Asian VCs Now Favor Consumer and Business Services Sectors

Dow Jones VentureSource reported on 1Q 2008 venture capital investment in India and China this week. China investment is strongly up and India is down compared with the same quarter last year. More noteworthy is Dow Jones' observation that venture capitalists are scaling back investment in high tech in favor of the consumer and business services sectors. This shift makes imminent sense to some one who spent twenty years working in the consumer sector in Asia. The reasons for the shift may be:

1. High tech products sold in India and China are in large part purchased by a corrupt government/military bureaucracy, which makes sales forecasting very challenging and troubling
2. Given the inherent high level of risk in these countries, perhaps the additional technology risk queered the risk return results
3. The early high tech investment was perhaps the low hanging fruit and now the real work begins to find suitable investments
4. The LPs could not understand why more money was not going into the two largest emerging middle class markets in history

I have said several times on this blog that investing in the emerging middle class is a sound investment strategy. Nice to see that the scions of Silicon Valley may be coming around to my way of thinking