Upcoming Event: Talkback with Top Tech VCs & Andrea Chang, LA Times

invite-pre
Inventus VCs Manu Rekhi and John Dougery will be speaking during an upcoming live webinar with moderator Andrea Chang of the LA Times, about global entrepreneurship and funding. They’ll be on-camera, taking written questions from viewers in roundtable fashion. Topics:

  • The current and future of the tech startup investment landscape
  • Investment tips for entrepreneurs
  • Top startups to watch out for in 2015
  • The rise of venture capital in India

The event takes place on Thursday, March 12, 2015 at 4PM PT. If interested in attending, please RSVP directly here: http://bit.ly/TechVCTalkback

In Search of The Elusive Billion

By Sanghamitra Manda for Fortune India

A pioneer startup support programme is aiming to take four Indian firms to the Unicorn Club.

Bangalore-based mobile marketing company ZipDial (known for its offerings that don’t depend on expensive data connections) ensured that Indian startups began the new year on a high. On Jan. 20, it became Twitter’s first Indian acquisition. The deal, estimated to be valued between $30 million and $40 million (Rs 190 crore and Rs 250 crore), will enable the microblogging site to grow its user base in emerging markets, where smartphone and Internet penetration is low.

The acquisition marks another chapter in the nascent comingof-age story of Indian startups on the global stage. Only last year, Facebook acquired Little Eye Labs (it develops performance analysis and monitoring tools for Android apps), Google bought cybersecurity firm Impermium, and Yahoo snapped up Bookpad, in the same space as Google Docs and Crocodoc.

While such deals validate the quality of Indian tech startups, they are nowhere close to commanding the fairy-tale valuations of, say, WhatsApp or Snapchat. Even when Indian firms have managed to break into the Unicorn Club (billion-dollar valuation triggered by venture capital funding before an IPO), they have typically been confined to the e-commerce or consumer tech space: The Wall Street Journal lists four Indian companies on its Unicorn list, led by usual suspects Flipkart ($10 billion), Snapdeal ($2 billion), and Olacabs ($1 billion), with mobile advertising company InMobi ($1 billion) the only businessto-business (B2B) or enterprisetechnology player.

That skew could soon end as a handful of Indian B2B startups prepares to expand in the U.S. market. The road map has been laid by TiE Silicon Valley (TiE SV, the Valley chapter of The Indus Entrepreneurs, a global not-for-profit organisation that nurtures startups) in partnership with the Indian Angel Network (IAN). Their programme, called Billion Dollar Babies (B$B), kicked off in January, and the first class making the cut includes Seclore, Sokrati, Vinculum, and Druva—all of which consider the U.S. a strategic market. They were chosen based on traction at home, track record of having done business abroad, and venture funding till date (see table).

B$B is the first institutionalised effort to handhold young Indian companies in the U.S. So far, the biggest hurdles most of them have faced are cultural differences and difficulty in nailing the productmarket fit. B$B will focus on those areas, says Venktesh Shukla, president of TiE SV. It will help the companies get a soft landing by connecting them with mentors/ advisors, potential customers, and venture capitalists. To build familiarity with the Valley culture, one co-founder from each startup will be stationed in the U.S. till the programme concludes. Success will be measured by revenue growth rate, and early achievement will be assessed by engagement with U.S. customers, clear demonstration of productmarket fit, and the ability to attract and hire talent.

VALERIE ROZYCKI Wagoner, founder and CEO of ZipDial, believes the overseas thrust is timely. While scaling up startups remains an inexact science, the presence of a virtuous cycle driven by two complementary factors—a large addressable market and the availability of funding to support growth—is considered key. E-commerce ventures like Flipkart and Snapdeal have drawn sustenance from this cycle. But for B2B companies, the domestic market alone cannot support exponential growth. “They must go global,” says Wagoner.

Lofty valuations also require generous VC funding. “You need VC money to outrun the competition and acquire market share,” says Wagoner. “That could be difficult to achieve at home.” Wagoner says Indian consumers are not connected enough to guarantee viral growth without user adoption and serious investment in marketing. “[Scaling up] requires big spend, but only a few investors will fund private companies in India,” she adds.

The U.S. market is ideal as sentiment around startups is booming there after a lull following the dotcom bust and the 2008 crisis. According to the National Venture Capital Association and PricewaterhouseCoopers, venture capitalists put as much as $48.3 billion into U.S. startups in 2014—a record of sorts since 2000, when investors poured $105 billion into closely held companies.

As a result, valuations are skyrocketing across Silicon Valley. For instance, mobiledriven ride-sharing service Uber more than doubled its billing in 2014, ending the year with a valuation of $41.2 billion. Data storage company Box went public in January and its market capitalisation has since surged to $2.7 billion, about 12% higher than the valuation at which investors TPG Growth and Coatue Management bought into the company last July.

Several experts feel the Valley is in a bubble, but the easy-money environment is ideal for startups from India, where funding remains relatively anaemic. A recent study by Nasscom and management consulting firm Zinnov found that software product startups have received funding worth $2.3 billion in India since 2010.

Saurabh Srivastava, India co-chair of B$B, stresses the importance of timing. “Ten years ago, this exercise would have been too early, as the services sector held sway at the time,” says the IT entrepreneur-turned-VC. (Srivastava is co-founder of IAN, the Delhi-NCR chapter of TiE, and Nasscom, the IT industry body.) But the ecosystem has matured and nearly 90% of the startups have moved away from that segment, he says.

