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Similar to Silicon Valley’s boom in the late 1990s, the Indian tech world is in full frenzy.

Ram Shriram, the founding investor in Google, started frequent travel to India last year to look for opportunties. He initially seemed close to Silicon Valley firm Sequoia Capital. They co-invested in online contacts company here in Silicon Valley, Plaxo, and ventured into to India three years ago to back 24/7 Customer. But lately, Shriram has cozied up with Sequoia rival Kleiner Perkins.

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Ram Shriram

He offered “a couple” of VC firms the opportunity to join him, he said. Kleiner took him up on it, and they’ve since co-invested in a couple of companies, including India online job site, Naukri, which has already filed for an initial public offering.

Sequoia, meanwhile, recently “merged” with an Indian firm, Westbridge, as a way of making investments in India. Through Westbridge, it has invested in travel site competitor Travelguru. Shriram, though, has beefed up his own efforts: About a year ago, he hired Sandeep Murthy as a partner at his firm, Sherpalo, to focus on Indian investments. He also brought on Murthy to become chief executive of Cleartrip, an online travel company that Sherpalo and Kleiner Perkins invested in early this year. Murthy is also evaluating deals for Kleiner in India.

Meanwhile, an increasingly prosperous Indian middle class is starting to travel more, and so online travel sites there are booming: Gabriel Venture Partners has led a $6 million round into MakeMyTrip. Norwest Venture Partners, yet another Silicon Valley firm, has backed Yatra. Cleartrip will launch tomorrow, July 4.

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Things are looking bubbly. Several other Silicon Valley venture firms have made moves to invest in India, and Shriram says such announcements “certainly appear to be the leading indicator of a bubble in equity values.” We at SiliconBeat have noticed that the venture data and reporting about the India market is pretty unreliable — or at least difficult to figure out. Venture capital firms and private investors last year poured $2.2 billion into 146 start-ups in India — compared with $1.7 billion invested in 71 deals in 2004, reports USA Today, citing data from TSJ Media’s Venture Intelligence India Roundup, and we’re assuming this includes U.S. venture investments into the country too.

But how can that be? In China, a much larger market, we learn from industry research firm VentureOne that venture investments rose to $1.5 billion in 2005, up from $1 billion the year before, according to preliminary data from industry tracker VentureOne. VCs made 158 investments in China, up from 123 in 2004, the report said. Perhaps the problem is that some local Chinese investments aren’t getting picked up by the trackers.

You’ll also see reports that the Indian state of Haryana is developing a research and education “Nano City,” modeled after Silicon Valley, to the tune of $2 billion, only to see some reports inflate this to an unqualified “$10 billion”.

So how to do you build smart companies amid the hype? We asked Ram Shriram whether Murthy is taking on too much, i.e., running a start-up and screening deals for two venture firms? Ram said he doesn’t see this as a stretch, saying that Murthy isn’t being asked to actually do the deals per se. On the contrary, Ram said, the point is to find solid teams that buckle down for several years to build great companies. So Ram is looking for the right market opportunities, and then working with Murthy to screen the teams. “Most VCs in India are investment banker types, not technologists or operating execs,” Ram says, saying that Murthy’s experience in building Cleartrip will also be helpful in nurturing other teams.

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