The Venture Intelligence Blog

Software and BPO services aren't the only areas where Indian companies are competitive on a global scale. Private equity investors have realized this early and voted with their cheque books in favor of pharmaceuticals, textiles and even steel companies in 2004. How come? "Indian manufacturers in these industries are getting coupled into global supply chains. It can only mean more global trade in the coming years," writes Businessworld's economics editor, Niranjan Rajadhyaksha. More factoids from the article: India's total foreign trade this year will be about 32 per cent of its total GDP. It means that about a third of our national economy is now linked to the rest of the world... ..Exports today account for about 15 per cent of India's GDP. So a 25 per cent rise in exports adds about 4 per cent to India's GDP growth rate. Or to put it another way, over half of economic growth this year will be accounted for by foreign demand.

Software services are an old story. Product companies - except for a few exceptions - have not taken off (for the usual set of reasons: marketing costs are prohibitive, etc. etc.). So what's new to write about the Indian software industry? "Product development services", according to a Businessworld article . What is a product development services company? Typically, when any company starts to develop a software product, it would have a unique differentiator or core of the product. That core generally accounts for 15 per cent of the development work of the product. This would invariably be developed in-house. But the product would also have a lot of other modules. These are essential, but they are not big differentiators. This is where product development services companies step in - they develop these non-core modules. Who are the players in this space? Bangalore-based Symphony Services was among the early players. Then there are Aditi Technologies and A...

In 2004, up to November, venture capital and private equity funds invested over $820 million in India-based companies, according to data from TSJ Media, the Chennai-based firm that tracks venture capital investments and mergers. But less than 10 per cent of this money found its way to start-ups. The pendulum is starting to swing the other way again because new investors are coming forward to invest in the several start-ups that have sprung up in the last two years or so. Explains Arun Natrajan, editor at TSJ Media : “The founders and early employees of IT services companies who have made it big are beginning to make serious investments in local companies.” He cites the example of Infosys co-founder N.S. Raghavan’s Nadathur Holdings which invested $7 million in the apparel design subsidiary of the Bangalore-based Reach Technologies in March 2004, adding that successful non-resident Indians like Vinod Dham and Tushar Dave of NewPath Ventures, their venture capital company, have i...

Businessworld magazine has published an article on why there has been a flurry of activity, interest and announcements in the recent times for manufacturing mobile telephone handsets in India. So, whose's making (going to make) handsets in India? Why India? The sheer size of the Indian market, its frenetic growth rates, and above all, the fact that it conforms to global standards...The Indian mobile market is expected to add around 20 million new subscribers in 2004. At an average price of Rs 5,000 a handset, the Indian mobile market is worth Rs 10,000 crore ($2.22 billion) already...And it is still growing very fast. In fact, the handset market is expected to grow at 35 per cent year-on-year on an average till 2010. In 2005, nearly 37 million handsets worth $4.2 billion are likely to be sold in the country. That will make India the third largest mobile handset market, after China and the US. By 2008, handset sales are estimated to touch 50 million, catapulting In...

What could be new or interesting about "yet another VC-backed BPO Firm" launching yet another call center facility? Luckily for me, I did not let this question dissuade me from attending the launch of the 24/7 Customer's latest facility in Chennai last week. A freewheeling conversation with P.V. Kannan, Co-Founder & CEO of 24/7 Customer, after the launch event, left me with a feeling that it would be wrong to slot his company with the rest of the pack. Here are a few factors that contributed to this feeling: One is Kannan's impatient attitude - including, refreshingly for me (but not necessarily for good for the company's PR firm), in the presence of journalists. Bangalore has enough PR savvy CEOs - including some who had journalists eating out their hands - but who are not so good when it comes to fetching returns for investors in their companies. Two, his strong bias for action (versus intellectual debates). Kannan believes the formula for succes...

Rajiv Gupta, an former HP executive who co-founded and sold Confluent Software (a Sunnyvale, CA-based provider of software for managing Web services) to Oblix in February 2004, has created a new "web telephony company" called Cirxit , reports SiliconBeat . Cirxit is powering local portal CitySearch's pay-per-call service under which advertisers pay CitySearch whenever a visitor to the latter's site make an telephone-based enquiry. Gupta wouldn't tell us much about CIRXIT, which is just now coming out of stealth mode — how many employees, how it's funded or much about its technology. The company doesn't even have a public web site yet. Gupta described CIRXIT as a "web telephony company." Its technology allows Citysearch to offer its customers a unique customer phone number that CitySearch can monitor. When a call comes in to an advertiser, Citysearch can charge the merchant for the call. "In some sense, what we're doing here is w...

