This post will be a random stream of thoughts, rather than a well constructed thoughtful essay. Apologies.
4 technology venture investors were at the accelerator today to listen to 7 corporate development and M&A teams on what they were looking for in an acquisition. The 4 investors together have over $2 Billion invested in India in the technology companies alone.
Exits are critically important to their (and hence entrepreneur’s) success. Exits with good premiums are even more important to them, but I am getting ahead of myself.
There are many reasons why a company acquires another company, but the 2 most important we talked about were a) Access to markets – in our case, India and b) Access to Intellectual capital.
Local acquisitions (Indian companies buying Indian startups) are fairly rare since many of the larger technology companies in India (services companies) dont believe they need IP based offerings and have the access to the market already.
Thanks to the FDI issues, eCommerce companies, which would have been a acquisition target for many companies are not longer on the shopping list of many acquirers.
So if you are looking to get investment from these venture investors, you will have to really follow the money trail, which starts at where companies are getting bought (since IPO’s are fairly rare).
For many of the larger technology companies, access to Indian markets is not a huge issue, (there are exceptions, IFlex and Oracle being one) and a few others might still happen, but the large source of exits will still be companies who need Intellectual property and those that need access to markets.
While many Indian entrepreneurs still hate the word “exit” and believe it is an unnatural act, they still do need to provide returns for their investors.
So to raise money now, you better have a clear idea about how you can plug a “white space” that exists among the larger companies from an Intellectual Property standpoint.
Some areas that we discussed were a) Payments b) Indic language technology c) On boarding SMB on the Internet d) cloud infrastructure and e) Software defined networking (SDN).