The Venture Intelligence Blog

TiE Bangalore has put together the Entrepreneur Accelerator Program (TiE-EAP or “tie-up”). TiE-EAP is designed to help companies get through the seed-stage of evolution and graduate to first round of funding from venture capital firms. The program brings together an ecosystem of early stage investors and mentors, as well as an array of support service providers such as incubation centers, legal and accounting services and recruitment services – and connects them with pre-screened and motivated entrepreneurs. To begin with, TiE – EAP intends to select between three and five entrepreneurs to actively assist through this program and is inviting 2-3 page business plan summaries from interested entrepreneurs and startups. For more information, visit http://tiebangalore.org/eap_home.html or contact Nishant Malhotra at eap-coordinator@tiebangalore.org Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies world...

Anand Sridharan of Bessemer Venture Partners has triggered off an interesting debate on his blog on when the Indian Internet market will really take off. At $25-30 million ad revenues and $150-200 million e-commerce revenues (gross), the India internet market is clearly a small market today. There is also no doubt on the direction and that this would eventually become significant. The main question is ‘how soon’? I don’t have the answer, but here are my views on some of the relevant factors and on what needs to change for us to get there. Let me start with my definition for ‘significant scale’. My medium-term target would be 30 million households having high quality (over 256 kbps), affordable ( under Rs. 500/month for PC-EMI + net access without download limitations), reliable internet access at home. I deliberately pick 30 million, as that is the number of households who’ll earn over Rs. 0.2 million/year in the 2010 timeframe. Arun Natarajan is the Founder of Venture Intelligence In...

Business Today has a detailed series of articles on the Indian automobile industry, including its various segments like cars, two-wheelers, trucks, auto components and auto engineering. Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Brad Feld of Mobius VC heaps praise on the performance of Stratify, Inc. on his blog. It’s always really exciting when a portfolio company hits its inflection point and has a year of extreme growth. All venture backed companies always predict their growth will follow a “hockey stick curve”. This of course is the exception, not the norm, for the vast majority of startups. Stratify had its hockey stick in 2005 – by the end of the year we’d had over 400% growth off of a multi-million dollar base revenue from 2004. While it’s easy to sit back and be delighted (or even a little stunned), there is no end in sight, which is a tribute to Ramana Venkata and his awesome team. Stratify was founded in 1999 - as Purple Yogi - by former Intel Corp. scientists, Ramana Venkata and Ramesh Subramonian, along with Rakesh Mathur (former co-founder of web database firm Junglee). In 2001, the company changed its business model (from selling to consumers) to selling its software as a service to enterp...

Angel investor Ram Shriram of Sherpalo Ventures has been named No. 3 on Forbes magazine's annual Midas List of technology industry investors. Here is what the magazine had to say in its profile of the 49-year-old Shriram: Joined the Google board at its creation. At last count had 2.8 million shares, worth quite a bit . Made his bones in mid-1990s at Netscape. "It died an early death but spawned other great companies." Ran shopbot Junglee, sold it to Amazon for $200 million. Stayed a year, later advised or invested in several firms run by Netscapees (Tellme, Elance). New deals include Zazzle, which prints custom graphics, and PodShow, which broadcasts music. Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

While both foreign and domestic Private Equity firms are rushing to launch Real Estate funds, observers have predicted that PE investors will face serious challenges in dealing with corporate governance related issues in this industry. A recent Businessworld column suggests that PE firms are willing to make compromises and live with workarounds. Builders may be nonchalant about walking around with suitcases bulging with unaccounted-for cash, but it might not be easy for say, an American private equity investor, unfamiliar with the Indian black economy, to do this. If a recent meeting between a foreign private equity player and a builder in Mumbai recently was any indication, the investors are planning to look the other way. The way it will work is this: the builder is the one who does the dirty work of buying the land and handing over bags of cash. He will set up a company which will actually own the land. Shares in the company will be sold to the foreign investor at a premium. This ...

Jeff Bussgang has a great post on how entrepreneurs envy VCs, how VCs envy their Private Equity cousins who, in turn, envy hedge fund managers. Is there anyone that the hedge fund folks envy? Yes, says Bussgang: Entrepreneurs! I often hear them (hedge fund executives) discuss with envy the life of the entrepreneur – cycling through exciting new start-ups every 5-6 years and then taking long sabbaticals in-between gigs. Meanwhile, the hedge fund executive is chained to every international market every minute of the day for fear they miss spotting the latest currency or interest rate fluctuation. Entrepreneurs actually create things of value and leave a mark on society, rather than simply financial engineering. And that nonsense about money flowing in so fast being such a great thing? Remember, it can flow out just as fast. And, besides, the hedge fund business as a whole has little barriers to entry and struggle to find true proprietary elements of the busines, resulting in too muc...

