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May 29, 2007

VC Market

The following companies are seeking capital for starting-up / expanding their operations:

07-05-30-1: Bangalore-based entrepreneur seeks $7 million to set up an MEMS & Micro Sensor Foundry that will cater to applications in sectors like Education, Agriculture and Energy.

07-05-30-2: Delhi-based travel and destination management specializing in corporate incentives and offsites seeks <$1 million.

07-05-30-3: Ranchi, Jharkand-based entrepreneur seeks >$5 million for online tutoring service.

07-05-30-4: Bangalore-based online comparison shopping and classifieds service seeks $1-5 million.

07-05-30-5: Rural TN-based eco friendly products company seeks <$100,000 for manufacturing palm leaf-based ice-cream cups and lids.

For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrepreneur seeking capital? List your company in the Venture Intelligence VC Market using the form here

Top 10 LP lies

Paul Kedrosky has a top 10 list of Limited Partner (LP)lies.
10: We don't invest in first or second funds, see #1

6: Our diligence is very deep (bottomless unless you are about to close and any of my close LP friends are in)

2: We would really like to be in the second close

1: See #10... we don't invest in first or second funds unless Harvard / MIT / Stanford are already in


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Profile of Just Dial founder

The Mint has a profile of Just Dial's Founder & MD V.S.S. Mani. Just Dial, which is backed by SAIF, provides commercial information over telephone and the Internet.
The original investment has now grown into a company valued at $125 million (Rs521 crore) with a revenue in excess of Rs110 crore. Today, Just Dial receives almost 100,000 calls a day (or 36 million calls a year); it has a directory of two million establishments across 40 Indian cities. Some callers are entrepreneurs looking for suppliers or distributors. Others are customers shopping for a product or service—such as a housewife in New Delhi looking for caterers for a party (Just Dial offers an option where it takes down the email of the person and mails him or her a list of establishments offering the product or service). And still others call when they need a number in a hurry. Devottam Sengupta, a Mumbai-based lawyer, says he calls Just Dial when he is out on the road and has forgotten to make a dinner reservation at the restaurant of his choice.

The company has several variants of this service, one is online at www.justdial.com. (Mani claims that the site, which launched in the middle of March, gets over 200,000 page views a day). From May there will also be an SMS (message on mobile phones) service. Just Dial started off with a flat-fee for all establishments it listed and then moved to an advertising-led business model where it charged up to a 3000% premium for featured positions. Last year, Mani moved to a pay-per-lead model that he admits was inspired by Google Inc. Of the two million entries in Just Dial’s database, Mani adds, 60,000 are sponsored— much of the company’s revenue, he says, comes from these and advertisements.

Just Dial’s headquarters is a 20,000 sq. ft office in Mumbai’s Malad (West) area. The company employs 2,650 people across 11 offices. Madhu Nair, a senior executive at Just Dial, has worked with Mani for 11 years. “You won’t know who is the boss and who is the worker,” Nair says. The office has a cafe where most employees eat, and a training room. When the company started off it was a 25 sq. ft office in Mumbai’s Nariman Point area, Mani says. At last count, Just Dial’s offices occupied around 80,000 sq. ft across India.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

May 28, 2007

BS interview with Actis' JM Trivedi

Business Standard has an interview with JM Trivedi, the new head of Actis' Indian operations.
An buyout deals we acquire non-core assets from MNCs/large corporate groups or from families which do not have succession or where the second generation is not interested in running the family business. We partner with entrepreneurial management to grow the business to the next level.

...For growth capital deals, we chalk out the growth sectors first and then the targets. We have a big research team of 18 people in three offices. We do a lot of proactive work like research about the sector and companies before we make our investments.

The healthcare services sector is one of the areas we find interesting for investment. There is huge scope in this sector as the infrastructure is inefficient. The quality of infrastructure is also a problem. The consumer goods sector which is benefiting from favourable demographics and higher disposable surplus also has a huge potential. Many manufacturing sectors where India is emerging as a global hub (for example, the auto component sector) and sectors that are servicing the fast growing infrastructure also have good investment potential.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

"PE deal sizes set to grow": Goldman Sachs India CEO

Economic Times has an interview with L. Brooks Entwistle, Head of Goldman Sachs India.
So far, private equity deals have been small in nature, but we see larger transactions on the horizon as investors start to partner with Indian corporates to realise global ambitions.

