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Showing posts from March, 2007

Vinod Khosla's portfolio of renewable energy startups

The Deal Blogs has an article providing a listing of Khosla Ventures' portfolio companies based on a recent speech by VK.
Most of the companies are based around the general themes of making coal, materials, efficiency and oil more efficient. Then, he further refines them by grouping his investments according to the type of energy that the portfolio companies are trying to improve or harness. Here are the specific investment themes and companies that fall into each category:

1) Cellulosic - Mascoma, Celunol, Range Fuels, 1 stealth startup

2) Future Fuels - LS9, Gevo, Amyris Biotechnologies, Coskata Energy

3) Efficiency - Transonic Combustion, GroupIV Semiconductor, 1 stealth startup

4) Homes - Living Homes, Global Homes

5) Natural Gas - Great Point Energy

6) Solar - Stion, Ausra

7) Tools - Nanostellar, Codon Devices, Praj

8) Water - 2 stealth startup

9) Plastic - Segetis, 1 stealth startup

10) Corn/Sugar Fuels - Altra, Cilion, Hawaii Bio

Arun Natarajan …

Case Study on YouTube

Deepak Thomas and Vineet Buch have published a case study on YouTube.
The reasons behind Google’s acquisition seem quite intuitive. YouTube falls in line with Google’s strategy of converting user visits to its properties into contextual advertising revenue. YouTube’s huge user-base combined with its own user base gives Google formidable market power and the ability to influence consumer behavior. Also, while the prospect of YouTube being acquired by one of the media giants was slim, the acquisition did serve to deter competitors like Yahoo from making further inroads into the online video-sharing market.

For Sequoia Capital, YouTube’s main investor, the investment turned out to be a huge success. Sequoia had initially invested $3.5 million at a pre-money valuation of $15 million and another $8 million in a second round of funding. Sequoia is estimated to have owned approximately 30% of YouTube, for a stake valued at $495M. This represents a 43X return on invested capital in less than 2 …

The party's on at corporate law firms as well

Economic Times has an article on how corporate law firms are benefiting from the boom in PE and M&A deals.
Industry observers believe that the revenues at India’s leading law firms which operate in this space like FoxMandal Little, AZB & Partners, Amarchand Mangaldas, Majmudar & Co, DSK Legal and Mulla & Mulla have gone up considerably. They believe many firms will hit record earnings numbers this year. Cyril Shroff, managing partner of Amarchand Mangaldas said: ”We see more private equity deals and inbound-outbound corporate activity in 2007. ”

So when and where exactly does a law firm come into the picture during a deal? Akil Hirani, managing partner, Majmudar & Co says that there are three primary occasions when law firms are always present: term sheet signing, due diligence and during the final negotiation and contract document signing. That the business is booming can be seen by the activity at the firm these days. Mr Hirani says that these days when they are cl…

"There's no short-cutting the VC process"

Speaking at Internet & Mobile Connect, Probir Roy, Co-founder & Director of Paymate, described how his company went about raising venture capital and the challenges during the process.

Saying that it took Paymate a total of 10 months from the time of active scouting for VC funding and eight months from the first meeting with the eventual investors, Roy broke down the time it took for various stages of the capital raising process. “The initial meeting to term sheet took 10 weeks. From the term-sheet to definitive agreement/shareholders agreement took six months,” he said. The money remittance however happened within four months of the terms sheet - prior to any formal agreement being signed up. “Don’t be daunted by paperwork, there is nothing you can do about it,” Roy added.


Probir Roy of Paymate

Pointing out how even a leading VC firm like Kleiner Perkins does not carry much name recall in India, Roy emphasized the importance of the VC investor being on the…

"Communication, Entertainment and Information: Order of Preference for M-VAS Cos."

Speaking at Internet & Mobile Connect, Alok Mittal, Executive Director of Canaan Partners, emphasized the need for Mobile VAS companies to “own the customer” as well as directly create demand for their applications. This would be the best way for them to get a larger share of the consumer’s spending. “We are seeing companies in India that get a 50:50 revenue share with operators as long as they have something unique to offer and they own the customer.”


Alok Mittal of Canaan Partners (Right)

Communication, Entertainment and Information would be his order of preference among services in the mobile sector, Mittal said. Pointing out that the sheer number of communication applications on the mobile platform was very limited compared to the Internet – including in terms of group communication, publishing, etc - Mittal said there was plenty of scope for entrepreneurs to come up with innovative products and services in this area. As a firm, Canaan would look more …

"Performance of Internet businesses better than perception"

Speaking at Internet & Mobile Connect, Avnish Bajaj, Managing Director of Matrix Partners India, said said how while in 1999-2000, perception of Internet-based businesses was ahead of reality, over the past few years, it has been the other way around. “Since investors have had such a negative perception, today we have a situation where while the audience is clearly there, there is a lack of compelling services and content.” He pointed out how India is among the few markets in the world where traditional media companies have latched on to the Internet quite early and ensured there wasn’t enough time for strong stand-alone businesses to emerge.


