VCs in the last three years of strong economic growth have invested in a few application segments – search and local search (eg, Guruji, AskLaila), payment systems (eg, Obopay, MChek, Paymate), ad networks (eg, Ozone, MKhoj, Komli), social networks and communities (eg, Minglebox, techTribe), consumer services (eg, Cleartrip, Seventymm, Carwale) and mobile VAS (eg, mGinger, smsGupshup) – that are high growth, low margin businesses. While these businesses may grow 100% year upon year, most of them do not generate enough cash to sustain them without additional rounds of venture capital. Not bad, when the objective has been to first get market share and then think about monetization but going forward, venture capitalists are likely to be very careful about low margin business models. This is the segment that may see VCs becoming the most conservative when it comes to new investments.
In the Entrepreneurship panel at HeadStart and Compute 2009, we have Sanjay Swamy, CEO, MChek that is a mobile SMS based payment systems provider, talk on ‘Building sustainable consumer businesses : High growth vs High margin business models’.
Sanjay Swamy, a Silicon Valley veteran, is the Chief Executive Officer at mChek, responsible for the entire operations of the company and scaling mChek to support customers across the globe. 
Prior to mChek, he was instrumental in setting up the India operations of Ketera India (a wholly-owned subsidiary of KPCB backed Ketera Inc.), a leading provider of on-demand e-Procurement and Spend Management solutions. Earlier, he had played a key role in setting up mPortal, a Virginia based start up in the Wireless Data Services domain. During his 12 year stint in the Silicon Valley, Sanjay has also held various senior positions in marketing and business development in Portal Software, Xerox PARC and Integrated Systems (now Wind River).
Sanjay has done his MS in Aeronautics from the University of Washington, Seattle, a higher studies diploma in Avionics from National Aerospace School (Sup-Aero), France besides holding an Engineering degree from Visvesvaraya College of Engineering, Bangalore, India.
High growth businesses indicate the need of the consumer to a large extent, and signify the demand for such a kind of product. I don’t think the venture climate would be knee-jerk. Downturns are an integral part of the market economics, and not all runs can be bull-runs.
In fact, it might be just the right time for good and justified investments. Probably such an opportunity comes every 50 years.