...Acquisition financing is a core part of what we do, and we can provide that financing in a number of ways depending on the client and the situation. We commit our balance sheet, we syndicate financing, provide private equity and underwrite public market financing. Very few firms can do all of these things. By getting this mix right, we are delivering superior client service and by adding more value. It is a part of our commitment as a financier, advisor and investor.

How much has Goldman already invested through the private equity route? A year ago, you had put a figure of $1 billion on possible investments.

The $1 billion we referred to early last year was a 2-3 year target and we are already over half the way there in terms of private equity deployed and put to work in India. I think that the pace of investment will only accelerate.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

May 25, 2007

VC Market

The following companies are seeking capital for starting-up / expanding their operations:

07-03-14-1: Chennai-based entrepreneur seeks $1-5 million to launch India’s first online journalism school that will work as an online coach; train technical editors; and build India’s largest social media site for journalism students and professionals.

07-03-14-4: Chennai-based Indian language publishing firm - mostly non-fiction and some fiction - across multiple formats (books, audio books, CD-ROMs, Web, VCDs, DVDs etc.) seeks $1-5 million to expand its operations.

07-03-21-1: Chennai-based gourmet food supplier to high net-worth individuals and cos. seeks $1-5 million


07-03-21-2: Bangalore-based animation, gaming and mobile content developer seeks $1-5 million

07-03-21-3: Hyderabad-based Mobile Solutions firm seeks $1 million


07-04-04-1: Vizag-based provider of Energy Efficiency / energy saving projects for Industry, Power plants, Power distribution companies and municipal corporations seeks over $5 million. The company offers projects on Shared Savings Energy performance contracts. It invests funds for the identified Energy efficiency project and collects its money in installments form the actual savings achieved.


07-04-11-1: Mumbai-based Handicraft Exports company seeks seed funding to market and distribute handicraft products by artisans and craftsman from rural India.


07-04-18-1: Singapore-based interactive digital communications company seeks < $5 million to expand its operations.


07-04-18-2: San Francisco, CA-based On-Demand Sales Management software firm, focused on to Small Businesses and Telecom Companies, seeks < $1 million

07-04-18-3: Bangalore-based list marketing company focused on education market seeks < $10,000


07-04-25-1: Gurgaon-based chain of Paint-Your-Own-Pottery Cafe's, with stores in Gurgaon, Mumbai and Bangalore, seeks $1-5 million.


07-04-25-2:
Chennai-based HR solutions and training firm seeks to raise <$100,000.

07-04-25-3: Chandigarh-based publisher of competitive exam prep magazine seeks to raise <$1 million.

07-04-25-4: Chandigarh-based provider of branding, promotions and marketing for Real Estate projects seeks <$10,000.

07-04-25-5: Mumbai-based provider of CRO services including Clinical Trials Management, Clinical Research Coordination for Principal Investigators, Training to Principal Investigators, Conducting QA & Audits on Trials seeks <$1 million.

07-05-02-1: US-based film producer seeks < $1 million for thriller feature film with an Indian connection.

07-05-02-2: Kolkata-based Facility Management and Contract Cleaning services firm seeks $1-5 million

07-05-02-3: Pune-based high-end IT Training and Staffing solution company seeks over $5 million.

07-05-16-5: Bangalore-based designer and manufacturer of furniture with turnover of $1 million during FY06 seeks to raise $1-5 million.

07-05-16-4: Madhya Pradesh-based manufacturer of bio-diesel and vegetable oils seeks Merger or Joint Venture.

07-05-16-3: Pune-based provider of web-based file sharing and backup software seeks to raise <$1 million.

07-05-16-2: Bangalore-based IT Services firm seeks $1-5 million for promoting its re-use asset meta-data repository software based on open standards (OMG RAS).

07-05-16-1: Gujarat-based real estate developer and construction contractor specializing in Western Indian cities like Mumbai, Pune, Ahemdabad, Surat, Valsad and Vapi seeks to raise $1-5 million.

07-05-23-1: Chennai-based visual simulation-base software products and services company specializing in aviation applications seeks to raise <$100,000.

07-05-23-2: Secunderabad-based publicly-listed software products and services company is seeking $1-5 million via the acquisition/joint venture route.

07-05-23-3: Guwahati-based supermarket retail company is seeking <$1 million for expansion.