Avnish Bajaj of Matrix Partners India

There is more opportunity for utilitarian applications in the Indian context than self-actualization ones, Bajaj added. Pointing to the success of the Indian Railways’ online ticket booking service, he said as long as there are compelling enough applications, companies can build significant businesses by se…

Internet & Mobile Connect - Post Event Info

Venture Intelligence organized “Internet & Mobile Connect”, a roundtable focused on opportunities and challenges for Venture Capital investing in Internet-based services and Mobile Value Added Services companies. The event, which was held on March 15 in Mumbai, brought together over 150 participants.

The event was sponsored by leading Venture Capital firm Canaan Partners.

You can view the post event newsletter here.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

"Real Estate firms looking beyond bank (and black) financing"

Economic Times has an article on the changing face of real estate financing in India.
The availability of clean money is perhaps the single biggest reason for the cleaning up of the sector. "The change in the financing pattern has altered the Indian real estate sector dramatically. The sector which was once fully dependent on a single source of financing - bank credit - has suddenly witnessed a flood of funds from various avenues like foreign funds and public offerings," says Balaji Rao.

It is estimated that over $4-5 billion FDI has been pumped into the sector in 2006 while during the 2005-06 the bank credit to the sector touched Rs 2,60,223 crore against Rs 1,45,605 crore in the previous year. This change has been driven by listed and unlisted real estate companies and private real estate funds catering to institutional investors, and a heightened focus on Indian real estate by leading international property consultants and commercial banks. And more than $8 billion worth of…

Kiva marries microfinance to the Internet

Mohammed Yunus started it with Grameen Bank. Now, most banks in India and other parts of the developing world have embraced microfinace and profit from it.

But, has anyone come up with significant innovation to the basic model for microfinance that Yunus created? The answer was "hardly any" until Silicon Valley-based Kiva - led by its President and former PayPal executive Premal Shah - which has married the power of the Internet - and the keenness of technology companies to help out entrepreneurs in less-developed countries - to microfinance.

Kiva has been receiving a lot of positive press. Here's how SJ Mercury News describes the service:
Here's how Kiva, 'unity' in Swahili, works: Lenders visit Kiva's Web site to find entrepreneurs from developing countries looking for a small loan. Kiva posts the entrepreneurs' funding needs and pictures online with the help of 38 local microfinance institutions around the world.

Anyone willing to lend as little as $2…

Why did Marketics sell out?

Analytics outsourcing firms, though highly profitable, cannot scale beyond a stage. This is why pioneering marketing analytics outsourcing firm Marketics - with estimated revenues of $5-6 million and highly profitable - chose to sell out (for $65 million to WNS), according to an Economic Times analysis quoting K. Ganesh, angel investor in the company who earlier founded BPO firm CustomerAsset (acquired by ICICI OneSource).
“Indian analytics companies are facing a significant challenge in scaling up. It is easy to get to $4-6 million but extremely difficult to get to $40 million,” says Jaswinder S Chadha, CEO, marketRx, a New Jersey based analytics and market research firm.

The analytics business in India is relatively new and has a handful of players like Marketics, Fractal, Pharmac and Kandor. Industry experts say that barring a few companies like Evalueserve (estimated revenues $30-40 million) and marketRx ($40 million), the rest are still small.

“Can an analytics firm grow to $100 mi…

New incubation program: dreamZhunt

Chennai-based IT services company SGS Technologie has launched a "business idea contest" called dreamZhunt.

"The contest is focussed at IT professionals who are looking to kick-start their first business," informs Manoj Kumar.G, one of the event's organizers and Business Manager with SGS Technologie. The event sponsors will provide seed-funding of up to $100,000 per selected company, he says.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

"The Loser's Curse"

Fred Wilson has an interesting post on how a VC who has lost money on a company will never again invest in the sector even though things might work out differently in a new investment (due to the latest market dynamics, a different management, etc.).
The loser's curse is when you fail at something so badly that you never want to try it again even if there are other and better ways to do it that may result in a better outcome.

