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Showing posts from March, 2005

Want to re-write your company's past? Don't forget the Wayback Machine and Google's cache

Venky Ganesan has taken exception to a MarketWatch
article profiling Certus (formerly nth Orbit) and its co-founder Vani Kola.

Ganesan's problem is that "this article makes it out to be (that) Vani left Rightworks and had this insight around corporate governance and decided to start Certus". "Great story but alas not the complete truth," he says and goes on to use the Wayback Machine's archive of the evolution of Nth Orbit's web site to desmonstrate that the company was originally focused on the supply chain software space and hence "not exactly" focused on corporate governance related problems. "Every company goes through ups and downs and if anything, we should congratulate Vani on how she has successfully evolved Nth Orbit into Certus. However its misleading to distort history. Its particularly ironic since she is trying to improve corporate governance," Ganesan says.

In his post, Ganesan provides that the blame for why the MarketW…

Sunil Bharti Mittal planning to incubate start-ups

Business Standard has an article on Bharti Group founder and Chairman Sunil Bharti Mittal's future plans, which includes an equity fund to invest in new ventures outside the group. According to the article, Mittal plans to step down as executive chairman of Bharti Televentures, the group's telecom business, when he turns 50 in three years time. He is, in parallel, working on growing the group's non-telecom initiatives (including especially, agriculture), which will be his focus area after he retires.

An Extract:Already, Mittal is charting a new course. Not content with being telecom's tycoon, he is giving shape to a new thrust in non-telecom businesses. A decade from now, he reckons, telecom may no longer be the largest slice in the Bharti pie.

Over the next three months Mittal hopes to float an equity fund with a large corpus (the extent of which is still being decided, though Mittal says money is not a problem), that will be used to fund new businesses in emerging are…

A "Private Investment for Royalties from a Public Enterprise's Future Revenues" deal

While it has moved away (like most other VCs in India) from investing in early-stage companies, ICICI Venture Funds continues to innovate when it comes to creating novel deal structures for financing late-stage companies.

The latest example of this is the fund's $56 million investment commitment to Hyderabad based, publicly listed pharmaceuticals firm Dr Reddy's Laboratories to finance the latter's new drug R&D. Dr. Reddy's would use the money from I-Venture to fund the development, registration and legal costs related to the commercialisation of Abbreviated New Drug Applications (ANDAs) for two years. In return, ICICI Venture will be paid a royalty by Dr. Reddy's pegged to the latter's net sales for a period of 5 years.

Given that new drug R&D is a high-investment, high-risk, but high-reward business, the partnership between a private equity firm which has access to a lot of capital and an established pharmaceuticals firm which has pioneered original R&a…

"Patient investors can win big in India"

"India is an acquired taste. India is about long-term perspectives. India is about patience. But India is a place where you can make a lot of money". So says Rajiv Lall, newly appointed CEO of Infrastructure Development Finance Co. (and formerly with private-equity firm Warburg Pincus in New York) in a Reuters article comparing India (of the "potholed roads and decrepit airports") and China (of the "first-world superhighways and magnetic levitation rail lines").

More extracts from this interesting article:JM Morgan Stanley estimates that China spent $325 billion on infrastructure in 2003, while India spent just $35 billion. Only in a few nations does the private sector play a big role in infrastructure development, JM Morgan Stanley economist Chetan Ahya says. He urges the government to spend an extra $20-$25 billion a year at least, to be financed by privatisation.

The China comparison makes Indian officials grumpy. They say India can be proud of its recen…

Nirma Labs: An incubator that advertises and charges fees

While the incubation programs at several of the country's business schools are figuring out their model, NirmaLabs, located in the Ahmedabad, Gujarat based Nirma University campus, has come up with an unique model that actively seeks out and markets itself aggressively to entrepreneurs. NirmaLabs is taking out prominent advertisements campaign in leading business magazines as part of its efforts to seek out "individuals (and) groom them to be a global player in select high tech fields, and incubate them to create viable high tech ventures by providing a nurturing environment and needed support."