07-05-23-4: Bangalore-based maker of nanomaterials and nanotech-based applications seeks $1-5 million.

07-05-23-5: Chennai-based Shipping & Logistics company seeks to raise $1-5 million.

For more information about any of these companies, investors - who are subscribers to the Venture Intelligence service - can email the company code to vcmarket@ventureintelligence.in. To learn about our subscription services for investors, please visit our web site.

Are you an entrepreneur seeking capital? List your company in the Venture Intelligence VC Market using the form here

May 24, 2007

Dotcom IPOs are back - on the AIM that is

PEHub and VentureBeat have reported how loss-making video search web site Blinkx has raised $50 million via an IPO on the London AIM exchange.

PEHub also points to an article on AIM listing by Jeffrey R. Houle a senior partner with law firm Greenberg Traurig LLP. (Related link: See earlier post linking to a downloadable primer on AIM listing by Indian law firm King Stubb & Kasiva.)
Depending on the amount of due diligence required, the admission process to join AIM lasts typically only three to four months. Costs associated with joining include AIM’s admission fees, currently £4,340 ($8,500), as well as commissions and fees for the various required advisors. Generally, fees total less than 10% of the amount raised.

...The AIM model appears to be working. According to Thomson Financial (publisher of VCJ), there were more public offerings on AIM in 2006 than there were at the exchanges of New York and Hong Kong—including a number of IPOs by companies in the environmental technology and software and computer networking sectors. Contributing to this trend is the perception of many high-tech entrepreneurs that European investors are less skeptical about high-tech startups than are North American investors because they were not as negatively impacted by the bursting of the dot-com bubble.

Post-listing, AIM’s less burdensome reporting requirements are also considered an advantage to potential listers. Beyond the cost and time considerations associated with reporting requirements under U.S. law, the ability to report financial results every six months can be an advantage. The additional time gives a startup that may have an erratic revenue stream considerably more breathing room that it would have under other reporting regimes. From the perspective of a fledgling company, the emphasis on growth rather than reporting and governance may make AIM a good market in which to mature.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

13-year-old CEO steals show at TiECon'07

VentureBeat has an interesting video interview with the 13-year old Anshul Samar, Founder and CEO of Elementeo, at this year's TiECon. Elementeo has developed a "combat" card game which aims to help make learning Chemistry more interactive and fun. Samar was pitching at TiECon to raise a $100,000 seed round - with an aim to hit $1 million in revenues before he graduates from eight grade in 2008! (The VentureBeat interview was so popular that it crashed the blog! :-)

Here is another TiECon video interview with Samar.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

May 23, 2007

Adveq to launch Asia-focused Fund of Funds in '08

AltAssets has an interview with André P Jaeggi, Managing Director of Adveq, a Switzerland-based Fund-of-Funds, in which he talks about the firm's increasing focus on Asia.
While we have always looked at Asia, to date we have had only a very limited amount of capital available for investments in the region. With both the Adveq Europe and the Adveq Technology programmes we have had the option to invest up to ten per cent outside of the core region. This exposure has allowed us on the one hand to get a better understanding of the markets in Asia, and on the other hand to respond to a demand from our clients who have increasingly been asking for more exposure to Asia.

In addition to our direct involvement in Asia we have also had indirect exposure to the region via some of the US managers in our technology fund portfolio.

Our first Asian fund of funds was not widely marketed; it was something we did with our existing investors. The second one, which will launch in 2008, will obviously be marketed much wider and is expected to be more sizable. Thanks to the fact that we already have a foot in the door, we should be able to increase our placement capacity with some of the very best Asian managers. Our Asian portfolio will consist of about 50 per cent buy-outs, with the remainder split between development capital, and venture and special situations.'

...The fund of funds market has become quite an open market. When we started our business there were about 60 or 70 funds of funds in the world. Today there are more than 150. There is still space for new funds of funds targeting very specific markets - geographies or industry sectors.'

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

May 21, 2007

Why doing R&D in Bangalore is becoming dumb and dumber

At least for start-ups - including VC-backed ones.

For over a year now, entrepreneur friends who are doing R&D for their product companies out of Bangalore have been pointing out how thankless it has become to hire and retain people there. Now, with a well funded start-up like Riya.com pulling the plug on their IDC, Bangalore seems ready to be officially declare a 100% MNCs-only zone.

