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April 30, 2008

Saudi Arabia to launch $5.3 B sovereign wealth fund

Saudi Arabia, the bid daddy of the oil kingdoms, has finally decided that it too needs to get on to the SWF bandwagon. However, according to this Financial Times article, it's starting with a small-sized exposure. Maybe, it's waiting for oil to hit $ (fill_in-your-favorite-big-3-digit-number-here), before it expands the size.
Saudi Arabia’s Public Investment Fund is in the “final stages” of launching the kingdom’s first sovereign wealth fund. But its early financial commitment will disappoint those hoping for another megafund. Mansour Al-Maiman, secretary- general of the internally focused PIF, said an investment company wholly owned by PIF would be set up with initial capital of SR20bn ($5.3bn). The move represents Riyadh’s first tentative foray into this class of state-owned investment tool and follows months of debate at the highest level.

...“The proposed investment company’s strategy...would, on a general and basic level, be similar to that of a number of existing portfolio investors – for example Norway’s GPF [Government Pension Fund] or Singapore’s GIC [Government of Singapore Investment Corporation] – while taking into account the specific requirements of Saudi Arabia,” Mr Maiman said.

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.

April 27, 2008

Has the time for electric vehicles arrived?

Businessworld has a cover story on Bangalore-based electric car maker Reva which had recently raised $20 million from Draper Fisher Jurveston and the Global Environment Fund.
Although only 2,500 Revas have been sold since 2001, it is already the world’s largest selling EV. In a few months, this little-known company will begin the single most ambitious period of its existence. In FY 2008 alone, RECC plans to sell between 3,000 and 5,000 cars, and in 2009, 12,000. RECC also wants to expand sales to 10 and 25 cities by end-2008 and end-2009, respectively. Currently, it sells in six cities.

...Ironically, even as the world seeks fortunes in India, RECC has had to go abroad to find success. India accounts for just 33 per cent of RECC’s sales, while 21 countries such as the UK, Norway, Japan and Sri Lanka make up the rest. The UK is the largest of these markets. RECC sold its first Reva here in 2004. Since then, 1,000 G-wizs, as the Reva is called in Britain, have been bought. Part of the G-wiz’s success is due to many government-led incentives. Also, the car is sold through the website of RECC’s UK partner GoinGreen to keep marketing costs down. Online, customers can request a test drive, and even customise their order.

...With so many incentives being offered around the world, it’s no surprise that the EV industry is growing rapidly. Several large car makers, such as Japan’s Mitsubishi, have active programmes to develop EVs. There are also a few Indian companies, such as the Gujarat-based Fieldmarshal group, in the fray. Last October, Fieldmarshal joined hands with Australian firm Farnow Technologies to make up to 50,000 electric three-wheelers and cars each year. That’s a big bet because, today, Fieldmarshal only produces 450 auto-rickshaws per year.

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.

April 24, 2008

Shake-out in Asian hedge funds?

Industry executives at the recent Reuters Hedge Funds and Private Equity Summit in Hong Kong forecast a period of consolidation in Asian hedge funds, according to a Retuers report on the event.
"Investors are demanding more of managers in regards to operational infrastructure, compliance, risk management ... you have to have a critical mass of assets under management to be able to pay for all of that," said Eugene Kim, chief investment officer of $250 million hedge fund manager Tribridge Investment Partners. "A lot of marginal managers who have not been able to make it to the next level in terms of fundraising, in terms of size, are either going to have to merge or get bought out or shut down."

...Ferenc Sanderson, senior research analyst with Reuters-owned fund information supplier Lipper, predicted the hedge fund attrition rate in Asia would be more than twice the global average of about 8 percent.

...Asian hedge funds were hit hard by tumbling stocks, partly because equity-focused long/short funds are overrepresented compared to more developed markets. While these funds are supposed to profit in both rising and falling markets because they can sell stocks short, in many cases they are long-biased, preferring to buy and hold shares.

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.

April 22, 2008

TIE-Canaan Entrepreneurial Challenge 2008 opens for entries

Extracts from the Press Release:

Canaan Partners and TIE come together to launch the second edition of the TIE-Canaan Entrepreneurial Challenge


Canaan Partners and TIE, today announced the launch of the TIE-Canaan Entrepreneurial Challenge, a business plan competition open to early stage entrepreneurs from across the country.

Entrepreneurs from across India will have an opportunity to compete for business mentoring, access to early stage investors and recognition in the second edition of this unique business-plan contest.

