India as a career move (spring 2011 update)

Article first published as India as a career move (Spring 2011 update) on Technorati.

This is the latest in a series of posts related to career options developing in India which I started putting together for business school students and professionals seeking my advice.  Most interesting developments to report on are in venture capital, private equity, investment banking, and entrepreneurship.  The previous edition is here for those who missed it.

Venture Capital / Private Equity / Growth Equity

The Indian PE/VC scene is thriving as evidenced by the Ernst & Young round-up for the most recent quarter. All the fund raising of the past year has now led to a number of funds stepping up hiring at the junior levels but there continues to be an exodus of professionals at mid-to-senior levels.  As I reported recently, limited partners are very concerned about this churn and although hiring has picked up we are in a period of transition for the industry.

Before you dial the recruiters, you must consider a perceptible change in how teams are being built in India now.   Funds are now reportedly a lot less excited about candidates that do not already have several years of experience in India, a substantial deal sheet and the most important shift (especially at the senior most levels) is an expectation of exits.

In my opinion, the sector has become less attractive: even if you do break into this business, as valuations reach stratospheric levels, it has become harder for investment professionals to do good deals and generate returns for investors (and hence for themselves).

Investment Banking

Investment bankers have thrived as India Inc. continues to raise money from private and public markets and buy assets overseas.  They also serve foreign firms that are hunting for a toehold in the growing Indian market.    Hundreds of intermediary firms and investment banks have sprung up over the past few years and this robust marketplace has a broad spectrum of them:

• Local equity capital market bulwarks (Edelweiss, Motilal Oswal and JM Financial)
• Local upstarts (Avendus, Equirus, Centrum, etc.)
• Advisory arms of Indian banks (Kotak, ICICI, Yes Bank , etc.)
• Global bulge bracket firms (Credit Suisse, JP Morgan, etc.)
• Advisory arms of accounting firms (Ernst & Young, PWC, Deloitte and Grant Thornton)
• Prolific free-lancers who are deeply entrenched in local entrepreneur networks

As the annual bonus checks got cashed over the past few months, I have observed several bankers switch places, but more interestingly some have moved over to VC/PE funds, which has created some vacancies.    Given the number of intermediary firms active today, there should always be some room for new entrants to the business.  But as good deals get harder to source and even harder to execute, I would assume it is a lot less fun and rewarding than it used to be.

Entrepreneurship

This is arguably the most exciting path that several new graduates and career changers are taking.  Enthusiasm for being part of the India’s growth story is understandable, but as this economy grows from US$1.3Tr to over US$5Tr over the next few years, entrepreneurship presents the best opportunity to capture value for oneself.  Any other career is likely to present only viewership or suboptimal positions.  India’s per-capita GDP on PPP basis is now over US$3000 and in nominal terms is over $1000.  According to BCG, at these levels countries develop a consumption boom.   Add to this other factors like the youngest workforce, a large middle class and stable macro-economic factors, there have been few better times and places to start a business than in India now.
Image courtesy: renjith krishnan

India: where are the information services?

In the US, I was on a team that invested in data centric businesses like Verid (acquired by RSA/EMC), Prosper.com, Cortera, and Asset Control.  When I moved to India, I brought along a fervent interest in information centric businesses.   Some examples of success stories in this sector are:

• Credit bureaus: Experian and TRW
• Corporate information services: Dun & Bradstreet and Hoovers
• Ratings agencies: Moody’s and Morningstar
• News and pricing services: Reuters and Bloomberg

Over the past three years, I have come to realize that the information services sector in India is still very young to say the least.  The only established models are a couple of ratings bureaus (CRISIL and the new entrant, Highmark) and rudimentary pricing/news services for financial investors.

It is hard to imagine that the entire $1.3 Trillion Indian economy is supported by less than $200M worth of information services (by my estimate which includes the $140M of CRISIL revenues and the Indian components of global information providers).

As we look at the prospects of a $5 Trillion economy  in India over the next ten years, this anomaly surely has to correct itself.