VC’s looking for new internet trends.

Foster Real Estate, Inc.
October 27, 2006

"Venture capitalists have become much more cautious in the last six to seven months in the wake of a high rate of failure in the dotcom business both in India and abroad," Amul Gogna, executive director of the Investment Information and Credit Rating Agency (ICRA), told India Abroad News Service.

In the changed scenario, VCs are now looking at new areas such travel, jobs, matrimony and real estate portals he added.

The emergence of venture capital funding in the country has helped in the evolution of Internet-based ventures. Risk capital investment in the domestic information technology (IT) sector increased from $20 million in 1996 to $320 million in 2006 and most of the venture funding has been in the areas of Web site and portal creation.

Analysts say dotcom companies, mainly in the business-to-consumer (B2C) segment, which were cash-starved, were spending more money than required or had no revenue model, have started wilting under pressure.

"Most of the venture capitalists in India were looking at valuation game and nobody took a close look at the revenue model of the dotcom companies.

Indian Dotcom Company has shot up with real estate portals after the bust of online travel portals such as yatra.com, cleartrip.com and makemytrip.com.

Although investments will continue to flow in for the right companies, real estate portals have new dimensions in this hot market of real estate.

Top 4 real estate portals to name are 99acres.com, magicbricks.com, realacres.com and indiaproperty.com. The real estate band wagon has just begun and internet players such as naukri and times group has taken internet classified business seriously.
Company Background for the above mentioned real estate portals are as follows.
1) 99acres.com - Info Edge (India) Ltd. (Naukri Group)
2) MagicBricks.com - Times group
3) RealAcres.com - InfoMedia Corporation
4) IndiaProperty.com - Bharatmatrimony group

Although online real estate portals was half a decade back but that did not survived. The trend of Internet business is changing and the mass is digging the information from the cloud of Internet.

According to ICRA's India Internet Business Report, there are around 50,000 dotcoms that are of Indian origin or are India oriented. In view of the high initial promotional expenditure, which is Rs. 100 million to 150 million on an average, it is assumed that the average turnover of a dotcom venture would be in the range of Rs. 100 million-120 million, says the report.

When this figure is reconciled with Rs. 253 billion, which is the expected aggregate, worth of e-commerce activities in India in 2007, the inevitable conclusion is that only five to 10 percent of the existing Internet ventures would eventually survive, it added.