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Showing posts from September, 2005

Businessworld interview with Blackstone's Akhil Gupta

Businessworld has published an interview with the Akhil Gupta, head of the Blackstone Group's Indian operations:

Which sectors do you find most attractive in India now?
We are looking at companies across all sectors. As big-ticket players, we will not look at any deal below $25 million. The BPO space for private equity participation is saturated. Thus, going ahead, one might see a lot of private equity participation in pharmaceuticals, real estate, export and infrastructure.

What is Blackstone's USP vis-a-vis other private equity players in India?
A clear differentiator is that we will only do the big-ticket deals. Second, we have the largest portfolio companies as compared to our colleagues in the private equity space. So we position ourselves as catalysts for cross-border activities and as partners for growth over a long term. Even for a sector like telecom, which is essentially local in nature, we bring in our global expertise about process knowhow, etc., to enhance performance…

InfoTalk's Podcast with Sequoia's Mark Kvamme

InfoTalk has a great podcast with Sequoia Capital's Mark Kvamme. Some sound bytes (some of which might be paraphrased):

It's a myth that we invest only in companies who are referred by someone known to us. We've recently invested in a company that cold-called us.

If we can build a world-class business, the liquidity (exits) will take care of themselves. In fact, in today's crazy world of Sarbanex-Oxley, it makes sense to stay private for as long as possible.

We want people to know that we can make $100,000 investments, that we invest in 18-19 year-olds and we invest in ideas that are not yet fully-developed.

My phone number is 650-854-3927 and email address is kvamme@sequoiacap.com. We love to hear new ideas and new entrepreneurs. !!!
How about that for an accessible VC?

Arun Natarajan is the Editor of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence …

MIT's Deshpande Center wins praise

Brad Feld has high praise for the Deshpande Center for Technological Innovation at MIT. He feels "it’s an awesome example of a university program that funds novel, early-stage research, connects innovators with the business creation infrastructure – including VCs and entrepreneurs – and actively helps new startups to be created out of fundamental early stage research".
As the Deshpande Center enters their fourth grant cycle, they just released the data on what happened with research teams that they have funded to date.

* 44 teams have been funded since 2002
* $4.9m of grant money has been awarded
* 9 companies have been formed
* $23m of angel and first round VC funding has occurred
* 7 other teams are forming new companies and actively raising money

This is an incredible hit rate – 20% of the teams have already started companies and 36% of the teams that received grants have either started or are starting companies. Congrats to all these teams, Charles Cooney …

India's Web 2.0 companies?

Business Today has featured a list of "dotcom" survivors - from Automartindia.com to YourManinIndia.com - as part of its recent Cover Story.

Arun Natarajan is the Editor of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

How much will CIFC and ChrysCapital make from the Suzlon Energy IPO?

Business Standard calculates how much the two late-stage PE investors stand to gain from the wind energy turbine maker’s forthcoming IPO:

Citicorp, which had invested in Suzlon in April last year, effectively paid Rs 21.6 per share, and will now get at least Rs 425 per share, since the price band for the IPO has been set at Rs 425-510.

That is a huge 1872 per cent return on investment in a period of less than 18 months. If the issue gets priced at Rs 510, Citicorp's return will jump to 2266 per cent.

Of course, Citicorp will not realise this return entirely, since it is selling only a small portion of its investment in the company through the IPO.

Suzlon's initial public issue of 29.34 million shares includes an offer for sale of 2.58 million shares by Citicorp. That will still leave Citicorp with 20.6 million shares.

In fact, Citicorp is not the only player that has benefited in a big way. ChrysCapital, another private equity investor, bought shares in August last year at an effe…

While IT services cos. are acquiring overseas, product firms are getting acquired by foreign firms

This week, I contributed to an article on M&A in India's IT services sector in the The 451 techDEALMAKER. I'm posting below some of my responses to a well compiled list of questions from The 451 Group's Fred Linden.

What trends do you see in M&A involving India-based technology and communications companies?
While product/IP-driven companies based in India are finding willing buyers and investors among foreign companies (examples include the recent Oracle-I-flex deal and Flextronics’ string of acquisitions in 2004), services-focused firms are capitalizing on the booming capital market to acquire overseas companies.

Based on the successful exits, technology-focused VC firms are now more bullish on backing product/IP-driven firms rather than IT services firms (except for niche/specialized players).

