Vineet Buch co-founded two Silicon Valley start-ups, Riya Inc. and Karient Inc. before signing up with Menlo Park-based VC BlueRun Ventures two years ago. The $1 billion (Rs4,100 crore) BlueRun started operations here in late 2004 and its portfolio includes Pune-based Nevis Networks and Bangalore-based Ugenie. It invests $500,000-$2 million per company. Buch spoke to Mint about Indian start-ups and BlueRun’s plans here. Edited excerpts:
Why did you jump the fence after ten years of being entrepreneur?
It just sort of happened that my firm BlueRun invested in Riya, a company that I had co-founded. We liked each other and they offered me a chance to work with them. That was a little over two years ago and I think I’ve enjoyed being a venture capitalist so far.
What is different about being a venture capitalist?
There is a fundamental difference. Entrepreneurs are in charge, they steer the ship. The VC is a kind of navigator. In the end, we can only give advice and suggestions. So, while we have a big-picture view and can offer connections, good VCs have to realize that they have to give control to the entrepreneur. Very often VCs who have been high-powered executives in a company don’t realize that they are not the people in control now. You can’t micro-manage the entrepreneur.
Does a background in entrepreneurship help in the investor role?
I think it is very important for a VC to have worked in at least one very young startup. The pace of change in a company that young and the very small problems typical to it are things you can’t understand if you’ve only worked in a big company.
Is the start-up environment in India very different now from what it was two years ago?
Yes. And the difference is dramatic. I’ve been following this for almost three years. Earlier people weren’t ambitious and didn’t appreciate markets. People were basically trying small cottage industries. Something has happened in the past year or so. The quality and drive you see in people today – I look at plans from India, Shanghai, Israel – represents a quantum shift in mindset. Partly perhaps because people have become more accepting of the notion of entrepreneurship. It’s okay to take a risk.
What is hot in the US Internet market right now? Do you see successful parallels emerging here?
The hot thing right now is social media, people like MySpace and Facebook. One of my companies is in that space. There are people trying to copy that here. There are many people trying to become the MySpace of India. I think the problem is that, first of all Orkut already has a big presence here. It’s so hard in the social media world to make money, even in the US market which is huge. I don’t know what the revenue opportunity is for Indian companies in that space. Given the very small size of the online advertising market here, I think what people are ignoring is that pure online models worked well in the US because of the sheer size of the cyber advertising market in that country. In India, given the very small size of the online market, a hybrid online-offline model will work better. The average Indian still isn’t very online savvy. People don’t go home and spend an hour surfing the Internet.
Have you seen anybody trying the hybrid model?
Well, just today. A very dear friend of mine is actually trying one of those hybrid models. We’re actively looking at them for investment. So the smart entrepreneurs do realize that.
Is there a specific online-offline model you’d like to fund here?
Yes, in fact, I’ve been trying to get to start such a company but haven’t found the right team yet. There’s a company in the US called Prosper Marketplace. It is a peer-to-peer lending marketplace. You could call it the Ebay of loans – between individuals, not within institutions. A pure online model like that wouldn’t work here because aren’t that many people online. But just think about how people in India create loans within communities. People have chit funds and organize collections. The notion of lending and trust within a community is well established here. It’s sort of like the micro-finance model, except that it’s taken to a higher, more affluent consumer, and is done in a manner where you have an online or mobile marketplace. The origination and distribution of loans could happen offline. I can see that model working very well in India – probably even better than the pure online model in the US. The preliminary validation I’ve done says there’s a company to be built here.
A lot of people are trying a localized version of search. You see it working the way it has in China?
Look at the Chinese market. Google and Yahoo! were not able to prevent Baidu from becoming the number one search engine in China. The dominant language was not English and Baidu had a great head start with the government’s support. By the time Google and Yahoo! woke up and started taking Baidu on, it was too late. India is not like that. The government does not control anything. It is an open market. Google and Yahoo! have certainly heard of India. The predominant language of the Internet is English. In the horizontal search market, which is really the biggest market for search, so I don’t think there’s room for an upstart. There are several websites in Tamil and Hindi but the bulk are still in English. Google and Yahoo! have Hindi pages as well. There have been similarities in the US on local search. The big issue here is how do you scale that? How are you going to get a local dosa joint in a little neighbourhood to advertise? How do you reach out to that small business and get its ads cost effectively?
What is BlueRun’s focus in India?
We are a global firm. We focus on early-stage companies where we feel that we have a strong connection with the entrepreneur. We focus primarily on technology, but realize that in India there is IT even in non-technology businesses. We invest globally from a single platform. We don’t feel compelled to invest in a company just because it is Indian. We’re looking very strongly at companies focused on the domestic market. We’re looking at companies in the power sector. We obviously keep looking at mobile and Internet opportunities as well. But I think in India there’s so much more than mobile and Internet.