More from the NirmaLabs web site:NirmaLabs is a not-for-profit Section 25 Company set up by Nirma Education and Research Foundation (NERF). NirmaLabs has been established with an objective to nurture talented individuals in their pursuit of high-tech, knowledge-based wealth generation. NirmaLabs has a corpus of over Rs. 5 crores earmarked to incubate promising individuals and pro…

How VCs should say "No", and how entrepreneurs should take them

Bill Burnham,Managing Director at Celsius Capital, has a nice 3-part blog post on the choices and dangers VCs face while saying "No" to funding pitches from entreprenreurs. "Saying “no” to any entrepreneur is not fun and creates enemies. It’s like telling someone their baby is ugly or their child is stupid. At best they will walk away puzzled at your inability to “get it”, at worst they will berate for your stupidly and declare a permanent pox on your house."

His parting advice to VCs:1. Being honest. It’s tempting to use a convenient excuse, but you and the entrepreneur are both better off if you are upfront and honest. Yeah, you risk alienating some entrepreneurs but if they don’t respect you’re attempt to be honest then they you probably wouldn’t have worked well together anyway.

2. Being specific. To the extent that you can be specific, you owe entrepreneurs the real reasons for why you are saying “no”. Not only is this the right, professional thing t…

Why VCs are jerks, according to Paul Graham

Paul Graham, co-founder of ViaWeb (acquired by Yahoo for $50 million), has figured out why (most) VCs are jerks. The problem with VC funds is that they're funds. Like the managers of mutual funds or hedge funds, VCs get paid a percentage of the money they manage. Usually about 2% a year. So they want the fund to be huge: hundreds of millions of dollars, if possible. But that means each partner ends up being responsible for investing a lot of money. And since one person can only manage so many deals, each deal has to be for multiple millions of dollars.

This turns out to explain nearly all the characteristics of VCs that founders hate.

It explains why VCs take so agonizingly long to make up their minds, and why their due diligence feels like a body cavity search. With so much at stake, they have to be paranoid.

It explains why they steal your ideas. Every founder knows that VCs will tell your secrets to your competitors if they end up investing in them. It's not unheard of for VCs…

John Doerr's presentation at Stanford University

A must see presentation from the famous KPCB partner behind Amazon.com and Google.

Just one extract:Entrepreneurs do more than anyone thought possible with less than anyone thought possible
UPDATE: The fact that Doerr celebrates entrepreneurs as the real heroes (and does not behave like a celebrity himself), earns him respect from even those folks who hate the VC breed in general. "I've met a few VCs I like. Mike Moritz seems a good guy. He even has a sense of humor, which is almost unheard of among VCs. From what I've read about John Doerr, he sounds like a good guy too, almost a hacker," allows Paul Graham, co-founder of ViaWeb (sold to Yahoo for $50 million), in his recent article attacking VCs titled "A Unified Theory of VC Suckage".


Arun Natarajan is the Editor of TSJ Media, 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.

McKinsey's mantra for MNCs in India

McKinsey Quarterly has article on how multinational companies entering India should avoid replicating products and processes that have worked in other markets. "Clearly, any entry into a new market requires a certain degree of tailoring to its specific needs and conditions. But for some companies, the entry into India has forced a fundamental rethinking of product offers, cost structures, distribution systems, and management teams. Companies that successfully tap into the promising Indian market often ignore conventional wisdom, including the need for joint ventures."

Multinationals in deregulating industries often need to be flexible and patient during the natural process of regulatory evolution. Regulations governing the mobile-telephony sector, for example, have been amended several times since 1994 as it has grown; it had two licensed operators per region back then and now has as many as six. Although most multinationals left the sector when the regulations governing it c…

Business school incubators change tack

Business Today has an article on incubation programs at various business schools in India. I found the changing face of incubator programs like IIM-B's NSRCEL (sponsored by Infosys co-founder Nadathur S. Raghavan) to be most interesting part of the article:Initially, NSRCEL started by offering cash awards to the best business plans of IIM students, who would partake in an annual competition meant for the purpose. However, within two years, the centre realised that while the plans sounded great on paper, few of the winning students wanted to pursue them. Instead, "they were looking for the glory of winning the competition," says (Mathew) Manimala (Professor of Entrepreneurship). So instead of giving the winning students cash, the centre decided to fund their business plans. When that didn't yield the desired results either, the centre broadbased its scope to fund anybody with a good business plan.

NSRCEL, though, isn't the only one doing so. At ICFAI's entrepre…

Raise Private Equity, boost valuation, go IPO

Economic Times points out how companies are finding it attractive from a valuation perspective to raise money from private equity funds just before going in for an IPO.
Suzlon Energy’s IPO plan is a classic case. Last November, Suzlon raised Rs 100 crore through issue of equity and convertible preference shares to ChrysCapital.

