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Showing posts from August, 2007

Where are (the worthwhile) Indian Internet and Mobile cos.?

Today's DNA has an article quoting VCs like Avnish Bajaj of Matrix Partners and Ashish Gupta of Helion VC - who were earlier Internet entrepreneurs themselves - saying how they were finding more interesting companies to fund outside of these sectors.
"If I were to look back, and observe what has happened in the past one year, I think internet and mobile have been disappointing in terms of current opportunities. We still haven't seen enough of promising, innovative, made-for-India kind of start-ups," says Bajaj. He adds that when they started out, he would have expected to do 4-5 deals by now in internet and mobile VAS, as opposed to the two he has made.

..."Across the board, most VC funds have at least a couple of investments in the internet and mobile space. But the rate at which these investments have taken place has been slower than what everyone had made it out to be. It has not lived up to the hype or caught fire very quickly," said Ashish Gupta, MD, Hel…

Profile of Virgin Comics

The Mint has a profile of Virgin Comics Llc., a company co-founded by former MTV executive Sharad Devarajan and Gotham Chopra (and backed by author Deepak Chopra, filmaker Shekhar Kapur and Virgin Group’s Richard Branson), which is aiming to take Indian culture overseas via the comics route.
ACK (Amar Chitra Katha) books are popular with the Indian diaspora, but Virgin’s model is different—the company wants to make its comics, with Indian characters and others, successful in the US, the biggest market for English language comics in the world.

...And Virgin Comics’ revenues from these top sellers has been more than $600 million (Rs2,460 crore) for the 12 months of data available on ICv2 (it arrives at this number based on sales of these comics by Diamond US, a company that has had an exclusive distribution agreement with Virgin since January). More than half of those revenues came from the Devi, Snakewoman and Ramayan 3392 AD series. Devarajan would not disclose the closely-held company’…

"Indian telcos need to be valued differently"

Randall L. Stephenson, Chairman & CEO of AT&T Inc., in an interview to
Business Today:
People keep missing this market. They keep evaluating the market using old traditional ways of valuing the cellular business. We come from the us and in the western culture and we are accustomed to these $30 (Rs 1,230), $40 (Rs 1,640), $50 (Rs 2,050) revenue per subscriber numbers. Who would have ever thought that you can make money at $8 (Rs 328) or $9 (Rs 369) per subscriber? So, here is a market where I would have never forecasted that companies coming here and are making 30 to 40 per cent profit at $8 revenue per subscriber. The model's very different here. The cost structures are very different here. They are engineering the networks very differently here.

I guess what I am suggesting is, looking at the numbers, you've got to look at India differently. This market is about 17 per cent penetrated with wireless. So, can you penetrate the rest? I suspect you probably can. But you ne…

An Ethiopian red carpet for horticulture cos.

Business Today has an interesting article on Indian horticulture firms find it more attractive to grow in this African country.
For Dr Reddy, it was a journey from red tape to red carpet. He recalls: "Like most people, I had certain notions about the country (Ethiopia). To my pleasant surprise, when I landed there, not only did government officials receive me personally, they also got all the required permissions for us to operate within six days. Imagine, all the paper work was done in six days and no corruption."

... Sample the largesse: all floriculture activities in Ethiopia are granted a 5-8 year tax holiday depending on the quantum of investment and people employed. Under a European Union (EU) grant, the Ethiopian government provides up to 70 per cent of the project cost as a loan at a mere 7.5 per cent. lso, freight costs are half of that from India and the EU allows flowers from Ethiopia to be imported at zero duties under the Lome Convention of Preferential Exports, w…

Funding microfinance firms

Business Standard columnist Key Sarkar has an interesting piece on the experience of funds like Bellwether, Unitus and Lok Capital which fund microfinance companies.
One of the big realisations Bellwether had, according to Prasad, was that transforming NGOs into for-profit MFIs is hugely time-consuming. While the statutory requirements of changing the legal identity have a time cost certainly, what really was more time-consuming than planned was bringing about the change in attitude. Transforming accounting systems and human resource management in existing NGOs actually took 70 to 80 per cent of the time earmarked for these companies.

What came as a very pleasant surprise and was an absolute delight, according to Prasad, was the quality of people promoting MFI start-ups. The fact that people with valuable corporate experience are setting up MFIs is a trend unique to India.

