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Showing posts from April, 2005

Will US PE firms' recent troubles in China, Korea favor India?

A new regulation prohibiting the creation of offshore companies "is bringing foreign private equity investments in China to a halt", says a news item in Private Equity Week:VCs came up with the practice of setting up offshore holding companies as a way to exit their investments in China. Using that strategy, they took 10 Chinese companies public last year on U.S. stock exchanges.

Richard Xu, a private equity attorney and partner at the law firm Jingtian & Gongcheng in China, says that his own work and that of his firm is slowly grinding to a halt as a result of the regulation...

...Jean Eric Salata, chairman of Baring Private Equity Asia in Hong Kong offered a more sanguine assessment of the regulation. He suspects its goal is to gain tax control over the many citizens who have made considerable fortunes through the sale of equities in off-shore companies. Such investors have escaped taxation by Chinese authorities. Salata maintains that the government is not trying to les…

Blog Watch: Sramana Mitra

Sramana Mitra is yet another new blogger that I intend to track.

Here's an extract from her bio:Sramana Mitra has been an entrepreneur and a strategy consultant in Silicon Valley since 1994. Her fields of experience span from hard core technology disciplines like semiconductors to sophisticated consumer marketing industries including fashion and education.

As an entrepreneur CEO, Sramana founded 3 companies: Dais (Off-shore Software Services), Intarka (Sales Lead Generation and Qualification Software) and Uuma (Online Personalized Store for selling clothes using Expert Systems software). Two of these were acquired, while the third received an acquisition offer from Ralph Lauren which the company did not accept (wrong decision).
Here's an extract from her recent post:Heritage Hotels: Roll-up opportunity for a Private Equity firm?

Spain developed the Paradors concept very effectively, by converting old forts, palaces, and monasteries into beautiful “experience hotels”. India has don…

Off Coast software development

H1-B visa caps preventing you from shipping software engineers to the US? No problem. Just buy a cruise ship and park it close to a major US port and have your programmers work "near shore".

Sounds outlandish? Well, that's exactly what SeaCode, led by its fomer tanker-ship captain CEO David Cook, is planning to do three miles off the coast of Los Angeles.

From ADT (Application Development Trends) magazine (via .
By stationing the ship in international waters..SeaCode will be able to remain close to U.S. clients while picking and choosing IT talent from around the world—something that tightening H1B visa requirements have made difficult in the U.S.

Depending on your point of view, it may also allow them to pay less than the rate a team of U.S. developers would command...

During off hours, programming teams can partake of the ship’s recreational facilities or head for the lights of L.A. on a water taxi, since each worker will be required to have a U.S. tourist visa, Cook says.

BA Systems and Teneo Systems: New stealth mode start-ups with Indian founders

Businesweek's Deal Flow blog as a profile of these two companies as part of an article on "Stealth Deals of Q1"* BA Systems -- Just four months old, this San Jose, Calif. company is so stealthy that we have little idea what it's doing. Bessemer Venture Partners led its $880,000 series A round. Founder P.J. Singh has been an entrepreneur-in-residence at Bessemer since 2003. Previously, he founded router maker Allegro Networks and gigabit Ethernet company Packet Engines. Could another communications equipment play be in the offing?

* Teneo Systems -- Founded in December, this stealth startup appears to be funded entirely by its founders, whose past ventures likely supplied them with the means. Venkat Rangan is the former founder and chief technology officer at Yodlee.com, and Charu Rudrakshi is the former VP of engineering at BizRate.com. They put $4 million into Teneo in February.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India …

Start-ups shouldn't bother with detailed business plans: Mike Moritz

According to BusinessWeek's Deal Flow blog, Michael Moritz, a general partner at VC firm Sequoia Capital and an early investor in Google, Yahoo! and Cisco, while speaking at the VentureOne conference in San Francisco told a story about Google that demonstrated why VCs always say they invest in entrepreneurs or ideas--and not business plans.As you might know, Google started out thinking it would sell its technology to corporations for internal use. After a year or two, that plan clearly wasn’t working. So the entrepreneurs started casting around for another strategy. "There is nothing like a declining cash balance to focus the mind," Mortiz quipped. Google's founders noticed the success of GoTo (later renamed Overture and bought by Yahoo) and set out to improve on its paid-search model. The rest is history--and so is Google's original business plan, which, to the founders' credit, they never formalized.