“Indian companies that can leverage their skills to develop products for the U.S. are the [real] value creators,” says cloud computing and information security consultant L.S. Subramanian, also the founder of Mumbai-based management consulting firm NISE. “Infosys, HCL, Wipro, and TCS demonstrated this in the first wave of the ICT revolution. Indian startups must adopt the same approach if they want to grow fast and raise big money,” he adds.

It helps that the chosen four are no rookies and can plug into the existing ecosystem of U.S.- facing Indian companies. “[Some] companies have been selling to business customers in the U.S. for more than a decade, and that knowledge will be extremely useful now,” says Manu Rekhi, partner at Inventus Capital Partners, a crossborder VC firm and part of B$B. To add muscle to the programme, Rekhi has reached out to peers at Accel Partners and Helion Venture Partners. Interestingly, all three VC firms are invested in one startup or the other chosen for B$B. If these firms manage to reach $1 billion market value with effective handholding from their investors, it will not only ensure good exits but may also kick off a strategic trend leading to better success rates for Indian startups and, consequently, more funding from global investors.

MEANWHILE, the billiondollar goal has drawn its share of sniggers. “Even in India, big corporate houses or institutional clients are not convinced that home-grown startups can churn out global-standard products,” says a Delhi-based education entrepreneur who didn’t wish to be named. “VCs are only eager to find a safe haven to park their money. Without big customers and big funding, valuations of these companies may dwindle.”

Co-chair B.V. Jagadeesh says VC sentiment is often affected by the lack of a strong exit market, especially for product/ tech startups, but the scenario is changing. “Indian companies just need to invest enough time to build great products—they shouldn’t be in a hurry to exit.”

Asked whether Indian startups have the patience to hold on and grow in a mature market like the U.S., most startup founders refused to comment. Alok Kejriwal, the founder of Games2win who has already Go global if you want to accelerate your valuation. You need VC money to outrun the competition, but only a few investors will fund private companies in India. ZipDial Valerie Wagoner, founder and CEO What do Indian B2B startups need to break into the Unicorn Club? logged two successful exits, feels there’s no right or wrong time to exit. “It’s almost like asking ‘What’s the right age to get married?’ No one knows! What matters is being there [when opportunity strikes] and not want to time anything. Leave that to destiny and market forces,” he says.

Here’s an example that’s fast becoming a case study on the futility of trying to time the market. Phanindra Sama, co-founder and former CEO of bus-ticket aggregator redBus, sold the company to the ibiboGroup—the India arm of South African media conglomerate Naspers—for a reported $101 million. But the sale was described by many as “too early”. (Fortune India contacted Sama via e-mail but got no response.)

Sramana Mitra, a Valley-based strategy consultant and founder of virtual incubator 1M/1M, drives home the real pain points in the redBus case. VCs today are interested only in scale and growth rate, she says. To get a billiondollar valuation, a startup has to tick both these boxes. “redBus raised around $10 million in venture capital and was doing around $10 million in revenue seven years into its lifespan. But it wasn’t growing fast enough, and the VCs ran out of patience. It wouldn’t have achieved a $1 billion valuation in a long time because of its slow growth rate,” Mitra argues. She adds that startups like Druva have a far better chance of achieving the mark as they are growing revenue at a faster clip.

As of now, B$B has not announced a time frame to assess the first class, adding to the scepticism. But Rekhi says TiE SV will invest as much time as it takes to make an impact. “Our goal is to bring out the full potential of Indian entrepreneurs,” he says. “If Israel and China can do it, why can’t India?”

It’s a feast or famine situation in the Indian start-up scene

I recall watching The Truth About Cats and Dogs in the late 90s. The plot revolved around a plain-looking radio show host, Abby (played by Janeane Garofalo), and her attractive friend Noelle (Uma Thurman). The self-doubt about her appearance makes Abby send Noelle, pretending to be Abby, on a blind date with a caller to Abby’s show.

While the twists and turns in the movie were largely predictable, Abby’s insecurities, and their causes, stayed with me all these years. I’m reminded of that plot by events that have unfolded in the Indian start-up scene lately.

It has turned out to be a feast or famine situation. On the one hand, we have a set of businesses that are able to raise gazillion dollars every few months—at progressively higher valuations.
One hears, and is witness to, these scaled and sought-after businesses being offered valuations that frequently double from a prior round just a few months earlier.
The money raised, as it happens, is twice as well. New hedge funds are being attracted to the India story every day. But this piece is not about the businesses that have seemingly arrived; enough newsprint has been devoted to that already. It is about the impact that gush of money has on the remaining entrepreneurs.
One sees good companies, built painstakingly over the years, finding it as hard as earlier to raise their next round of financing.
To us, the root cause seems that these businesses are not in sought-after sectors such as e-commerce, mobile or Internet.
With a few notable exceptions, this would be true of most businesses that serve other businesses (B2B) and some non-sexy (for whatever reason) customer-facing (B2C) enterprises. There are many such entrepreneurs we meet as part of our daily beat. This quite naturally leads to self-doubt in the form of: “What more do I need to do?”; “Why a different set of standards for us?”; “How come the deep technology solution I have built counts for so little?”; “Why is capital efficiency important just for us?”, and so on.
It is heartbreaking to try and rationalize this chasm to the passionate, hard-working entrepreneurs running these companies. In other words, the Indian start-up ecosystem’s very own 1%-99% dilemma.
To the entrepreneurs on the 99% side of the divide I will point to the old running adage—run your own race. To continue that analogy, most of these are at the 10km mark, or less, in a marathon. There’s a long way to go, and initial bursts of speed (even rocket speed, no pun intended) count for little. But it is worthwhile to harbour no doubt that they will be rewarded if they keep at it—the Gita, anyone?
To the 1%, they hardly need my advice. Some of the new enterprises more than deserve to be there. Humility is a great virtue. It’s best to be well-prepared—the music will inevitably stop.
As for my fellow venture capitalists, and not-so-fellow hedgies, an earnest request to look beyond the obvious. The next winners are as likely, if not more, to emerge from the 99%. Robert Frost’s “…took the one less travelled by..” comes to mind.
I will readily acknowledge that there is a dedicated cache of B2B investors; it’s just that in a beauty-lies-in-the-eye-of-the-beholder world, it helps to have more beholders.
Irrespective of the scenario, it is great times for the ecosystem ahead. Who, even a year back, could have imagined a seven-year-old Indian company will be valued at over $10 billion?
Valuations aside, we at Inventus observe genuine momentum on the ground.
Parag Dhol, a venture investor for 18 years, is managing director of Inventus Advisors India.
Read more at Livemint.

