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India goes dotty over dot-coms

Indian entrepreneurs have embraced the Internet with a fervour which has more than matched more developed nations in the Asia-Pacific region.

The signs of change are everywhere, with billboards bearing Web addresses mushrooming across the country.

According to Dewang Mehta, chief of India's 520-member National Association of Software and Service Companies, or NASSCOM, nearly 500 Internet-related start-ups were launched in calendar 1999.

"Now there are more than two dot-com firms being launched every day," Mehta said.

"The cities of Bangalore, Hyderabad, Bombay and Delhi may be the epicentre of the Internet boom but it has now spread to the whole country."

Undeterred by an inadequate bandwidth and the fact that there are only 600,000 Internet subscribers in India, venture capitalists have loosened their purse strings to fund dot-com firms.

"Money is flowing to small firms previously starved for capital," said B V Jagdeesh, co-founder of software technology firm Exodus Communications.

"A financial system that once steered funds only to well-known industrial heavyweights is now actively funding lesser-known Internet firms. Now any Indian technocrat with a unique Internet start-up idea can get seed capital."

The Indian Venture Capital Association says that by 2005 the venture capital corpus in India would cross the $ 10-billion mark.

It estimates that $ 500 million was invested in start-ups in 1999.

"Funding will go up now that India has revised its laws to make the Securities and Exchange Board of India the sole regulatory authority," said a NASSCOM official.

A year ago, fund managers had to get a green signal from not only India's central bank, but also from the market watchdog and finance ministry to set up shop.

NASSCOM says there are 35 venture funds active in India right now and their numbers are likely to shoot up.

Mehta said countries such as the United States, Australia and Britain would also help Indian start-ups get the venture capital they required.

"In the next 18 months we expect $ 3 billion worth of overseas venture capital funds to flow into the Indian IT sector," said Mehta.

Some of the funds have already started trickling in.

Global software major Sun Microsystems has just announced plans to "incubate" software and dot.com firms in India -- something it has not tried in any other foreign market.

"India has great potential both in terms of technology as well as business terms. This is the reason we are rolling out the programme exclusively for India," said a company official at Sun Microsystems.

Last month, Australian media tycoon Kerry Packer created a three-way venture capital fund worth $ 250 million to invest in Indian infotech companies.

Sabeer Bhatia, Indian-born founder of Hotmail, believes these are heady days for the Internet, but cautions that unique start-up ideas are not enough. They also have to work.

"People get crazy over uniqueness. Some start-ups come up with esoteric ideas which will never work," he said in California. In India, millions of youngsters hero worship Bhatia and hope one day to emulate him.

"All it really took was a couple of people who were successful. At least that was what inspired me to take the plunge," said Delhi-based Vibodh Vedyanathan, 28, who is creating his own dot.com firm to provide Internet solutions.

Former IT journalist Osama Manzar, who founded technology services firm 4cplus.com, says that as the Internet gains speed, more talented people will spy opportunities to join or start small companies.

"Media has always attracted people. And, the Internet is perhaps the most creative, cost-effective and liberating medium we have seen to date," said Manzar who also runs an Internet magazine.

"The Internet does not erect entry barriers related to age, experience or money. That is why Indian youngsters feel the Internet will give them an early break in life. There are enough Indian dot-com success stories to inspire them."

N K Goyal, president of India's leading telecom provider Himachal Futuristic Communications Ltd, said Internet usage would grow exponentially.

"India is expected to be the fastest growing Internet market in Asia," said Goyal.

According to a Himachal Futuristic survey, the number of Internet users in India will explode to two million by the end of 2000.

Internet service providers, or ISPs, are also pulling out all the stops to expand the subscriber base.

"We will give away set-tops with every purchase of 500 hours of Net-time," said an official at state-run Videsh Sanchar Nigam Limited, which is both an ISP and an overseas telecom operator.

According to Bhupendra Mathur of the Indian Market Research Bureau, television and cable networks hold the key to the faster, wider and cheaper user access needed to sustain India's dot-com boom.

"The conventional route of Internet through PCs and over the phone suffers from limitations in both telephone and PC penetration," said Mathur.

"Television and cable will eliminate the limitations in Internet access posed by limited telephone lines, as well as take care of rising costs in telephone usage."

Mathur said that even though the electronic commerce potential of the Internet was under exploited, Indians recognised the potential of trading over the Net.

"Dot-com firms need to seriously focus on the more easily acceptable products and services that consumers will be willing to purchase off the Net."

NASSCOM estimates India's e-commerce transactions for the year ending March 31, 1999 at about Rs 1.4 billion.

Analysts say India could be generating Rs 100 billion worth of business on the net by 2002.