Via Rajesh Jain comes this perspective of the Indian VC market by Sumant Mandal of Clearstone:

'There is approximately $1 billion that's been raised for investment in private companies in India. I'm not quite sure how much of that is going to go towards IT or services businesses that are IT enabled, but I can say for sure that a vast majority of that money will go into existing and later-stage businesses. There is little or no real VC money available in India. Companies that are receiving money in India are either spin outs from existing large businesses (an example being GECIS, which is a spin out of GE), captive units or second tier outsourcing providers that may lack the size or scale to compete with giants like Wipro and Infosys and want the private equity money to grow through rollup and acquisitions. In the early-stage investing business, there are a few small funds that are local to India but have not done too many deals.

So there's a big hole in venture money for start-ups in the way we recognize them here in the U.S. (early stage, pre-product or pre-revenue companies), and a majority of the private equity is going into late stage businesses. There is quite a bit of competition for later-stage businesses as there are very few that have strong management teams and international aspirations. Funds that are active in India for later-stage investments are General Atlantic, Warburg Pincus, TPG, Carlyle and some local players like Chryscapital. We [Clearstone] would fit in the early-stage investing mold. For early-stage investing, there are either companies that are developing IT products that are internationally relevant (technologies that are servicing the North American or European markets but are built using Indian talent) or companies that are creating services targeted at the Indian consumer, where there is potential for hyper growth. Connectivity (mobile and broadband), content and enabling electronic commerce are good areas in India today."