Archive for November, 2006

No money for early stage ?

Written by: Vivek Garg

On Nov 30th, 2006

We have asked if India is ready for web2.0 here. Also we raised our concerns about our booming internet industry here. Although we have our doubts about the industry, we are seeing a lot of money flowing into India recently. We saw guruji.com grabbing $7 million and then we saw sulekha getting $10 million and more recently we see that travelguru, the leading travel portal got $15 million. See a comprehensive list of investments here. We have stats and reports of VC firms raising billions of dollars to invest in India. New funds are coming into existence every day raising even more money. But the point to note here is that most of the investments we have seen till date are either late stage in nature or in the companies that mimic proven business models elsewhere. Some of the companies we recently interviewed like redbus here, onyomo here and picsquare here are all still working on angel funding. These companies are more or less in early stage now. The feeling we got after talking to them was that the VCs are queued up on the sidelines. VCs don’t want to miss the opportunity when the time comes but they don’t want to move in unless they see some traction in these markets. Is it the traction or is the risk of investing in early stage Indian startups way too high?

There is a lot of buzz about a maturing investment ecosystem in India with impressive exits. We saw that with the Info Edge IPO recently that is trading at 85% premium. This article here states how early stage funding has grown YOY in India listing some good examples. Still it’s not scratching the surface of billions of dollars already waiting to be invested. In the report “Is the Venture Capital Market in India getting overheated” – Evalueserve reports that over 44 VC firms are now seeking to invest more than 4.4 billion dollars in India over next 4 to 5 years but cautions that there will be a glut of VC money. It also highlights that it is not possible to invest in 150+ startups if the VCs are going to be sticking to their favorite sectors and just the late stage investments for that matter. Well, we are not saying that they should start throwing money at every startup out there. What we are trying to understand that if the VCs will be at ease with the risk levels associated with early stage funding in India, compared to rest of the world. While looking for an answer, we found a paper on “Accessing Early-Stage Risk Capital in India” by Rafiq Dossani, a senior research scholar at Shorenstein APARC. Some of the points in the paper resonate with our thinking about web 2.0 companies in India. Following points might be the reasons why a lot of early stage ventures are not getting funded. We have read similar arguments earlier in the blogosphere in some form or the other and this paper actually goes in much more depth. For the sake of discussion we will reiterate some of them

1. Lack of confidence on early stage entrepreneurs.
2. Lack of weak ties network like the one in Silicon Valley.
3. IP creation and protection not clearly defined.
4. Domestic consumption and market not easily identified.
5. Govt. hurdles – redbus founder confirms this sentiment after spending a day in offices to register their company.
6. Poor internet penetration and computer illiteracy.

As per this paper, India has 6.9% of total risk capital invested in seed and early stage ventures, compared to 12.5% in China, 29% in US, 32% in Israel and 39% in UK. What can we do to change this? Is getting into a proven business model the key for Indian startups? What will drive business process innovation? India is a different market and what works elsewhere might not necessarily work in India. Key dynamics are different. We access internet not from schools or homes but from cyber cafes. We do more texting than typing on keyboard. Mobile penetration and growth far exceeds internet and broadband penetration. In our opinion we will need some serious business process innovation to build good companies and this can only be possible with money going into innovative and not yet proven ideas.

Let us know why do you think early stage is not getting funded or if you think otherwise. Read more on early stage investments at iLeher trusted sources powered by Google customized search.

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Announcing iLeher reViews

Written by: Madhur

On Nov 20th, 2006

I’ve been getting a few requests lately for reviewing new startups in the consumer Internet space. Even though iLeher was not started with this aim initially, I figured it would be still valuable for readers to see reviews of startups/companies offering useful/cool services for users. Of course the usual analysis/commentary style posts will be there (thats what I like writing most). So to streamline the review process, I have come up with iLeher reViews. The way it will work is the following:

  1. The owner/promoter of the startup can contact me (madhur at iLeher dot com or use the Review Me link ) for getting their site/service reviewed.
  2. I will send a brief questionnaire, which the owner/promoter of the startup will fill and send it back to me.
  3. The question-answers will be put up on iLeher reViews.
  4. The readers will read these question-answers and vote/comment on these.
  5. On a regular basis, I will pick up an active startup/company, if any, in terms of number of votes and comments and review it (do analysis, point out competition, include suggestions, etc.) and put it up here on iLeher.
  6. I will also include the best comments from the readers in the post. After all user feedback is the most important thing for a consumer Internet company.