When evaluating a nascent startup, Moritz doesn't look…

"India AND China" season

The Chinese Prime Minister Wen Jiabao’s visit to India this week has triggered a lot of "India and China" articles. Here are a few interesting extracts.

From Businessworld's cover story:

Amartya Sen, the Nobel Prize-winning economist, says that this gives the lie to India's argument that its democracy is the cumbersome, if wonderful, weight that is slowing its road to development. Many democracies are progressing much faster than India. The gurus of India's economic and political establishment would like to claim that China's economic boom is rooted in its authoritarianism. But then, they cannot explain why other authoritarian states such as North Korea, Pakistan and Myanmar are economic basket cases.

New York Times columnist Thomas Friedman writes in his book, The Lexus and the Olive Tree, that the dividing lines of the 21st century are not based on politics, ethnicity or history, but on speed. Success, he says, will come to those who are fast and adaptable. A…

Why ICICI Venture's Renuka Ramnath is smitten by the retail sector

Economic Times has a profile of ICICI Ventures CEO Renuka Ramnath with a special focus on her fondness for the retail sector.
Definitely the first and one of the few private-equity funds to put its money on the organised retail sector, the $400 million fund has pumped in close to $49 million through its flagship, the $240 million India Advantage Fund, and even
more through other funds.

And it’s reaping benefits beyond the financial. ICICI Venture is now seen as a crucial industry player. Its year-on-year returns are close to 25%, and according to the company’s managing director and CEO Renuka Ramnath, are expected to reach 40%.

From pushing a multi-state expansion plan for Subhiksha, to finding prospective second-round investors at PVR Cinemas, Ramnath is driving growth in the sector. If some ICICI Venture officials play a pivotal role in real-estate negotiations on behalf of companies they have invested in, others are leading financial restructuring and often forcing mergers and acquisit…

Hey, wanna go public?

I got the following unsolicited email today:

I hope this finds you well, as you may already know, we specialize in assisting companies in Going Public. We also assist with Private Placement preparation. The President of our company is a very experienced securities and corporate law attorney.

Many people are not aware that any company can go public. Please go to see our site to receive our Advantages of Going Public Report and our Go Public Report.

We would like to propose a joint venture with you. If you or an associate of yours is interested in taking a company public, please let us know. We are happy for you to be very generously compensated for any referrals.

I wish I could convey, all the many benefits of going public in a letter. I'm not sure if you can imagine how valuable and powerful a public company can be in achieving your goals and objectives.

We look forward to developing a long term business relationship.


Sincerely,

Shaun Anthony
http://www.hipub.net/



#CSDGI-MW
We also have a …

Moment of truth for the Indian textiles industry

McKinsey Quarterly has an article on the opportunites thrown up for the industry by the removal of world trade quota restrictions.India's apparel industry faces a moment of truth when world trade quota restrictions are fully removed, in January 2005. Exports could increase by more than 15 percent, making India the big winner after China—but only if the Indian government accelerates economic reforms and local manufacturers become more competitive...

With full-blown reforms, we estimate that Indian exports could increase by 15 to 18 percent annually—much higher than the historical growth rate of 6 percent. This expansion would enable India to win 5 percent of the global apparel-exports market by 2008 and to capture $25 billion to $30 billion by 2013. With only minor reforms, we expect annual growth of 8 percent at best.
Private equity firms, who have made significant investments in companies like Welspun India and Sintex Industries, will be watching the government's moves quite ke…

Is publishing a good investment opportunity?

There is certainly a lot of action suddenly, as this Businessworld Cover Story shows:



And a lot of investments going on as well:



But are the players going to make money?
Sure, it has been a good year for advertising and many mainline papers are doing well, but The Hindu's Murali thinks it is a "bubble". "A shakeout or churn is bound to happen," he thinks. "All this growth has come on the back of very low pricing."