...Mehta says that from his deals in the pipeline and the proposals that they get, it may be that MFIs working in t…

VC Market

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

07-08-15-1: Vadodara-based civil engineering firm seeks $1-5 M for setting up a factory to produce products used in construction industry.

07-08-15-2: New Delhi-based events listing portal seeks <$10,000 for marketing and operating expenses.

07-08-15-3: Bhopal-based manufacturer of empty hard capsules for pharmaceuticals seeks to sell out for <$1-M

07-08-15-4: Agra-based online retailer of educational books seeks <$100,000 for expansion.

07-08-15-5: Mumbai-based Flower Bouquets retailer seeks $1-5 M for establishing support infrastructure (including a call center) and national expansion.

For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrepreneur seeking capital?…

VC Market

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

07-08-08-1: New Delhi-based 12-year-old corporate travel and event management company, with 34 people and turnover of Rs.8 crore, is looking to sell out.

07-08-08-2: Bangalore-based relocation management company seeks <$100,000.

07-08-08-3: Ajmer-based dealer of surgical equipment seeks <$1-M.

07-08-08-4: Bangalore-based HR Services company seeks <$100,000 for expanding operations geographically.

07-08-08-5: Mumbai-based maker of LCD monitors, with a manufacturing facility in Sri Lanka, seeks $1-5 M for expanding its manufacturing base and setting up a R&D center for LCD applications.

For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrepreneur seeking capital? …

Why did Wipro buy Infocrossing?

The $600 million buyout of the US IT services firm is the biggest acquisition by an IT firm by a long shot and very different from Wipro's earlier "tuck in" or "string of pearls" acquisitions.

Businessworld proposes that the deal is aimed at pre-empting problems relating to data migration.
Infocrossing’s revenues during the last fiscal were $232.4 million, while its net profits stood at $9.3 million. Wipro’s all-cash buyout is equivalent to 2.5 times Infocrossing’s revenues and 64 times its earnings.

The buy is significant as it comes at a time when American clients demand more control over customer information and software they share with Indian outsourcing firms. Many US firms even want their data to reside in the country, and a new legislation to enforce this is currently being debated in Washington.

Through Infocrossing, Wipro hopes to pre-empt the growing data migration problem plaguing the offshore outsourcing industry.
Economic Times has an interview with Wip…

Why are VCs arrogant?

In a posting on the rising popularity of VC Rating site thefunded.com, Jeff Bussgang explains why.
Why are VCs often arrogant? Is that what they teach us at VC breeding schools? I think some of it is just the nature of the business. As I mentioned in my post “Dr. Seuss and The Land of No”, VCs have the job of saying “no” hundreds of times for every “yes” that they fund. To be efficient, they are trained to say “no” quickly and not waste time on projects they simply don’t like or don’t believe in. Whether you believe in a project or not is such a subjective standard, that it can always be open for debate and argument. But VCs can’t afford to have debates and arguments about projects they don’t like, they must quickly, unemotionally move on to the next one.

Entrepreneurs, on the other hand, are emotionally attached to their projects and wired to believe that what they are working on is the absolute best thing going on – after all, they chose to work on it at the expense of every oth…

The investment banking boom in numbers

Business Today has a cover story on booming business of investment banking.
So how much exactly are promoters willing to fork out for I-banking advice and deal execution? Ravi Sardana, Vice President, I-Sec, the investment banking arm of the ICICI group, warns that when deal sizes increase, companies typically tend to opt for a fixed-fee format. Nobody's complaining. "In billion dollar deals the fees can vary from 0.10 per cent to 1.5-2 per cent," he offers. For instance, when a few months ago the promoters of Anchor Electricals sold an 80 per cent stake to Matsushita of Japan for Rs 2,000 crore, Kotak Mahindra Bank, which represented Anchor, pocketed a fee of Rs 25 crore, accounting for 1.25 per cent of the deal size (see Laughing All the Way from the Bank, to find out how much bankers are taking home). "Fees are stable. There hasn't been any fee compression for the past 24 months," says Vedika Bhandarkar, Managing Director & Head of Investment Banking…

Catering start-ups that are going places

Businessworld columnist Rashmi Bansal profiles two start-ups that are creating waves delivering quality lunches to office goers. Not unexpectedly, the article is titled "The New Age Dabbawalas".
Mom’s Kitchen’s USP is simple, no-frills food and ‘no repeats for 30 days’ — all at an affordable price. The service caters to a clearly defined segment — value conscious bachelors, students and the elderly. Meals cost Rs 30 each, with a Rs 25 budget option.

