March 02, 2015

Under Promising & Over delivering is for Amateurs?!

Clearly, our entrepreneurial ethos and role models are going through a massive generation change. The quotes from Infosys founder N.R. Narayana Murthy that entrepreneurs in the 1990s took to heart included:

``Under promise and over deliver. Investors respect this.'' (On why Infosys gets the kind of valuations it does) 

"Revenue is vanity; profit is sanity; cash is reality"

and

"PSPD: Predictable, Sustainable, Profitable and De-risked"

Cut to 2015. Mukund Mohan, Head of Microsoft Ventures, writes:
Amateurs under promise and over deliver. They are the ones I hear always complain about valuations. They fail to realize that the “professional” entrepreneur friend they have is growing at an insane rate, but they choose to only compare “valuations” and dilution.
And what do the "Professionals" do to make "investors chase them"?
Professionals over commit and outperform. They are the ones that get the best valuations and are diluting very little. They push their entire team to crush already high expectations. They dont heed the “research” that says that it does not pay to over deliver. They crush their metrics on all accounts and deliver growth that’s off the charts.
The times are indeed changing. What do you make of this?

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.

March 01, 2015

A follow-on investor's take on Seed Capital sources in India

Sandhya Hegde of Khosla Impact has listed out the seed capital sources she likes in India and why. Extracts:
I have categorized them in 3 different groups — angel networks, fundraising platforms and seed funds. Over time, group 2 will eat group 1 (à la Angel List). 
...I am really excited about the potential of angellist-like platforms in India where startups are more geographically dispersed and it’s often harder to get meetings quickly for founders. Platforms are efficient, help standardize terms and give more power to entrepreneurs. We need some of that. I already see IAN members rapidly signing up on these sites☺ 
...Everyone’s doing seed investments at this point so nothing, apparently, is too early for institutional capital. Accel, SAIF, Kalari, IDG, Accel, Helion, Sequoia, Matrix, Nexus.. I begin to think even Tiger Global might make a seed investment in the right team given the exuberant environment in India. If you have their attention, you are winning.

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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February 11, 2015

Khaitan & Co. Tops League Table for Legal Advisors to M&A Transactions in 2014

AZB & Partners, J Sagar Associates follow at Nos. 2 & 3 respectively

Khaitan & Co. topped the Venture Intelligence League Tables for Most Active Legal Advisor to M&A transactions for 2014 with 114 points (across 34 qualifying deals) followed by AZB & Partners with 112 points (across 30 deals) while J Sagar Associates came in next with 106 points (29 deals).
The Venture Intelligence League Tables, the first such initiative exclusively tracking transactions involving India-based companies, are based on volume of Private Equity and M&A transactions (combined with credits based on fulfilment of criteria) advised by Transaction and Legal Advisory firms.
Khaitan & Co. advised M&A deals during the year included Meiji acquisition of Medreich for $290 million and the $74 million acquisition of Transpole Logistics by SBS Holdings. AZB & Partners advised M&A deals during the year included the $2.43 Billion acquisition acquisition of ING Vysya Bank by Kotak Mahindra Bank and the $984 million acquisition of Lanco Infratech by Adani Power. J Sagar Associates advised M&A deals in 2014 included the $470 million acquisition of Reliance Mediaworks by Prime Focus and the $336 million acquisition of Positive Packaging Industries by Huhtamaki.
Other legal advisors who had advised a significant number of M&A deals during the year included Amarchand & Mangaldas (76 points, 21 deals), Trilegal (52 points, 13 deals) and ALMT Legal (46 points, 12 deals).
Amarchand & Mangaldas topped the table in terms of value of the deals advised. Amarchand & Mangaldas advised deals during the year included the $4 billion acquisition of Ranbaxy by Sun Pharma. Amarchand was followed by AZB & Partners and Luthra & Luthra in terms of deal advised by value.
Khaitan & Co. topped both Inbound and Domestic deals table with 18 deals and 16 deals respectively. While AZB & Partners came in second in Inbound deals with 17 qualifying deals, and J Sagar Associates came in second in Domestic deals with 12 deals. Nishith Desai Associates led the Outbound M&A deals advising three deals.
New Entrants to the Venture Intelligence M&A table for Legal Advisors during 2014 include NovoJuris, Agram Legal and iCounsel.
The full league table can be viewed online at http://ventureintelligence.in/leagues.php