Riya.com's CEO Munjal Shah has sparked off a very interesting discussion on this topic with his blog post.
Unlike Silicon Valley, however, the employees in India didn’t value stock options as much as folks do in Silicon valley. It was understandable, however, given they had never seen a friend hit it big or seen the Google like wealth effects which occur every 5 years in the Valley. Hence, they argued more for cash compensation. This combined with the fact that we were going after the best in Bangalore (the most impacted city in India) increased our exposure to wage inflation.

Bangalore wages have just been growing like crazy. To give you an example, there is an employee of ours who took the first 5 years of his career to get from 1% to 10% of his equivalent US counterpart. He then jumped from 10% to 20% of his US counterpart in the next 1 year. During his time with us (less than 2 years) he jumped to 55% of the US wage. In the next few months we would have had to move him to 75% just to “keep him at market.”

Keep in mind that Riya are at the leading edge of this trend. We tend to only hire folks from IIT or other top schools. We tend to only hire the smartest folks from these schools. We only hire in Bangalore (just too hard to have three offices). We tend to only hire folks with a lot of experience. These are all characteristics that are critical for technology startups, but not necessarily for a big company like IBM or a services company like Infosys who can afford to train new graduates. I do believe that other startups in Bangalore will see the same issue in 12-24 months.

Extracts from the comments section:
Whatever has happened with Riya is not a new phenomenon...many other Product companies with their R&D centers in India and also startups with distributed "core" teams have faced the similar challenges and taken tough decisions Eg Pervasive, Apple, Accelrys.

Personally,I have decided that I'll never start a people intensive business in India. Hiring people is a pain - apart from the hiring pain, you have the salary pain and the infrastructure pain. And yes the job market does not understand stock options, but you don't have to go after the general job market, either. There are smart, ambitious and stock-option-friendly individuals here; they don't have IIT degrees, but they meet in shady bars and talk geek over kingfisher beers. I think I'll go find them now.


The question for start-ups is will the Bangalore disease - skyrocketing salary expectations, nightmarish traffic and other infrastructure bottlenecks, etc. - start inflicting start-ups in other cities as well?

The benefeciaries of this trend could be outsourced product development companies like Persistent Systems, GlobalLogic, etc.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

May 14, 2007

"Emerging markets PE to fetch 5.4% higher returns over US buyouts": LP Survey

The Emerging Markets Private Equity Association has released the exectuive summary of its 2007 Survey of Limited Partner Interest.

Some highlights of the survey's findings:

• 52% of LPs said that returns from their current emerging markets commitments met or surpassed expectations, a dramatic change from the 25% of LPs who thought similarly in EMPEA’s 2006 Survey. In 2007, only 15% thought returns fell short of expectations, versus 42% who reported such disappointment in 2006.

• LPs expect their current emerging market commitments to produce returns of 22.6%, on average—a 5.4% premium over the 17.2% return expected from their U.S. buyout commitments. 63% of LPs said emerging markets private equity funds would still be delivering substantially higher returns than developed markets in five years’ time.

• 78% of LPs surveyed in 2007 expect that emerging markets will grow as a percentage of their private equity commitments over the next 3–5 years, versus 65% of respondents in 2006, and only 45% in 2004.

• LPs indicated plans to ramp up investments across all emerging markets over the next 5 years. Asia and Central and Eastern Europe/Russia are the destination markets of greatest interest over the medium term, with 89% of LPs expecting to invest in Asia by 2012, and 87% in CEE/Russia by 2012.

• Of LPs with no experience in these regions, the Survey found that 70% planned to invest in Asia by 2012. LPs also think that within Asia, China and India will continue to dominate. 62% agreed or strongly agreed that these two markets would dominate emerging markets private equity in 5 years’ time.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Air Deccan CEO interview to The Mint

The Mint has an interview with Air Deccan's Founder & CEO, Captain G.R. Gopinath, on his company's plans to raise a large amount of Private Equity funding at a time when the pioneering low-cost airline is mounting losses.
We said very clearly we would be in profit in 2008. We foresaw that, because of a temporary, sudden burst of so many aircraft from so many airlines, there would be some amount of bleeding, especially on the trunk routes. Now we have redeployed our aircraft in a different manner, where 80% of our aircraft are on the non-metro routes, and we think we could be in profit earlier.