But just as it is with airlines, so it is with lunchrooms. Although there is a huge market for low cost carriers, a lucrative little segment still prefers business class. Take Calorie Care, India’s first customised, calorie counted meal service. At Rs 150 a meal, you get health food dressed up in a range of designer recipes, from various cuisines.

...Of course, Calorie Care is about more than weight management. While 20-25 per cent of the customers are looking to either shed some pounds or gain muscle, around 5 per cent have medical…

Alternative energy gaining steam?

Businessworld has a cover story on alternative energy scene in India.

Extract from the section on Wind Energy:
For India, these wonder machines have already helped generate more power with each passing year — from 2,483 MW in March 2004 to 7,093 MW last March. In October 2005, India raced past Denmark to become the world’s fourth-largest producer of wind energy after Germany, the US and Spain. In 2006, India installed 1,840 MW of additional capacity. It is also way ahead of China, which will add 5,000 MW only by 2010. Asia, which generates 10,600 MW through wind alone, beat the rest of the world last year with 53 per cent growth in installed capacity.

A global consolidation in the wind energy industry has also been taking place. As a result, 80 per cent of the world’s wind energy business is now cornered by top five players. Pune-based Rs 1,530 crore Suzlon Energy, India’s largest and the world’s fifth largest wind turbine maker, glides on a 52 per cent market share in the country. The …

Interview with One97's Vijay Shekhar Sharma

Venture Intelligence featured an interview with Vijay Shekhar Sharma, Founder & Managing Director of One97 Communications as part of the July issue of the US-IVCA / Venture IntelligenceIndia VC report. One97 is one of the pioneering start-ups in the Indian Mobile VAS space and recently raised its first round of funding led by SAIF Partners.

Some extracts from the interview:

VI: How were you funding the company until now?
VSS: We were the first company to put a revenue sharing model in place with operators. That gave us recurring revenue and made the company cash positive.

VI: What were your challenges in fund raising?
VSS: Two challenges: first, deciding on the network the fund could provide and second, the kind of size commitment they can make for future investments. A third factor was the comfort with the VC: what kind of team it was, the chemistry between team members, the kind of person who will come onto our board. The VC on the board becomes your everyday business partner.

V…

Lobbying goes professional

Business Today has article on how lobbying in India is acquiring a more professional face.
Not too long ago, effecting such a policy change may have simply meant a quid-pro-quo, where money is exchanged for a favour. However, deregulation over the years has meant that there are fewer government approvals required, less bureaucratic control over rules and regulation, and far more access to information. The Right to Information Act, for instance, allows anyone to access information from government departments, including the freedom to "inspect works, documents and records". With their decisions open to scrutiny, bureaucrats want to play by the rules more than ever. Says a veteran of the lobbying business: "Corruption continues to be rampant in the government, but that is not a substitute for a convincing case." Moreover, to have a convincing case is no longer a sufficient condition; it is a necessary one. In other words, you may still have to pay money to get your wor…

Indian EIRs - and their VCs - strike it rich as Bladelogic pulls off IPO

Dev Ittycheria- and Vijay Manwani- co-founded BladeLogic, Inc., a Lexington, MA-based provider of data center automation software, pulled off a successful IPO in July even as Hewlett Packard announced an $1.6 billion acquisition of its rival - the Marc Andreessen founded Opsware.

This latest story of Indian-born entrepreneurs striking it rich in the US tech industry has multiplied their VC investors' money several fold. Early investor Bessemer Venture Partners' (BVP) total investment of $6.5 million for instance is now estimated to be worth $120 million.

Interestingly, both Ittycheria and Manwani were entrepreneurs-in-residence - the former at BVP and the latter at Battery Ventures - before founding BladeLogic. Ittycheria and Manwani had earlier worked together at Breakaway Solutions after the Internet consulting company had acquired their previous companies (Applica Corporation and Eggrock Partners respectively).

Arun Natarajan is the Founder & CEO of Venture Intelligence…

VC Market

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

07-08-01-1: Chennai-based publisher of English career magazines seeks $100,000 to $ 1-M.

