Posts filed under Venture capital

QnA with Morpheus Venture Partners

Written by: Madhur

On Nov 3rd, 2008

Morpheus Venture Partners aims to provide mentorship and advice to early stage startups. We recently got a chance to speak with the founders Sameer Guglani and Nandini Hirianniah. Here is the transcript:

How are you different from a typical seed/angel investor?

MVP is a currently only a Business Advisory Firm. We have plans of raising a fund to invest in the companies we involve ourselves with. However, the amount that we will invest is going to be a small component of what MVP has to offer. We will invest 5-10L where as, Seed and Angels look at deals in the range of 50L to 1Cr.
MVP works with companies one step before seed/angel stage, most of our companies will go on to raise their angel/seed round during their engagement with MVP.
We work with companies in very early stage/ idea stage where as angels/seed investors look for some level of maturity in the business in terms of product, customers, revenues, business model etc. We primarily back promising teams with interesting ideas.
MVP also has a strong community that’s getting created as part of MVP is invaluable for young entrepreneurs. Currently we have 11 companies and 35 odd founders/entrepreneurs as part of this community, who share their learning’s, relevant contacts and much more, which forms a support system for each of the MVP companies.

What do you look for in a startup that’s right for mentorship by Morphius?
* A rockstar team, with the right set of skills, a great vision and a lot of passion.
* Are they solving a real problem and will customers pay them for their solution
* Business targeting a large market opportunity which is growing at a rapid pace.
* Scalable business model
* The comfort level between the MVP team and the founders.
* The amount of value MVP can add to the business has to be significant.

Are there any areas of businesses that you specialize in? (example: internet, enterprise, etc.)

MVP is a sector agnostic business advisory firm open to all kind of startups, at the same time we may not the best choice for all startups. Some of the primary selection criteria are:
* The startup has a rockstar team, with the right set of skills, a great vision and a lot of passion.
* Startup is targeting a large market opportunity which is growing at a rapid pace.
* Can the MVP add significant value to the startup to justify the engagement
* Most importantly, there is a lot of comfort level between the MVP team and the founders.
* Currently we have 11 companies in the portfolio some which are B2B, some are B2C and some are both. Around 40% of our companies are creating products for global markets and the rest are only focusing on Indian market.

Current portfolio spans following sectors:
News, Micro finance / finance, Wellness / Preventive Health, Online Content sharing, HR/hiring, Saas / Online collaboration, VOIP, Local search, Food, Web Services
MVP has also built a panel of Subject Matter Experts with varied expertise and experiences, who are available to work with MVP companies either on a one-off basis or for a longer advisory role, with specific timelines/deliverables built in. These are people who are experts from different fields, entrepreneurs, investors, etc. They come with in depth knowledge of their field of expertise and make available 3-4 hrs every month for the MVP companies.

Do you mind sharing the names of a few companies that you are currently working with?

Following are some of the names from our portfolio companies:
Instablogs (www.instablogs.com )
Commonfloor (www.commonfloor.com)
Foodathome (www.foodathome.in )
moblf (www.moblf.com)
Call Graph (www.callgraph.in)
Crederity (www.crederity.com)
Deskaway (www.deskaway.com)
Dhanax (www.dhanax.com)
Fachak (www.fachak.com)
LifeMojo (www.lifemojo.com)
SutraHR (www.sutrahr.com / www.sutrajobs.com)

6% equity for zero money and 6 months of formal guidance, isn’t that steep?

As a response to this question, I’d like to quote Paul Graham’s views about the quantum of the equity. Although we are not investing any money at this point in time like Ycombinator, but the same reasoning applies in our case too. Below is a link to the interview in reference and I have pasted the relevant section of the interview down here:
http://paulgraham.com/frinterview.html

Question asked to PG: I read that when you call Y Combinator winners, the founders have only five minutes to accept. (”If people turn us down,” he says, “as far as we’re concerned they’ve failed an IQ test.”) Have startups turned you down? Are there any that have turned Y Combinator down and still gone on to succeed with a liquidity event?

Relevant part of PG’s response: The “IQ test” quote refers not to how fast they have to decide, but the amount of equity we usually ask for. In the median case it’s 6%. If we take 6%, we have to improve a startup’s outcome by 6.4% for them to end up net ahead. That’s a ridiculously low bar. So the IQ test is whether they grasp that.