So please get in touch with me if you want your site to be reviewed and I will follow up with the questionnaire. Meanwhile, for the readers – the first startup for reView is already up and it’s Onyomo.com – the local search engine. Check it out and put your valuable vote and comments.

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$1.5 million funding for Meravideo – joke or sign of boom?

Written by: Madhur

On Nov 12th, 2006

Introduction
Recently came across this post at Mashable (thanks Vaibhav for point this out to me) that exposes how Meravideo.com is a rip-off of a $300 product from some software company. And if you haven’t read before, they recently claimed to be close to closing a round of funding worth $1.5 million. The interesting thing that I wanted to discuss here is whether this is a joke (how can you launch a company by buying an off the shelf product and get funded!) or a sign of a boom time (when you can convince investors that doing your laundry online is the next ground-breaking innovative idea to be implemented as a web service).

Reality check
I tried to contact Meravideo to get the real scoop, but there has not been a response so far (rather I did get a response that they would love to chat about this, but haven’t heard back since then). Personally, I think India is not really ready for video right now (I might be wrong, but I would not invest my time/money in doing this type of thing considering the Internet and more importantly broadband penetration and the online ad market, more details here). I know that a simple strategy is to build up a large user base and get acquired by a big company, but then again, would any big company be interested in acquiring such a site that is full of mostly sleazy bollywood videos?

What if you still want to play and try your luck?
Now just playing a bit of devil’s advocate: I do not think that this is a joke as Pete Cashmore of Mashable thinks, I just think this is more a sign of boom time. But lets say you ignore all the reality and are convinced that you can build a large monetizable user base in a short time. What would you do in this type of case when you are just trying to copy a web2.0 idea from the US market and do it for Indian markets. I think instead of building the technology from ground-up, you might as well focus on more important aspects such as marketing and trying to attract more users and innovating ways to get users to generate more and more content on your site, compared to others. The main idea is anyways validated in the original concept, the most innovation that is required in Indian Internet (Web2.0) companies I think is how to get users to come to your site and spend maximum time there and generate content for you (for example, I believe Meravideo is going to try revenue-sharing for attracting users to submit videos). So what’s wrong with the approach of taking an existing product and building on top of it? Think about this – what is the barrier to entry for other players in such a venture? Its not the idea, its not the technology (these are copied anyway from a model that has already worked bigtime). But if there is already a player who has strong foothold (in a small market) – thats a real barrier. After all an investor is much less interested in how you build the UI or the technology, and more interested in the fact that you are able to show them that there is a considerable market and you are successful in acquiring a large chunk of it.

Bottomline
Where I am going with this? The point I am trying to make is twofold:

  • If the news is really true, to me this is a sign of boom that such sites are getting funded.
  • If you are trying to catch on to the boom to kind of just try your luck, it may not be a bad idea to start with some thing existing and add features suiting to the targeted demographics and more importantly focusing on trying out new business models and marketing gimmicks to attract users and spend more time on your site. Of course you can do slightly better by not being as blatant and changing the skin a bit so as to not look as conspicuous, for example like ApnaTube. If you look closely, do you really think they are any different?

Exclusive interview with CEO of Guruji.com

Written by: Madhur

On Nov 9th, 2006

I wrote about Guruji.com on the very first day of their press release and then followed up with another post clarifying on what they are doing. My initial response was skeptic as I didn’t quite get what their value proposition was. Local search definitely sounded like an opportunity but that clearly wasn’t their main (or only) focus. In the Indian content search area, Google.co.in already seemed to be doing a good enough job. I am sure some of you would have got similar doubts, but hey, they are backed by Sequoia and generated quite a bit of buzz in the media. I had a chat with Anurag Dod, their CEO and asked a few questions to clarify some of the doubts (Update: added conclusion at the end – due to some technical snag, missed adding this when first posted the article)

What is your biggest value proposition?
We want to be the one stop shop for anyone search anything related to India. Be it India related content or Indian city specific data. “Think India – Think Guruji”. This access to any type of information from one search box will provide a significant value add for the users.