07-08-01-2: Bangalore-based Enterprise software company offering solutions to the forging and construction industries seeks $10,000 - $100,000.

07-08-01-3: Chennai-based entrepreneur seeks <$10,000 to develop an information portal for home products.

07-08-01-4: New Delhi-based hotel and resorts co. seeks <$1-M for setting up economy hotels for business travelers.

07-08-01-5: Mumbai-based wireless sensor network infrastructure and integration company seeks <$1-M.

For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrepreneur seeking capital? List your company in the Venture Intellige…

The new face of angels

Businessworld has an article on the difference between the current angel investment "wave" versus the pre-2000, NRI-led one.
Unlike the largely expatriate angels who came to India in the late 1990s and invested in companies with a global focus, these new angels are lending a helping hand to fledgling enterprises that have the Indian market as its primary focus (at least for now).

...(Avnish) Bajaj of Baazee fame has made several small investments in many companies like Pangea3, Pinstorm, Orbit, Indus Biotech and Cleartrip. His investments range from Rs 10 lakh to Rs 20 lakh. “As a rule, I will not touch anything where I do not get between 0.5 per cent to 1.5 per cent of the stake,” says Bajaj. He and his peers also say they realise the main reason their expatriate predecessors failed was that they were hamstrung by the fact that they were largely absentee-investors, who merely introduced Indian start-ups to clients in the United States.

Hence, Bajaj and the new angels say that …

India Inc shrugging off US banking crisis in its global buyout march?

Even as news reports in international publications like the Wall Street Journal scream scary tales on how "the big chill gripping global credit markets has caused 46 leveraged financing deals around the world to be pulled since June 22" (as against zero last year), Tata Steel has gone ahead and made another overseas investment to support its Corus acquisition (let alone worry about financing the $11 billion deal), while JSW Steel has announced that it will soon complete due diligence on a $1.2 billion US acquisition!

From the WSJreport:
The credit squeeze has slowed to a trickle the flood of debt financing that has driven the buyout boom for the past couple of years. None of the 46 pulled financings have led to the cancellation of takeovers. But with banks saddled with billions of dollars of debt they can't sell to investors, it could make it harder for other deals to get initial financing from banks.

Already, some companies that had put themselves on the auction block are …

PE Interview: Dilip Kothari

Here are some extracts from the interview with Dilip Kothari, Founding Managing Director of JMF India Private Equity Fund, that appeared in the Venture Intelligence quarterly Private Equity Roundup report published in early July. The full interview (available to Venture Intelligence "Series C" subscribers) provides a more detailed profile about the PE arm of JM Financial group and other interesting snippets from the fund-raising experience

VI: What would differentiate JM Financial India Fund from other funds?
DK: When we were raising money, the joint venture with Morgan Stanley had created a lot of synergy from a deal flow perspective. While the circumstances may have changed somewhat now (JM sold its stake in the JV to Morgan Stanley in Feb 2007), the original thesis still remains – JM is a strong organization in institutional broking and investment banking. This makes us a one stop shop. So a promoter could think in terms of: Can I get private equity money (from JM) if I ne…

VC Market: Audio Visual Solutions provider seeks to raise $1-5 Million

Bangalore-based Audio Visual Integration company with pan-India presence, also present in new verticals like Lighting, Security, IT and networking services, with strong brand equity, and a customer-base representing ITES/MNCs/Aerospace/Medical/Education/BFI/Home automation/Consulting and maintenance/Govt. sectors, wishes to induct a private equity partner to capture additional market share.

The PE Partner/s will be investing in a sector which has huge and sustainable growth potential.

Investment Contact: Bala ugotbala@rediffmail.com / 9880245288

VC Market: Generic pharmaceuticals maker seeks $1-5 M

Generics are growing rapidly across all markets, and the developed markets in particular are in need of cost-effective generic pharmaceuticals. India as a source of generic pharmaceuticals is reaping the benefits.

Having started as an outsourcing services provider, this Hyderabad, AP-based firm has development projects for clients from Europe which will be commercialized through launches during the next 3-5 years. The company requires seed capital to finance these exclusive development contracts that would result in long-term supply agreements and milestone-linked payments.

For more details about this investment opportunity, please contact us at vcmarket@ventureintelligence.in