How do you measure the progress of startups working with you? What metrics do you use?
Since every startup is different from each other, we track each one of them separately with different set of metrics/KPIS. At the same time we use common frameworks to ensure scalability. MVP has created an agile start-up framework, which includes
* Weekly meetings, Monthly meetings
* Daily 10 minute calls
* Business goals documents (monthly/quarterly)
* KPIs
We work with each startup to create a set of KPIs (Key performance Indicators) which make sense for their business and these are tracked on weekly and monthly meetings both by us and the founders.
Here are some of the important metrics that are tracked across our portfolio:
* Unique visitors
* Time spent on the website
* VAC (Visitor acquisition Cost) – applies to online visitors
* LAC (Lead acquisition Cost) – applies to offline leads
* TAC (trial customer acquisition Cost) - only applies to SAAS type services where one acquired trial customers and later coverts into paid ones
* CAC (customer acquisition cost)
* ARPU (Average Revenue per user)
* Customer lifetime
* Customer lifetime growth rate
* Monthly expenses
* Monthly revenues
* Monthly Cash flow
* Cash in Bank
* How many months of cash is available
* Product Activity (different for different startups)

The progress is measured based on two criteria:
* Comparing planned Business goals and the achievement done
* Tracking the movement of KPIs again against what was planned as part of business goals

Most of our portfolio companies use the online project management solution from Deskaway (also MVP company) to manage their projects and collaboration. Google docs is also used heavily for document sharing and collaboration on the documents. Callgraph (another of MVP companies) is used to record and share daily/weekly and scheduled discussions that happen over skype.

How is the current market affecting startups in India? Do you see it as an opportunity or death of startups due to lack of funding?
It’s an absolute opportunity for startups and situations like this always separate wheat from the chaff. There will be a set of “Not so good” startups that may panic and succumb to an early death. At the same time the good startups with good teams will figure ways to stick it out, last thru the current market scenario and come out STRONGER on the other side.
Below are some of the measures startups should implement:
* Closely re-examine all costs and eliminate costs which are not needed or which are optional. Also squeeze costs in necessary areas as well.
* Think harder before making any significant cash investment/commitment
* Increase priority of revenue generation activities and initiatives
* Get to positive cash flow scenario asap
* Come up with a product / service which can allow the startup to take advantage of the current market conditions. A good product which can allow people to save money, which is what most customers/enterprises will look to do, will have an good potential to succeed.

Since startups will have hard time to get money, do you think your business will get affected due to current market conditions?
We don’t think startups will stop happening, India is seeing a good momentum of quality startups and we expect the same to continue. This is one of the best times to work with early stage startups as the valuations are favorable and the weaker startups are automatically disappearing, leaving behind quality startups.
Also, the VCs are saying they intend to continue doing deals but they will look harder and deeper and hence take more time on each deal. So the startups today need to make more progress than before in order to secure funding and will need to make the same money last longer, reach cash flow positive and figure out ways to do stuff without spending money. This presents MVP with a good market opportunity.

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India Internet - status check

Written by: Madhur

On Jul 17th, 2007

comScore recently came out with a report on the Indian Internet industry. Here are some of my observations and thoughts:

Search engines - One of the popular category of sites. This category pretty much reflects the global trends in terms of the popularity of search engines. (Google, Yahoo, Microsoft, Ask). The interesting thing to note here is that there is no Indian company in the list. Given the variety of different cultures and languages in India, one might think local players might have an edge if they really tried. Currently though, most of the Internet population is English, but this is certainly going to change as the penetration increases. If Chinese search engine Baidu is anything to go by, there is certainly room for a local player in India too. And hey, its not like no one is trying. But frankly, other than Guruji, no one seems to be anywhere close to the standards of the big global players. We have talked about Guruji here and here, let’s see how they progress in the coming years.