Mumbai-based Dickenson Intellinetics has launched "VC Guide for India 2004-05" providing profiles of national and international Venture Capital/Private Equity that have a keen interest in India. Using a standard template for each VC/PE firm, the Guide sets out crucial information - industry preferences, preferred investment stages, financing role, type of funding, main source of capital, as well as contact information. The Guide also includes an overview of the venture capital industry in India based on Dickenson's survey of 80 VC/PE firms. One of the highlights of the Guide is an index of VC/PE firms by industry preferences and minimum investment size. Located at the very beginning of the Guide, the index provides an easy and quick way to specific VC/PE firms listed within. The VC Guide is priced at Rs 6,900 for India and US$295 for other markets. Visit http://www.vcindia.com for more information about the Guide.

China has a very strong government and a weak corporate sector. India has a weak government and a strong corporate sector. Some extracts from an interesting interview in Businessworld with James J.C. Birch, managing director, Institutional Client Services (equities division), Goldman Sachs International, who recently escorted a group of twenty large institutional investors to India: On the surface, as you step out of the airport, China appears to be light years ahead. It looks like Chicago. It's simplified by the fact that they have a one-party government. If they want to do something, it happens. But trying to find good companies to invest in is very difficult. China has an economy that has been fairly closed until recently. They don't have much history in competing on a worldwide basis. You (India) have companies who are leaders in their own field and have competed against the world's best companies in a reasonably open way. And in fact, they are doing better than e...

# Unless your best friend in the world -- whom you happen to have embarrassing pictures of -- is a VC partner, please do not contact any VC. It makes no sense. # Passion, experience, real-world results are not qualifiers for introduction to VCs. An MBA from some elite school with 20 board members who know Jack Welch personally, with an extremely complicated idea that has never been built, are preferred. -- E-mail from a Dallas-based CEO to Jerry Colonna, a former VC with JPMorgan Chase, Flatiron Partners and CMG@Ventures. Here's an extract from Colona's response to the e-mail in his column for Inc.com: Yes, I'll admit, having compromising pictures of a VC may help get a meeting or even a term sheet, but the larger point speaks to the network effect. Implicit in his frustration is a question I often got when I was on the speaking circuit while an active investor: What's the best way to get the attention of a VC? Unfortunately he's right about the bus...

What is the size of the domestic market for IT products? This is one of the first questions that a General Partner at Boston and Silicon Valley based Battery Ventures posed to me, when I introduced myself to him as someone who tracks VC activity in India (at a Silicon Valley Bank event in Bangalore). The question was interesting since the popular assumption is that US VCs are primarily interested in India as a place for their portfolio companies to outsource R&D or other backend work. Now, there's a new report saying Battery is set to invest $8-12 million in Bangalore-based optical networking technology company, Tejas Networks, most of whose customers are Indian telecom companies. Not surprising. Since telecom is indeed one sector where the Indian domestic market is large, fast growing and cutting-edge in terms of technology adoption to be very attractive to international product companies. And VCs. Larry Cheng, an investment professonal with Battery, explains why ...

Mountain View, CA-based law firm Fenwick & West has released the 3Q04 edition of its Silicon Valley and Israel Venture Capital surveys. Click Here for the Silicon Valley survey. Click Here for the Israel survey.

Ram Shriram of Sherpalo Ventures, an early investor in Google, is free to become a billionaire anytime - ie, anytime GOOG trades above $190. As of last Tuesday (November 16, 2004) the lock-in period on his shares - and that of other early investors in Google - expired . Here is an extract from SiliconBeat (a blog created by two writers at San Jose Mercury News and seemingly, huge fans of Shriram), which "calculates" that Shriram's Google investment was "the best, if not the best, investment in a company ever": Shriram is keeping the exact amount he invested into Google a secret. However, the angel round in 1998 of slightly less than $1 million consisted of four main investors, of which Shriram was one. When you factor in that a few other individuals, family and friends may have invested some money, we'll assume Shriram invested between $100,000 and $200,000 give or take. Given that his return is near $1 billion (see math below), he's made betw...

As I was going through the program agenda of Ernst & Young's Israel-India-China Global Hotbed Cross-Border Company Showcase event (at the San Mateo Marriott on November 4, 2004), I was intrigued to see a "Sandeep Kumar" listed as the presenter for an Israeli multimedia semiconductor company called Adimos. Must be a misprint, I thought. And marked Adimos as an "Indian company" whose presentation I needed to attend. As I learnt later from Kumar's confident presentation to the gathering of VCs, investment bankers and fellow entrepreneurs (most of whom had traveled from the three "hotbed" countries to pitch for their companies' next round of funding) and a visit to the Adimos web site , the company is located in Los Altos, CA (USA) "with research and development facilities in Israel and a growing presence in Japan". Adimos' chips help electronic devices transmit multimedia content wirelessly within the home (like video from a D...