Content startups bank on technology to lure investors as new YouTube economy booms

BENGALURU: Start-ups engaged in the business of producing content are hopeful of attracting more investments this year especially if they can showcase technology that promises a massive reach.

The companies expect continuation of the trend that saw digital content platform NewsHunt recently raise $40 million (about Rs 250 crore) from New York-based hedge fund Falcon Edge Capital to fuel its growth. Culture Machine, a new age media company raised $18 million (about Rs 110 crore) from Tiger Global Management and existing investor earlier this month while ScoopWhoop raised Rs 10 crore from Bharti SoftBank in November last year. “The only reason we got funded is because we had technology and content,” said Sameer Pitalwalla, 29-year-old co-founder of Mumbai-based Culture Machine.

Not only does it produce content – its team of 60 has produced two lakh videos so far – but also it identifies trending content and advises brands on the sort of content they should create. It also has analytics and marketing capabilities to help creators, and brands reach out to their audiences at scale through channels like YouTube.

Investors are fast waking up to content version 2.0, tucked away from ecommerce and enterprise start-ups, which is expected to realise its potential as the new YouTube economy flourishes.

“For a long time the industry has ignored content,” said Amit Anand of Jungle Ventures. “We are looking at a few companies actively in India.” Rutvik Doshi, director of Inventus (India) Advisors, which has backed companies such as online bus ticketing platform redBus.in, also said content is going to go big in 2015.

Ping Network, #fame and Qyuki, are a few companies in the same segment as Culture Machine. Then there are firms like Times Internet-backed Vidooly, which has signed on over 1,000 individual YouTube content creators to use its video analytics product to grow on YouTube.

Content can be sliced across print, video and audio media, and across technological capabilities – aggregation, analytics and publishing platforms.

According to Franklin Hatchett, a surge in 4G roll-outs, higher broadband penetration are all fuelling this trend. India ranks fourth in the world in content consumption, according to a report by Ernst & Young. The country has the largest box office attendance and 160 million pay TV households, and it publishes 94,000 newspapers.

To fill the gap in expertise, multi-city GSF accelerator carved out a new vertical for start-ups focused on the digital media industry in December 2014. It has received 40 applications so far from start-ups across India and is evaluating its options.

“We are experimenting, learning and creating our own expertise,” said Rajesh Sawhney, co-founder of GSF. However, most start-ups hit a wall when it comes to making money from content. Unless content goes viral, it is difficult to make money off it. According to a 2013 report titled ‘The Death of the Long Tail: The Superstar Music Economy’, the top 1% artists made 77% of the total revenue in the digital music industry.

“The content business needs to be scalable. Monetisation will come automatically when we can scale up,” said Sawhney of GSF.

Print publishers such as Aadarsh Publishing are also reaping benefits of going all out across different mediums to monetise Purple Turtle, its gender-neutral animated series for kids. “The next big leap will happen when we do a 52-episode series on You-Tube,” said director Manish Rajoria, who is optimistic about his transmedia strategy of earning revenue.

The 26-year-old company in Bhopal, which became the first Indian player to gets its cartoon licensed to 25 countries including China, has sold a million copies and is adding revenue by licensing its IP for bags, books, T-shirts and apps. On the other side of the spectrum are aggregators like two-yearold Spuul, which purchases Indian TV and film content from content providers and makes it available for streaming across platforms such as Airplay on iOS, and Chromecast on Android.

The company is adding users at a rapid pace of 20% every month in India and is eyeing $150 million (about Rs 930 crore) in revenue in the next three years. “The content producers are stoked by the fact that there is another line in the balance sheet,” said cofounder Subin Subaiah, 63, whose company earns revenue through advertisements and premium subscription model.

 

Read more at Economic Times

Early-stage startups should be wary of fund-raising pitfalls

BENGALURU: Entrepreneurs nurturing young companies are liable to strike poor bargains with investors in their quest to raise money, according to startup industry practitioners, highlighting the need for caution about an event that is widely regarded as rite of passage in the life of company founders.

“In a market where investors are autorickshaw drivers, and startups are passengers, the rickshaw is still overcharging them,” said Sharad Sharma, the cofounder of software product think tank iSpirt, on Friday. Sharma was speaking at an ET Roundtable on the subject, ‘Are Investors Taking Too Much for Too Little?’ Niketh Sabbineni, cofounder of Bookpad, maker of a document handling tool that was acquired by Yahoo last September, and Rutvik Doshi, director at Inventus Capital Partners, were the other speakers.

The fund-raising successes of companies such as Flipkart, Snapdeal and Olacabs for valuations in the thousands of crores have created a widespread impression that copious amounts of money are waiting to flow to back Indian entrepreneurs. Overall, entrepreneurs are giving up less of their company for more money, but it is still not ideal, the panelists said.

