Knowledge Partners


 Basiz Fund Service    Economic Laws Practice    Avalon Consulting  

 Spark Capital    Tatva Legal   

January 30, 2004

Wi-Fi tops list of what's NOT hot among US VCs


Forbes magazines asked several top VCs in the US to name their picks for the best and worst sectors for investments in 2004. David Strohm of Greylock, Daniel Nova of Highland Capital Partners, and Todd Dagres of Battery Ventures were unanimous in naming Wi-Fi as the area that they will NOT fund. "Startups will have a hard time competing against titans like Cisco and Intel," said Strohm. "Wi-Fi chip sets are overfunded; technology like this comes along and all the VCs think they need to have one," adds Dagres.

Kevin Compton of Kleiner Perkins Caufield & Byers said he would avoid companies trying to build spam filters. Reason: "Microsoft is going to take care of that". Dixon Doll of Doll Capital Management says he would stay away from "storage area networks and social networking outfits".

Click Here to read the full article.


Promod Haque displaces Vinod Khosla in Forbes' "Midas List"


Norwest Venture Partners' Promod Haque displaced another VC of Indian origin, Vinod Khosla of Kleiner Perkins Caufield & Byers, to climb to the top of Forbes magazine's annual Midas List. (The Midas List seeks to "identify individuals who deploy venture capital to create wealth for their investors".)

Son of a bureaucrat father and schoolteacher mother, Haque grew up in Delhi and gained an engineering degree from the University of Delhi, the Forbes profile says. He moved to the US to obtain a Ph.D. in electrical engineering at Northwestern University and an MBA from Northwestern's Kellogg Graduate School of Managemen. He worked for 10 years in a string of medical instrumentation companies including Siemens, before joining Norwest in 1990. He catalyzed the fund's investments in Tivoli, Forte Software, Cerent, Siara, OnDisplay, Extreme Networks and Winphoria Networks. His current investments include AmberPoint, Cast Iron Systems, Inkra Networks, Open-Silicon, Veraz Networks, Virtela Communications, and ZettaCom.

Click Here for Forbes' latest Midas List compilation.

Click Here for a detailed profile of Haque.

Brunei VC fund scouting for early-stage, "spin-in" deals in India


The BI Venture Capital Group, a part of Brunei Investments Group which manages investments of royal families across Asia, is scouting for deals in India, Businessworld reports quoting fund manager Ram Shanmugam. The BI Venture Capital Group has a corpus of $125 million for investments in India and Asia-Pacific countries (especially Taiwan and Korea). "I see great investment opportunities in India, especially in technology products and healthcare services," Shanmugam says in the report.

The fund will focus on early stage companies. Shanmugam is keen on investments in "spin-ins". (A spin-in involves large, established companies investing in start-ups to test out concepts and technologies. This model ensures lower costs and more focus. If the experiment provdes successful, the large company will have an option to acquire the start-up.

Click Here to read the full article.

January 24, 2004

Exits, aggressive entry valuations to be themes of '04: Ashish Dhawan


As the stock markets continue to heat up in 2004, private equity investors--at least, the "disciplined" ones--will focus on taking their "chips off the table", according to Ashish Dhawan, Senior Managing Director of ChrysCapital. "For example, venture-backed companies such as Patni and Daksh are already slated for IPOs this year. This first wave of private equity exits will solidify the track records of selected blue-chip funds," he says in his column accompanying Business Today magazine's cover story on the VC industry.

A corollary of a booming stock market and economy is the rise in expectation among entrepreneurs and CEOs when it comes to valuing their companies. "For private equity investors, aggressive entry valuations will pose the most significant challenge in 2004," Dhawan says.

Dhawan sees the increasing specialisation among private equity funds as a welcome sign. (He cites JumpStartup's focus on cross-border technology deals, GW Capital investments in emerging domestic service businesses, and CDC's pioneering of management buyouts and corporate carve-outs). "The increased specialisation translates into accumulated expertise that funds can bring to their investments and prevents lemming-like behaviour," he says. Dhawan is however skeptical about the prospect for investments in operational turnaround and LBO transactions.