Fuelled by booming demand for mobile games and local content, the Indian gaming content industry is set to grow five fold to touch $100 million by 2006-07, according to a KPMG study. The current size of the industry is about $20 million, Economic Times reports quoting the KPMG study. Most of the 15-odd game developement companies - which together employ about 600 people - are focused on providing development services to overseas gaming firms. Businessworld magazine recently profiled three of the largest players - Paradox Studios (a subsidiary of telecom services firm Reliance Infocomm), Dhruva Interactive and Indiagames - which are busy creating their own branded games.

While venture capital serves a valuable role in providing capital and partnership to young entrepreneurs, "if you have a seasoned management team and a track record, VCs are more of a hindrance than a help". This according to Harry Gruber, co-founder and CEO of Nasdaq-listed Kintera Inc., which provides software and services to help for non-profit organizations raise funding through the Internet. Gruber, a trained medical doctor, has raised funds from leading VC firms like Kleiner Perkins Caufield & Byers and 3i Group for his earlier companies including two publicly traded biotech firms and InterVu (a provider of Internet video and audio delivery that was acquired by Akamai Technologies in 2000). For Kintera, Guber avoided VCs and had raised about $30 million from high net-worth individuals, before taking the company public in December 2003. "VCs have a need to gain control of their investments because founders are typically inexperienced. So, certain decisio...

It is tough to do venture capital research in the US these days. Start-ups that receive VC funding are no longer keen to publicize their fund raising. So much so that the "dip" in VC investments during the latest quarter - indicated by data from VentureOne and VentureEconomics , may in fact be "artificial", according to a report in San Jose Mercury News . The newspaper's assertion that "start-ups are trying to stay under the radar longer and not announcing their VC funding", is validated by no less than John Doerr, Brook Byers and Ray Lane (all partners at leading Silicon Valley VC firm Kleiner Perkins Caufield & Byers). "Entrepreneurs want it that way. Ten years ago, as soon as a venture was funded by a reputable venture capitalist, within six months, two or three clone ventures would be launched like heat-seeking missiles right up their tailpipe. People got wise to that. Why should we say anything about what we're doing until w...

Ram Shriram, founder of Sherpalo Ventures, and one of the first investors in Google, helped Google's co-founders "in the Menlo Park garage by consulting his 'Ram’s Book of Mistakes', reports SiliconBeat , a new blog by reporters at The San Jose Mercury News . One of the tenets in Shriram's book, which "he started eight or nine years ago to help remind him of all the bad decisions he’d made", is that "bad hiring decisions are the most fatal". Other extracts from the posting, which was based on an interview given by Shriram to the President of TiE Silicon Valley Sridar Iyengar about the “Google story": --..there are huge opportunities afforded by the new Internet economy -- in China and India, especially. --Launching a company is easy. The great thing about the Internet is you can launch and test an idea easily, and cheaply. If it doesn’t work, you can go back to the drawing board. “If you build your field of dreams, and no one comes...

siliconindia magazine has published a profile of Dr. Naveed Sherwani, Co-Founder, President & CEO of ASIC design and development firm Open-Silicon.

According to a report in siliconindia magazine, "Indians who have founded technology companies - in hardware, software, or innovative biotech - are in serious trouble, once they land some venture capital". Based on a study of over 62 Indian-founded companies that raised venture capital funding during the one year period spanning June 2003 to June 2004, the magazine discovered that more than 80% no longer list the founder as the CEO. "The founder or founders have either gone on to become board members, playing no active role or simply awaiting the vesting period to expire; or have become Chief Technology Officers and vice presidents of engineering, product development or technologies. In some devastating incidents, the founders have left the company in an acrimonious ending," the report adds. The main question that popped up in my mind when reading this is whether the percentage of founders of Indian origin being replaced as the CEO unusually higher compared t...

Extracts from a great post by William Luciw, Managing Director, Viewpoint West Partners LLC, in the AlwaysOn-Network blogzinw: (-) BAD VC: Refers to "Winning DNA" and uses this nebulous criteria as an excuse to fund friends and family. (+) GOOD VC: Never, ever(!), makes eugenics references. (-) BAD VC: Refuses to drive more than 30 minutes to see entrepreneurs, but is concerned about their "China Plan". (+) GOOD VC: Understands that you must go to the market to actually transact commerce, and does not sit on an Ivory Hill refusing to roam.