What he means is that it is not economically sensible for publishers to sell newspapers for Rs 1-1.50 a copy, when the printing costs alone are anywhere between Rs 4-7 a copy (This does not include fixed costs)...

...This puts newspapers in India at the mercy of advertisers. It means that the focus is more on the trade, the advertiser and the media buyer and less on the main currency of publishing - the reader. Now, add price cuts to an already reduced cover price. "Price cuts are usually short term if you look at the UK market. In India, TO…

The appeal of value-added BPO services

Businessworld examines the opportunity in outsourcing of services like data analytics, patent examination, tax return preparation and market research. That is, stuff that can fetch billing rates of above the $10 per hour (or less) that call center services fetch.

The Opportunities:



The Players:These niche players include MarketRx (pharma marketing research), Ugam Solutions, Copal Partners (research and analytics in areas like e-commerce), Scope e-Knowledge Centre (market information), Take Solutions (supply chain management), Inductis (equity research and analytics), Lexadigm, Intellevate (both into legal services) and TechBooks (publishing). Joining them are larger, 'blended service' players like WNS, Wipro Spectramind, EXL Service, ICICI OneSource, 24x7 Customer and Msource.
The Challenges:
But as these companies are getting into these new services, they are facing new concerns, too. For one, getting professionals who can do the complex tasks can be a problem. For the sort of j…

"Do I need a MBA to become a VC?"

Here is Fred Wilson's (of Union Square Ventures) answer to this often-asked question:

I never place any value on the schools people went to and the degrees they have. It's bullshit for the most part.

My partner from Flatiron Jerry Colonna has a liberal arts degree from Queens College and he was one the best VCs I've ever worked with.

My partner Brad Burnham doesn't have an MBA either and he knows more about startups, technology, and markets than almost anyone I've ever met.

I don't have anything against MBAs. Going back to school and getting an MBA can be a great break from the career path that allows someone to find out what they really want to do. And you can learn some things along the way.

But you can't learn real life business in school. That requires doing it, not studying it.

So I'll take a candidate who's got the track record over the pedigree any day.
Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India an…

Why Aruba said no to Cisco

"You must always recognize that venture backed companies are not sold, they are bought. When the large company comes knocking on the door and offers a good deal, you should generally take it." - Fred Wilson of Union Square Ventures

Keerti Melkote, Merwyn Andrade and Pankaj Manglik co-founded Aruba Wireless Networks, a San Jose, CA-based provider of wireless LAN switching systems, did exactly the opposite when Cisco Systems made an offer to buy out the company.

In a nice PR move, the founders explain why in an interview to the New York Times:
Cisco, based in San Jose, Calif., first approached Aruba in early 2003, when it had just started selling its wireless systems. Leading the Cisco team was Dan Scheinman, the executive charged with keeping tabs on new rivals that might present a competitive challenge or an acquisition opportunity.

For Aruba's top executives, the disadvantages of life as a small unit of Cisco - constantly battling for resources and attention - outweighed th…

VCs respond to Paul Graham's "VCs Suck" post

Quite a few VC bloggers have responded to Paul Graham's essay on "The Unified Theory of VC Suckage".

"I do not aspire to defend VC's. Like everything else, there are good people and bad people, good Germans and bad Germans, and good VC's and bad VC's," says Globespan Capital's Venky Ganesan.

"I won’t even try to defend my VC brethern since Paul’s theory is sound in many ways. He admits that he’s met a few VC’s that he likes, so there must be something messed up in the universe somewhere," offers Mobius VC's Brad Feld.

Fred Wilson of Union Square Ventures refers to Feld's days as an entrepreneur, when his mantra was that all companies sucked in servicing their customers at some level and the goal for his company was to suck less. Entrepreneurs are always going to think that VCs suck at some level. But clearly some VCs suck more than others. If you must fund your company with VC money, it pays to do your homework and find the one…