Portal/Services - A popular category from the Web 1.0 era. The sites in this category either have day-to-day utility or entertainment value. Lot of early local players here from the 90’s, yet only a few established ones. Google, Yahoo, MSN are again the big players, although the good news here is that there are at least a handful local players in the sector.
news/entertainment/communication - rediff, timesnetwork and sify - decent content but poor user experience (broken links, popup ads, flashy ads)
classifieds - This is one category which has achieved the best success rate as far as the local players are concerned. One of the reasons is the demographics that is online in India and the fact that these players jumped on to the opportunity quite early in the game and more importantly stuck it out at the time of dotcome burst. Naukri, Shaadi, Bharatmatrimony, etc. are a few examples. A few promising sites in this space - mapmyindia (maps and directions), onyomo (local yellow page listings)

Social networking / web2.0 - A rapidly growing category. Very few decent Indian sites. Mostly dominated by the likes of Orkut, Facebook, Youtube etc. Again this is a category where one would think a local player can gain an edge as they would presumably understand the sensibilities of the youth better. Like I mentioned above, once English ceases to remain the predominant language on the web, more possibilities will open up. A few promising startups in this space - Minglebox, burrp.

Ecommerce - My personal favorite but not a popular category in India yet. We really need to catch up here if Internet has to sustain. The reason is simple - the most popular business model on the Internet is advertisments and for ads you need companies who are ready to advertise in the first place. Yes offline companies do want to advertise online, but there is only so much they will do. Real spending will come only from ecommerce players as they can directly affect the sales/branding using this form of advertising. We are seeing growth in this category. Check out some good articles on this space at Darpan Munjal’s blog. Travel is definitely a hot sector which already has a bunch of players (makemytrip, yatra, travelguru, cleartrip etc.) followed by entertainment (seventymm). The next big sector is retail which is currently dominated by Ebay India, but definitely expect to see some action here. IndiaPlaza.in and Futurebazaar are upcoming players. Remains to be seen who will emerge out as the Amazon of India (how about Amazon India itself?)

While on this topic, you might want to check out an interesting discussion here about why Indian companies are lagging behind global players (as opposed to Chinese, Korean, European markets). You can read the complete article for details, but the summary is that dominance of English language and poor user experience of Indian sites are the two main reasons.

Conclusion
India Internet has come a long way just in the last 3-4 years, but I think we are still in early stages. It might still take some time to reach the maturity level of more developed markets. To me, it looks more like the pre-bubble period (’97-98) of the US market. A lot of investment is happening, user base is increasing, new companies are coming up - things seem to be moving in the right direction. What are your thoughts?

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Chat with the founder and CEO of Seventymm

Written by: Madhur

On Apr 22nd, 2007

[Update: Seventymm has given a special discount code for the readers of iLeher. See how to avail the offer at the end of the post]

Bollywood is big. It produces more movies than Hollywood. It sells more tickets worldwide compared to Hollywood. It has more more than double the annual growth rate compared to Hollywood. It was only a matter time that someone took notice of this and did an Indian version of Netflix, the online DVD rental service. Well as it turns out, several did. Seventymm is one of the largest and most VC funded players in this space. We profiled another company Madhouse.in few months back on iLeher. There are several others trying to make a mark in this seemingly lucrative space. And just when you thought the market is getting saturated, the Indian behemoth Reliance announced its entry in this space with BigFlicks.com. Did someone say bubble? Well we’ll see who (perhaps there is room for more than one?) emerges out as the winner but the activity in this space is peaking because of combination of several factors including growth in Internet penetration and usage, growth in the installed base of DVD players and burgeoning venture funding scene in India.

We talked with Seventymm on various aspects of their business including market stats, competition and what we expect to see from them in future. Here is what Raghav Kher, the founder and CEO of Seventymm had to say. Also they were kind enough to give our readers a special discount code to try out their service for free. Find the code at the bottom of the post.

1. Seventymm is obviously the most well funded company and has the largest footprint in India. Do you mind giving us some quick stats on number of subscribers, number of DVD’s it has in the collection, current market share etc.?

Seventymm has a library of over 15,000 films in Hindi, English and 12 other regional languages like Malayalam, Tamil, Kannada, Telegu, Bengali, Marathi, Bhojpuri, Rajasthani, Assamese, Oriya, Punjabi and Gujrati. The home video market in India is still skewed towards VCDs and so a large part of our inventory are VCDs. Approximately 30% of the titles are available in the DVD format. Currently we have a subscriber base of over 16,000 subscribers across Bangalore, Delhi & Mumbai. Our target is to reach 50,000 members by the end of 2007 across the top 10 cities in India. This has so far been a largely unorganized market and we are the largest player in the organized sector, both in terms of content and number of members. We are no doubt the market leaders by far.

