Creating Regional Wealth in the Innovation Economy: Models, Perspectives, and Best Practices

Pradeep Kar

Challenges and opportunities of transnational businesses

India has the potential to be the global provider of all remote services using its vast pool of educated manpower, cost competitiveness , and use of English in business and education. The Indian industry is estimated to grow from its present size of $6.5 billion to $85 billion in 2008, employing over 1.5 million new professionals, including 800 telecom services among all support and customer transaction services.

The challenges lie in convincing a larger number of MNC customers of the benefit of outsourcing work to India and in providing assurance that it will be done on time and to the expected quality standards.

Wealth creation through VC investments: Silicon Valley compared with India

The model of VC investing is very similar across the Silicon Valley and India. When a company is being conceived, the founders seek to raise monies from U.S. VC companies with a presence in India as well as from VCs based in the U.S. who are open to investing in Indian companies.

Investment money today is global. Hence, you can easily see the correlation of the Nasdaq with the Bombay stock exchange and other Asian exchanges. Exit options for investors in Indian companies are through public offerings in the Indian exchanges or the issue of American depository receipts in the U.S. exchanges.

Role of venture capitalists in India

An important role VCs play is finding CEOs who are entrepreneurs and who can share their passion and vision. Indian CEOs do not spend adequate time and focus in hiring their teams . I define and share the vision, hire top- notch management teams, set the expectations, plans, and milestones clearly, and institute a clearly defined review process. Subsequent to that, we work together with the company management team to help raise the next round of capital.

Two examples of companies we funded that have been successful are indya.com, a large portal that was recently acquired for cash by News Corporation, and planetasia.com, a leading Internet middleware software company.

Government role in the high-tech economy

The Indian federal and state governments have realized that India's future is in the knowledge economy. These sectors create large numbers of jobs, earn foreign exchange, and foster education.

Hence, for the first time the federal government and most state governments have ministers of information technology, including a secretary of information technology, whose role it is to focus on creating an enabling environment through policies, infrastructure and, to some extent, subsidies for the growth of this industry.

Government allocation of VC funding is not a very useful or important role. However, creating policies that encourage VC investments in India and helping VC companies easily set up shop are initiatives that can make a positive difference.