Knowledge Partners


 Basiz Fund Service    Economic Laws Practice    Avalon Consulting  

 Spark Capital    Tatva Legal   

May 30, 2005

What Microsoft looks for in an potential acquiree

Will Price reports from Microsoft's VC Summit in Mountain View on what MSFT - according to its CEO Steve Ballmer - looks for when it considers acquiring a company:

* technical innovation with impact
* protected IP (patent portfolio)
* market understanding
* engineering excellence
* alignment with sales capacity (can you sell it?, do you know how to sell it?)
* timing and tenaciousness
* understanding of value chain and how to partner to win

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Meetings without cell phones and Blackberrys

Will Price reports from Microsoft's VC Summit in Mountain View on how MSFT CEO Steve Ballmer does not carry a Blackberry or a cell phone during the work day.

He does not permit meetings where people use laptops or notepads to check and write email. His goal is focused interaction, drive to a solution, and then break up the meeting and move on. He recounted a story of where a major company CEO interupted him in mid-sentence as his Blackberry vibrated, only to tell him after checking that Scott Peterson had been convicted. The CEO then had to ask Steve where they were in the conversation.

Will feels this is habit of "switching off" - cell phones and sundry other devices, that is - would also serve VCs quite well:
The VC industry suffers from very short attention spans, and I pity the CEOs who need to compete with VCs checking random emails and text messages during their pitches. I, guilty as anyone at times, took a lot from Steve's views on self-discipline and respect to other meeting participants.

Rather than join the Luddite crowd rejecting the convenience of mobile email, I simply am trying to ensure that meetings are sacred (as is time with wife and kids!!!). Perhaps, I will recover some IQ points (I need them) and get more done as a result.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

May 21, 2005

How to join the VC/PE industry

Seth Levine of Mobius VC has a few tips for MBAs and wannabee MBAs keen to join the Venture Capital/Private Equity industry:
Understand the math. The partners are quite literally taking money out of their own pockets and giving it to you. Rationally, they will only do this for one of two reasons – either you are significantly impacting their lives in a positive way that makes the trade-off worthwhile for them (you cost less than the marginal life benefit they get from having you around) and/or you will help create more carry (i.e., they can manage more deals with you around and therefore deploy more capital; you have a skill set that will positively affects the portfolio, etc.). If you fail to do these things you are just eating up management fees. There is a grey area here for Principals (called VP’s or SVP’s at some shops, junior partners at others) who are managing their own deals as well as supporting partners’ deals.

Get close to VC’s.The road to becoming a VC follows many different paths, but fundamentally your first step in landing a VC gig is likely to be figuring out who the VCs are in your area and trying to get close to them. If you’re still in college, consider a job in an investment bank or other financial services firm (even VC analyst jobs are hard to come by straight out of college – VCs tend to hire people with at least some financial training at those levels) to get the best possible training for an entry level job in VC. If you are in business school, look for internships that will allow you to meet venture capitalists (either at a VC directly or for a portfolio company of a VC). If you don’t fit any of those categories, take a job at a company backed by venture money and try to get exposure to the venture capitalists on the company’s board. In short do what you can to get to know VCs in your area so that when a position opens up you can be both top of mind and a known commodity. Take a longer term view of your approach and remember that many VCs got there not by following a traditional path (banking --> b-school --> VC) but have years of operating experience, were entrepreneurs themselves, or were somehow else involved in the business of building and growing companies.

While on the topic of "Getting close to VC’s", we at TSJ Media, are looking for MBA-Finance grads whose job description is something like this:
Interact with Venture Capital and Private Equity firms, Investment Banks, VC-backed firms and other hi-tech companies on a regular basis to track deal information - including on VC and PE investments and exits, M&A deals, IPOs, etc.
Going by Levin's post, this sounds like as good as a pretty decent stepping stone for aspirants who want to eventually join the world of VCs, right? Interested candidates can send their resume to info(at)tsjmedia.com.

UPDATE: Fred Wilson of Union Square Ventures seconds Levin's thoughts:
How do you get a job in VC?

It's the second most common thing people ask me (after how do I get a VC to invest in my business?).

The truth is the odds of both are about the same. Very long.

And as hard as I try, I really can't help most of the smart, capable young people who come to my office asking me that question. The demand for VC jobs is way in excess of the supply and probably always will be.


Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Can HR services firms do justice when it comes to hiring VCs?

Recently, we have tracked several appointments and movements in the Indian VC/PE industry in our Venture Intelligence India newsletters. There has been a lot of churn at India-based firms as well as US firms who have been in India for a few years now. Plus, quite a few new US and European entrants into India have recently appointed country managers.

I've been wondering whether VC firms use HR services firms for hiring partners/country managers and if yes, whether HR services firms understand this unique industry well enough to do justice to it.