Click Here to read the full article. (Paid subscription required)


January 23, 2004

We’re not moving jobs offshore; we’re adding jobs worldwide: Dell


Here is what Michael Dell had to say, in his interview to Always-On Network, when asked whether his company was sending jobs offshore in order to cut costs:

We’re not really moving jobs offshore; we’re adding jobs all over the world. We added a couple thousand jobs in the US this past quarter on a year-over-year basis. We added jobs all over to support our growing business. My own view is that the bogeyman of offshoring is a lot worse than the reality. I think jobs have been moving from one country to another as long as there have been electricity and telephones and transportation.

Click Here to read the full interview.

January 20, 2004

Asian private equity firms raised $3.3-B in 2003: AVCJ


Asian private equity firms raised $3.32 billion in calendar 2003, up from $2.99 billion in 2002, Reuters reports quoting data from the Asian Venture Capital Journal (AVCJ). The pool of private equity capital under management across the region rose to $97.6 billion in 2003, up from $88.6 billion in 2002. AVCJ expects fund raising to pick up pace in 2004.

Click Here to read the full report.

Manipal Group launches Healthcare BPO ops; mulls venture in education space


The Manipal Group, which operates over 50 colleges and 15 hospitals in India and South-East Asian countries, has launched a 600-seat Healthcare BPO operation in Bangalore, reports Business Line. The new company, Omega Healthcare Management Services, will offer a full range of services, including revenue management, clinical services and clinical staff augmentation to healthcare industry companies in US and Europe-based.

The group is also considering a foray into education-related BPO, the report adds quoting Mainpal Group Executive Chairman D.A. Prasanna. "We have our strengths in healthcare and education and we want to unlock these values," Prasanna said in the report.

Click Here to read the full report.

Indian cos. dominate sponsors list at Software 2004 Conference


Sand Hill Group, a Silicon Valley-based investment and advisory services firm co-founded by M.R. Rangaswami, is organizing a software technology conference, Software 2004, between March 1-2, 2004 in San Francisco. Themed "Blueprint for the Next Decade," the inaugural event will bring together over 1,000 CEOs and vice presidents to gain knowledge from industry veterans. Software 2004 will include a "Hardball" style interview with CEO of SCO, Darl McBride and keynote presentations from industry visionaries such as Ray Lane, Shai Agassi, Sanjay Kumar, Drew Ladner, Geoffrey Moore, Toby Redshaw, Romesh Wadhwani and Ed Zander. In addition, the Sand Hill Group and McKinsey will unveil "Blueprint for 2004," a report focused on the new business models, growth patterns and efficiencies that will be necessary to propel the software industry into a continued growth phase. "Our goal for Software 2004 is to provide our attendees with insight from the most innovative and influential software leaders and visionaries," says Rangaswami, who serves as Sand Hill's Managing Director.

India-based companies dominate the conference's list of sponsors. While TCS is the Platinum sponsor, Persistent Systems and Sonata Software are listed among the Gold sponsors. Aztec Software, Goldstone Technologies, Sierra Atlantic, and Symphony Services are among the Silver sponsors.

Guess this makes it obvious who is making money--at least, these days--in the enterprise software space!

More information and online registration is available at www.software2004.com

January 18, 2004

Why Pharma is hotting up


The pharmaceuticals sector has been witnessing mega-deals in recent quarters: Indian companies have been acquiring overseas firms and attracting dollops of private equity investments.

According to an article in Business Standard, the key driver for these deals the fact that market for generics is "all set to explode" with drugs with sales worth $80 billion set to go off-patent over the next few years. "This is the opportunity that several Indian drug companies want to grab with both hands. Three decades of reverse-engineering patented medicine has given them formidable technological skills in the generics space," the article says.

"The smaller companies are looking at becoming suppliers of generic products to overseas companies. But the giants are going a step further and want to market generic products themselves. This is where overseas acquisitions fit in," it adds

Click Here to read the full article.

January 17, 2004

Sumir Chadha's interview to Always-On Network


Sumir Chadha, Founder & Senior Managing Director of Bangalore and Silicon Valley based VC fund, WestBridge Capital, has been interviewed by Always-On Network. Chadha works out of WestBridge's office in Silicon Valley.