...At Flatiron we backed a company called Smallworld Sports which was one of the leading fantasy sports services in 1999. The year before we invested they had done something like a million in revenue and made money. We invested a lot of money in them, I can't remember exactly how much but it was between $5mm and $10mm. The year after we invested, they did about the same amount of revenue and lost well over $5mm. Venture capital killed that company and it was sold for pennies on the diollar to The Sporting News.

Never again.

I realize that times have changed. …

Roomali With A View, Dal Fryday and other BangaloreRestaurants.com

Givent that one survey has found that IT professionals spend US$1bn annually on “eating out, it is not probably not surprising that some IT industry executives in Bangalore have decided that they might as well get a share of this spend.

Business Today has an article on some of the IT industry executives - including some full-timers and some moonligthers - turned restaurateurs. (The IT industry connection also explains why most of these restaurants have "offbeat" names reminiscent of dotcoms.)

The article also has a "box item" former venture capitalist Kiran Nadkarni (JumpStartUp and Draper International), who now runs the Kaati Zone chain.
At Mast Kalandar,..Gupta and her techie husband Gaurav Jain are content catering to the ever-burgeoning demand for clean, hygienic north Indian food from the hundreds of it companies around its four units. "We have used some retail expertise we picked up previously (Wipro Technologies, TCS and Vensys, an Australian it company …

VC Market

The following companies are seeking capital for starting-up / expanding their operations:

07-03-07-1: Pune-based entrepreneur seeks <$10,000 for commercialization of his innovative method of production of Bio-Diesel from fat that is washed off while cleaning equipments in dairies.

07-02-28-1: US- and India-based publishing BPO firm is looking for <$1 million for its B2B online financial service.

07-02-28-2: Mumbai-based online and mobile Car Pool Service seeks $1-5 million.

For more information about any of these companies, investors can email the company code to vcmarket@ventureintelligence.in

Are you an entrepreneur seeking capital? List your company in the Venture Intelligence VC Market using the form here

The hotel room shortage - and boom - in India

Businessworld has an interesting article on the opportunity and challenges facing the Indian hotel industry - including the current acute shortage of rooms, the supply rush to fill the gap, the real estate connection

..there is a big supply rush coming. Many real estate developers and funds have rushed in to fill the supply gap. However, the hotel opportunity is not simply lying there for investors to pick up. Real estate prices are exorbitantly high, regulations for hotel construction are restrictive and there is acute shortage of good staff, with most flocking towards other sectors such as aviation. All these paint a not so rosy picture.

...Among homegrown hoteliers, Indian Hotels is showing the most appetite for rapid expansion in the utilitarian hotels segment. Roots Corporation is targeting 100 hotels over the next decade, of which 10 will become operational this year. It is also bidding for upgrading and taking over the operations of the existing Yatri Niwas hotels of the Indian…

The IT industry's impact on the Indian economy

Based on an online survey of over 42,000 IT professionals, CLSA has come out with an interesting report, - titled "Chain Reactions" - about the impact of the growth of the IT industry on the Indian economy.

Where IT makes an impact

! From FY08CL, India’s IT exports are set to exceed its net oil imports.

! The IT sector will pick up over 80% of India’s employable engineers and 60% IT-employable graduates –addressing one-third of the urban employment challenge.

! We estimate that each IT job will create at least 1.4 other jobs in the economy.

! We forecast IT to account for 20-25% of Indian GDP expansion over FY07-10; transform Indian cities; and, as the sector matures, drive innovation in the country.

Spending trends among IT professionals

! IT alone can absorb 70-75% of residential and two-thirds of forecast commercial
FY07-10 real estate demand. Realty demand forecasts seem conservative.

! We see the segment supporting two-thirds of five-star hotel-room additions and one-th…

State of Indian Life Sciences industry

Business Today has a special feature on the Indian Life Sciences industry including the generics, contract research, original drug development and biotech sectors.
Mid-January, Mumbai-based Nicholas Piramal announced a deal with giant Eli Lilly to develop a patented molecule. The $100-million deal requires Nicholas Piramal to take the molecule (meant to treat metabolic disorders better) through clinical development phases I to II. In return, the Indian partner will get milestone-linked payments (which, hopefully, will total to $100 million), besides the right to market the drug in India and some other parts of South East Asia.