Extracts from an Always-On Network posting: India’s small but fast growing clinical trials industry has the potential to significantly lower drug development costs for U.S. and global companies. Drug trials in India may also mean the difference between life and death for startup companies in the biotech and medical device fields... ...Multinational drug companies like Pfizer, Eli Lilly, Novo Nordisk, Aventis, Novartis and GlaxoSmithKline have been running Phase II and III clinical drug trials in India. Eli Lilly alone is conducting tests on 20 new drugs in India, and will include India in global testing next year with its important new inhaler insulin drug, Oralin. Pfizer has been conducting limited clinical trials in India for seven years, and is testing drugs for the treatment of schizophrenia, menopause and breast cancer. A variety of both India-based and global CRO firms that specialize in outsourced clinical trials management are working to expand India’s clinical trials busi...

Job Trends Bangalore-based IT and BPO services firm MphasiS is hiring "MBBS Doctors" to help their "global clients" (persumably, insurance companie) "analyze and understand medical risks" of their customers (read "insurance seekers"). "Besides an ambient work culture and a sound process, you could also command a handsome package. There is after all, an alternative to the clinical side of medicine," says the company's ad in The Times of India, Bangalore (Appointments supplement; Oct. 13, 2004). The International Jobs section same appointment supplement also carries an ad from New Jersey, USA-based generics drugs maker Able Laboratories, Inc. seeking a "Patent Research Specialist". "Responsibilities include assisting Patent Counsel to deliver quality search results and analysis relating to patent and prior art". Wonder what the company plans to do about the candidate's H1-B visa. They might be bette...

Start-up Watch At a time when US-based Voice-over-IP start-up Skype has drawn millions of users and also millions in venture capital from top Silicon Valley VCs, does a spin off from an Indian academic institution offering a similar service (with $200,000 in funding) stand any chance? Businessworld magazine has carried a profile of the Indian Institute of Science (IISc), Bangalore spin-off Esqube Communication Solutions Private Limited and its VoIP service VQube. Esqube was founded in 2003 by IISc faculty members include Dr. H. S. Jamadagni, Dr. K.V.S. Hari, Dr. T.V. Sreenivas and Dr. Chandrasekar. The Esqube web site descrribes the company's "current focus" as developing "novel products based on VoIP, speech and Wireless technologies". In January 2004, Esqube received about $200,000 (Rs.1 crore) in seed capital from Cranes Software International Limited, a Bangalore-based vendor of scientific and engineering software.

It is now the turn of the Far Eastern Economic Review to publish a profile of Temasek Capital's recent large investments in India. Some extracts: Temasek's drive into India is part of an aggressive diversification plan, sparked by executive director Ho Ching, who is also the wife of Singapore's Prime Minister Lee Hsien Loong. The company plans to reduce its exposure to Singapore from around 75% today to 33% over the next six years. It plans to have another third of its money in developed markets such as Japan and the United States and a third in developing Asian markets such as Indonesia, Malaysia and India. The stakes for the city-state are high. Singapore wants to create a cadre of global companies in order to diversify its economy, which is still reliant on electronics manufacturing and has seen some of that core business shift to China. Corporate Singapore can wring little more from its own economy, so its cash-rich companies and Temasek have to invest abroad to ...

Click Here to read the article.

"You're about to see (the China) bubble burst in the next five years, or sooner, that will make our bubble look meaningless," Sequoia Capital partner Don Valentine said at a panel discussion in Palo Alto sponsored by Silicon Valley Bank. According to SJ Mercury News report (in two versions here and here ), Valentine's recent trip to China (as part of a SV Bank led delegation) had "only confirmed his view that Sequoia should stay away from direct investments there". "China has no laws, no accounting system, bankrupt banks, and according to Fortune, a stock market that is made up of a den of thieves -- different from the ones on Wall Street."

Singapore-based contract electronics manufacturer Flextronics has made several aggressive strategic investments in India in recent months as part of its move to make India its global center for software product design and infrastructure. In May, Flextronics had led a $10 million investment in Silicon Valley and Bangalore, India based chip design firm inSilica. In June, Flextronics had acquired a 55% stake in publicly listed telecom software firm Hughes Software Systems for $226 million in an all cash deal. It late August, it acquired Chennai-based communications software firm FutureSoft (formerly Future Software) for 440 million. Here are some extracts from Business Today magazine's interview with Flextronics' CEO Michael Marks: On the Hughes acquisition: We have really big plans for Hughes. We have a big infrastructure business and we believe we can grow the company (Hughes) faster and derive greater value for our entire company than what Hughes would on its own...