Some extracts from the interview:

On investment opportunities thrown up by the rapid growth in India's telecom sector:
We see explosive growth in telecom. Three years ago, India had the highest cost per minute in the world for wireless telecom. Now, it’s the cheapest—30 percent cheaper than even China. And a year ago, there were 8 million wireless subscribers in India. Today there are 22 million, and we’re seeing growth of 2 million subscribers per month. This is a revolution in the making.

Other investors are acting on these trends, as well. Warburg Pincus has its largest investment in India with Bharti Telecom, one of the largest wireless providers in India. Among domestic markets, India’s telecom infrastructure is seeing the same growth China’s telecom industry went through ten years ago, and we find it very interesting.

On the rising interest among Limited Partners to invest in Asia-focused funds:
There’s real disillusionment with US VC as an asset class. There’s a perception that the United States is overfunded, and there's some concern about the capital overhang...

...VCs in India are seen as an emerging market asset class. With India, LPs have heard about huge successes with software development companies. So, we’ve been contacted by a number of LPs interested specifically in India.

On offshore outsourcing trends:
The links between the Valley and India are becoming really strong. It’s coming about out of necessity and realities of the cost structure, because 80 percent of early-stage costs are development oriented.

...(One of our portfolio companies) Emagia, has developed its cash flow management product almost entirely in Hyderabad.

... It’s not the United States versus India; it's more of a partnership. Emagia, for instance, builds cash flow management software. It has key technical architects in Santa Clara, but the bulk of the development team is in India. You want architects close to the customer and product teams, and they’re mostly in the United States. This challenges Western developers to move up the value chain.

Click Here to read the full interview.


January 12, 2004

Nasscom proposes fund to help SMEs file patents


The National Association of Software & Services Companies (Nasscom) has proposed a special fund, in association with the Indian government, to provide financial assistance to small and medium sized software products firms to file patents, Financial Express reports quoting Nasscom president Kiran Karnik.

The quantum of the funds required for each company will be determined by a Nasscom-designated committee based on the importance of the product and the extent of handholding required. The funds will be provided initially as a loan. If the patent application is successful, the amount will be converted into a grant.

Click Here to read the full news item.

January 10, 2004

Govt. announces Rs.10,000-Cr fund to provide soft loans for SMEs


On January 09, the finance minister Jaswant Singh announced that the central government is to set up a Rs.10,000 crore fund for providing loans to small and medium enterprises (SMEs). The interest on loans from the new fund will be provided at 2% below the prime lending rate, the minister said. The fund is expected to be operational within four weeks and is to be structured by the the Small Industries Development Bank of India (SIDBI).


Click Here
to read the PTI news agency report on the announcement.

January 09, 2004

Be vary of VCs, say ex-Internet entrepreneurs


"In 2002, we sold egurucool to NIIT for Rs.14 crore. But that was because we were forced by the venture capitalists (VCs) to do so. I didn’t want to," says Vivek Agrawal, co-founder of online education company egurucool, in a Business Standard article. "VCs are a double-edged sword," he adds in the article featuring interviews with former Internet entrepreneurs and executives.

"Set up your venture without external investment," advises Rajiv Vij, co-founder of net2travel.

Click Here to read the full article.

January 08, 2004

Profile of engg. services co. QuEST


Express Computers has published a detailed profile of Bangalore-based engineering services company, Quality Engineering & Software Technologies, LLC (QuEST), which recently received a $6 million investment from The Carlyle Group.

"Offshoring can rescue the US software industry"


One of the key problems facing US software companies is lack of innovation, according to George Gilbert and Rahul Sood, principals at Tech Strategy Partners. Innovation is being "strangled" due to insufficient R&D budgets on the company side and an overspending hangover on the customer side, they say in a recent CNET News.com. "Offshore development can help on both fronts," they claim.

The authors point out that as software companies mature, innovation tapers off and grunt work multiplies. By leaving the grunt work--"work that lends itself to a standardized development process" in more politically correct language--to offshore companies, US developers can focus on more creative and innovative programing. "American developers have a passion for innovation. They are more interested in pushing the state of the art in design and functionality," the authors say.

The authors argue that using offshore labor will help US software companies improve the quality of their software. "US companies are forced to compromise on quality to meet deadlines and to focus on more creative tasks. The result is a surge of post-release bugs discovered by customers. Offshore companies, who have grown up testing other people's code, have invested in more advanced testing methodologies than most US companies," they say.

Click Here to read the full column.