The non-conventional energy major had also raised Rs 100 crore from Citigroup Venture Capital International, a Citigroup global investment unit, a few months ago.
Arun Natarajan is the Editor of TSJ Media, 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.

Bill Gurley (finally) launches a blog

In my opinion, Bill Gurley, a partner at Benchmark Capital and one of the best known VC columnists (in Fortune and News.com), was a "blogger" even before blogging was invented. It has therefore been a source of constant surprise why he had let other VCs like Brad Feld steal the limelight.

Whatever the reasons for the delay, Gurley has - finally - turned blogger now with a "Sorry it took so long to "get with" this new wave" note. Check out his blog at http://www.abovethecrowd.com.

Arun Natarajan is the Editor of TSJ Media, 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.

Profile of Pantaloon Founder & CEO

Business Today (paid access required) has a profile of Kishore Biyani, Founder & CEO of publicly listed retail firm Pantaloon.A little over seven years ago (August 1997, to be precise), when Biyani opened his first Pantaloon family store in Kolkata's Gariahat, few retailers could have dreamt that the commerce graduate, who started off with an investment of Rs 7 lakh and capacity of 200 trousers a day, would rise so rapidly. When Biyani talked about his "pan-Indian retailing model", reactions ranged from good-humored incredulity to downright derision. That is, till Biyani proved them wrong. Take the test case of Kolkata. He invested Rs 5 crore in the first Pantaloon store, including a Rs 40-lakh promotional campaign-unheard of for a retailer with just one store. Surprisingly enough, the response was overwhelming. With daily footfalls of over 1,200, it notched up Rs 10 crore in sales in the first year...In quick succession, Biyani opened two other Pantaloon stores, fol…

"Early stage investments still make sense"

Ravi Chiruvolu, a general partner at Charter Ventures, provides a reminder of why early stage companies, while currently out of fashion, are an attractive investment opportunity in his column for Venture Capital Journal:Not only are valuations more attractive, not only is deal flow more robust, not only is there less competition for entrepreneurs to accept term sheets, but investing earlier cuts to the very notion of why most VCs do what they do. To create and add value within organizations where bandwidth and talent is sorely needed. To take risk in the hope of creating sustainable businesses where quality output, increased hiring, and contributing to the overall health of the economy all go hand in hand. To prime and polish even more companies in order to create an ever better and more efficient channel of mid-to-late-stage startups for further follow-on investing by larger funds.

Thus, to add talent, resources and capital at the earliest stages of company formation essentially adds …

The Hedge Fund alternative

The Economic Times has a news item on how hedge funds are now competing for deals in India with VC and PE firms. While the ET article doesn't mention it, the deal which comes to mind readily is US-based Farralon Capital's investment in stock broking and financial services firm, Indiabulls, which pulled off a successful IPO recently.
Recently, hedge funds have been doing the rounds of investment bankers and private companies looking to invest in unlisted companies. Hedge funds have realised that with just a handful of private equity investors in India, there are a lot of investment opportunities to be tapped among private companies. Moreover, they feel that the potential or returns could be much larger in the private markets, compared to public ones.

Private equity investors admit that hedge funds are sniffing around. Raj Dugar of Carlyle Private Equity Fund says, “Some of the hedge funds have also started doing the rounds, searching for a toe-hold among unlisted companies, a pr…

Report alleges Naveen Jain led InfoSpace fudged revenues and misled investors

The Seattle Times has published a 3-part investigative report alleging InfoSpace executives misled public investors about the company's performance. "InfoSpace's success was an illusion, built on accounting tricks and the hype of charismatic founder Jain," the report says. "The investigation — built on internal company e-mails, confidential documents filed in court and scores of interviews — found that Jain and others created the illusion of revenues with accounting tricks and dubious deals," it adds.

Arun Natarajan is the Editor of TSJ Media, 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.

Are PE firms good at running media companies?

The Economist has an interesting article on the huge investments being made by Private Equity firms in taking over and turning around media firms.

Some extracts:
Some private-equity firms have long put money in media assets, but mostly reliable, relatively obscure businesses with stable cashflows. Now, some of them are placing big strategic bets on the more volatile bits, such as music and movies. And they are currently far more confident than the media old guard that the advertising cycle is about to turn sharply upwards...