A couple of weeks after my article about VCs' blogging appeared on the Venture Intelligence India blog and the Always-On Network , the San Jose Mercury News' Matt Marshall has published a similar article titled "VC partners open up with industry blogs". Good to confirm that VI India can spot trends in Silicon Valley's VC industry before the "locals"!

A $22 million plus investment to buy out the Tatas from their Yellow Pages publishing company (now called Infomedia India Limited); a $16 million investment in terry towel maker Welspun India; $11.4 million in TV picture tube maker Samtel; a 54% stake in clothing retailer Arvind Brands; a $4.3 million mezzanine investment - the first of its kind in India - in pharma firm ArchCommerz, etc., etc. Add to this talk of serious investments in the real estate sector and even co-investing with the big daddies of buyouts like KKR. ICICI Venture’s investments in 2004 are certainly complex. And BIG. Business Standard attempts to profile I-Venture in its new avatar

Extracts from Joe Kraus, co-founder of search engine company Excite, recent 2-part blog post - here and here - (on the importance of persistence) provide a good idea why Vinod Khosla of Kleiner Perkins' is considered "an entrepreneur's dream VC": While we were still in the garage (literally), we met with at least 15 different venture capital firms. The meetings we're all the same. We showed them our search technology, showed them "concept-based" search, and showed them targeted advertising. To a firm, the first question they asked was a very reasonable one: 'great stuff guys, but what's your business plan? how are you going to make money?' Of course, being 22 years old and fresh out of college we replied, 'we thought you could help us out with that.' Apparently, that's the wrong answer. Who knew? Rinse, lather, repeat. Then we met Vinod... By then, our deal had developed a certain "smell" -- smart guys wit...

Extracts from an interview given by Luiz Fernando Furlan, Brazil's Minister of Development, Industry & Foreign Trade, to BusinessWeek magazine: We have a target to improve our IT exports to $2 billion in 2007 -- software and services. Now it's $100 million. It's very ambitious. But the private sector tells us it's possible.... We have all the conditions to be a player in the world software market. We have a good infrastructure of telecommunications and energy. We have the domestic market. We have more than 6,000 PhDs in technology coming out every year. The cost of production in Brazil is much lower than U.S., Europe, and Japan. We can deal with Europe and Japan in the daylight. We're the sixth- or seventh-largest market for software worldwide. We have an $8 million market for software... We're building up our own model. We have seen Ireland, India. We look at other countries. We can't buy a canned model. We have a base already.

While I knew the one line description "Vinod Khosla was the founding CEO of Sun Microsystems and was earlier part of the founding team at Daisy Systems", I hadn't come across a more detailed version of Khosla's pre-KPCB exploits before Joe Kraus talked about it on his blog . Here are some extracts from the Harvard Business School case study (by Dr. Amir Bhide) that I found interesting: How a Stanford secretary "linked up" SUN's co-founders: I'm probably more of a conceptual engineer, and I can draw block diagrams for almost anything I can think of, but I can almost never implement them. So I started looking for someone who had done this kind of stuff before. I heard of a project at Stanford called the Stanford University Network, or Sun.workstation project. I called the computer science department, and some secretary who did not want to bother a professor gave me the uame of a graduate student from Germany, Andy Bechtolsheim. Apparently,...

In an article appearing in the Financial Express , Dr. Y.R.K.Reddy, Chairman, Yaga Consulting Pvt. Ltd., provides strong arguments on why the Indian government's department of company affairs and SEBI must simplify the rules relating to the issue of sweat equity. "The current rules and guidelines are so elaborate that they may meet the ideals of corporate governance and yet are revoltingly cumbersome. They are indeed an over-kill," he says Click Here to read the full article.

Bangalore's increasingly intolerable infrastructure problems and the sky-rocketing salary expectations of its residents seem to be achieving what economic recession and the "outsourcing backlash" in the US, failed to achieve: spell the decline of IT industry in the city. Yup. Hyderabad's emergence as a serious competitor has not really dented Bangalore's ability to attract MNCs and Silicon Valley start-ups. Bangalore's original advantages - weather, cosmopolitan culture, "critical mass" and "network effect", etc., etc. - continue to work in its favor. However, the knowledge that these companies have of Bangalore is often second hand. Wipro and Infosys - the city's original "crown jewels" - are better "lead indicators". Whether they say it explicitly or not, it is clear these companies are expanding faster in other cities than in their "home town". Venture capitalists based in Bangalore too have b...