Sabbineni said that while some companies may get a lot of attention and funding, others, especially those looking to gain a foothold, are in danger of under-selling themselves. “Early-stage companies are still taken for ride,” said the former CEO of Bookpad that was acquired by Yahoo last September. The Bengalurubased company had raised an angel round through convertible debt a month before it was bought over. “We also struggled in the initial stages. It’s a big problem, if you are given a free wireless credit card machine but take a royalty for life, you should ask questions.” said Sabbineni.

Sabbineni, who has become an angel investor after the acquisition, said he chose the convertible debt route for his investments as one could secure funds without settling on a valuation on a company. This is a type of bond that the holder can convert into a specified number of shares or cash of equal value in the next round of funding. Doshi of Inventus Capital Partners said that the relationship between the investor and the startup founder is guided, in large part, by demand and supply. While the amount of money available has increased, so has entrepreneurship multiplied manifold. An important development, he said, would be a big increase in the amount of money Indians are willing to allocate to back startups. “If there are more Indian investors putting in rupee capital, the demand-supply gap would correct itself,” he said.

Inventus has invested in companies such as online bus ticketing firm redbus.in, policybazaar.com and car rental company Savaari.com.

Sharma, a former head of R&D at Yahoo in India, said entrepreneurs must discriminate between ‘quacks’ and ‘investors’. Too many people with too little knowledge of investing are responsible for the imbalance, he pointed out. As for startups, “Entrepreneurs should trust their gut, have emotional certainty but at the same time have intellectual uncertainty.”

Sabbineni of BookPad added a company’s financial health would give it leverage at the time of raising funds. “Work towards becoming cash-flow positive before every round of funding. That puts you in a better position,” he said. An alumnus of IIT-Guwahati who has been an angel investor since he sold his company, Sabbineni said he has been on both sides of the bargain and, therefore, makes it his business to use fairness as a guiding light.

All three were of the opinion that it is vital to encourage greater dialogue and knowledge-sharing between entrepreneurs who can learn from each other. “We need a founders’ union,” said Sharma

 


Reproduced from – http://articles.economictimes.indiatimes.com/2015-02-10/news/59005599_1_bookpad-angel-investor-startups

#Outlook15: What Indian Investors Plan To Do in 2015

As a part of our #Outlook15 series, we asked venture capital firms – Nexus Venture Partners, Blume Ventures, Helion Venture Partners, GrowthStory, LightSpeed Venture Partners and Inventus Capital Partners about their focus areas for 2015, and the challenges that the digital ecosystem needs to address. Answers have been shortened for brevity.

Which according to you were the top developments in the digital (Internet/Mobile) industry in 2014? Why?

 

Suvir Sujan, Nexus Venture Partners

– E- commerce has matured in 2014, Internet users has reached critical mass.

Karthik Reddy, Blume Ventures

– $50 million to $1 billion rounds by the dozen(s) – unprecedented confidence (by no investor who is living in India btw) in the seeming promise of the Internet inflection point being achieved soon.
– Global trends being mirrored here in terms of investing into a path to IPO – which suggests that IPOs and large M&A’s maybe round the corner.

Ashish Gupta, Helion Venture Partners

– The significant adoption of smart phones by large number of people. It is a game changer because it has now produced critical mass of users in India to be able to support many different businesses.

K Ganesh, Portea Medical (GrowthStory)

– Rapid ‘mainstreaming’ of digital. Smart marketers have realized that offline media is a one-way street, a ‘spend-and-pray’ way to try and achieve your goals. However, digital marketing opens up the box with the ability to gather data on a minute-to-minute basis, translate this into insights and knowledge enables deep understanding of customers and markets.

Anshoo Sharma, LightSpeed Venture Partners

– Growth of smartphone base – new smartphone sale are inflecting.

Rutvik Doshi, Inventus Capital Partners

– Coming of age of mobile Internet and consumer facing companies achieving scale. The mobile Internet adoption grew manifold and for the first time several Indians have a device which can be truly called a “personal device.”

– Scale achieved by consumer facing Internet companies. A few achieved the $1B+ valuation mark, which was unheard of. Some of the e-commerce companies are doing far more in revenues and transactions than several offline retailers put together.

 

How has the investor sentiment regarding Indian digital businesses changed from 2013 to 2014? Why?

 

Suvir Sujan, Nexus Venture Partners

– Given the Internet and mobile penetration has hit critical mass in 2014, investors are now bullish.

Karthik Reddy, Blume Ventures

– Dramatic positive shift – large bets in the direction of 300-400 million Internet users (mobile-heavy) expected to come online and spend/discover/consume over the next 2-3 years.
– Deep bets are being made early on the “frontrunners”.

Ashish Gupta, Helion Venture Partners

– The adoption of technology went through an inflection point and caused the investor sentiment to become a lot more positive.

K Ganesh, Portea Medical (GrowthStory)

– Investor sentiment has been positive towards businesses that are leveraging technology to solve major pain points for Indian consumers. This can be businesses that ensure all manner of goods, services and conveniences are made available at a location and in the format of the consumer’s choice.

Anshoo Sharma, LightSpeed Venture Partners

– Changed in a significantly positive way. As number of people coming online through their smartphones grows, it will disrupt existing business models and create new ones. Access to distribution gets democratized and high quality products and services delivered digitally can grow rapidly.

Rutvik Doshi, Inventus Capital Partners

– Prior to 2014, investors were cautious of putting large sums of money into Indian companies because there was always a doubt on the time taken to scale. However, the $1B+ valuation companies in 2014 have proven that it is possible to achieve scale in India.