2. We have spoken to Madhouse and other DVD rental companies that have plans of making the service available via phone, local shops, etc. What is Seventymm doing to address the needs of customers who do not have access to Internet?

We have tried to make the online process very simple, as simple as using e-mail. However those who are not familiar with the internet have the option of ordering DVDs either by calling our customer care even by sending a sms.

3. There are these often quoted issues around logistics of delivery, cheaper rates at local shops due to piracy etc. How does Seventymm deal with this?

Seventymm has set-up an efficient logistics infrastructure to support the service offering. We have an army of 125 delivery boys across to support the demand. Consumers are getting sensitized to the issue of piracy; one of the key reasons for accessing pirated copies was the lack of a credible option. However now they have a choice in players like Seventymm who are not only credible but also capable of catering to the needs of consumers in terms of choice and convenience.

4. Seventymm has this referral program where you get 1/6th of your rent off for every new customer you bring. How useful has been the referral program so far? Is this going to continue forever?

In India movies are a religion and people not only love to watch movies but also talk about them. Our referral program provides an opportunity to our members to talk about a service like ours to their friends and relatives. This not only helps in brand proliferation but also sign ups. Our referral program has been very useful in meeting these objectives and we wish to continue the same as a brand strategy.

5. Any potential threats from Moser Baer (they recently announced selling Hindi DVD’s at less than Rs. 40, which is less than the cost of the rental)

The entry of Moser Baer and low priced CDs & DVDs is a positive sign as the movie consumption will grow and so will the overall market for home video. However we do not perceive it as a threat at all because consumers may not like to buy all content even if they come very cheap. Consumers still buy content which they want to treasure or share, but predominantly rent.

6. What innovations, new services are we going to see in the future from Seventymm?
We will be present in 10 cities across India very shortly. In the next few years the speed of broadband will go up to one megabit per second. Once that happens we will start distributing movies digitally.

7. Anything else you would like to add for our readers?
We would like to welcome your associates and readers to try our service and have a special offer for them. We wish to discuss this with the concerned person in your team to execute the offer at the earliest. Please find the discount code below.

Read the rest of this entry »

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Internet and Mobile Connect

Written by: Neeraj

On Mar 30th, 2007

Got a chance to attend the ‘internet and mobile connect’ in Mumbai — the panel and audience stirred some interesting thoughts and I would like to throw them open to the audience of ileher:

Is the boom in Indian internet space real or just hype?

There was a consensus among the panel that even though internet population in India is rising sharply, the monetization from this traffic has yet to happen to its full potential. So, the boom is growth based but not profitability based.

Why is the reach of main Indian portals - rediff.com, indiatimes.com dropping over last few months? (Reach on Alexa.com)

Alexa’s system of ranking can be debated but given what it does, the reach should not fall.

Rediff Alexa
Will India see new Internet and Mobile services coming from Media houses such as the Times Group / TV18 or standalone players will play a more important role?

The panel’s view was that media houses are in an enviable position to cross sell and up sell their new services to their existing customer base. But at the same time, smaller outfits can be disruptive and a lot faster to hit the market.

Looking at the way some of the successful internet companies such as shaadi.com and naukri.com are setting up offline distribution channels, can we safely say that it is not possible to succeed in Indian internet space by being purely ‘online’?

Will the products and services based on model arbitrage work in India?
Yes and No. To put things in perspective, the panel pointed out that the Match.com model has not quite worked in India. But, matrimonial services such as shaadi.com and Bharatmatrimony are doing well. So, model arbitrage concepts have to be implemented keeping in mind the Indian cultural and demographical nuances.

Overall, a very well conducted session. Kudos to the team at Venture Intelligence for bringing VCs and entrepreneurs together on the same platform.