...It’s not a question of passengers not wanting to pay. Today, the yield of SpiceJet, which has much smaller operations than ours, is about the same as ours, and our costs are about half of Jet Airways. Four years ago, when Air Deccan was started, there was a cartel between Jet Airways, Indian Airlines and Air Sahara; it cost Rs12,200 to fly between Bangalore and Delhi. Today, if I get Rs4,900, I am in profit. If I am making a profit at under Rs5,000, compared to four years ago when salaries were half, fuel prices were a third, what does it show? It shows that it is a different business model, a more robust business model. We need to get another Rs500-600 more in some sectors, Rs300-400 more in other sectors. The problem is that we are not getting (that) for various reasons.

...When a customer goes to a website and sees that Indian Airlines is dropping its fare below mine, obviously, even though he may have an emotional attachment to Air Deccan, he will go and buy the Indian Airlines ticket. There is definitely excess capacity in the market. So you need to have two things: have the same price at a higher load factor (the number of seats occupied in a plane in percentage terms), or get higher prices. That is a factor of a societal shift happening in the Indian demographic... of the customer shifting to air travel.

It will take six-seven years: it’s a J-curve (at some point passenger traffic will soar straight up). But, when that happens, you have to be able to exploit it.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Globalization through acquisitions: Pharma cos. show the way

Habil Khorakiwala, Chairman, Wockhardt Group has an article in the Economic Times on how Indian pharmaceuticals are leading the way in creating global operations via the inorganic route.
The transition from being entirely domestic-centric to sprawling multinational corporations has taken merely a decade. Consider some of these facts. During the past couple of years, the Indian pharmaceutical companies were involved in almost two billion dollars worth of outbound M&A transactions, acquiring incremental sales of nearly a billion dollars.

... Since 2000, Indian pharmaceutical companies did 62 global acquisitions, which accounts for 20% of all M&As by Indian corporates. The pharmaceutical sector ranks next to only IT/ BPO sector in the number of transactions, and it has been responsible for setting the pace, starting as early as the nineties

... there is a fundamental difference in the M&A trend in other sectors compared to the pharma sector. In other sectors like steel, aluminium, automobile and software a handful of leading companies have been aggressively going for acquisitions. When it comes to the pharmaceutical sector, the acquisition urge is not limited to a few leaders but it is an all-pervasive trend characterising the entire industry. Some of the larger ones like Ranbaxy, Wockhardt, Dr Reddy’s, Nicholas Piramal, Sun Pharmaceuticals, etc, have each done four or more global transactions, gaining leadership position in many of these markets.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Do buyout firms need operating partners?

Knowledge@Wharton has an interesting article on whether buyout firms hiring operating partners "with experience running plants and facilities, and rolodexes full of industry contacts" will boost their higher returns.

A "pro" view:
Peter Clare, managing director of The Carlyle Group and another conference panelist, says that with increased competition for deals bidding up valuations, operational improvements are more important than ever for companies hoping to continue to deliver above average returns for their private equity investors.

"We've developed both in-house and loose networks of operations executives who will participate in due diligence and may end up running a company or serving as an executive chairman," Clare says. "Industry expertise helps us set the plan accurately and focuses [us] on what is achievable in the shortest amount of time possible given the competitiveness of our business today. It is fundamental to what we all do. It's a big reason for our ability to generate returns that are above overall equity markets."

An "anti" view:
Kevin Landry, chief executive of TA Associates, is not a believer in operating partners. "We don't have [them]," he says. "We expect everyone here to be a complete player." Partners at TA follow the more traditional private equity design in which accountability for results lies with the partners who find the deal, conduct the due diligence, structure the transaction and serve on the board. "If a company becomes a problem, then it's his or her problem. We might bring in some people [from] industry who can be helpful on the board, and maybe even active board members, but we're not going to have people here that we would call operating partners."

Landry says that if a target company's management needs so much help that a financial sponsor needs to bring in an operating partner, he steers clear of that company. "We're trying to invest in good companies. If a company needs an operating partner, then there's something wrong."

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

May 12, 2007

Paco and Witco

V.P.Harris, Managing Director of Chennai-based speciality retailer Witco, sent me a note with some interesting takeaways and reactions to the recent presentation made by retail guru Paco Underhill in Bangalore.