Which is why this interview with Charley Polachi, Founder and Managing Partner of Polachi & Company a Sherborn, MA-based executive search firm focused on the venture capital, private equity and technology markets, caught my attention.
Venture guys do deals, but they don’t do staff. They are inherently networked and they do much of the staffing for their portfolio companies, but the fact remains that the glory of the business is not about having great partners or a great CEO; it’s about doing a fabulous deal. We can put structure around the recruiting process. Recruiting a general partner for an existing partnership is like finding one spouse for seven or eight people. Imagine trying to get eight people to agree on whom they want to live with for the rest of their life. Second, we can handle all the approaching and rejecting, and both parties can hold up their heads and be dignified regardless of the outcome. We also track the industry more than the industry tracks itself...

...Generally, there are five key criteria VCs use when they go to hire: pedigree, fit, experience, peer review, and familiarity.

Pedigree is very specific firm by firm. There is a list of schools, in some cases several graduate and undergraduate, and if you didn’t go to both of those, you probably don’t need to apply.

Fit is the intangible dynamic of five meetings, three dinners, and a few bottles of wine. We may get a phone call the next morning saying, “This guy is absolutely awesome. He fits.” And I will ask, “Well, tell me more.” And the partners can’t. They just say he fits. But if he doesn’t fit, they can take half an hour trashing him for the wrong socks. They can go on and on about non-fit, but when I ask what constitutes fit, they can’t articulate it.

With respect to experience, the assessment is made on the least amount of information available as to whether or not you have been successful. You’re a hero or a zero based on guilt or glory by association. I can put 50 names on a whiteboard and sit down with four partners and I’m lucky if I have five names left, because everybody has an opinion and they can shred everyone based on what they know from the public domain.

Peer review is confronting this question in the eleventh hour of the search when you’re about to make an offer. The managing general partner leans over and says, “Well what do you think Greylock will think if we hire this guy?” It’s very similar to evaluating a deal that you really like. If, in the process, you find out that Highland, Matrix and Greylock all passed on it, you think to yourself, “They are smarter than I am, maybe I will pass.” Same thing happens in the hiring process. Their question is: “Is this guy going to help us to be perceived as a top-tier fund, or is hiring him going to push us down to a second-tier fund?”

The fifth point is familiarity. Many times, one of the general partners throws a name on the table at the eleventh hour and it turns out to be the name of a roommate from business school. Often, they wanted to hire this guy all along but couldn’t do it because it would be hard to sell to the partnership. So instead they propose the guy at the end of an exhaustive search, after evaluating 15 or 20 others, and settle on him because they know him. They are trying to minimize the risks. They will opt for someone who has lived with them; they will opt for someone they have backed twice.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

May 20, 2005

A tech VC calls it quits

Howard Anderson's article in Technology Review magazine on why he belives the VC business - at least, the IT-focused part - is no longer a great one is attracting a lot of attention and comments.
Venture capitalists view themselves as pragmatists, but if they think the dynamics of the business haven't changed, they're as self-deluding as the next person.

Ever wonder what we did for a living in early-stage venture funding? I bet you think we spent the day searching for the next insanely great company. But we spent most of our lives in endless meetings with people who were lying to us: scientists who swore that their patents were solid and entrepreneurs who insisted that they had no competition. We lied right back at them: said our money was different.

That was the old way, and it was tons of fun, and we all made too much money. I'll miss it. But now the markets are too rational, and the returns are too small and uncertain. So, time to leave.


Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

How US equity research is parcelled out to India

Stephen Castellano has a post on which elements of US equity research can be outsourced to India:
While I do not think every function within equity research can be outsourced, I believe there are many areas that can. Currently in an analyst’s typical 12-hour work day, there are plenty of “back-office” functions that are left unfinished. If a senior analyst can trade at least one associate for six outsourced staff to cover non-time sensitive and “industry agnostic” work, I think he would gladly do so.

If I were a senior analyst with a staff of four associates, I would replace two of them with 12 dedicated outsourced staff (on an attrition basis, of course). The first thing I would ask my outsourced staff would be to audit my Excel models and think of ways to improve them.

Other tasks I would have them do would all be related to providing background research material like a specialized news clipping service – from creating spreadsheet models and databases, to simply taking and indexing notes on the vast number of conference calls, online presentations, press releases and media reports that concern my industry. If breaking news occurred on a weekend or late at night, it would be nice to know I have 12 associates ready to jump on any instructions to draft a morning note or report.
From what I understand, the folks at OfficeTiger and Irevna have been doing such work for a few years now out of good old Madrad (aka Chennai).