More than two-thirds of technology companies replace their CEOs sometime during their company's lifecycle. How should founders, investors and board members work together to minimize the pain and maximize the long-term benefits to the company and its shareholders during the process? Pascal Levensohn, Founder and Managing Director of Levensohn Venture Partners has released a White Paper on this topic titled "Rites of Passage: Managing CEO Transition in Venture-Backed Technology Companies". Brad Feld of Mobius VC (and one of the best VC bloggers), recommends the White Paper as "an excellent addition to every entrepreneur and VC's bookshelf". Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Businessworld has an article on how mobile operators are expaning their services into small towns and rural areas. It is these markets that are now spurring much of telecom growth. Over a period of nine months, from January to September 2005, the subscriber base in B and C circles grew by 44.7 per cent and 46.7 per cent respectively - more than double the 22.2 per cent growth in metros. Of the 60 per cent volume growth expected in the Rs 80,000-crore telecom industry in 2006, more than half is expected to come from small towns. Look at it another way. Of the 180 million mobile phone subscribers that India expects by the end of 2007, at least 85 million will be from B and C class towns. Currently, only 28 million of the 71 million mobile phone subscribers in India are from these areas. Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsl...

Businessworld has a cover story on how a clutch of entrepreneurial companies are making a mark on the global drug discovery value chain. The article includes an interview with former Ranbaxy Labs CEO D. S. Brar, who along with GVK Group's G.V. Sanjay Reddy, has entered the discovery services space. Others include people like A.V. Rama Rao (Avra Labs, Hyderabad), Ranga Raju (Sai Life Sciences, Hyderabad), T.R. Bhoopathy (Magene Life Sciences, Hyderabad) and V. Ravindranath (Bharavi Labs, Bangalore). It is also attracting the attention of global financiers like Purnendu Chatterjee, who has already financed four projects under the TCG Lifesciences umbrella in India. Click image for more detailed table. ... What is the business opportunity for India in terms of numbers? Brar: Currently, the value of work being done by discovery services companies is about $300 million, including the clinical trials business. And it is growing at 30-40 per cent annually. In three years, I think ...

In this guest post, Abrar Hussain , points out that India’s venture capital ecosystem has “some ripening to do” before it can be equated to the original Silicon Valley. "Opportunity is missed by most people because it is dressed in overalls and looks like work." - Thomas Edison They heyday for Silicon Valley’s monopoly over the technology industry is long gone. Nowadays, Bangalore is often included in the same breath when there is a reference to Silicon Valley. But, is this really a realistic comparison? Although everyone seems to equate the two, if we poke around this comparison it’s easy to see that there are some big differences. I won’t pretend to have a monopoly on the items listed--I think lots of people are thinking the same thing. India is still maturing and, although there seems to be some recent evidence that the Indian VC industry is beginning to "fill in the gaps" within its offerings, there are still some significant parts of Indian venture capital ec...

Businessworld has a detailed cover story on the state of the low-cost airline industry in India, including a comparison of the strenghts and weakness of the current leaders - Air Deccan and SpiceJet - and an interview with former CEO of easyJet, Ray Webster. Ray Webster, the former CEO of easyJet, who established the efficacy of the low-cost model in Europe, is bullish: "In Europe, the number (of passengers) is far lower, journeys are short, and travelling by train is a nice experience. Yet, the low-cost airline model has worked very well. I can't begin to imagine the size of the market in India." The two airlines have done well so far. Loads have been high and increasing (Air Deccan claims 75 per cent average load in April-September 2005; SpiceJet claims around 84 per cent). Both airlines have been cash positive for several months. Deccan had projected revenues of Rs 275 crore in its third year but made Rs 318 crore in 2004-05 (the second year) itself. In 2005-06, the f...

Businessworld has a detailed cover story on the Indian film business, the major players and the challenges facing them. PVR Cinemas, Yash Raj Films, UTV Software Communications, Adlabs, Sahara, Pritish Nandy Communications (PNC) and Percept Picture Company are among over a dozen companies finally emerging out of the wilderness. Most are putting their bets on becoming conglomerates with a hand in everything - production, distribution, retail, the overseas market, home video and so on. Over the last 24 months, investors have put in between Rs 1,500 crore and Rs 2,000 crore into the expansion plans of these companies. There is an entire ecosystem - investors, Internet, technology, marketing and advertising firms - that is building up around the film business. Companies like Spice, Epigram, Group M and Madison Mates (marketing); Interactive Television (a theatre activation company); Prime Focus, Pixion and Autodesk (post-production and special effects); and Hungama, Indiatimes and MSN (di...