Some Extracts:

Paco: Mirrors – For the younger generation the “mobile” is a fashion accessory and not just a communication device. They need mirrors to check out “the look”

Harris: At Witco, we have found even 40 + Maritian’s (Men) like to check out ‘’their look” with the new port folio in hand. So, mirrors are definitely not for clothing, footwear, cosmetics, jewellery alone.

Paco: Self-Service need not be for self-service stores alone. Almost any store can be designed for partial selfservice.

Harris: At Witco we have added shelf talkers, specs sheets, feature highlights, navigational aids – all in relatively small stores to address this. After all you cannot staff the store based on the needs of some 30 minutes a day when you may have customer’s out numbering the store team. So, this is an absolute necessessity for us!

Paco: How come Supermarket ailes are all of the same width? The very high traffic ones need to be wider.

A drug store increased sales by 18% by just handing over baskets to people who have more than two three items in hand.

Harris: Landmark book stores always do that for me! Many supermarkets, departmental stores do that here in India.
You can download the full article here

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Why captive outsourcing centers are "imploding"

Basab Pradhan, former head of sales at Infosys, has his own take on the recent Forrestor Research report on how captive centers of MNCs are underperforming their third-party outsourcing peers.
...The real reason why captives fail is because IT organizations don’t know how to make distributed teams work. Here are a few things you will find in how IT organizations work with captives:

1. They don’t have and don’t realize the need for stronger life cycle processes for distributed development.

2. Organization models put all decision making in headquarters and none in the captive.

3. Dull, repetitive tasks like testing or support that nobody in headquarters wants to do are the first to be shipped out.

4. Average experience levels in captives will be lower. Just the nature of the Indian market. Companies won’t invest in adequate training and then arrive at incorrect conclusions that employees in the captive don’t “get” the business side of things.

5. Small things matter. Like when conference calls are scheduled. If they are always during work hours at headquarters but outside of work hours in Bangalore, there’s a sign of dysfunction right there.

6. Headcount at the captive keeps growing, but the organization model is such that headcount at headquarters never comes down. The business case goes phut.


I also enjoyed the following comment about the report (at CIO Insight, via Basab's post):
This article seems like so many others that Ziff-Davis dangles: sensational title, thought-provoking concept/theme, but, you've gotta pay $280 for an 18-page white paper that never goes deep enough into detail or facts - true 'research' - to draw any sort of conclusion...

...The author calls the majority of companies who've chosen the 'captive' strategy to be 'flawed' because "it is driven by personal reasons such as an expatriate employee's urge to go back to India for family reasons." vs. key business fundamentals. That's like comparing reasons for deciding on which restaurant to go to dinner with reasons for purchasing a yacht. There's no relevant connection whatsoever... Who cares? What do those personal reasons have to do with the key business reasons???

...In my experience, the most logical arrangement would be a combination/integration strategy, where part of the function's operations are purely outsourced, part of them (the critical IP, secured data control and branding issues/functions) are 'captively' outsourced, and part of them are quite frankly 'in-sourced'. It's up to each organization to determine where either the "sweet spots" or "sensitive spots" in each sub-function of the organization are (IT Help Desk, Desktop Support, Data Center Operations, Software Application Development, Systems Integration, etc.) but having an integrated team consisting of a US-based 'presence' manager, a captive outsourced person or team, and a pure-play outsourced team working in harmony as a seamless unit would seem to be optimum.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Social Networking sites: The VC View

Alok Mittal of Canaan Partners and Avnish Bajaj of Matrix Partners India have triggered off an interesting discussion at VentureWoods on Social Networking start-ups in the Indian context.

Extract from Alok's post:
..some social networks will fly in India, IMHO. I believe these will be driven by specific tangible benefits, rather than being “hangouts”. I will afford a couple of examples. The first one is referral based recruitments. The Indian e-recruitment technology is 10 years old. Global sites like linkedin, simplyhired, jobster and so on have demonstrated how social networking can be tied into recruiting very effectively. The Indian model is going to be different from these, and I believe there is a significant market there.

...The second example that I would afford is networks for buying services (I am yet to see a good model around product ecommerce) — services are intangible, and often very fragmented. Think of hiring a printer for printing visiting cards. These selections are essentially social in nature, and I believe translating them to the web will be productive.

I am sure there are a lot more examples — social internet is waiting to be discovered in India. And like any other business, the customer is a good place to start from.