What is one trend that you hadn’t expected but happened in 2014? What are your observations?

 

Suvir Sujan, Nexus Venture Partners

– Mobile commerce has grown faster than predicted.

Karthik Reddy, Blume Ventures

– Overreach by Series A VCs into seed. The gap in seed players as well as risk+capital appetite being more attractive than Series A has led to this move.

K Ganesh, Portal Medical (GrowthStory)

– Despite the increasing number of Internet users from Tier 2, Tier 3 cities, adoption and usage of social media channels among non-English speakers still lags the English audience. This is likely to change quite rapidly in coming years with more content in local languages and content with a non-metro focus being produced.

Anshoo Sharma, LightSpeed Venture Partners

– Quantum of risk capital that has come in from new sources that weren’t previously active in India.

Rutvik Doshi, Inventus Capital Partners

– The line between desktop browser based Internet and mobile is completely blurred.

– Prior to 2014, we (and many investors) use to classify companies as consumer Internet or mobile separately. They are no longer separate, since every tech enabled company needs to provide both desktop & mobile experience. Even mobile first companies need desktop web experience to complement/augment their products.

– The exponential growth of content based companies was also something which took me by surprise.

Which are the sectors that you intend to focus on in 2015? Why?

 

Ashish Gupta, Helion Venture Partners

– Online services (like jobs, matrimonial, classifieds etc), e-commerce, mobile applications across many areas and enterprise software.

Anshoo Sharma, LightSpeed Venture Partners

– Mobile led growth – transaction based businesses, online to offline, virtual services/experiences, SaaS.

Rutvik Doshi, Inventus Capital Partners

– We will continue to focus on consumer facing tech companies in India.
– We are very bullish on enterprise software companies which address global markets. We have the right talent pool in the country and the cloud based delivery models have made companies’ geographical location redundant.

What are some of the broad trends that you expect to see in the digital industry in 2015?

 

Suvir Sujan, Nexus Venture Partners

– We will see advertising start to mature. It generally follows e-commerce.

Karthik Reddy, Blume Ventures

– Mobile = Internet.
– Everything will be built mobile only / mobile first, else why bother?
– Digital media’s time will come – beyond music and YouTube.

Ashish Gupta, Helion Venture Partners

– Adoption of technology by the domestic enterprises – especially SME.
– Some monetization models for the mobile application companies.

K Ganesh, Portea Medical (GrowthStory)

– Major shift is the mobile usage and apps usage catapulting with consumers accessing products and services through this medium.

What are the key trends you see in Venture Capital in the coming year?

 

Suvir Sujan, Nexus Venture Partners

– There will be a lot of early investments made in Internet/mobile in 2015.

Karthik Reddy, Blume Ventures

– Push for exits and teams/bankers designed to focus on this.
– Larger funds (both series A and the foreign funds) playing aggressive larger bets in Series A (that’s the last frontier of aggression which we haven’t seen).
– More new players emerging in Series B and beyond.
– The “fashion” of Series A VC’s playing large number of Seed cheques will stay alive, shifting from one set of VCs to another until all of them hit their natural limit of management bandwidth.
– More and more seed / superangel funds will be attempted.
– Angel investing by organized groups will deteriorate further and aggregate in other forms.

Ashish Gupta, Helion Venture Partners

– More money coming into India. Some firms will lose people and new firms will start out of it.

– Money will continue to flow even if there is a global hiccup. If there is a hiccup, I think companies will be built with a more sane approach (of not burning money), so I am actually looking forward to a slow down.

K Ganesh, Portal Medical (GrowthStory)

– Lot of new VC money coming in especially VCs coming into India for the first time.
– Acceleration of hedge funds and late stage PE funds / growth stage funds playing in the VC sector in India.
– VCs getting active in seed stage investments by putting small money in very early startups.

Rutvik Doshi, Inventus Capital Partners

– Hedge funds and PE funds will continue to invest large rounds in Indian companies.
– Several VC firms may also raise new funds to support the growing startup ecosystem.

Which are the sectors you’re going to avoid in 2015 and why?

 

Karthik Reddy, Blume Ventures

– By nature of our fund size and scope, we will avoid anything that’s already been funded by the larger VCs.

K Ganesh, Portea Medical (GrowthStory)

– Horizontal E-commerce.
– Replicating already evolved sector with very well funded, large players.
– Me-too plays in Education and healthcare, since it’s very difficult to differentiate and scale.
– Replicating US models for India without localization and changes for country specific factors. For eg AirBnB for India, Facebook for India.

Anshoo Sharma, LightSpeed Venture Partners

– Real estate and capital intensive business.

Rutvik Doshi, Inventus Capital Partners

– We are agnostic to sectors and prefer looking at every opportunity from the fundamentals of the business.

What are some of the challenges in the digital segment that you feel, need to be addressed in 2015? How do you think these challenges can be addressed?

 

Suvir Sujan, Nexus Venture Partners

Consumer Payments continue to be a challenge.

Karthik Reddy, Blume Ventures

– Sustainable long-term Revenue models ahead of exaggerated capital infusions.
– Capital infusions OK if not artificially (and absurdly) stoking supply and demand for the short-term.
– Eventual liquidity events – M&A’s and IPOs – to validate above.
– Domestic regulations – it seems like the lack of domestic capital participation makes them lobby hard to keep status quo while consumers are demanding better and better integrated tech solutions to costs and bottlenecks in India.

Ashish Gupta, Helion Venture Partners

– While the numbers of users is very large in India – their ability to pay meaningful amounts of money is still unproven. So we have adoption being driven at huge expense; but have yet to see whether the economics of most of the online companies will be sustainable.