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Making of Naukri.com

Written by: Madhur

On Jan 31st, 2007

Rediff has this detailed interview with the CEO of Info Edge Sajeev Bikhchandani, where he talks about about the eventful journey of Naukri.com. Its a typical story how legends are made - clear vision, immaculate execution, unperturbed perseverance and a bit of luck - leading his way from rags to riches, garage to IPO (the first for an Indian Internet company in Indian markets)

Key takeaways from the interview:

  1. Idea: Saw a real opportunity from his own experience. Notice at first his idea was just to aggregate all the job listings - computer and later the Internet just happened to be the medium to realize the idea.
  2. Funding at the right time: Like he says, this may be just his luck, but he raised money right before the bust happened, as a result of which, he used the money much more frugally compared to what a lot of other companies were doing at the time.
  3. Early mover: Was one of the first Internet companies that targeted Indians in India, more importantly for something that people cared about, not just to copy one of the ideas straight from the West and hope to get lucky.
  4. Persistence: Waited for 10+ years before he drew any salary from the company. That requires quite a bit of determination. But like he says, doing what you really want to (with some alternate source of money to make ends meet) really keeps you going.
  5. Risk: It’s interesting - he makes conflicting statements at two different places (unless I am misunderstanding something) in the interview. At one place he says real risk is often times less than that perceived risk and then the converse of it at another place. But the bottom line is that you have to evaluate your risks before making the jump and over time you will manage to find your cushions and buffers.

I will say though that Naukri.com being the poster child of Indian Internet success, could do with some makeover in the UI. The overall impression the sites gives on the first look is as if its 5 years behind the times. If nothing else, stop those annoying popups and remove those flashing gifs from bulletin board on either side of the page.

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Online DVD Rental: Behind the curtains with Madhouse

Written by: Vivek Garg

On Jan 9th, 2007

[Update: Madhouse has given a special discount code for our readers. Details at the end of the post]

A lot has been written about online DVD rental business in India and Madhouse being one of the earliest player in the sector, it’s getting buzz everywhere. Seventymm is the poster child of the sector with a funding of $7 million dollars. Madhouse recently closed an angel round of $228000 and looking for more. We sat down with Nandini Hirianniah and Ankur Agrawal, the cofounders of Madhouse to learn the tricks of the trade. Instead of writing directly about Madhouse which already has been discussed several times, we will try to learn the challenges, business process and state of the sector taking Madhouse as our case study.

Start of DVD rental business in India: Most widespread means of watching movies at home is either VCDs or tapes. Consumer appetite for free and cheap content and lack of attention to quality makes it hard to get good quality DVD movies at local rental stores. Also limited shelf space makes it hard to cater to the consumer looking outside of popular bollywood flicks. Success of players like Netflix in USA makes it a known business model. These are precisely the reasons why Madhouse entered this business and I won’t be surprised if others did for the same reason too. Madhouse started this service in May 2005 and they supported this business without funding for almost 1.5 year.

Business Goal: Since movie rental is a subscription business, growth in number of subscribers in one area + growth in numbers of areas served would bring success provided the subscriber acquisition cost (SAC) + cost of keeping the subscriber (churn) + cost of serving the subscriber (COGS) < revenue generated per subscriber (ARPU). This is a greatly simplified picture but I like looking at it with this basic goal. Madhouse wouldn’t give us these numbers but they did mention that they are keeping an eye on their churn. They could keep it constant and even managed to reduce it over time after learning from the customer feedback and by introducing new schemes. I think there is a real lesson here. Understand why your customers are leaving you and act on it.

VCs waiting on the sidelines: We have said this before in earlier post that VCs in India are sitting at the sidelines with their money waiting for the traction in various markets. Madhouse also gave us a similar picture. According to them VCs are going to wait to see how they use their angel money. Some of the VCs think that Seventymm has already got a huge amount of money and this is a winner takes all market. Madhouse also told us that they are looking to increase the depth in the existing markets they serve instead of spreading too thin by expanding immediately. This will mean that they have to go beyond the early adopters of DVD rental business. I think this is a really good way to show to a VC that they are capable of gaining majority share but this also means that they lose the early movers advantage in other areas. What would you do in this case? Madhouse also suggested that VCs typically want to invest into businesses with 10X returns in 5-7 years and some of them don’t see the DVD rental as one. Other concerns raised were logistics and piracy and investors are still skeptical about the licensing and revenue deals with production houses.

