Joshua Bornstein didn’t have big India plans when he came here in 2001 to work as a summer intern at Infosys, Bangalore. He thought he’d gain the twin experience of working in a technology company, and do so in an emerging economy, which at that time was poised to turn a corner. The emerging economy card worked and Bornstein soon landed a job at an investment bank in Los Angeles in 2002. But, that joy was short-lived. Bornstein was miserable with the company’s hierarchical structure and in 2003 decided to come back to Infosys. His second stint at Infosys ended in 2006. But, Bornstein, a US citizen, still hasn’t bought a return ticket home. In 2007, he began an early stage venture capital fund called Footprint Ventures with two other partners from the US. Over the past seven years, Footprint has invested in companies such as Canvera, Mast Kalandar and Hector Beverages. Bornstein admits doing business in India has been far from picture-perfect. He lays out the good, the bad and the ugly for us.  

s observation in the Indian business environment has been its tendency to conform to near term thinking.

My Challenges:
As a non-native investor in India, I think I enjoy the advantage of having a long-term perspective towards business that is otherwise missing here. The Indian business environment is about very near-term thinking. I’ve seen many entrepreneurs look at their roles with a very limited lens. If someone has invested Rs20-30 crore in their business, then tend to think about how to maximise their returns instead of building an organisation that can scale up.

Also, there is a tremendous amount of operational friction in India because the existing infrastructure, distribution networks and payment methods that are present elsewhere need to be created from scratch. This takes up a lot of investment and time. You need extreme patience to navigate through that especially if you’re growing businesses in the domestic consumer market like we do. 

A big challenge also is the unfortunate situation you will encounter by way of under the table pay-offs in a lot of businesses where you can make money in India. This doesn’t interest me from an ethical perspective or a Foreign Corrupt Practices Act perspective. I wouldn’t want to get my hands dirty. But I find that people here don’t seem to have ethical qualms about sometimes indulging in that. There’s a lot of family money to put to use. Let’s be honest, sectors where real wealth has been created in India in the past 20 years include resources—whether it is coal or telecom spectrum—things that are in short supply and require government licenses.

On the other hand, it’s interesting how you can make money in the cross border technology sector in India. Because valuations are so high and money is so free flowing in the US, as an early stage investor, you may not get much in a $75 million or $100 million deal. Because these companies require so much capital, unless you’re the last investor or you have some liquidation preference or other rights, you’ll get cramped down. So the advantage that India brings on the tech side is that costs are lower due toa solid tech base, so even if a company has $75 or $100 million acquisition price, everyone in the food chain can make money because the place is so starved for capital Secondly, in the US, because there is far more capital than there is in India, there is far more competition as an investor. While you have less operational friction there, there are 10 guys shooting arrows in your back or trying to take you down. There is no guarantee that you’ll be the winner because technology and consumer preferences are quick to change. Because of the dearth of capital in India, if you’re able to build a brand with a unique distribution here, you have a high chance of creating profitable properties that will last for a long time. You get a much longer gestation period in India if you’re investing in building brands.The Indian Opportunity: I think there’s a huge opportunity in the two areas we invest in—the domestic consumer market in India where companies are trying to shift the system from unorganised, fragmented suppliers to an organised branded environment. That’s an unfilled niche in the market and people are beginning to look at more branded options as opposed to local options . The other area is cross border technology startups that use India as a low cost development base because you have a highly talented technical base available at a relatively low cost and sell in the overseas market. There may be some initial customers in India but the real market is outside of India because people do not value technology here. May be it’s  because the cost of labour is so cheap or because technology breeds transparency. If you could use the best of both worlds, India’s talent base and markets outside that are willing to pay for value, I think then you can make money

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