January 22, 2015

Is India the Next China - In Internet & Mobile investing terms?

Here's an extract from the Rise Capital Blog:
... the differences between China and India matter just as much as the similarities. We believe that there will be quite a few investors who get “burned” by buying at lofty valuations this time around who subscribe fully to the convenient idea that India is the “next China”, and that Internet companies there are the “____ of India” (fill in the blank with any successful Chinese Internet startup).

At Rise, we are eerily reminded of the rush of investment capital that flooded into Brazil a few years ago, with VCs believing that Brazil could also become the “next China”. At one point, the overnight flights from Kennedy (NYC) to Guarulhos (Sao Paolo) were packed with American VCs, startups were getting funded at a breathtaking clip, and early-stage valuations well north of >$100m were not uncommon. So what happened? A dip in the Brazilian economy combined with a realization by VCs that Brazil is actually quite different than China has created a much different dynamic. Foreign capital has dried up and the situation has returned to “normal” from a valuation perspective, and many of those startups (and the VCs who backed them) who participated in aggressive financing have found themselves on the wrong side of this dynamic.

Do we think India will go through a similar roller-coaster? For those who’ve been investing in India for a long time, this wouldn’t be unexpected, as there have been many starts and stops for Indian VC journey previously and there will no doubt be other hiccups in the future. At Rise, we think the smartest way to navigate such scenarios is to simply remain prudent when it comes to valuation. After all, as Warren Buffet once remarked, “only when the tide goes out do you discover who’s been swimming naked.”
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

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January 12, 2015

What the Flipkart & Snapdeal fairy tales of 2014 mean for Entrepreneurship in India?

By Arun Natarajan

An abridged version of this article appeared in the Business Line dated Jan 13, 2015

Home grown E-Commerce leaders Flipkart and Snapdeal between them raised almost $3 billion from investors during 2014. Powered by the E-Commerce segment, Online Services companies accounted for as much as 37.6% of the total $10.9 billion invested by Private Equity (including Venture Capital) investors during the year, according to figures recently compiled by Venture Intelligence.

Startups are clearly back. And how. PE investments in India during 2014 were second only to their historic high of 2007. The year in which Flipkart was founded. At which time the PE investment action in the IT industry was focused almost exclusively on mature IT Services and BPO companies.

Unicorn Club Effect

What effect will the recent membership to the “Unicorn Club” – i.e., startups with valuations of $1 billion or more – of Flipkart, Snapdeal, etc. have on entrepreneurship in the country? Are we going to witness more stories of “two guys with a business plan walking into a VC firm’s office and leaving with a cheque for millions of dollars”?

Let’s first see what the data from Venture Intelligence for 2014 reveals about investments by PE/VC firms in Early Stage companies – i.e. companies that are less than five years old and are raising their first and second rounds of institutional capital. In other words, classic startup funding. (Note: the latest rounds of investments in Flipkart and Snapdeal were their seventh and eighth rounds of investments respectively. The investors in these rounds included hedge funds, mutual funds, sovereign wealth funds, MNCs and ultra HNIs from various parts of the world – including Russia, Qatar, Singapore and South Africa. While these companies are very much a product of Venture Capital funding in their earlier stages, the kind of monies they have been raising in the last couple of years is no longer in the VC realm.)

Venture Capital firms invested about $428 Million over 163 deals in the Early Stage segment in India during the twelve months ended December 2014. The investment activity was effectively flat compared to 2013 (which had witnessed 162 investments worth $378 million) and almost 22% lower than the peak year of 2012 (208 investment worth $540 million).

Investments by Industry

With 124 investments worth about $299 million, the Information Technology and IT-Enabled Services (IT & ITES) industry was the overwhelming favorite investment destination for early stage investors during 2014, accounting for 76% of the investments (70% in value terms). The volume of investments in IT & ITES were up by 7% over that in 2013, and increased by about 26% in value terms.