To compete in the challenge, participants will need to download and submit their applications from http://www.tienewdelhi.org/canaan/. The deadline for submission of the business plan applications is May 12, 2008.

Eight teams will be shortlisted based on their potential scale of the business, the strength of the team and sustainable differentiation in the business model. These shortlisted applicants will be invited to participate in the final round in the month of June which will see them presenting their plans and ideas in detail to an eminent jury of the country’s leading entrepreneurs and corporate heads. At this stage the shortlisted participants will gain valuable inputs and be mentored on their plans by these jury members.

This year’s jury will include Pramod Bhasin (CEO & President, Genpact), Raman Roy (Chairman, Quatrro BPO Solutions), Saurabh Srivastava (President, TIE Delhi), Sanjeev Bikhchandani (co-founder and CEO of Naukri.com), Mahesh Murthy (Partner, Seedfund) and Alok Mittal (Managing Director, Canaan Partners India).

April 21, 2008

Anil Ahuja on Power Sector investments

Moneycontrol.com has an interview with Anil Ahuja of 3i, which recently closed a $1.2 billion India Infrastructure fund.

I think both the P/E and the public market will be very critical to finance the power requirement and if you look at the overall numbers for power in India, they are just crazy. You have about 440,000 MW shortfall if some of the numbers are to be believed, it is a USD 140 billion investment. Even with a debt to equity ratio of 4:1, you are still talking USD 30 billion of equity that could take up every single fund that has been announced in India plus a large chunk out of the public markets and the IPO markets and still remain insufficient. That is the equity side.

The ECB market in any case will only be able to support the debt aspect, which we have already; if you look at these numbers you are talking about very large debt commitments also. So I think the demand-supply for capital in the power sector will remain skewed for sometime and the demand for capital will far outstrip the supply of capital.

...I think it will be pretty simple for you to figure out that almost everybody who is in the market is discussing with large credible private equity firms today because they need pre-IPO anchor. So I think the demand is pretty strong for capital write down.

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.

April 20, 2008

George Soros' "Superbubble Bursting" theory?

New York Times has an article on the famed hedge fund manager and his latest theory warning that the financial pain, triggered by the US sub-prime mortgage crisis, has only just begun.
“I consider this the biggest financial crisis of my lifetime,” Mr. Soros said during an interview Monday in his office overlooking Central Park. A “superbubble” that has been swelling for a quarter of a century is finally bursting, he said.

...Mr. Soros began meeting with hedge fund managers like John Paulson, who was early to predict a crisis in the housing market. He interrogated his portfolio managers and external hedge funds that manage his fund’s money, and he took on new positions to hedge where they might have gone wrong. His last-minute strategies contributed to a 32 percent return — or roughly $4 billion for the year.

The more Mr. Soros learned about the crisis, the more certain he became that he should rebroadcast his theories. In the book, Mr. Soros, a fierce critic of the Bush administration, faults regulators for allowing the buildup of the housing and mortgage bubbles. He envisions a time, not so distant, when the dollar is no longer the world’s main currency and people will have a harder time borrowing money.

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.

April 18, 2008

Audio interview with CEO of Futurebazaar.com

Kiruba Shankar has an audio interview with Sankarson Banerjee, CEO, Futurebazaar.com, which recently announced funding from Kleiner Perkins and Sherpalo Ventures.

One of the interesting points he makes is that while 75% of the traffic to the site is from metros, over 52% of the orders are from non-metros. Banerjee feels this is due to the fact that people in non-metros do not have as much access to organized retail.

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.

April 15, 2008

VCs taking external help to walk the talk on value-add

The Mint has an article on how VC firms are signing up advisors who can add value to their portfolio companies.

Helion has hired Dhruv Prakash, a former human resources manager at Hewlett-Packard Development Co. Lp., to address another big issue faced by start-ups: recruitment and training. In addition, the firm shares other resources with its portfolio companies. For example, its chief financial officer Natarajan Ranganathan holds a session with all its companies every two months to discuss issues faced by each and share bestpractices.

These initiatives can be put down to a few key factors. One, as VCs with finance and technology backgrounds get into new, unfamiliar sectors such as clean tech, retail or health care, they need domain expertise. For VCs entering India, it could be the need to familiarize themselves with the market quickly. DFJ, for example, has in-house analysts focused on clean tech at its Menlo Park, California offices, but does not have similar resources here.