K Ganesh, Portea Medical (GrowthStory)

– Government in India, both at the Centre and state-level, seems ill-equipped to handle issues related to digital businesses. A case in point is the knee-jerk reaction of authorities to the Uber incident.

– Simplifying of laws across business segments is essential since it is only a matter of time before every sector is impacted by digital. There is no sense in framing regulations on the fly, as and when situations arise as it will lead to investor sentiment getting hit, hardship to consumers and bad PR for the country.

– Digital Bharat should not be just a ‘term’ that’s seen the flavor of the month but should be accompanied by a true appreciation of what is involved and its impact on a society that is digital.

Anshoo Sharma, LightSpeed Venture Partners

– Access to high quality talent pool is a key issue. It is a virtuous but slow cycle – more startup success will lead (and is leading) to better talent availability.

– Payments ecosystem needs to be seamless and allow for micro transactions outside of telcos; Many companies are working towards solving it and slowly making progress on this front.

Rutvik Doshi, Inventus Capital Partners

– Monetization for content based companies is still a challenge in India. The monetization of most of these companies is disproportional to the kind of traffic they get.

Read Original at Medianama

Recruitment Startup Aasaanjobs Raises Seed Round Of Funding Of $1.5m From Inventus Capital & IDG Ventures

Aasaanjobs.com, a recruitment portal for blue collared and entry level white collared workers in India announced that it has raised $1.5M in its seed round, from venture capital funds, IDG Ventures India and Inventus Capital Partners. The investment received will be utilized to expand its existing offerings, hire management and tech professionals and to ramp up technology and product development.

Dinesh Goel, Founder and CEO, Aasaanjobs said, “We are trying to mobilize a large unorganized section of contributors to the Indian economy which is a tough operational challenge. I am happy about the timing of this funding round as we can now ramp up and mobilize even more people, not just in Mumbai.”

Aasaanjobs was set up in late 2013 by IIT Bombay alumni who quit their jobs at The Boston Consulting Group, Deutche Bank and the likes to pursue their goal of improving the lives of blue collared workers in India. Based out of Powai, it is among the many startups founded by IIT graduates to have emerged recently from the region.

Rutvik Doshi, Director, Inventus Capital, said, “I am impressed with aasaanjobs vision and the team they have in place. It’s an exciting idea with a capable core team. I am really looking forward to what these guys will create. Going forward, every year over 1 million workers will enter India’s workforce – and enabling these workers to find the right jobs matching their skills is imperative. This is where aasaanjobs.com fits in.

Ranjith Menon, Senior Vice President, IDG Ventures India, said, “India is at an exciting point in its development journey. Job creation and enhancing employability is what the country really needs right now and this team aspires to help solve this problem – and we want to be a part of it. They are bringing technology into an extremely underpenetrated supply side of the workforce which brings to the table very exciting possibilities.

Aasaanjobs envisions creating a consumer solution where long-term and short-term hiring should be as convenient as ordering products online and this funding is a step towards realizing that vision.

About Aasaanjobs

Aasaanjobs.com is a recruitment company for entry level and mid-level jobs in the country. We are in the process of creating a digital identity for the millions who play such a crucial role in the ever expanding service industry of the country. The platform went live in August 2014. The company is focused on disrupting the extremely frictional recruitment industry by making the process quick, convenient and smooth for all the collaborators. The playfield is a multi-billion dollar domestic market and an even bigger international market which is looking for meaningful consolidation. Such a consolidation would ensure that people are not haggling with sub-standard products but are being offered a delightful one.

To learn more about the company and its offerings, please visit http://www.aasaanjobs.com/

About Inventus Capital Partners

Inventus Capital Partners is a US-India venture firm managed by successful entrepreneurs and industry operating veterans who have backed over 100 entrepreneurs with operations in India and/or Silicon Valley. Inventus backs entrepreneurs first and foremost. The companies financed by Inventus include TELiBrahma, Insta Health, redBus, FundsIndia, Vizury, Sokrati, Cbazaar, Savaari, Power2SME, Policybazaar, eDreams, Unbxd, Avaz and Peel-Works. Inventus is currently investing out of its Fund-II. More information about Inventus is available at www.inventuscap.com

About IDG Ventures India

IDG Ventures India is a leading technology venture capital fund in India. The fund is part of IDG Ventures, a global network of technology venture funds with over $5.5 billion under management with over 220 investee companies and 10 offices across Asia and North America. By combining the IDG platform — an unparalleled combination of global publishing, market research (IDC), and conferences and exhibition resources — with years of hands-on experience in early-stage company building, IDG Ventures India helps its investee companies understand their markets better and achieve leadership position ahead of competition. IDG Ventures has been an early investor in digital consumer companies such as Ctrip, Tencent, Baidu, Netscape, BabyCenter, Sohu, Vancl and VinaGame. In India, IDG Ventures has invested in companies such as Flipkart, Yatra, Newgen, Brainbees (FirstCry.com) Vserv, Manthan Software, Valyoo (Lenskart.com), Ozone Media and Actoserba (Zivame.com). More information about IDG Ventures is available at www.idgvcindia.com

As VC cash pours into India, buyout firms head for exits

Naspers Ltd., the South African internet services firm, had just acquired Manu Rekhi’s India bus ticketing serviceredBus.in, in a $120 million transaction that, amid a din of billion-dollar deals in India over the past 24 months, might have gone unnoticed on this side of the world.