On the web, where do you find the most relevant “India” specific content? Does this mean data from sites hosted in India or sites with .in or .co.in extension or something else?
We have a technology that classifies Indian content as it looks a web pages. Based on this technology we decide if the page is Indian or not (in which case we do not include them in our index). Our web crawl is focused to get only Indian content and the premise is that any good Indian content anywhere will be linked from the initial set that we start with (and this set keeps on changing as our team keeps modifying that). As a result we are able to index the most relevant Indian content from the web with less resources and refresh the data frequently.

How do you differentiate from Google/Yahoo/MSN India search?
One clear difference is that none of them provide local city data. Another thing is that when you search for Indian content on Google.co.in, you get some relevant results on “web search” and some relevant results on “pages from India”. Also you get different and maybe relevant results when you search from Google.com by appending your search with “india” keyword. As a result, users are confused as to what is the best way to search for Indian content and this where Guruji is different. You can search for anything India related from one search box without any confusion.

Don’t you think Google can realize this problem and take actions to fix this confusing experience of searching Indian content?
We definitely cannot discount Google as they are big and smart, but we will have the early mover advantage which will keep users coming back to our site.

How will you start building user base considering that Google already has a strong foothold in search in India?
As we keep on adding more features for India specific searches, there will be more and more reasons for people to switch. Also another major point is that currently the Indian Internet population stands at roughly 30 million and is expected to increase to 100+ million in the coming few years. We plan to go after these new users who are going to come online as well, which is going to be very important for increasing the search share.

Do you plan to support searching for regional language content on the web?
Yes, as the number of Internet users increase there will be more and more regional language content and more users wanting to search for that. We plan to introduce support for searching regional language in the coming few months. This is another area where lot of the other big search engines do not have a presence.

What will be your main business model?
We plan to roll out our own Google Adword’s like sponsored listings program in the next couple of months. One of the advantages for advertisers using our advertising program will be that their ads will get exposure to Indians who are searching for India related content (like “gifts to India”) from outside India as well. This advantage is not there for advertisers using Google.co.in for advertising as people performing Indian related search from outside of India may be using Google.com or their own country’s Google version.

What do you think of competition from other players in local search area?
We realize that there will be more and more competition from local players like Onyomo (local city specific data search) and others. A lot of these startups in local search today lack comprehensiveness. They have good depth but less breadth. Guruji will keep improving web search for Indian content as this is our core focus, but we will also add features like maps and make the city specific data more and more comprehensive to compete in the local search market. Also at Guruji, we have integrated results for web search and local search, so users get all their India specific search results at one place.

How has been the uptake of Guruji.com so far?
We have received a good amount of traffic since launch. It has clearly met our expectations. We have observed a very good number of users coming back to the site after their first visit. We will continue to focus on making our technology better to provide good user experience, which will help in getting more users through word of mouth marketing. We also plan to launch more marketing activities to create buzz for attracting new users.

iLeher Bottomline
I think they have the right ideas, but beating Google in the search game will be a Herculean task, esp. if/when they become serious about search in India. I have discussed quite a bit in the previous posts that getting the most ‘relevant’ Indian content could be tricky. For e.g. when searching for “Taj Mahal” I do want to see article from Wikipedia as a top result, which I do not on Guruji right now, but do on Google (granted it may be in their plan and may take some time for these type of technological issues to be ironed out).

They do have an advantage that market is still in the nascent stages as a result of which relevant, more targeted and comprehensive search results (including local and regional content) coupled with clever marketing (for e.g. deals with local PC manufacturers to make Guruji as homepage, campaigns targeted towards new Internet users) can definitely help them in making some inroads. Also here is an opportunity for players in local search (onyomo, makemyindia, etc.) to be comprehensive and win traffic in the local search vertical to give Guruji a run for their money and become potential candidates for takeovers (by Google/Yahoo/MSN or Guruji itself!)

Related posts:
Guruji.com: Baidu of India?
Guruji.com: Web search or local search?