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

May 19, 2005

Microsoft's VC Summit

Jeff Clavier posts on Microsoft's annual meeting with Silicon Valley VCs in their "own backyard":
Every year, Microsoft hosts a VC Summit involving 100+ Microsoft senior executives and 200+ venture capitalists with a stated objective of sharing the strategic roadmap of the company, highlighting the famous "white spaces" in their plan (i.e where they don't plan to invest R&D efforts in the next 12 to 24 months) and creating a unique networking opportunity. The latter is the most obvious benefit of the event, because of the concentration of senior executives (VPs and Corporate VPs) leading the different business lines. Whilst there is a large proportion of Silicon Valley VCs, a number of East Coast and European ones also make it to the Mountain View campus.

Most large technology vendors have VC relationship programs, facilitating access to corporate resources for partnerships, development support and M&A. But the scale at which Microsoft does it is unique. And the fact that they fly 60+ executives from Redmond to meet us here, as opposed to organizing the event in Redmond, is also a sign of commitment to engaging with VCs "where things happen".

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

May 18, 2005

Venture Intelligence India is "Blog of the Day" at BlogStreet

Venture Intelligence India is the Blog of the Day for May 19 at BlogStreet India.

Not sure how this works, but am nevertheless happy to note from their profile information that Venture Intelligence India has a blog rank of 647 (out of 1642).

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

May 14, 2005

US VC firms in India: They came, they saw and now they are investing

The efforts by Silicon Valley Bank and TiE in 2004, in bringing a long line of US VCs to visit India, are bearing fruit in 2005 as actual investments in the country.

Following the Battery Ventures led $15 million third round investment in telecom products firm Tejas Networks comes Nokia Ventures $3 million investment in telecom R&D firm Sasken and Bessemer Venture Partners' $3 million investment in automobile components maker Rico Auto.

Here's hoping that this highly positive trend continues and there is a "trickle down" towards early-stage investments as well.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

New vigor at New Vernon

New Vernon Capital, a New Jersey based fund founded by former Merrill Lynch global executive VP Arshad Zakaria, has stepped up its investments in India. In May, the fund's Mauritus based investment arm, New Vernon Bharat, invested $5.4 million in Gurgaon-based publicly listed automobile components firm Rico Auto Industries Ltd and $7 million in Jagran TV Pvt. Ltd., the broadcasting arm of Kanpur-based publisher Jagran Prakashan.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

May 13, 2005

Panel on VC funding scene in the US

Extracts from a report on a recent panel discussion organized by IBD Network on the US VC funding scene:

* Where venture dollars are going (consensus): Open Source software, wireless, digital media, and consumer-facing technologies; other areas (no consensus): VOIP, on-line business services, Internet 3.0, analytics/business intelligence, enablers for on-demand computing

* Areas to avoid: security, enterprise software; digital media is probably on the cusp of being over-invested

* Do more for less: If a start-up might have commanded $35 million in total funding three years ago, VCs expect them to do it for $20 million today

* Companies that get funding: An experienced, hungry, and patient management team, clear market opportunity, defensible IP, a capital-efficient model, and an unrelenting focus (from CEO on down) on getting the sale


Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

May 12, 2005

Profile of IDFC's new CEO

Businessworld has a profile of Rajiv Lall, the newly appointed CEO of Infrastructure Development Finance Corporation (IDFC) and former Managing Director at Warburg Pincus.



Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Why Shriram Transport Finance attracts PE firms

Chryscapital, CitiGroup and FMO-Netherlands have invested into this Chennai-based listed truck financing firm. Why?

Businessworld explains in a recent article:
The Shriram group has three truck finance companies - Shriram Investments, Shriram Transport Finance and Shriram Overseas Finance. Together, they have a combined equity of Rs 117 crore. Their combined net worth is Rs 360 crore. But the group has managed to raise and lend Rs 6,000 crore. (That's a debt-equity ratio of 1: 17). How?

Neither Thyagarajan nor his three companies fully own the Rs 6,000 crore they have lent out to the trucking sector. Half the funds belong to several others including Citicorp, UTI Bank, ICICI Bank and ABN Amro. The Shriram group merely manages the money. To be precise, it manages Rs 3,000 crore on behalf of eight banks. It lends this money to truckers, collects the interest and principals every month and passes it back to the banks. "This is outsourcing. The Shriram group has been practising it much before the word became popular," says R. Seshasayee, managing director, Ashok Leyland...

...Move down to the lending level and the story gets more interesting. "Every truck that we lend to is a partnership of three parties," declares R. Sridhar, managing director, Shriram Transport Finance. "It comprises Citicorp (or UTI Bank or any other bank), Shriram, and the truck operator." Citicorp puts in 85 per cent, Shriram 5 per cent and the operator brings 10 per cent of the cost of the truck. The modus operandi is simple. Citicorp or UTI Bank would provide the funds. Shriram would identify the truck owners and lend to them. The assets would be booked directly in Citicorp or UTI Bank's books. When the instalment comes in, Shriram takes its share, passing the rest to the respective bank. But Citicorp or UTI Bank still controls the lending decision.