Within services, it has been quite fascinating to witness how much more rapidly the Indian BPO services sector grew and matured – including in terms of attracting M&A inte…

Making merry until the IPO party lasts

In an article for the Financial Express, I highlight how late-stage companies are tapping Private Equity investments just a few months before filing for an IPO.October 2004: HT Media raises private equity capital from Citicorp International Finance Corporation, following an earlier investment from Henderson.

August 2005: HT Media's IPO is oversubscribed.

May 2005: ABG Shipyard raises funds from Merlion India Fund and IL&FS VC.

August 2005: ABG Shipyard files for IPO.

May 2005: Telecom R&D firm Sasken raises a reported $9 million from US-based VC firm, NEA, and files for an IPO almost simultaneously.

See a pattern here? Welcome to the world of pre-IPO Private Equity deals. As long as the IPO window in India is wide open we can expect the pre-IPO PE financing to gather momentum. (After all, right now, the only difference between one IPO and another is how many times each one is oversubscribed). Investing in mature companies just before their IPO – which sets a nice healthy valuat…

Why all this buzz around media?

The latest issue of Businessworld magazine has a cover story on the heightened deal-making in the media and entertainment sector in 2005.

Here's my take on the Private Equity action in the Media & Entertainment sector (some parts of which were featured in the Businessworld article):

For almost three years since the 2000 downturn, PE and VC firms focused whatever little investments they were making into the Information Technology and BPO services sectors. The media & entertainment sector, which was reeling under the impact of the sharp decline in advertising spends, never got a dekko.

September 2003 witnessed two major investment announcements in the media & entertainment sector: Henderson Global Investors' $27.8 million investment in HT Media for a 20% stake and ICICI Ventures' $22.2 million buyout of the Tatas 50% stake in Tata Infomedia. HT Media went on to raise a further $15.3 million from CIFC (a part of Citigroup) and Henderson in October 2004 - the only si…

Citigroup launches "venture lending" service in India

This week, Citigroup announced the first customer - Chennai-based Secova eServices - for its new "venture lending" service to Venture Capital-backed companies in India. Apart from providing a term loan, as part the Venture Lending transaction, Citigroup will also acquire a small pledge of stock warrants which would entitle it to invest and acquire equity shares in the customer company at a predetermined price.

The service is aimed at early- and growth-stage companies which have already raised a round of VC funding. Secova, for instance, raised its first round financing from the Tamil Nadu IT Fund (managed by IL&FS VC). By using debt financing from the Venture Lending service to finance fixed-asset purchases or working capital, entrepreneurs can employ their VC funding in areas such as accelerating product development or in making key hires. This way, entrepreneurs can achieve a better valuation for their companies before going in for the next round of equity dilution.

More…

“Regulators need to watch out for Private Equity firms”

In the context of the launch of large buyout-focused PE funds like Blackstone and The Carlyle Group in India, Raghuvir Mukherji, a consultant with the Financial Securities Group of Infosys Technologies, stresses, in a Business Line column, the need for urgent regulation in three areas: The level of gearing expected (including, if necessary, mandatory credit ratings for these firms) to prevent them from creating an asset bubble;

Publishing of data on activities of these firms and those they take-over, to prevent them from using the latter to do things that fall within the grey areas of the law;

Minimum lock-in period for these equity firms to prevent them from asset-stripping the companies they promise to turn around.

Does it pay to be an iconoclastic VC?

Extract from a recent The Deal.com report:(Tim Draper, Managing Director of Draper Fisher Jurvetson) is best known for self-promotional stunts such as singing at conferences, dressing up as Batman on the floor of the New York Stock Exchange and generally, just making really silly public statements that attract attention. While VC investing may require brains and native shrewdness, Draper's rebound may show that success can also come through a willingness to take risks on new geographies and sectors. And if self-promotion and buffoonery are an inseparable part of that risk-taking proposition, so be it…

For all this ridiculousness, Draper still sits on a significant stake in one of the world's more promising startups that happens to be located in Eastern Europe. Tallinn, Estonia-based Skype was founded by Niklas Zennström and Janus Friis, the engineering duo behind file sharing technology KaZaA. Skype offers PC-to-PC Internet telephony calling that is free for registered users an…