Why is Lilly, which has better labs and vastly bigger R&D budgets, turning to a small Indian company to develop drugs for it? The answer has to do with what's happening in the global pharmaceutical industry. Finding blockbuster drugs has got a lot harder, even as costs of R&D and compliance have steadily climbed. Various estimates put the cost of deve…

Primer on AIM listing

AltAssets has a downloadable backgrounder
, by law firm King Stubb & Kasiva, on Indian companies looking to list on the UK's AIM market.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Actis goes gaga on the Indian consumer boom

UK-based PE firm Actis' India managers sing paens to the Indian consumer boom in the article for AltAssets.
With 1,000 new cars a day crowding onto the streets of India, and one million passenger vehicles sold in the 12 months to March 2006, there is very real evidence of escalating consumer demand, driven by increasing affluence, available credit and a growing propensity to spend. Yet at the other end of the scale India is still home to some of the world’s poorest people.

...What’s more, growth in this sector is also being fuelled by the climbers, who represent 37% of India’s households, not to mention the aspirers who are joining the market economy for the first time.

...It is the young working populations that drive personal consumption. These are the individuals that are driving the purchases of televisions, cars and mobile phones. It is this group that has made a generational leap built on buying now – possibly using a new brand of credit card that just did not exist in India a…

Is the media celebrating Silicon Valley VCs a bit too much?

This PEHub article on a man - "Anand Lyer Vaidyanathan" (persumably, Anand Iyer Vaidyanathan) - arrested for repeatedly tresspassing Seqouia Capital's Sand Hill Road office seems to indicate as much.
Sequoia posted a job opening for an early stage associate on its website at the end of November, one that Vaidyanathan decided to apply for on December 7. Sequoia’s private investigator responded to him via email, outlining in no uncertain terms that Vaidyanathan should not contact Sequoia. Vaidyanathan responded “I thank you for your offer. I appreciate your timely action. I accept your offer of employment,” court documents show.

On December 11, Vaidyanathan returned to Sequoia’s offices and was again arrested for trespassing, according to the PI’s testimony.

Vaidyanathan, formerly a student at Iowa State University, had sent Sequoia several hand-written letters offering the firm the opportunity to invest in two startups, A@stra Impact and Silicorn. He had also requested that …

Sarbox and Private Equity

Blackstone CEO Stephen A. Schwarzman pointed out how buy out firms are benefiting from Sarbanes Oxley regulations at the recent Wharton Private Equity and Venture Capital Conference. Knowledge@Wharton has an article based on his presentation at the event:
Public companies are now increasingly open to private equity advances. Sarbanes-Oxley and other regulatory and accounting rules are making some CEOs eager to work for private equity owners. Executives are also tired of the pressure to make quarterly numbers for the benefit of Wall Street analysts. "This is a transformation from 10 years ago when people in the buyout world were regarded as marginal, and becoming the CEO of a publicly traded company was an apogee moment."

Boards and executives are so concerned with Sarbanes-Oxley and compliance that they take very little risk in running their companies. Board members now come to meetings with their own lawyers, Schwarzman said, adding that accounting changes limiting write-offs…

Speaker list for Internet & Mobile Connect - Mumbai, March 15

Over 15 leading VC investors and top executives from Online Services and Mobile VAS companies will be speaking at the event. The speaker list includes:
Murugavel Janakiraman, Bharatmatrimony.com
Alok Mittal, Canaan Partners
Alok Kejriwal, Contests2win.com
Ashish Gupta, Helion VC
Manik Arora, IDG Ventures India
Anurag Dod, Guruji.com
Avnish Bajaj, Matrix Partners
Sanjay Swamy, mChek
Nitish Mittersain, Nazara Tech
Sandeep Singhal, Nexus India Capital
Arvind Rao, OnMobile
Probir Roy, Paymate
Rajesh Sawhney, Reliance Entertainment
Ravi Adusumalli, SAIF Partners
Mahesh Murthy, Seed Fund
Sandeep Murthy, Sherpalo Ventures
Ashwin Damera, Travelguru
For more information about the event, please visit http://ventureintelligence.in/ev150307.htm

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of…

Should VCs buy out angels?

Interesting discussion at VentureWoods between Deepak Shenoy and Roshan D'Silva on this "perennial topic". Here are their first posts (in the comments section):


Deepak Shenoy said,

Alok, true - there is reason to think about why one wants to exit. As a stock market investor, I have made decisions to sell companies at (say) 400% profits, when the company went on towards 1000% of what I bought - yet, I wasn’t sulking in a corner. Because a) 400% is pretty nice and b) I’d reached that comfort level of profits.

Angels may not want to stay the distance, which could be much longer than their cash needs, and if the current valuation is attractive enough for them to exit. As individuals I would imagine that angel investors are the kinds that put in Rs. 10 lakhs to Rs. 50 lakhs in a business - and honestly, there are a number of such people who have this kind of cash lying idle in bank accounts (idle = they don’t need it right now). Such people can be angels, but they won’t be beca…