Rekhi, partner at Inventus Capital Partners, the venture capital firm that backed redbus, however, was looking at a problem: $20 million of the exit capital set to come his way was being placed into escrow. Such are the regulations surrounding finance in M&A in India, and, in part thanks to the re-election of Narendra Modi, the nation’s popular prime minister, they are likely to be abolished, reduced to a single-digit escrow percentage more commonplace in American deals. If Modi doesn’t do away with it soon, Rekhi said he’ll impress his point upon the PM himself, when he and other investors meet with government officials to talk about India’s tax code (he said he’ll be joined by the U.S. Bar Association, as well as American VCs).

It is perplexing to listen to Rekhi describe India’s regulatory approach to business — “a top-down nanny state” — and his outlook: “the best is yet to come.”

Still, Rekhi, and a great deal of other VC investors appear to share a similar sentiment, and it comes as Indian markets are soaring, fueled by Modi’s commitment to draw more global capital into his emerging economy, and sparked again by plummeting fuel costs as of late.

Modi’s prolific Twitter account serves as a testament to his dedication to his country — it is far more active, and conveys more emotion than the standard PR-office driven accounts of U.S. politicians. He regularly singles out countrymen (and women) for business and academic achievement, aims to console those affected by national tragedies, calls for Indian infrastructure development — even posts photographs with Internet luminaries likeFacebook Inc.CEO Mark Zuckerberg. And, similar to the U.S. initial public offerings market, India’s economy appears to celebrate youth at a time when startups and relatively young companies are seeing valuations soar.

But even as Modi’s ascension to power appears to invite overseas funds into the country, private equity firms are pulling back. After years of leveraged buyout shops putting more capital to work in India, some are turning to exits, having helped beef up emerging markets companies across a variety of sectors over recent years. While some of the reasons stem from peculiarities of the country’s markets, others are just plain business judgments.

ONE AREA private equity firms have been particularly active is on the healthcare front — although, at a time when more companies are being prepped for exits, these assets are often being readied for an IPO.

HealthCare Global Enterprises Ltd., the Indian cancer care company generating around $200 million in annual revenue, is expected to hire bankers and debut on public markets there in 2015, The Deal previously reported. Backers includeTemasek Holdings Pte. Ltd.

In October,Warburg Pincus LLC, a regular investor in India, invested inLaurus Labs Ltd., which develops drugs and nutraceuticals, Before that,Kohlberg Kravis Roberts & Co. LP took on a minority stake in Gland Pharma Ltd., valued at about $200 million and at the time billed as the biggest PE deal in India’s healthcare space. The sponsor did not respond to requests for comment.

A common characteristic of India’s pre-IPO healthcare deals is an abundance of minority stakeholders, a characteristic that turns off many sponsors, especially in a market half a world away.

At a time when buyout targets are scarce, India’s current regulations make it cumbersome for foreign LBO shops to do little more than pick up minority stakes — which likely accounts for some sponsors’ reluctance to dive into the region as they have in some other emerging markets, like China, according to one person familiar with the industry.

“The unwillingness of most promoters in privately held firms in India to sell controlling stakes in their companies, coupled with the fact that the majority of companies in India are family-owned, has left private equity investors in a crowded space with very few deals to deploy their cash at very expensive valuations,” said Venkat Pasupuleti, co-manager of the Dalton India Fund at Dalton Investments LLC.

And PE investors seeking digital assets run up against strategic competitors looking to make investments, and able to wield famous brands before awed entrepreneurs.

In late November,Rupert Murdoch‘s News Corp. — which owns Dow Jones, the Wall Street Journal and recently acquired Realtor.com operator Move Inc. — put $30 million intoElara Holdings Inc., operator of property portal PropTiger.com. News Corp.’s online deal in the U.S. set it back $950 million by comparison — and even though the company holds only a minority position, it amounts to a 25% stake, which is a lot more than $30 million will buy your company that processed $1 billion in transactions in the frothy U.S. venture market.

Amazon.com Inc., which has bought into everything from daily deals to robot warehouse workers in the U.S., is also taking a gamble on Indian startups. The company is nearing a deal to buy Rocket Internet GmbH-backed retailer Jabong.com in a deal that could surpass $1 billion in valuation, Indian website VCcircle.com reported last month, and, in October, bought QwikCilver Solutions, a gift card company based in India.

Then there’sMoody’s Corp.which was allowed in 2013 to take a stake in a ratings agency. Several sources described India’s debt markets as developing, but increasingly attractive to foreign investors.

ONE U.S. PRIVATE EQUITY firm with plans to develop its role as a lender and asset manager is KKR, which earlier this year revealed plans to provide lending to companies in India at a conference in Mumbai.KKR’s method — reflecting its strategy in the U.S., where it has also provided debt for big LBOs — could become more popular with other sponsors.

Still, 2014 isn’t going to be a banner year for PE investment in India — then again, it comes in the wake of years of a plunging rupee, and slower-than-expected GDP growth that has locked some LBO shops into their portfolio companies longer than they would ordinarily anticipate. So perhaps it’s no wonder that PE is heading for the exits.

The Wall Street Journal recently noted that PE firms, including3i Group plc,Providence Equity Partners LLC,General Atlantic LLCand others are lining up or completing profitable stake sales.

Add Carlyle Group LP to that list. The firm has made several successful exits, includingTirumala Milk Products Ltd.— reportedly producing a 3 times cash multiple on the $85 million the PE firm invested in 2010 — network security firmCyberoam Technologies Pvt. Ltd., andRepco Home Finance Ltd.Those deals were all in 2014, although the sponsor declined to answer questions about its ongoing commitment to the region. Since 2000, according to a source, the private equity firm has spent more than $1 billion on India deals. No different than other U.S. PE firms looking to put capital to work in the healthcare sector, Carlyle found an opportunity — in India, of course, not America — in 2013, taking a stake in hospital Global Health.