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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February 10, 2015

Ernst & Young Tops League Tables for Most Active M&A Transaction Advisor for 2014

Ernst & Young topped the Venture Intelligence League Table for the Most Active Transaction Advisor for Mergers & Acquisitions deals for calendar 2014 with 58 points (across 15 qualifying deals). ICICI Securities finished second with 36 points (across 9 deals) while Kotak, MAPE and PwC shares the third spot with 28 points (across 7 deals).
The Venture Intelligence League Tables, the first such initiative exclusively tracking transactions involving India-based companies, are based on volume of PE and M&A transactions (combined with credits based on fulfilment of criteria) advised by Transaction and Legal Advisory firms.
Transactions that Ernst & Young provided financial advise to during the year included the $470 M acquisition of Reliance Mediaworks by Prime Focus and the $114 acquisition of Jaypee Group cement units by Dalmia Cement. E&Y provided due diligence services to deals like Sun Pharma’s acquisition of Ranbaxy and Kotak Mahindra Bank’s acquisition of ING Vysya Bank.
BMR Advisors earned 26 points across 8 deals during the same period, while O3 Capital earned 24 points across 6 deals. Other transaction advisors who had advised a significant number of M&A deals during the year included Axis Capital (6 deals) and Signal Hill Capital (4 deals). Deloitte and Veda Corporate Advisors advised 3 deals each.
Some of the new entrants to this year’s M&A league tables included Trans Corporate Advisory and Equirus.
The full league tables can be viewed online at http://ventureintelligence.in/leagues.php

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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February 09, 2015

AZB retains top ranking among Legal Advisors to Private Equity Transactions in 2014

AZB & Partners retained its status – for the fifth consecutive year - as the Most Active Legal Advisor for Private Equity transactions during 2014. According to the Venture Intelligence League Tables, AZB finished the year with 176 points (across 44 qualifying deals). IndusLaw and Impact Law Ventures vaulted to the second and third spot with 164 points (across 41 deals) and 132 points (33 deals) each.

The Venture Intelligence League Tables, the first such initiative exclusively tracking transactions involving India-based companies, are based on volume of PE and M&A transactions (combined with credits based on fulfilment of criteria) advised by Transaction and Legal Advisory firms.

AZB advised deals during the period included Warburg Pincus’ acquisition of minority stake in Kalyan Jewelers for $200 million; General Atlantics’ $100 million investment in Citius IT Solutions and the $210 million investment by Softbank Corp. and other investors in Olacabs. Transactions advised by IndusLaw included Snapdeal.com’s attracting $637 million investment from SoftBank Corp. and other investors while Impact Law Ventures advised Knowlarity Communications in its fund raising of $15 million from Mayfield and Sequoia Capital India.

AZB & Partners also topped the tables in terms of deals advised by value. Trilegal (which advised BlackRock in SoftBank and other investors deal in Snapdeal) came in second while IndusLaw finished third in terms of deals advised by value.
The year also saw a lot of new entrants like Impact Law Ventures and Agram Legal entered the Venture Intelligence Most Active Legal Advisors for Private Equity league table.

The full league tables can be viewed online at http://ventureintelligence.in/leagues.php

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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February 07, 2015

Unitus Capital retains status as Most Active Financial Advisor for Private Equity Transactions in 2014

Ernst & Young retains Most Active Transaction Advisor status inclusive of due diligence, other services 

Unitus Capital retained the top position of the Venture Intelligence League Table for Most Active Transaction Advisor (Private Equity) for calendar 2014 acting as financial advisor to 17 qualifying PE investments during the year (and notching up 68 points). Among the transactions advised by Unitus were the $13 million investments by Fidelity Growth Partners and Aavishkaar in Milk Mantra and NMI investment in Satin Creditcare Network.