Silicon Valley/San Jose Business Journal has an article on how India's growing economy and booming stock market is encouraging Indian companies to make ambitious acquisitions overseas - including in Silicon Valley. India-based corporations are scouring Silicon Valley for small and medium-sized companies in the $20 million to $200 million range, with a particular interest in management and networking skills. "They need the contacts," says Vish Mishra, a venture capitalist with Menlo Park-based Clearstone Venture Partners. "They are active not only in Silicon Valley, but in Europe, Asia and elsewhere." The stock value of such large concerns as the Tata Group, with more than $17 billion in capital, the $3 billion Nicholas Piramal India, a pharmaceutical company, and the $7 billion Aditya Birla Group has skyrocketed in New York and Bombay stock markets over the past few years. Some of the more recent deals include Fremont-based IT-system concern, Cymbal Corp., whic...

The Evolvence India Fund (EIF), the first independent private equity "Fund of Funds" set up exclusively for investments in India, has been very active in the six months since its launch in June 2005. EIF has already invested into five India-focused funds: GW Capital’s India Value Fund II, Barings (India) Private Equity Fund II, IL&FS India Leverage Fund, IDFC Private Equity (Mauritius) Fund II and UTI Venture Capital's Ascent India Fund. EIF is sponsored by the Dubai-based Evolvence Capital which started out as a vehicle to manage the personal wealth of nine high net-worth families in the Middle East. EIF received commitments of $73 million at its first closing in September and expects to have its final closing by Q4, 2006, Jay V. Jegannathan, Managing Director of EIF told Venture Intelligence India . The final fund size is expected to be $300 million. EIF will focus on investments in private equity across all sectors, including real estate and infrastructure develo...

At a time when US enterprise software firms are facing challenging times thanks to a "Perfect Storm" created by the rise of Open Source software and the Software as a Service (SaaS) model, Indian software product firms have a window of opportunity to make a significant mark on the global landscape. In this context, the Indian software industry association Nasscom's recent efforts to encourage Indian software product companies is well timed. Nasscom has just published its first "Innovation Shortlist" of companies featuring profiles of IT companies that "have distinguished themselves as imaginative thinkers, product developers and service providers". The list includes Subex Systems Limited, Bangalore Softsell Ltd., CG-Smith Software Private Limited, Skelta Software and Encore Software Limited. Click Here to view their profiles. Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded...

While the other trends we are looking forward to in 2006 - a steady pick up in buyout activity and the re-emergence of early-stage technology investing - might or might not pan out, the rise of Real Esstate as a destination for Private Equity funds is something that is much more certain. Both domestic firms like HDFC, ICICI Ventures, IL&FS Investment Managers (IIML) and Kotak, as well as a host of overseas firms have lined up significant funds for this sector. While there have been some early nibbling investments in 2005, the funding tap for real estate can be expected to open up fully in 2006. Recently, I had the opportunity to attend a presentation by Dr. Archana Hingorani, COO of IIML, (at an event organized by AVCJ in early December) on why the real estate sector presents an interesting opportunity for PE firms. During her presentation, Dr. Hingorani pointed out that a key attraction was the fact that real estate investors can expect yields of 11-13% in prime properties (comme...

Fred Wilson has a great take on this topic: Many of the people I know in the venture capital business think their customers are their investors, called LPs in the industry vernacular. I've always thought that was dead wrong. The entrepreneur is the customer and the LP is the shareholder. That's the only way to think about the venture capital business that makes sense to me. ...I start with the value chain. The entrepreneur creates the value, they are the "raw material" in the venture capital business. If there were no entrepreneurs, there would be no venture capital business. So the VCs who treat the entrepreneur like the customer and invest heavily in customer service will be rewarded with the loyalty of the most important component in the value chain. Money on the other hand is a commodity, whether its in the hands of the LPs or the VCs. Money flows to the best returns and always will. So if the VC does a good job of serving his customers well and generates supe...

Vineet Buch of BlueRun has a nice post on "What's looking promising in India in 2006?" from an investor's perspective. Some extracts: * Consumer Internet : I predict that the interesting Indian internet businesses will be hybrid businesses, combining a variety of communication assets, not just the Internet; and these businesses will address needs unique to the Indian market rather than being mere copycats of Western models. * Mobile Value Added Services: Value-added services (VAS), such as ringtones and ringback tones, are big sources of revenue to Indian wireless carriers. Practically everywhere else, including the US, Korea and Europe, startups have managed to grow big by getting a significant chunk of this revenue. In India, however, the VAS provider market is fragmented and the carriers reluctant to share the pie and hence encourage innovation. It's time that some brave souls in India banded together to replicate the success of global players in the V...