Financial Express has published a short profile of incubation programs at IIM-Bangalore and IIT-Delhi. Extract: IIM-Bangalore IIM-Bangalore, which started its incubation facility in 2000, has so far seen three IT companies being incubated. “Nine Cloud Entertainments, SeNate Communications and Voice Tech Solutions are working at our centre,” said Dr Mathew Manimala, professor of organisational behaviour and chairperson for Jamuna Raghavan Entrepreneural Academy. Nine Cloud Entertainments is working on animation and other entertainment projects. SeNate Communications is developing firewall security solutions while Voice Tech Solutions provides IT solutions to the telecom companies. Usually, we give one-year term for incubations. Sometimes, depending upon projects, we might extend it to one-and-half years,” said Dr Manimala. So far, two companies Meta-I Systems and EmbedX Systems Pvt Ltd have exited and started out their own operations after being incubated at IIM-Banga...

Some extracts: The 45-year-old Paul, a graduate of India's Birla Institute of Technology who earned a master's degree in business administration from the University of Massachusetts, is an unapologetic believer in the virtues of making U.S. companies more efficient through offshoring -- an activity that at the same time helps raise living standards in his impoverished homeland. But he also expresses compassion for the American workers who lose out in the bargain... ...Paul lives with his wife and three young children in Los Altos, working out of the company's U.S. sales office in San Carlos about a third of the time. He splits the rest of his time on the road managing Wipro's global operations and running the company out of its headquarters in Bangalore. Tall and trim, he is an inveterate jogger and swimmer who says he avoids playing golf with business associates... ...Paul concedes there are legitimate concerns fueling the backlash against offshoring. He bemoa...

The latest issue of Economist carries a detailed article saying that remote IT infrastructure management is the next big opportunity for Indian IT outsourcing companies like HCL and Wipro.

Beginning January 2005, Zee Telefilms will air an 36-episode show in which entrepreneurs will get an opportunity to pitch their business plans on TV. This contest -type show will see the best plans getting funded, Business Standard reports quoting Zee Telefilms VP Abhijit Saxena. Click Here to read the full article.

By Arun Natarajan "Man has Venture Blogging come a long way since we started VentureBlog a year and a half ago. At that time, the only way that there would be robust discussion and debate about venture capital related topics in the blogsphere would be if Andrew and I took different sides of an issue and duked it out on VentureBlog. Now folks like Brad Feld from Mobius Venture Capital and Fred Wilson from Flatiron Partners are discussing and debating VC issues of real interest and import. While Venture Capital still remains quite individualistic and, at times, enigmatic, VC bloggers have gone a long way to help demystify what has for years been a bit of a black art" - David Hornik of August Capital in VentureBlog (August 27, 2004) Venture Capitalists in the US are taking a strong liking for blogging. As Hornik has pointed out , from just a couple of active VC bloggers two year ago, there are now well over a dozen VCs who blog regularly. Not stopping there, VCs have ...

Here's what Michael Moritz had to say on the "secret" of Sequoia Capital's success during the Silicon Valley 4.0 conference (via Always-On ): On the whole we've had the incredible benefit of having been investors in a whole slew of companies over the years. And if you're an investor and you remain awake and alert to the possibilities of tomorrow, those companies inevitably wind up as lamplighters that illuminate the future. ...if you're an investor in Apple Computer, to knowing what the shortcomings were to using cassette tape as a storage mechanism for personal computers in the late 1970s, to understanding the implications of what disk drives could do for personal computers. So Sequoia went ahead and invested in a couple of disk drive companies. And if you invest in a disk drive company, why, you're alert to the importance of the magnetic heads inside a drive company, so you invest in those. And if you're an investor in a PC company and d...

As Microsoft takes time to digest web-conferencing company PlaceWare, the market leader - Subrah Iyer-founded WebEx Communications - has been picking up more momentum and market share. But can WebEx sustain the lead? "WebEx hasn't been steamrolled--yet--but Microsoft's plans for an upcoming version of Web conferencing software makes clear the extent to which it uses more established products to gain a foothold in new markets," warns an article in Forbes .

"Writing a check is the first, and perhaps easiest, part. Yet angels-most of whom are themselves seasoned business executives, entrepreneurs, technologists and finance people-can do the venture community the greatest good by not just writing that check, but by stepping in and prepping the company for sustainable company growth," says Ravi Chiruvolu, a general partner with Charter Venture Capital, in an open letter to angel investors . Chiruvolu seeks to "cross (the) chasm of misalignment between what VCs really want and what angels often fail to provide" through his letter which appears in his column for Venture Capital Journal . In April, VCJ had carried a Cover Story titled "Angels or Devils?" in which it has outlined the problems faced by VCs when it comes to funding companies which had received investments from angels. An extract: "VCs still have a bad taste in their mouths from five years ago, when everyone and his grandmother wanted to...

