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Regional Embedded Technology Investments: An Emerging Perspective on India

According to a recent Reuters news report, Intel Capital, the investment arm of Intel Corp. believes valuations of early-stage technology companies in India have reached a "near-bubble" stage, as too much capital chases too few high quality opportunities.  If an accurate depiction, this represents a scenario reminiscent of the late 1990s when valuations of many technology start-up organizations led to a precipitous decline. 

Certainly, the worldwide investment landscape has changed significantly over the past decade. Today, for instance, in India, there are hundreds of active investment funds, where there may have been only several dozen a decade ago.  According to some reports, venture capital funds, for the most part, have remained stage agnostic (except for early-stage investors), whereas the choice of sectors in which these funds invest has grown far beyond technology as the domestic economy in India has grown and developed other viable sectors for investment.

Turning to Intel, the chip giant typically invests in stakes of less than 20% in early stage companies, with an average deal size of $5 million. Its $250 million India fund has made about $40 million in investments so far in 2011, according to Reuters. 

From the embedded technology perspective, with the growth in the sheer size of India's VC community running loosely in parallel with Intel's view of an emerging bubble in the technology sector, this reality could indicate an important shift in the appetite for investment risk going forward in India.  VDC senses that, to some degree, this shift could have an impact on second-stage technology firms that need a second or third round of funding to meet long-term strategic objectives. 

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