Healthcare & Life Sciences companies followed as a distant second attracting 11 investments worth $49 million during 2014. Not only that, the volume of HLS investments in the Early Stage segment was actually down by over 30% compared to 2013 (which had witnessed 16 investments worth about $80 million). Out of the about $9 million that Education companies managed to attract, $6 were grabbed by two online test preparation startups. Clean energy companies had to rely on interest from sector focused seed funds for the total of less than $2 million that was raised across four companies.

Within the IT slice of the pie, Online Services companies, which attracted 59 investments worth $118 million, accounted for 47% of the Early Stage investments during 2014. Enterprise Software companies retained the second spot (attracting 28 investments worth $75 million) and Mobile VAS companies were third (attracting 19 investments worth $39 million).

The Tiger Global led $15 million second round raised by women’s apparel & accessories e-tailer LimeRoad.com was the largest investment in the Online Services sector, followed by the $10 million second round investment raised by jewelry e-tailer BlueStone and the $8 million second round raised by fashion apparels e-tailer Fashionara.com.

Even among Enterprise Software companies, the top investment featured Tiger Global – which led a $10 million second round investment for Unicommerce, a provider of logisitcs management software to retailers. Unlike Online Services, where almost all the investments go into domestically focused companies, in Enterprise Software, Indian startups have to fight for the capital available with Indian VC firms with foreign companies! Nexus Ventures for instance made three investments in Silicon Valley based Enterprise Software companies in 2014 - ElasticBox, ArkinNet and BlueShift.

Among Mobile tech focused startups, consumer app makers like Tinyowl (a food ordering startup) and Vee (a mobile dating service) as well as enterprise targeting firms like Mobstac (focused on publishing) and SilverPush (focused on mobile ads retargeting) found favour during 2014.

In Healthcare & Life Sciences, specialized clinics were in focus with dental chain Denty’s, renal care chain DCDC Health Services and orthopedic surgeries focused Lokmanya Hospitals attracting investments. Eyecare diagnostics equipment maker Forus Health stood out as the sole medical devices startup to attract VC funding during 2014.

The Bottom Line

Clearly there is a giant sucking sound of dollars chasing what investors hope will be the next Flipkart or Snapdeal. The message – as indicated by how mainstream VC investors have voted with their wallets in 2014 - seems to be: if your startup is an Internet or Mobile play, we are all ears. (Many VC firms who had abandoned early stage investments a few years back - in favour of growth stage investments – are today competing with angel investors and seed funds to write sub $1 million cheques.)

For entrepreneurs from outside the Internet & Mobile sectors however, the chances of getting investor attention seems to be tough.

What if anything will cause a change during 2015?

Exits 

Exits are the name of the game in Venture Capital. Even if they might not have actually sold their holdings, the mega valuations that Flipkart and Snapdeal have commanded in their later rounds of funding, have made the fortunes of their early stage investors (or at the least enabled the firms to close new funds).

If the exit momentum for Private Equity in general picks up – including through the mother of all exit routes, IPOs – then the likelihood of new funds being raised and in turn, the “trickle down” impact of more dollars becoming available for startups (of all kinds) will follow.

Regulatory “VUCA”

VCs have favoured non IT sectors in the past - like Microfinance and Education – only to be scared away by political and regulatory risk. Even for investors in Online Services companies, it’s hardly been all smooth sailing in 2014. Coming as it did soon after Japan’s SoftBank led a $210 million investment OlaCabs, the race to ban the operations of Online Taxi Booking startups post the Delhi-Uber episode, is still a live issue.

The perennial grey area in which E-Commerce companies are forced to operate vis-à-vis FDI rules and also taxation, continues to pose a threat to the sector. Unless the VUCA (Volatile, Uncertain, Complex and Ambiguous) risk in regulation subsides, VC dollars will flow to only where the current risk-reward equation appears the best.

US Bubbles & Local Ripples

There is a theory that the excitement for startups in India is highly correlated with the latest bubble manufactured in Silicon Valley and fed to the public markets in the US. And as and when those bubbles get pricked the corresponding “startup waves” in India collapse very fast.