Express Computers magazine has profiled Powai Labs, an EDA tools provider that is being incubated at IIT-Bombay's "KReSIT". An extract: Says Reapan Tikoo, chief executive officer, Powai Labs, “Today, there is no tool which can cater to the need for a desktop simulation accelerator. We see IMAGE 2.5 (2.5 million gates) and IMAGE 1.2 (1.2 million gates) fulfilling this need. We are selling IMAGE 2.5 at $75,000 and IMAGE 1.2 at $32,000. With our products, a chip design company can get its chips validated at one-tenth of the existing cost.” The price advantage arises because the company’s technology utilises off-the-shelf components. Tikoo also says that the product enhances the speed of simulation, thereby increasing the productivity of every engineer. Significantly, unlike any other company, Powai Labs plans to support every client with a dedicated support engineer at each client site—at no extra cost. Not only does this increase customer satisfaction, it also pr...

With the rapid maturing of the IT Services and BPO sectors, VCs - especially early-stage investors - will soon feel the need to spread their nets wider. Sanjay Anandaram, Managing Director of Indo-US cross-border VC fund JumpStartUp, feels these funds will now gravitate towards "Innovative Technology / Intellectual Property based product and services companies" In an interesting presentation, which reflect his personal views, Anandaram highlights various factors catalyzing the emergence of IP-based companies in India. These include the availability of high-quality management talent (thanks to returning NRIs and the shifting of R&D units of MNCs and VC-backed Silicon Valley firms to India), the rapid growth in India's telecom sector, increasing access to other rapidly growing Asian markets, and emergence of a start-up culture in Engineering Schools like the IITs. Anandaram provides examples of several exciting "born in India" start-ups focusing on IP -...

By Arun Natarajan, Editor, TSJ Media My article on the above topic was published recently in the AlwaysOn-Network "blogzine". Here is the article's introductory paragraph: In the first six months of 2004, venture capital firms exited their investments in 13 India-based companies. Although business process outsourcing (BPO) firms constitute a major portion of the successful acquisition-based exits, the real bonus has been the spurt in the number of IPOs by venture-backed firms. Click Here to read the full article.

Conventional wisdom has it that operating experience contributes significantly to making a successful VC. Bill Burnham, Managing Partner at Softbank Capital Partners, doesn't buy it. An extract from his recent blog post on the topic: When you catch most VCs in a moment of honest reflection they will tell you that while they enjoy working with their investments and trying to “add value” by using their operating experience, the single most important action that they take is deciding whether or not to invest. This is because a start-up’s initial “genetics” in terms of market opportunity, technology and founding team are typically the biggest determinants of investment’s success. Put another way, it’s almost impossible to turn a start-up with bad genetics into a good investment, no matter how good an operator you are. Thus, if the initial investment decision is so critical, than it stands to reason that investment skills are potentially more important to VC success than operati...

Some enterprising folks in the troubled state of Kashmir have decided that would like to join other Indian states which are riding the boom in IT and BPO services to prosperity. Quite a few newspapers in India and abroad (including the New York Times) gleefully picked up and published a Reuters report profiling Srinagar-based Magnum Software Services, which, has recruited 315 young Kashmiri men and women in recent weeks to provide transcription services for a client in Singapore. "Officials at Magnum said they hope to be an outsourcing pioneer in the troubled region where barely two years ago Internet and mobile phone services were barred because of fears separatist militants could use them to foment violence," the report said. More strength to Magnum's founders. They are the kind of guy that will render Kasmir's Osama Bin Ladens jobless. When the number of well-paying jobs in a region increases, the Osamas will have to look elsewhere to find youth willing to d...

The free publicity rain for Indian IT companies continues. After giving Indian IT companies several million dollars worth of column space in the form of anti-offshoring reports, the same US publications have now started to make a U-turn and are praising Indian companies for adding jobs to the US economy! "(Wipro) could end up being the techie's hero. In the past 18 months, it has taken on 300 US-based consultants, and that's just the start, says Pratik Kumar, the company's corporate vice-president of human resources. The outfit is actively recruiting U.S-educated MBAs, most of them Americans.... Judging by various outfits' plans, this trickle of reverse offshoring may well turn into a flood," gushes a new report in Businessweek . And replacing Forrester Research's famous (??) "3.3 million US jobs to be lost due to offshoring" report, is the "recent study by economic think tank McKinsey Global Institute (that) has found that every dolla...

