The Venture Intelligence Blog

There's nothing new about fights between Venture Capitalists and the founders of start-ups they've invested in. What's new about Businessworld magazine's detailed description of the battle between The View Group and Tracmail founder Adi Cooper is that such fights have now broken out in India's BPO sector. BW indicates that it is not just Tracmail. Similar battles are also being fought at other early-to-market call center firms like Epicenter and Infowavz as well. According to the article, since Tracmail started out in 1999 - well before the BPO sector became a VC-darling - Cooper did not have too much of a choice about which VC to go with. So, he took "latched on to what was available" by selling "a hefty 50% stake" to The View Group for a "mere $7-8 million". "Over the past two years, every time Cooper tried to replace his current VCs with investors who had a longer time horizon and bigger resources, The View Group would sim...

In April, when Magma Design Automation Inc., led by Co-founder, Chairman & CEO Rajeev Madhavan, announced the acquisition of Vivek Raghavan co-founded Mojave Inc. for about $140 million, many commentators termed the deal "pricey" pointing out that Mojave had no products, zero revenues and just 10 employees. While it doesn't exactly justify the valuation of the Mojave acquisition, TheDeal.com has published a detailed article explaining why Madhavan is in a hurry to grow Magma through acquisitions. (Magma had also acquired Guruprasad Rao co-founded Silicon Metrics Corp., an Austin, TX based provider of chip design solutions, in November 2003). According to the article, EDA companies need to have $300-400 million worth of sales to be able to porovide local support to chip OEMs in various parts of the world. "If you have $100 million in revenue, you might be able to afford an office in San Jose and Paris and Tokyo, but Helsinki and Osaka would be too expensive...

Private equity investments in India have fetched foreign investors an "Internal Rate of Return" of 25-40% in recent years, Business Standard reports quoting PricewaterhouseCoopers (PwC) Associate Director Sanjeev Krishan. ChrysCapital generated an IRR of more than 135% on the sale of its stake in Spectramind to Wipro. The successful IPOs of TV Today Network and NDTV also fetched handsome returns for their PE investors (GE Capital and ICICI Venture in the case of TV Today and Fleming and JP Morgan in NDTV), Krishnan said in the report. Click Here to read the full article.

By Arun Natarajan My article on the above topic was published recently in the AlwaysOn "blogzine". Here is the article's intro: While India's software and business process outsourcing (BPO) services companies hog the headlines, venture capitalists in the country have begun to cast their nets wider. Recent quarters have seen private equity firms investing significant amounts of money into sectors such as pharmaceuticals, high-tech manufacturing, retailing, banking, media, cinema theaters, and even restaurant chains. So what's cooking? Over the last two years, VCs in India have been behaving pretty much like their U.S. counterparts: making fewer but larger investments and focusing on late-stage companies. (The few early-stage bets have been reserved for the booming BPO sector.) However, in recent quarters, two India-specific trends have started to play out quite strongly: (1) Indian VCs are looking beyond software and BPO services, and (2) they aren...

Posting by Arun Natarajan in The Startup Journey web log. I recently watched an interview with MphasiS-BFL's Chairman & CEO Jerry Rao television ( Udaya TV on February 20, 2004), when he said - quite firmly - that luck plays a huge role in any entrepreneur's success. He said a large part of his success was owed to the fact that he was "at the right place at the right time". Rao gave examples to prove his point about luck being so important. For instance, his highly successful career with Citibank had begun "willy nilly" - via a campus placement at IIM-A. And even his founding of Mphasis Corporation, a California-based software company that subsequently merged with BFL Software to form Mphasis-BFL, was sparked off by a chance meeting with MphasiS' future co-founder during a flight trip. Rao's remarkably candid and humble admission made me think about the role of luck in my own entrepreneurial endeavors as well as that of my friends. An...

The election results in India, which had surprised most people (including so-called expert pollsters), dominated the chatter among the 3,000 attendees at TiECon, the annual global Indian entrepreneurs event held in Santa Clara, reports San Jose Mercury News. While Houston-based entrepreneur Ashok Rao said he was "shocked, disappointed and nervous'' about the results, Vinod Dham of NewPath Ventures was more positive about the new left-of-center Congress Party-led coalition that is set to take power (replacing the BJP-led coalition). Dham hopes the new government would focus on improving infrastructure and putting up manufacturing facilities in rural areas. "They (India's rural folk) don't have water, power, electricity or roads connecting to rural areas. They didn't see any benefit trickling down from the growth in IT,'' he said. "The existing government was all drunk with its success,'' Dham added for good measure. Harish Meh...

Business Today magazine has published a profile of ICICI Venture Funds and its CEO Renuka Ramnath. Click Here to read the full article. (Paid subscription required for access)

At a time when Vivek Wadhwa, Founder & Chairman of US-based enterprise software firm Relativity Technologies, is generating a lot of publicity for the Hindi film he's producing via his BusinessWeek column , India's answer to BusinessWeek - Businessworld - has published an indepth article exploring the roadblocks facing private equity investments in the Indian film industry. The article points out that the spurt of private equity investments that happened when the sector received industry status in 1998, has now fizzled out. The prominent investments so far include the $5 million raised by Shringar Films from GW Capital, the $8.5 million (Rs.38 crore) that PVR Cinema raised from ICICI Venture, and the angel investment raised by Bobby Bedi's Kaleidoscope Entertainment from Silicon Valley veteran Kanwal Rekhi and Infinity Venture co-founders Saurabh Srivastava, and Pravin Gandhi. One of the main roadblocks is the lack of transparency in film distribution. ...

"In the long run, given the competitiveness and cost increase of doing business in India, I am sure that many companies will increasingly look to other locales with strong talent and less competition like Belarus, Romania, Argentina, Russia, and China. I am already seeing that happen," says Ed Sim, Managing Director of Dawntreader Ventures (previously SoundView Ventures), in his recent web log posting. "The problem is that offshore development has become so popular that the cost of doing business has increased since wages have been bid up and since employees have many job options," Sim adds. With $290 million under management, Dawntreader Ventures primarly invests in early stage information technology companies. Sim says he and his partners have also decided that it is best for their portfolio companies to set up their own or "captive" development centers rather than deal with third-party vendors. "While a couple of our companies chose to use consu...

Ram Shriram the former Netscape and Amazon.com executive who runs Sherpalo Ventures will make the maximum returns (in percentage terms) when Google goes public, according to a column by Matt Marshall in San Jose Mercury News . Shriram was an angel investor in Google and is a part of the company's 6 member board . "We don't know exactly how much he invested, but we do know he invested in part of a $1 million seed round pledged by four principal investors in 1998. Let's assume Shriram's investment was $300,000, give or take. Now his approximate 2 percent share of the company will be worth up to $600 million," the column says. Marshall also points out that unlike venture funds KPCB and Sequoia Capital (which together own a 20% stake in Google for their $25 million investment), who need to share their bonanza with their investors, in Shriram's case "it's all his money".