Crossing the chasm: Everett Rogers theorized that innovations would spread through society in an S curve, as the early adopters select the technology first, followed by the majority, until a technology or innovation is common. We can think of the current DVD rental business at early adopter stage and it is yet to be seen if we can reach majority. According to Moore, the marketer should focus on one group of customers at a time, using each group as a base for marketing to the next group. The most difficult step is making the transition between visionaries (early adopters) and pragmatists (early majority). This is the chasm that he refers to and it will be interesting to see how it applies in this scenario. Madhouse agreed that most of their customers are early adopters and they are not doing any mass marketing as yet.

Customer, Customer, Customer: Educating customers is tough. Madhouse is not trying to educate customers rather they are trying to gobble up as many customers as possible before they hit the chasm. Their existing markets are Delhi and Chandigarh and they are taking these markets as good learning experience. They have learnt about the consumer habits about watching their movies as soon as they get it. They think 1 on 1 communication works best instead of mass advertising. They cannot stress enough about the quality of movies but they experience tough time explaining to average Joe why DVDs are better than VCDs. Madhouse says it is too soon to say what percentage of customers is with which company. In fact they are working together with some of their competitors to establish this business in the minds of people. When asked about their biggest challenge, Madhouse rightly noted that it is acquiring customers.

Moat and Barrier to entry: What are the differentiating factors for a DVD rental business? What would prevent your competitor from stealing your customers?
-I think exclusive licensing or innovative licensing methods with the publishers and production houses are certainly one of them. Madhouse licensing structure with various publishers includes flat payment per title for unlimited rental for the entire year. They also mention free licensing if they buy the DVD. To reduce this cost they are also thinking about revenue sharing deals. Primary goal here is to reduce capital cost with increased availability of titles.
-Low cost and a large scale distribution network. This can become a true moat once companies go national. Madhouse is trying to build their own.
-Technology for online recommendation and title queuing algorithm. Getting this system right is very important. Madhouse has tied up with NetKode, the company that manages technology for Hollywoodclicks.com, biggest DVD retailer in Singapore.
-Offline presence: madhouse is trying to position itself as movie rental service in their users mind instead of web company. This is why they put emphasis on interacting one to one with their customers. They will also try to achieve this by increasing their offline presence. I would like to remind our readers that one of our predictions for 2007 was that DVD rental companies will come up with offline presence and Madhouse is the first company that is doing this. They have introduced a concept of Movie point. These are existing retail stores that will agree to become DVD return outlets. Slowly they can expand these channels as pickup points. This will create indirect channels at reduced or fixed SAC targeting customers who are not going online. This is important as reverse logistic (returning DVDs) makes a big chunk of operating cost for Madhouse.

Milking the cow: Kishore Biyani of Pantaloon recently said “The money is in the peripheral activities; it’s never in the retail itself. It’s the power of retail that gets you the money; it’s never the transaction that gets you the money.” We think that once a transaction based system is set up, one can do different things to milk their setup. What can DVD rental business do? Some of the ideas we could think of
-Use DVD packaging/labels for ad distribution
-Sell merchandising related to the movies being rented like posters, shirts and coffee mugs.
-Outsource their distribution network for delivering other internet purchases.
Can you give us more ideas how Madhouse can make money?

Competition: We did an earlier post on various ways of distributing media and how online streaming could be a potential disruption to DVD rental. I would like to add an interesting quote on that. “if you carry a 4.7-gigabyte DVD down a ten-meter-long hallway at one meter per second, you’ve effectively “transmitted” the data on that disc at more than 3,700 megabits per second–a speed home networks won’t be reaching for a long time.”

Madhouse team has agreed to answer any direct questions that you have for them about their business. Feel free to leave them as a comment to this post.

[Update] They also have a special promotion for our readers. Subscribe to any of the Madhouse subscription plans and get a 10% discount when you use the promotion code “ileher”. Have fun renting.

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where is the investment dollar going?

Written by: Vivek Garg

On Dec 9th, 2006

I discussed “no money for early stage” earlier and I said there is not enough money flowing into early stage investment. I also cited a couple of reports that corroborated my thoughts. But after that post, I found following comment on mercury news.