Bubble set to burst or not, the Flipkart and Snapdeal have established that ambitious young, first generation entrepreneurs building ventures of their dreams – with dollops of venture capital to power them – are no longer stories that happen only in Silicon Valley.

And drawn by the phenomenon, in 2014, local Indian billionaires like Ratan Tata and Azim Premji have opened their cheque books to startups.

Flipkart and Snapdeal have between them acquired a dozen Indian startups.

The founders of these companies have become among the more active angel investors in the country.

The 2014 wave has left the startup soil in India much richer.

The Venture Intelligence APEX Private Equity & Venture Capital Summit - on March 12 at Mumbai - will explore the above themes and more with the help of stellar speakers. Click Here for the details.


The author is founder of Venture Intelligence, the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. 

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Deal Alert: Mobile SDK maker AppVirality raises $465-K from IIG, TNN Capital, angels

Mobile app development software maker AppVirality has raised $465,000 in seed funding from India Internet Group, TNN Capital and other investors including Rajan Anandan, managing director of Google India; Mike Galgon, co-founder of aQuantive; Ravi Gururaj, chair of the Nasscom product council; Baron Capital research analyst Ashim Mehra; InMobi vice president of technology Mohit Saxena. AppVirality provides a software development kit (SDK) and dashboard that allows developers to add growth-hacking techniques to their apps without having to write new code. The company, which took part in Microsoft Accelerator last year, will use the capital for product development and hiring. 

Source: TechCrunch 
 
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

January 07, 2015

Unraveling Oravel's founder

The Mint has a detailed profile of the founder of Venture Capital-backed budget hotels aggregator Oravel (now, OyoRooms) titled "Will the real Ritesh Agarwal please stand up?".  The piece makes the company appear  Facebook like - at least as described in the move The Social Network - full of bad behaviour, co-founder strife, et al.

Extracts:
A co-founder booted out, employees not given their due and hung out to dry, pieces of paper with informal promises of a stake, a charismatic founder’s attempt to wipe the slate clean, exaggerated pitches, cold and calculated interference of venture capital firms, their sanctimonious contracts and clauses, and the world of make-believe valuations.
...“See, Ritesh is a gifted and talented person. I genuinely believed in his ability and story when he first signed me up as a co-founder,” he said. “But later there was this other side to his personality that surfaced. Many things that happened are unethical and I have lived with them not fully knowing or realizing what had gone on. Though I discovered it somewhat late I feel that the complete story—with his grey zones and his propensity for unfair play—needs to be told.” (Attributed to Manish Sinha, Co-founder)
...Ten minutes into the meeting Ritesh pushed a paper towards Sinha and asked him to sign it. He then excused himself and stepped out. Sinha picked up the paper, thinking it must be a bill or something. But as he read it, the colour drained from his face. “The document stated that I would sell all my shares to Ritesh,” says Sinha. “I was furious. I just flung the paper on the table and walked out.”
Well, well, well.
“See, Ritesh is a gifted and talented person. I genuinely believed in his ability and story when he first signed me up as a co-founder,” he said. “But later there was this other side to his personality that surfaced. Many things that happened are unethical and I have lived with them not fully knowing or realizing what had gone on. Though I discovered it somewhat late I feel that the complete story—with his grey zones and his propensity for unfair play—needs to be told.”

Read more at: http://www.livemint.com/Companies/7CN7u5d4i3bfYgBAZLdLpM/Will-the-real-Ritesh-Agarwal-please-stand-up.html?utm_source=copy
“See, Ritesh is a gifted and talented person. I genuinely believed in his ability and story when he first signed me up as a co-founder,” he said. “But later there was this other side to his personality that surfaced. Many things that happened are unethical and I have lived with them not fully knowing or realizing what had gone on. Though I discovered it somewhat late I feel that the complete story—with his grey zones and his propensity for unfair play—needs to be told.”