..Private equity's buying spree reveals a lot about the media business in particular. Media conglomerates lack the confidence to make big acquisitions, after the last wave of deals went wrong. Executives at Time Warner, for instance, which disastrously merged with AOL in 2000, wanted to buy MGM, a movie studio, but the board (it is said) were too nervous. Instead, private-equity firms combined with Sony, a consumer-electronics giant, to buy MGM late last year...

Profile of GVFL's Vishnu Varshney

Financial Express has a profile of Vishnu Varshney, managing director and CEO of Gujarat Venture Finance Ltd (GVFL).He wanted to be an entrepreneur initially.. He was so serious about starting his own venture that he even applied for a plot of land in Kanpur...When he sought the help of UPSIDC (Uttar Pradesh State Industrial Development Corporation) for land, he got a job offer from Jagdish Khattar (the present Maruti CMD) who was heading the organisation. He joined UPSIDC and then went to Gujarat Industrial Investment Corporation (GIIC) after a brief stint in L&T.

An opportunity to add meaning to his career arose in the form of GVFL which was being formed with World Bank assistance in 1990. Mr Varshney’s name was recommended by GIIC for the chief executive post. “That was the turning point,” says Mr Varshney. “I underwent a 18-week training with Hambro International Equity Partners, USA in venture capital after which I set up GVFL, a venture capitalist firm.”

In the past 15 years, …

Lemming mentality in the airline sector?

At a time when it looks like every Ram, Shyam and Hari has plans for launching an airline in India, InterGlobe Enterprises, one of the first companies to get clearance from the government to start an airline, has decided to ground its plans. InterGlobe's Managing Director Rahul Bhatia, in an interview to Business Standard, cited "excess capacity generated in the market" as the reason. In the last few months India has seen a sudden upsurge in the number of airlines planning to start services. Various prediction by airline industry point out that about 13 airlines would start operations over the next 12 to 18 months. And most of them will follow a low-cost no-frill model.

The airlines that are expected to start services are Air One, Indus Air, Royal Air, East West, Wadia, Kingfisher, Visa, Yamuna, Air India Express and the low cost service by Alliance Air. Airlines like Royal Air and Kingfisher are currently in the process of acquiring aircraft and are expected to start op…

Profile of Jet Airways founder Naresh Goyal

Times of India has a profile of Naresh Goyal, Founder of privte airline Jet Airways, which recently pulled off a successful IPO.
This is undoubtedly a great achievement for a man who first stepped into the aviation industry when he joined the Delhi-based Continental Travel — an agency floated by his mother's uncle. After a short stint there, Goyal established his own airline agency, Jetair.

Nursing greater ambitions, Goyal then went on to set up a domestic airline in India when the government opened up the skies to private players. Having staved tough competition from the state-owned behemoth Indian Airlines and rival private carriers such as East West Airlines, Jet today has established itself as one of the most profitable and successful airlines in India.

"Goyal never ran his airline," says Kapil Kaul, senior V-P, Centre for Asia Pacific Aviation. "I see him as a man who possessed a vision. Back in 1993, when other start-ups were inducting Boeing 737-200 aircroreaft,…

Indiagames and its investors

Business Standard has an interesting article which touches upon the relationship between Vishal Gondal, the founder of Indiagames (now 80% owned by China's Tom Online), and the company's VC backers, Infinity Ventures and IL&FS.

Some extracts:

How Gondal met with the VCs:Hollywood is a long way from Chembur and might have remained so had Gondal not “bumped into some suits” from PricewaterhouseCoopers, the management consultancy, in 2000. The consultants offered to introduce him to new investors, and the result was seed funding of $750,000 from IL&FS Investment Managers and Infinity Ventures, both Mumbai-based private equity funds.

How the investment changed Gondal:“For me, the arrival of investors was the most valuable MBA education anyone could have,” he said.

The clashes:The investors were keen to develop Indiagames as a source of “advertorial” games, a business model that relied on online games designed around consumer brands. But that model did not survive the dotcom c…

TSJ Media featured in Business Today article on VC exits in India

Business Today (subscription required) has an article on VC exit trends quoting data from TSJ Media:By all accounts, 2004 has been a golden year for venture firms in India. For one, there were record exits, 30, according to Chennai-based industry tracker TSJ Media, not counting some smaller ones that fly under the radar. That's a clear sign of exit routes improving, with options like IPOs and M&As becoming available to the firms.
Arun Natarajan is the Editor of TSJ Media, 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.