In India, VCs have made 53 early-stage investments in start-ups worth $355 million during the first nine months of 2006. That’s still nearly twice as much activity in that period than the two previous years combined, according to Venture Intelligence, a Chennai research service focused on private equity and venture capital activity in India” .

This statement directly contradicts where I was going with my entire theory as it seems that there is a lot of dough flowing into the market. So I wanted to look into this in more detail. After talking to some people, I got mixed comments and I thought it would be best to contact Arun Natrajan of Venture Intelligence. According to Arun, Over 90% of early-stage investments went into IT & ITES companies. Among sectors, Online Services, Mobile VAS and BPO (high value and vertically focused) companies are attracting the most interest.

Top 10 companies in terms of amount raised are Travelguru, PharmARC, 24X7 Learning, Mauj Telecom, Applabs, Bubblemotion, Newgen Imaging, Secova, Billdesk, Seventymm. I am trying to compile a list of investment funds to understand what really constitutes early stage for a startup. To start with, I created this table in our resources section, from various sources to give us a start on different firms and their portfolios. I don’t see a lot of online services companies here. Where is the money going? I want to investigate various portfolios from seed fund, early stage and later stage to understand where money is flowing and which companies are making best use of it. Let us know if you know of any such funds that are not covered in the list.

In comments to the post “no money for early stage“, an interesting question was raised. How much money is good enough to bootstrap a web2.0 startup in India and how much money is required for subsequent stages? It seems there is not one good answer. $355 million in 53 startup means ~$6 million each but Arun says this amount varies hugely by sector and the inclination/ability of the company to bootstrap. Travelguru has taken in $25 million, while Seventymm has attracted $8 million. The number is also driven by the VC industry’s economics: given their growing fund sizes, they can’t be bothered to deploy anything less than $2 million per investment. Santosh from Sukshma.net argued for somewhere like $500,000 to bootstrap which looks more realistic to me personally. All this makes the line between seed, early and later stage funding blurry to me. I think the most essential is bootstrapping and with low startup costs for internet companies, a lot of people are turning to self/angel funding instead of going to VCs. Like onyomo and redbus founders told us that VCs are waiting on sidelines for traction. And they will get in sometime after early stage (midstage anyone?). Once their concept is proven it is the series of rounds (we can call it early or later), that will make or break the companies in longer run. Collecting more data will shed some more light on sector and willingness of VCs to participate in these rounds.

As always, your comments are most welcome. Also, read more on seed, early and later stage from our trusted sources powered by Google custom search which I use extensively for my own research.

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Silicon Valley in India?

Written by: Madhur

On Dec 4th, 2006

Mercury News is running this special series on India’s rise as a technological powerhouse, with a lot of Silicon Valley entrepreneurs returning to India as Venture Capitalists. Some of the striking points from the article:

“It took the valley 30, 35 years to get where we are today”, observed Ash Lilani, head of Silicon Valley Bank Global, which has an office in Bangalore and assists VCs looking for overseas investments. “We are trying to replicate that in India in two years”.
-Not sure what is the magic formula here!

In India, VCs have made 53 early-stage investments in start-ups worth $355 million during the first nine months of 2006. That’s still nearly twice as much activity in that period than the two previous years combined, according to Venture Intelligence, a Chennai research service focused on private equity and venture capital activity in India.
-We are trying to find out how many of these are related to consumer Internet industry, will report back here when we get the details.

Evalueserve, a Saratoga-based market research firm, estimates that more than 40 India funds have been raised, or are being created, by U.S. VCs. Silicon Valley Bank, though, figures the number to be closer to 24, with about $1 billion flowing into start-ups during the next few years. Either way, investors are now sensing India’s economic ascension is arriving.

-You can read more details here.

The report also outlines some of the risks of a tech bubble. Some more points include the lack of labor laws, the fact that judicial system moves slowly and the fact that there is no concept of preferred stocks.
-We had covered some of the concerns here.

In the end, the article talks about some of the rural possibilities coming out of entrepreneurial activity. For e.g. a Hyderabad based CoOptions Technologies.

Also they have compiled a list of VC’s along with their portfolio companies in India and a good slide show here.

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