Intel capital leads the pack of corporate investors. It began strategic investments in India in 1998 but announced a $250 million India Technology Fund in late 2005 to focus on technology start-ups. Soon after that, it set up smaller funds for China ($200 million), the Middle East and Turkey ($50 million), and Brazil ($50 million). Intel Capital has invested in 10 start‑ups since it began India Fund. “We invest in companies that complement Intel’s technology initiatives and accelerate the computing and telecom infrastructure build-out in India,” says Sudheer Kuppam, Intel Capital managing director for Australasia, India, Japan, and Southeast Asia. More infrastructure in India means a bigger market for Intel’s products.

The impact of corporate VCs is potentially bigger than what traditional VC firms can deliver. “When companies like Intel come on board as venture capitalists, there’s a huge boost to the credibility of the start-up, as these VCs have a very high diligence process. They evaluate a start-up much more stringently than a traditional VC firm,” says Sriram Raghavan, president of Comat Technologies, in Bangalore. Earlier this year, Intel invested about $4 million in Comat, which is developing e-government software. Once a firm gets money from the VC division of a big company like Intel, adds Raghavan, it can draw on the company’s expertise to fine-tune its technology strategy.

IBM, is a latecomer to India, though the company has relationships with more than 1300 VC-backed projects worldwide. “We are just getting started here; the VC ecosystem in India is in start-up mode,” says Drew Clark, director of strategy at IBM VC Group in Menlo Park, Calif. IBM has invested in three Indian companies so far and is evaluating more than a dozen proposals. It is scouting for opportunities, both in the country’s proven outsourcing area and in companies serving India’s growing domestic travel, retail, and health-care markets.

IBM’s VC business model is unique. It does not make direct financial investments but forges partnerships with start‑ups and offers its ­customer base, experience, and above all, market standing to expand a company’s ­businesses. IBM, says Clark, uses start-ups to drive innovation around open-source software, where IBM is staking out a leadership position.

In India, IBM’s partnership with NVP’s portfolio companies Virtela Communications and Persistent Systems is paying off. Virtela and IBM have jointly sold networking services to hundreds of customers worldwide. Meanwhile, Persistent, which provides outsourced software product development, has helped IBM serve its customers better. “When our customer requires a customized product such as a database or management services, Persistent, with its on-demand skills, helps us do that,” says Clark.

Cisco systems exemplifies a different approach. “Typically, Cisco uses investments to learn about new markets and participate in market transitions that add more value to the network,” says Sameet Mehta, director of India Investments and Acquisitions at Cisco. For now, that has meant investing in the entertainment industry, which according to a Confederation of Indian Industry–KPMG report is growing 20 percent annually and will reach $13.5 billion by 2010.

With an eye on putting content and digital media over an IP network, Cisco recently invested in Nimbus Communications, a Mumbai-based TV production company. Cisco hopes that one day Nimbus might stream video worldwide. “India is one of the largest producers of movies in the world and has over 300 TV channels. While there is a vast repertoire of content, there is very little in terms of legacy distribution,” says Mehta, who thinks India could move quickly toward direct distribution of content.

Having invested more than $70 million in less than two years, Cisco plans to put another $25 million to $30 million into India over the next few months. Some of these investments are likely to become full acquisitions by Cisco later on, says Alok Shende, vice president of IT practice at research firm Frost & Sullivan, in Mumbai.

Most of the corporate VCs are investing in middle or late-stage start-ups, and little money has trickled down to early-stage start-ups. Google intends to fill the gap by investing in three Indian early-stage venture capital funds and by supporting a group of Indian entrepreneurs and investors called Band of Angels.

Other technology companies such as Nokia, Philips, and Siemens have VC divisions interested in India as well. Siemens Venture Capital, which started operations in June 2006, is now looking to invest in one or two companies in India every year.