| | By Subhankar Kundu @ Wednesday, March 18, 2009 9:47 AM
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| | In these tough times of economic downturn, Venture Capital (VC) investors have taken a slightly different stance by looking at companies with strong foothold in familiar sectors rather than investing on technology start-up firms in largely untapped technology spheres.
 Core banking technology is one area that doesn't attract investors' attention and even most entrepreneurs are not too keen on entering this area.
Kallol Borah, director of a start-up forum, Headstart said, “There are a few start-ups developing finance products but not exactly in core banking technology as most of the start-ups don’t have the infrastructure and expertise required to come up with a product in such large scale”.
Cannan Partners' executive director, Harish Gandhi told ITExaminer, “We have not invested in any company that develops core banking technology but we are always open to innovative ideas.”
However, Gandhi declined to comment further on whether any startup company would approached them with core banking ideas.
Borah said, “The cost of developing product and huge system industry expertise are the factors that need to be addressed to compete with the products from bigger players. The VCs wouldn’t like to put money on technologies that they are very familiar with”.
Oracle Financial Solutions (Iflex) and Infosys have been dominating the market with core banking products like Flexcube and Finacle.
But the market is quite wide open for start-ups if they can come up with truly competitive core banking products.
Finance products can be categorised under three segments – consumer facing applications and services, enterprise applications and platforms (Core technologies where the real-time transactions take place).
Start ups like Eko solutions, Cash Next or Dhanax are faring well in areas like consumer applications and Enterprise applications. Dhanax is an online-offline person-to-person lending platform that allows Indians to lend and borrow money from each other.
Taking the overall scene into consideration, the VC investments have gone down in 2009 compared to 2008. Some of the VCs are still sticking to early-stage ventures in areas such as mobile services and technology product or healthcare firms. To strike a balance, most companies are now going ahead with a few large deals but also considering early-stage deals. X
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