consumer Services sectors. Mumbai and NCR contributed 18% and 16% respectively. A majority of ideas from these cities were from Consumer Services and Internet / Mobile VAS sectors. Hyderabad and Chennai contributed 5% each mainly though Consumer Services and IT services sectors. According to Mr. Ashish Gupta, Managing Director, Helion Advisors, “While we are present and engage widely in metros, this survey allows us to actually see the emergence of smaller cities as new breeding grounds for entrepreneurial activity. VCs have already started to look beyond just metros and in the coming months we will see a lot of interesting propositions coming in from several of these smaller cities”.

Non-resident Indians from the USA contributed to over 8% of the total number of ideas evaluated. Enquiries also emanated from regions as diverse as Kenya, Nepal and Spain.

Mumbai and Bangalore take the lead in consumer services

Bangalore is fast catching up with Mumbai in leading the new venture rally in consumer services, with 20% as against 23% respectively, according to the survey. Consumer services include retail, healthcare, education, financial services, food, media and entertainment. “This again comes as a surprise; as we expected other cities to considerably lag behind Mumbai in breeding entrepreneurs in this space.” added Mr. Gupta of Helion Advisors.

About Helion Venture Partners

Helion is a multi-stage, India-focused venture fund with $350 million under management. The fund invests in businesses that are either technology-powered or catering to the Indian consumer services space. The focus sectors of investment include - outsourcing, internet, mobile, technology products, retail services, education and financial services. The fund’s investors are well-respected global institutions including top tier university endowment funds, foundations and family offices. The fund and its portfolio companies are advised by an experienced and industry renowned team of professionals based in India which include Sanjeev Aggarwal, Ashish Gupta, Kanwaljit Singh and Rahul Chandra.

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