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India is becoming one of the hottest destinations for investments due to tremendous increase in entrepreneurial activities and it would not have been wise for Google to be left behind.

Google has started making investments in India. First it was India-based seed investment fund called Seedfund and now it is Erasmic Venture Fund. The amount of investment is undisclosed.

Seedfund has offices in Mumbai and Bangalore. It was founded by Pravin Gandhi, Bharati Jacob and Mahesh Murthy. Pravin Gandhi and Bharati Jacob came from Infinity Venture, the fund behind Indiabulls, Indiagames and the like. Mahesh Murthy came from Passionfund, where he backed Geodesic, Pinstorm and other successes. Here is what they think is the fund size required for startups in India:

From our experience, we figured the right amount of funding for an Indian startup wasn’t in the millions or in tens of millions of dollars range. It was closer to about $500,000. We also figured we could work closely with about 15 or 20 companies over the next 5 years – and hence arrived at a fund size of about $10 million.

They are looking mostly at internet / media / mobile / telecom / retail / consumer-facing plays – and things that are not defined as sectors. Fund investors include Motorola Ventures, Reliance ADA Group, SVB Financial Group, an affiliate of Silicon Valley Bank, Sierra Ventures, Mayfield Fund, Edelweiss Capital – and individuals like Kanwal Rekhi, KB Chandrashekhar, B V Jagadeesh and Sridar Iyengar.

Here is an interview with Pravin Gandhi (one of the founding members of Seedfund) on Podtech.net:

Erasmic is a Bangalore based early stage venture fund that has made two investments: SEO and Marketing services company Position2 and travel information portal India Resorts Survey (now called Holiday IQ). Erasmic plans to fund at least seven to eight companies including these, from the first fund. Erasmic works only with companies located in Bangalore. It was founded by Subrata Mitra, Venk Krishnan and Anurag Srivastava.

We propose to put together a US $5M fund to work with start-up companies in the cross-border (US/India) space, leveraging on, our ability to build India based delivery and US based sales …. The proposed fund will plug this gap, by picking a set of 4-6 companies where we invest small amounts of capital (between $100-500K each), and a lot of senior management time to mentor and build these companies out. 

The response these two firms have received so far has been terrific. Erasmic is getting at least 34 business plans a week while Seedfund has received about 200 plans since November, 2006.

Source: ContentSutra, IndiaInvestopedia.com

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