Business Today magazine reviews the changes at iGate Global Solutions since the former Infosys Technologies marketing head Phaneesh Murthy took over as the company's CEO one year ago. Click Here to read the full article. (Paid subscription required)

Businessworld magazine has published an article on Singapore-based Temasek Capital's investments in India as well as an interview with Manish Kejriwal, who took over as Managing Director of Temasek's company's Indian arm. The article points out that, with $500 million invested or committed to the Indian market, Temasek is the second-largest private equity investor in India (after Warburg Pincus). Apart from direct investments in Indian companies (like Matrix Labs), Temasek also invests indirectly through its investments in India-focused VC funds like Merlion India Fund (a JV with StanChart Private Equity) and WestBridge Capital Partners. "The fact that we are not structured as a fund means we can afford to take a long view on investments, as we do not need to divest our holdings within a certain period of time," Kejriwal says in the interview .

The New York Times has published an interesting article featuring several professionals of Indian origin who quit successful careers abroad and returned to India. As the article indicates, several of the returnees are venturing beyond their lives in "gated colonies" and making a positive change to their wider social environment. Here's one from the many examples in the article: A radiologist, Dr. Kalyanpur had resigned himself to a significant pay drop upon his return. Then he proved to Yale that he could accurately read CT scans and other images transmitted via broadband to India. He began working for them from afar before starting his own business, Teleradiology Solutions Inc., in 2002. He spends his days reading images for the emergency room nightshifts of about 40 American hospitals, compensating for the shortfall of nighttime radiologists in the United States, and being compensated at near-American salary levels. His partner, like him, is American-trained; a...

While doing development out of India has become a "no brainer" for all enterprise software product companies, the most "obvious" way to go about exploiting the India advantage has been to set up a captive development center. Like Microsoft, Oracle, Novell, Adobe, etc have done. So, how does Symphony manage to convince software companies like Siebel Systems (the world's leading provider of CRM software), Autodesk (the leading CAD software vendor) and other clients to outsource development work to it? (As Economic Times reported recently , Symphony has been providing software testing and development services to Siebel for over a year now.) What is Symphony's secret formula? Businessworld attempts to provide the answer. "To address the issue of trust, Symphony works on a build-operate-transfer (BOT) model. The understanding is that at any time the client can acquire the operations - including the team working on the project - from the servi...

At a time when pretty much all VCs in Silicon Valley are pushing their portfolio companies to open R&D centers in India, Promod Haque, Managing Partner at Norwest Venture Partners (NVP), is adopting a different tack. He is encouraging his portfolio companies to view India as not just a low-cost development base, but also as a key market for their wares. With the Indian telecom services market already the fifth largest in the world and Indian IT services and BPO vendors making a serious mark on the global outsourcing market, Haque wants his portfolio companies to get an early entry into on what promises to be a long-term growth market for technology products. Haque calculates that India's call-center industry alone would be spending $12 billion on telecom equipment over the next four years. Haque is leveraging the PR value of his recent anointment - by Forbes magazine - as the world's top VC to help his portfolio firm kick-start their sales to Indian companies. After...

Red Herring magazine has published an offbeat interview with Kailas Narendran, a 25-year-old researcher at the Massachusetts Institute of Technology's Department of Mechanical Engineering, who co-created a device that provides mobility for patients with spinal cord injuries. Narendran and his co-inventor recently won a $30,000 prize for their business plan to commercialize the technology at MIT's Entrepreneurship Competition. The RH article points out that former MIT contest finalists - including Akamai, Centrata, and Firefly - are now valued at over $4 billion. Click Here to read the full profile.

New Delhi-based private equity fund ChrysCapital is vastly different from its former avatar, Chrysalis Capital. While Chrysalis began life (in Mumbai) as an venture capital firm focussed on start-up investments, today's ChrysCapital is best know for its late-stage investments (often in already public companies). The fascinating part of this transformation is that one of the fund's original partners - Senior Managing Director Ashish Dhawan - has been firmly in the driver's seat throughout the process. It's a story that needed to be told. As a cover story. Kudos to Business Today for telling it first. Thankfully, unlike the glowing profiles that BT is famous for - including the one featuring infamous stock brocker Harshad Mehta with his Lexus on the cover - this one has a lot of facts. Some well known. And others less so. That ChrysCapital's first fund would have been a disaster but for the pioneering investment in Raman Roy founded BPO firm Spectramind i...