Extract from Avnish's comment:
4. What I don’t think works (FOR NOW) is pure SN style models which don’t have a “pull” element. Key is that this is based on current levels and type (non-broadband) of Internet penetration. This will change in 3-5 years

5. So key is to build “made for india” models rather than “me too” models like youtube and myspace. Key is to ask yourself the question as to why in an English speaking country, the global english site is not good enough already? Key example would be that Orkut is more successful in India than any of the Indian SN sites

6. It’s sites which don’t have this “India” filter that I don’t think will work. Having started Baazee and funded Seventymm, I am clearly not one to bag the “me too”’s without thinking - the question is whether the model needs and has a unique to India flavor

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

May 01, 2007

Gaurav Dalmia on the Real Estate correction

Business Standard has an interview with Gaurav Dalmia, Chairman of Landmark Land Holdings, on the correction in various pockets of the Indian Real Estate market.

Instead of maximising returns from one project, developers were looking at moving from one project to the other. As cash was constantly required, many of them sold their projects too early. I am not sure if the developers believe in their own projects as they should.

If you look at the development of the Indian real estate market, DLF made its money in Gurgaon working there patiently for 20 years. The Hiranandanis made their money in one suburb of Mumbai over 15-20 years. They maximised the value of each project before moving on to another one.

You can make a couple of billion dollars by working at just a few projects. Large projects take time and require solid project management skills. If you are doing large projects, you must be prepared to go through a downturn. The 20 million square feet Canary Wharf project in London was conceptualised in 1987 and is still being done. Developers in India think such projects are easy. They aren’t.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

More Middle East money flowing to India

Economic Times article on how more and more middle east based banks and financial institutions are investing in India.
Corporate India will have a new set of deep-pocket investors eyeing investments in both equity as well as debt in India. With oil prices on a high for quite sometime now, investors from the Middle East are increasingly turning their focus on countries like India. Already Rana Talwar’s Sabre Capital, along with Abraaj Capital, has set up a $300-million fund to invest in India.

Now, BankMuscat, the largest bank in Oman, is looking at a whole lot of initiatives, including setting up a private equity fund, an Islamic fund which is Shariah-compliant and would also look at helping Indian corporates to raise money through Sukuk — Islamic bonds.

Till now, a host of small Shariah-compliant funds from the UAE and Saudi Arabia have invested in the Indian markets. These funds do not invest in liquor, tobacco and banking stocks. Also, these funds will have to look at how companies are leveraged as high debt-equity ratio may not be acceptable. Many of the smaller funds have been investing in oil stocks. However, the entry of larger funds could change the dynamics and could also bring in more investments.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

How will Indian outsourcing cos. impact Open Source software?

Bill Burnham has a post on how Indian IT outsourcing companies are promoting open source software among their enterprise customers and, in the process, also taking away some service revenues away from open source software firms.
...it would appear that Indian outsourcers are one of Open Source's best friends. Not only are they driving adoption of the products into enterprises (both overtly and somewhat covertly), but because everyone is hiring them as "experts", their endorsement of open source platforms is likely to start swaying the minds of a lot of internal IT types ("If it's good enough for the experts, it's good enough for us").

I was pretty much set on this opinion until I talked to an entrepreneur friend of mind who was telling me about his own set-up. He has outsourced all of his IT to India (it's interesting to note that he has also outsourced his CFO to India, his customer service to the Philippines, and his manufacturing to China). For his CRM system, his outsourcer recommended a well known Open Source CRM platform and even offered to customize it for his needs. This would seem to prove the above point in spades expect for the fact that in addition to the customization work the outsourcer offered to do all regular maintenance and support for $10/hour. This meant that my friend had no need to buy a support contract from the Open Source CRM company which means, being a cash poor entrepreneur, he didn't.

Now the idea of a 3rd party providing open source support is not a new one and is often held out as a convenient Open Source boogie man. For example, Oracle has made a big deal out of its own efforts to offer 3rd party support for Red Hat's Linux distribution. However, big firm's such as Oracle are never going to be the low cost providers of support and are not likely to view 3rd party support as a core business. That's not true for the outsourcer's though. They are definitely focused on being cost competitive. What's more, support services have the potential to become a critical component of their business models as it gives them a means to not only generate more stable non-project based revenue streams, but also a persistent connection to their customers. After all, what better way to amortize their up-front training costs and ensure continuing proficiency than to have their own troops continue to support Open Source products once they are deployed.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.