The Venture Intelligence League Tables, the first such initiative exclusively tracking transactions involving India-based companies, are based on volume of PE and M&A transactions (combined with credits based on fulfilment of criteria) advised by Transaction and Legal Advisory firms.

Ernst & Young came in second (for pure financial advisory) with 40 points (across 10 deals). Inclusive of its roles in due diligence and related advisory activities, Ernst & Young retained its status as overall Most Active Transaction Advisor for Private Equity deals in 2014 with 99 points (across a total of 69 deals). Ernst & Young advised deals included the investment of $50 million by ADB, DEG into Welspun Renewable Energy and the $31 million investment by Tata Capital into Sai Lifesciences.

Intellecap came in third with 32 points (across 8 deals) advising deals including Suryoday Microfinance’s fund raising from IFC, Aavishkaar Goodwell and Lok Capital and SME lender Intellegrow’s investment from Omidyar Network and Michael & Susan Dell Foundation.

O3 Capital and Spark Capital Advisors, which advised 6 deals each, completed the top five for 2014.

New entrants into the Venture Intelligence league table in the category during the 2014 included Think Capital, Intensive Fiscal Services and Dexter Capital.

The full league tables can be viewed online at http://ventureintelligence.in/leagues.php

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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February 03, 2015

"Tutors are the True Heroes of the Indian Education System"

Interesting article in Forbes India by Meeta Sengupta:
If there is one system that is working to further rigour, accuracy and excellence (of sorts), it is the tutoring ecosystem...it is the tutoring system that has added the quality dimension to it. If the goal is better marks, the tuition system has delivered on it. If the goal is smaller classes, the tutoring system has delivered. If the goal is teacher accountability – again, the tutoring system has delivered excellence.
...Students are not necessarily becoming dumber or smarter; they are becoming more skilled at taking exams. This is what a tutor does – and they are good at it. Here is the interesting thing: the tutoring ecosystem has delivered on a national goal of improving standards (as measured by marks) without being organised, regulated, scaled or standardised.
There are lessons here for the schooling system – both in the public and private sectors. The tutoring system has been able to deliver much more than a traditional schooling system struggles with on a daily basis. Quality (as defined by goals set), time on task, efficiency, lack of absenteeism – tutoring scores. Tutoring is also a completely self funded system with little pressure on the exchequer. At the same time, the system remains flexible enough to deliver an affordable solution at each price point the market demands – the cost per child is monitored, managed and responsive to the needs of the group they serve. When one looks at delivering to standards, at standardised learning – again the tutorial system makes the grade. Or they go out of business.
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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February 01, 2015

YoCAPTCHA - Yet another founder breakup - but thankfully managed success despite - story

From The Mint profile:
In June 2012, a clutch of investors—part of the Mumbai Angel Network—approached Gupta. However, the presence of a third dormant partner—Agarwal—remained a concern. Agarwal, who had not yet left the company on paper but was inactive in day-to-day operations, left the investors jittery. In the final stages of the term sheet being signed, a dispute between the three partners led investors to back out. It was a very stressful period, adds Gupta, explaining that there were times when he thought of giving up the venture.
By the end of 2012, it was very clear that Agarwal would not be returning to the venture. However, good news appeared in the form of a strong order book with advertisers such as Reliance 3G and Proctor and Gamble getting on board. Digital advertising networks such as Networkplay Media, then part of German media group Bertelsmann, became regular marketers of Yo!CAPTCHA. In May 2013, Networkplay offered to buy Yo!CAPTCHA, from Innovese. The acquisition was completed in June 2013.
...“Managing people was a key part of our business; also, don’t be focused on the money, it will come,” explains Gupta. And “start young”, no amount of education can teach you what a start-up can, he adds.
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 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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