Read more at: http://www.livemint.com/Companies/7CN7u5d4i3bfYgBAZLdLpM/Will-the-real-Ritesh-Agarwal-please-stand-up.html?utm_source=copy

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

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Deal Alert: Snapdeal founders invest in apparel e-tailer Bewakoof.com

Snapdeal founders, Rohit Bansal and Kunal Bahl have made an investment in Mumbai-based Bewakoof Brands Private Limited, the company behind online apparel portal Bewakoof.com. 

 
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

January 06, 2015

Deal Alert: Peer to peer lender Faircent.com raises funding from MFI execs

Gurgaon - based peer- to-peer lending pioneer Faircent.com has raised capital at an enterprise valuation of $4 million from Devesh Sachdev and Ashish Tiwari, promoters of Fusion Microfinance Pvt Ltd. The money raised would be used for strengthening technology, talent and brand. 

 
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

Deal Alert: Healthstart, others invest $135-K in wellness startup Gympik

Bangalore-based Gympik Health Solutions, which owns and operates online marketplace-cum-ecosystem for fitness & wellness service providers Gympik.com, has raised $135,000 (about INR 86 lakh) from healthcare accelerator Healthstart and a group of angel investors including Capvent’s managing partners Tom Clausen and Rohan Ajila, as well as BSE listed manufacturing firm Haldyn Glass. Healthstart’s Pradeep K Jaisingh had joined the board of the company in Feb-14 and Rohan Ajila, Managing Partner, Capvent India joined the board in Sep-14. 

The funds will be used for marketing, geographic expansion and for developing new features. It will also be used to enter newer verticals that also involve providing B2B software services to players in the fitness space. 

Source: Nextbigwhat
 
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

January 05, 2015

Deal Alert: Fashion portal Purplle.com gets funding from IvyCap

Fashion portal Purplle.com has raised its first round of institutional funding from IvyCap Ventures. The funds will be used to create a TripAdvisor-like marketplace for discovery of beauty and grooming products and services. Purplle's earlier investors include Mumbai Angels, the Chennai Angels and early-stage investment fund Blume Ventures. 

Founded by IIT-Delhi alumnus Manish Taneja and IIM-Ahmedabad graduate Rahul Dash, Purplle has claims to have tied up with more than 7,000 salons, spas, skin care and hair care chains across Mumbai and plans to take that number up to 50,000 across 30 cities by the end of this year. The company aims to close 2015 with annualized sales of $30-40 million. 

 
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

Deal Alert: Canbank VC picks 5% in engg. pdts maker Anand Teknow for Rs 16-Cr

Canbank Venture Capital Fund Limited (CVCFL) has invested INR 16 crore in return for a 5% stake in Anand Teknow Aids Engineering India Ltd, a Rs 300-crore closely-held public limited company manufacturing engineering products for the oil and gas sector in India and Gulf. The funds will be used to expand the company’s ball valve plant at Talawade near Pune. CVCFL has made the investment from its INR 435 crore Emerging India Growth Fund. 

Anand Teknow has two plants for the manufacture of ball valves at Talawade and Chinchawad near Pune (India). The company’s clients consist of 31 refineries including 15 from the Gulf region and Malaysia. 

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

January 04, 2015

Deal Alert: Fashion social network VioletStreet raises Rs.2-Cr

Fashion social network VioletStreet.com has raised Rs. 2 crore in an angel round led by Venkat Vallabhaneni with participation from Srinivasa Rao Paturi. The company will utilize the funds to scale the technology, grow its team and increase its reach in the Indian market. Following the round, Venkat Vallabhaneni, Former Senior Vice President of Bank of America and serial entrepreneur, and Sudhakar Reddy, Founder and CEO of Abhibus.com, will join the board of the company as directors. 

 The platform allows users to put together matching products to create fashion looks and have instant feedback from friends. The company had previously raised Rs. 10 lakh in a TiE Smashup event held in May 2014. 

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.