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India Strategy Series: Experiment with different services and steadily build a loyal user base

Written by: Madhur

On Nov 6th, 2006

I asked a question last week that generated a lot of discussion. In that post, I had concluded that market is hot and there is definitely a need for some of the Web 2.0 services like online social networking joint, India specific news/media sharing etc. Now how to take these needs and turn them to viable business models with the constraints of operating in Indian market (less Internet penetration, small online ad market) is the interesting aspect of it. There are a lot of players and they are applying different strategies to work through these constraints and make their model more appealing than others. I am talking to some of the players in the market and getting their views on the strategy that they are using and why do they think their model will succeed. In this series, I present one strategy in each post as quoted by these players to me. I do not know how well these strategies are going to work, just bringing them to fore to have discussion around them and see where they go.

Strategy: Experiment with slew of services, build organic and loyal traffic over time
Case in point: Better Labs, India
I talked with Vaibhav, the founder and CEO of Better Labs, India. Their strategy for India angle is to launch a slew of useful services targeted towards a particular demographic and build organic traffic. The set of services they offer (termed as india 2.0 by them) are news aggregation from newspapers/blogs, social bookmarking of news/events/links. The problems that they are trying to solve are the following:
1. The user experience of a lot of news sites in India is not very pleasant because of overload of ads, pop-ups etc. With indiagoes, they want to come up with a service that provides a much richer news reading experience on the web.
2. It is very difficult to find good India specific user generated content on the web. With indiamarks, indiaevents and indiahappening, they want to device ways to incentivise people to participate and create great new content or label already existing great content.

None of these are ground breaking ideas and they realize these will not become the next youtube, but they think these are useful services which at least the IT people (the demographic that they are targeting) who have Internet access for a large part of the day care about. What I found interesting is the “experimentation” strategy that they are adopting to try out these services. They do not plan to raise VC money until they hit a critical mass and the reason he quotes for that is once you have VC funding you are under pressure to deliver and get your google analytics numbers ticking up all the time. He further says that once they build a steady organic traffic by rolling out new features and relying mostly on word of mouth marketing, they will be able to create a set of loyal users that will keep coming back to use their other services. Once they reach that level, they may plan to raise money to expand their operations. Of course this strategy can only be applied if you have access to personal funds to sustain during this “build up” time.

One notable company that has adopted this strategy in the past is mouthshut. They probably have the best user generated India specific content (other than Wikipedia maybe) and this has resulted with a sustained effort of over 5 years. They had a bad patch from 2001-04, but now with the market picking up I think they are are in a very good situation for monetizing the content they have and expand their operations. Another company that has adopted this model in the past is Sulekha that has over the last few years (since last dot com bust) built a good user base and has now raised a bunch of money.

If you are an entrepreneur and have adopted a new model for playing in the Indian market, ping me and we can talk about it and I will put it up here for discussion.

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Your feedback ==> New blog features

Written by: Madhur

On Nov 3rd, 2006

Latest News
Over the past few weeks, I got quite some feedback from the readers of iLeher. One of the common ones was that while iLeher carries good analysis type stuff, day to day action/happenings in the industry is not covered. My common reply to this has been that I want this to be more analysis/discussion/detailed oriented blog to foster healthy discussions and create a community to share opinions on interesting stuff that is happening today and where the industry in heading. But recently I came across this neat plugin, using which I can post news links on the side. Look at the “In the News” section on the right hand side of the screen. I will try and regularly link to the latest interesting news in that section. I am not including this section in the feed as I do not want to clutter your feed readers with repetitive news that you may already be getting from other sites (partial list is in the blogroll on the side, will be adding more links there shortly)

Feedback
The usual email method of feedback works (madhur at iLeher dot com), but it is usually not the most convenient one. Please find a “Ping” link on the top bar using which you can send your feedback. Use it for any type of feedback like suggesting interesting ideas, trends, ventures, companies, case studies or for requesting topics you may like to be covered here, or anything else related to the theme of this blog – Internet industry in India.

Custom Search
Google introduced custom search recently and I gave it a shot and found it to be quite useful. I have added a list of carefully selected trusted news sites to this custom search widget (look at the right side bar just below the Subscribe links) for searching news related to Internet industry in India. This comes in handy if you want to quickly look up info or stats on some company or industry.

More of your feedback/ideas/thoughts/suggestions are welcome.

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