Carlyle isn’t the only U.S. shop looking to reap exits in a rising market: according to a recent Reuters report, Bain Capital LLC‘s planned sale of a piece of Hero MotoCorp Ltd., India’s leading scooter and motorcycle maker, attracted enough interest that it unloaded most of its stock, bagging $400 million in the process.

“For three years, private equity investing in India continued and increased,” said Arun Gore, president and CEO of Gray Ghost Ventures, a regular investor in India. “The market is very richly valued at this time.”

That could be part of the reason private equity is having such a time trying to put money to work. Another similarity between India’s deal scene and the U.S.’ is the regularity with which sponsors, for a variety of reasons tethered to a lower Ebitda multiple threshold for M&A, are having a difficult time investing in a market now besieged with strategic investors.

Where PE isn’t getting elbowed aside by the corporate players ranging from Amazon to Moody’s they’re running into hedge funds.Tiger Global Management LLC teamed with Warburg Pincus and VC backers to fund Indian auto sales website CarTrade.com in October. The month prior, Tiger backedQuikR, a classifieds service in India, with $60 million, and the month before that, Hike, a mobile messaging service, with $65 million.

IN GENERAL, BALLOONING valuations are making U.S. venture investors look downright stingy. And the market is likely to heat up even more in the coming years. India’s online economy could one day — soon, some say — dwarf that of America’s.

“Think China, 20 years ago,” said Vivek Wadhwa, a prominent Silicon Valley academic and regular blogger on tech. “That is where India is today. India is about to add half a billion Internet users over the next three to five years as smartphones become cheap as cellphones.”

Digital startups — freed of the shackles of fuddy-duddy family ownership and complex capital structures — will reap the benefits of a burgeoning online economy. It’s starting already. About a year ago, Flipkart Online Services Pvt. Ltd., the Indian online delivery service, was valued at a seemingly paltry $1.6 billion. A year later, it would raise far more than that, shocking industry onlookers.

That was when the company took on about $500 million in funding, across the balance of 2013, a batch of cash only reserved for Silicon Valley’s “honor roll.”

In 2014, Flipkart, has raised more money than even Uber Inc., or at least that’s the case as of Dec. 1 (Uber is reportedly currently in the midst of a mind-boggling convertible debt fundraising, and, simultaneously, a separate equity round). Packing on more than $1.8 billion in capital as its valuation has soared to the $10 billion mark, Flipkart’s cash haul for the year makes the $1.2 billion Uber raised across the first 11 months of the year look like a weak poker raise.

Taking Wadhwa’s comments into account, along with India’s population of 1.25 billion, one might understand how the “next Amazon” might not be found on this side of the world. Of course, it isn’t necessarily Flipkart, and India’s premier business family is making a bet on a different company — albeit, at a very high valuation.

Tata Sons Ltd.chairman emeritus Ratan Tata took a stake of less than 1% inSnapdeal.com, another Indian e-commerce site, in a deal reported in November. The septuagenarian billionaire’s stake in the company is worth just a few million dollars, but it valuesSnapdeal, which has raised hundreds of millions in private funding — at up to $2 billion.

INVESTORS HAVE BEEN burned here in the past. Modi’s challenge, for now, is putting a prettier face on a country with a reputation for rulebooks as difficult to navigate as its roads. Looking at China’s astronomical development over the past decade, it is almost hard to fathom that in 2007, before India’s currency plummeted against the dollar, the pace of PE investment outpaced that of even China. A KPMG LLPreport put PE dollars spent in India at more than $17 billion in 2007; China, just $11.5 billion. A separate Bain & Co. report, from April of this year, highlights another point of pain for LBO shops; the $6.8 billion in exits expected for PE firms in 2013 wasn’t much of an increase and more than half the capital put to work in 2005 was not fully exited. Until PE gets the returns it needs, it may not have the justification to spend more with its limited partners.

In the time since, of course, China’s markets have attracted billions more in foreign capital, headlines and prestige. If India is indeed going to produce an equivalent of Jack Ma’sAlibaba.com Corp., that company hasn’t come to light yet — or, at least, its valuation is in a downright-reasonable single-digit-billions range. So while LBO shops are readying offerings and selling high, VCs feel India’s second go-round could be shaping up just now, with Modi’s re-election. They both can’t be right.

“Investors got all fired up a decade ago,” said Michael Jackson, a partner withMangrove Capital Partners, another regular VC investor in the region, “and then were disillusioned by slow progress.”

LEAN VC: WHY SMALL IS BEAUTIFUL IN VENTURE CAPITAL

The Kaufmann Foundation recently noted in a controversial review in the Wall Street Journal that, of its past 20 years of investing in nearly 100 venture funds, “Only four of thirty venture capital funds with committed capital of more than $400 million delivered returns better than those available from a publicly traded small cap common stock index.”

Further damning evidence cited is that fully two-thirds of compensation for general partners comes from fees, not performance (carry). These results reflect the severe challenges of scaling venture’s long-standing “hits business” in an all too elusive “grand-slam business” that a larger fund requires.

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MANAGERS VERSUS ENTREPRENEURS

What is the difference between a manager and an entrepreneur?  Is one better for society than the other? These are questions that frequently arise during our mentoring sessions with young college graduates who are at the beginning of their professional careers.

Management, as a scientific discipline, and managers as practitioners of it, are concerned with the control and maximization of a firm’s resources. These resources may include capital assets, human resource assets, customer assets, and processes.

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