Shriram is also responsible for the collection. In return for its services, Shriram earns a 2-3 per cent fee-based income. This is in addition to the spread it earns on its 5 per cent share in the partnership. The fee may seem small. But it makes sense when the volumes are high. "More importantly, it is higher than the 1.5 per cent to 2 per cent spread that the lender may be earning," says Sridhar. But then, Shriram also bears most of the risk. Shriram follows the concept of 'first loss'. In case of defaults, the first 10 per cent of the loss is borne by Shriram and the balance by Citicorp or UTI Bank. "So far losses have rarely crossed 10 per cent," explains Sridhar.


ChrysCapital’s Ravi Bahl
believes Shriram’s
business model
is unique.









Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

May 01, 2005

"The Swami of Enterprise Software"

SiliconValleyWatcher conducted a short interview with M.R. Rangaswami, co-founder of Sand Hill Group, on the sidelines of Software 2005, Sand Hill's annual enterprise software conference:

[On trends at the show…] The software-as-a-service sessions have been jam packed; that wasn’t the case last year. This makes me wonder if we’ve seen the last of the $1bn software company, whether any software company will ever again reach that level of revenues.

[On startups…] Greg Gianforte’s session on how to bootstrap your company was packed. Next door, the venture funding session was packed too! That is so very typical of Silicon Valley. About 50 percent of the people here at the conference are from startups.

Sand Hill's web site has recently been relaunched as an enterprise software e-zine.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Silicon Valley Bank gets more buzz

I have blogged earlier about the good PR that Silicon Valley Bank's Bangalore office is getting in the media. Well, here's more PR for the office, this time in the Wall Street Journal:
Say you're a Silicon Valley executive assigned to set up an offshore software-development office for your company. You touch down in this high-tech hub and check into a luxury hotel. By morning, you realize you're not sure how to incorporate an Indian company, open a bank account, get legal advice or even find office space.

Not to worry: These days, you can just call Arman Zand.

Mr. Zand, who works here at a unit of Santa Clara, Calif.-based Silicon Valley Bank, enjoys a growing reputation as a go-to guy for start-up companies trying get a foothold in Bangalore, a booming city that has emerged as a global technology hot spot -- albeit one with sporadic power outages and really bad roads.

For Silicon Valley Bank's U.S. clients who are opening offices in Bangalore, the stocky, 27-year-old Mr. Zand and his small staff will do almost anything, from recommending local architects to prescreening vacant office space. They will book hard-to-find hotel rooms for visitors and even lend them cellphones...

...Ash Lilani, Silicon Valley Bank's global head of sales and marketing in Santa Clara, likens Mr. Zand's services to those of a "professional concierge." The services are offered free to U.S. bank clients and even a few promising prospects. The bank may impose a charge for more in-depth, consulting-type jobs in the future. It may also try to offer banking services in India in the years to come. Mr. Lilani, a Bangalore native who forged many of the relationships that drive the bank's Indian business, is formally in charge of the bank's office here, although Mr. Zand and his partner, Kiranbir Nag, run day-to-day operations.

It's not just the India office that's getting all the buzz. The parent firm came in for some ebullient praise recently from August Capital partner David Hornik:
SVB is unquestionably a part of the startup ecosystem in the Bay Area. They work closely with a half dozen companies in which I have invested and with dozens of companies in our portfolio. They appreciate the nature of venture backed startups and provide banking support -- including debt financing, for example -- in a way that acknowledges the nature of startup finances. SVB aren't the only bank in the Bay Area that happily accommodate startups and the unique nature of their profile (namely, their volatility and cash consumption needs) but SVB have made it their mission to court startups and help them find their way through the funding and growth life cycles typical of any successful startup (with all its ups and downs). That support is just one small piece of the ecosystem that I believe distinguishes startup favorable towns from startup hostile locales.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

TiE connections fetch Clearstone $100-M

From a Red Herring article:
Clearstone (Venture Partners) has tapped into the Indian entrepreneur community via venture partner Vish Mishra and TiE, a worldwide entrepreneurship network with a mostly Indian membership. Managing director Jim Armstrong estimated that half of the firm’s deals come through some TiE-related connection.

Given that Clearstone's latest fund size is $200 million, the firm fetched almost $100 million via the TiE network. Wow! That's surely adequate incentive for anyone in the venture community to attend the 2005 edition of TiEcon, the annual conference organized by TiE's Silicon Valley chapter (May 13-14, Santa Clara Convention Center & Westin Hotel, CA).

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.