Do China and India have the Midas touch?
May 14, 2012

China and India’s industrial and trade numbers might be indicators of an anemic economy, yet Venture Capitalists are pouring funds into the two countries in an almost assured chance that they will reap high returns.

At a time when the both the European and American economies are struggling to keep their heads above water, China and India seem like the only beacons of hope. According to the Forbes’ Midas List 2012, one-quarter of the top 100 ranked VCs have China and India deals sprinkled into their mix of deals spanning Europe, Israel and the U.S.  Of the top 100 venture capitalists who scored in the 2012 ranking but were not on the 2011 list, 12 have China deals sometimes several successful ones among their investments. Two more VCs on the Midas 2012 list have funded at least one winning India startup. A majority of technology driven firms, the 2012 list also highlights those VC firms that have invested in Chinese and Indian companies that have gone public over the past five years, – these include Chinese companies Renren (China’s facebook), Tudou (China’s Youtube), HiSoft Tech, Dangdang, Bitauto, VanceInfo and Qihoo 360 as well as Indian online travel portal MakeMyTrip.

According to the financial and markets magazine, the 2012 list reflects the importance of China and India as emerging hotspots of technology innovation. Both countries already account for 17 percent of the total venture capital invested – and are continuing to grow in relation to the U.S., which still claims a sizeable 70 percent of the total.  Overall, the 2012 rankings highlight the trend of Silicon Valley dealmakers that have gotten on the fast track to China and India.

Trends are however changing, and VC’s are looking for more innovation from entrepreneurs especially in the e-commerce space in both India and China. According to Avnish Bajaj, managing director of Matrix Partners India, “We are essentially a copycat country; hence we are always trying to catch up with the west. And most of the Internet businesses in India are basically ‘inventory e-commerce models’”.  According to VC’s worldwide, both China and India will need to create better and more dynamic business models in order to gain funding,  otherwise the deals which fueled businesses in the last few years, will drain out soon.

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