Dark-Horse Jockey

By MEGAN RUTHERFORD

Take a government renowned for red tape and an infrastructure famous for inefficiency. Add to those a business culture struggling to escape its predigital mom-and-pop era--and you have a formula that is hardly likely to appeal to a tough-minded American venture capitalist at the top of his game. But there was another side to the equation that led Norman Prouty to head for India three years ago. By his calculation, 40% of all successful high-tech stock IPOs in Silicon Valley were floated by Indian entrepreneurs. Why not go to the source of all that talent and help it reach its full potential by adding venture capital and U.S. business know-how? Prouty's reckoning seems to be paying off. As managing director of ICF Ventures, he is helping modernize the way India does business, giving some bright, young tech upstarts a chance to succeed without leaving their homeland. And he's making lots of money for his Western investors. He's got a dozen deals clinched or in process, conservatively projected to return within two years five times his fund's investment of $15 million.

Prouty isn't the only businessman to look at India and see untapped opportunity, but he's the only American venture capitalist who lives and works there, 24/7. And being there makes all the difference. A Yale liberal-arts graduate, Prouty spent the first 20 years of his career at Citibank as a senior credit officer lending to multinational companies, and the next 15 financing $100 billion worth of mergers and acquisitions at Lazard Freres before exiting as a general partner. Prouty could have retired. "But that was a sure way to feel like an old man on the shelf," says Prouty, 61. "Instead I chose to work with people half my age and twice as smart."

Prouty arrived in Bangalore in 1997 when most of Asia was in economic meltdown and India was in a period of political instability that saw four governments in less than two years. He and his partner, Vijay Angadi, a founding member of India's first venture-capital firm, TDICI, studied some 700 business plans and were poised to pounce in 1999 when the economy moved into recovery. Last year they signed half a dozen deals to fund Indian start-ups, including a 24% stake in Linc Software Services, which specializes in insurance and banking software; a 49.5% stake in the business-to-business portal MatexNet; and a significant stake in Explocity.com to help the cross-India city-guide publisher get established in e-commerce. They expect to close another half a dozen deals in the next three months.

ICF brings more than money to the table. Indian entrepreneurs have traditionally resisted any active role by financial backers in their operations, but Prouty's powerful contacts abroad and business acumen inspire trust in his clients. Says Prouty: "Our work just begins with investing the money. It is a seven-day-a-week, 365-day-a-year job of being useful to the companies." Says Rajan Narayanan, director of Linc Software: "He has given us leads and advice, opened doors internationally and participated in our strategic decisions."

An example of the brand of connectivity Prouty can bring to bear: last month when media mogul Rupert Murdoch was passing through Bangalore, Prouty dined with him--and the two are now working on a deal for additional venture funding of Explocity.com Says the company's exultant CEO, Ramjee Chandran: "[Prouty's] deep insights into international business match with my ambitious global plans."

Indians have relied for venture capital on their own financial institutions, which tend to focus conservatively on balance sheets and which make decisions by committee. ICF and similar funds are making a persuasive case for being faster off the mark and more forward-thinking. "What ICF does is take the core of an idea and try to grow it big by marrying it with high-quality international players. Our idea of a committee meeting is making a phone call and taking a quick decision," Angadi boasts. Adds Prouty: "ICF funds come from some of the U.S.'s most successful investment bankers, venture capitalists and institutions. These people have ridden some very fast horses in the U.S., and in India they see the opportunity to ride even faster ones."

Living close to the track gives Prouty an advantage in spotting India's dark horses, but it has entailed some hardship. His wife Allison, a lawyer, and his daughter Annabel, 9, initially accompanied him to Bangalore but returned to the U.S. after two years because Allison cannot legally practice law in India. They rely on e-mail to keep in touch day to day, and they vacation together several times a year. In the intervals, Prouty finds that work is the best antidote for his loneliness, and India is the beneficiary. With one hand on the pulse of the country's tech industry and the other flipping through a Rolodex of global resources, Prouty is helping import the vibrancy of Silicon Valley to southern India.

--Reported by Saritha Rai/Bangalore

With reporting by Saritha Rai/Bangalore