Two, as the portfolio grows, VCs will be stretched to be very hands-on with each company. For example, both Helion and Erasmic, which have four partners each who can take board seats, fund at least a dozen companies, meaning each partner will be on the board of at least three firms it funds. The partner-to-company ratio is similar for firms such as Nexus India Capital, NEA IndoUS Ventures and Matrix Partners India, all of which have dedicated funds to invest over the next few years. “You can use your VC contacts to help the company with the first few customers, perhaps, but companies have to go beyond that, and it is very difficult without external support,” says Prashanth Prakash, managing partner, Erasmic Ventures.


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.

April 14, 2008

So, you want to be a VC...

Business Today has an article providing career advice for wannabe VCs.
So, what does it take to be a successful venturepreneur? First and foremost, a word of caution from Bajaj: “Enter the industry recognising where you want to be. Don’t enter with rose-tinted glasses. If you are a failure as an investor, you lose all your credibility.

You should evaluate your readiness for this job—do you have the ability and the networking skills?” The latter resonates as the requisite trait both according to the existing players as well as recruiters as “a good network in the industry makes a big difference”. Sanjiv Kaul, Managing Director, ChrysCapital India, agrees: “Networking is extremely important here.”

Says E. Balaji, COO, Ma Foi Management Consultants: “We have seen top management leaders from large companies taking up the role of a partner as they have had the experience of leading large operations, closing large international deals, turning around businesses, handling teams, developing market strategies, organising funds, handling investor relations and balancing value creation from both shortand long-term perspectives—all at the same 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.

Coffee Entrepreneurs

Business Today has an article on India's Coffee industry entrepreneurs wit turnovers ranging from Rs. 6 crores to Rs. 500 crores.
Till they came along, India’s 200,000-plus coffee growers largely depended on the volatile export market, where margins were thin and the risks immense. Even today, only about 30 per cent of India’s total production of 300,000 tonne per annum is consumed domestically, but in value terms, the Indian market, at Rs 2,000 crore, now equals the export market.

...Coffee Day was among the top three exporters of green coffee beans in the mid-’90s, but has since moved down the ladder—deliberately. Siddhartha realised that rather than bet on the volatile global markets, he was better off investing his resources on the vast but virtually untapped Indian market. Incidentally, all the coffee served at Coffee Day outlets comes from the 10,000 acres of plantations that Siddhartha owns. “This gives us control over quality from the bean stage itself and makes value addition easier,” Venu Madhav says.

...He opened his first cafĂ© at a time when Bangalore was on the cusp of a transformation from a pensioners’ paradise to an IT and lifestyle haven. It was a gamble— Coffee Day was entering a market that had been traditionally dominated by tea—but it paid off. Between 1998 and 2008, domestic coffee consumption went up from 55,000 tonnes to 90,000 tonnes per annum...Siddhartha proudly points out that his chain serves more than 600,000 customers per day. “We serve the finest Indian coffee. Before 1994, good coffee was available in only a few places. Today, Coffee Day has operations in 100 cities and towns across India,” he adds.

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.

April 10, 2008

Profile of Rural IT-focused Comat Tech

Outlook Business has a profile of the Avigo Capital- and Intel Capital-backed Comat Technologies which is taking technology to rural India.
According to Raghavan, the company invests Rs 1-1.5 lakh to set up an RBC—which means breakeven takes less than a few months! And that’s why the company is already making profits. "We should end the year with a couple of million dollars," is all Raghavan is willing to say on the subject. Future expansion is likely to be funded by a stake sale to VCs (Hughes and Intel Capital reportedly invested $5.5 million in the first round and negotiations are on for the second round of funding).

Comat plans to expand its portfolio of services. It recently tied up with insurance major LIC to offer rural insurance services. A similar tie-up has also been finalised with ICICI Lombard for general insurance. According to Pranav Prashad, Head, Rural & Agriculture business, ICICI Lombard: "The tie-up with Comat ensures a reach and at a cost of delivery that is impossible to replicate otherwise." While Comat is not the lone player in the e-governance space, it scores over bigger names like Reliance Infocomm, Wipro-Srei and Priya Informatics because of its business model.

But things haven’t been easy. The foremost challenge has been dealing with the government, which is a slow mover at the best of times. There are also challenges at the local level. "There have been instances of middlemen instigating villagers against our employees; fires partially destroyed a couple of our RBCs; on occasion we have to deal with a local politician... you learn to live with these things," says Raghavan philosophically.
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.

April 06, 2008

Nasdaq to list SPACs

The Nasdaq has recently announced that it will permit special purpose acquisition companies SPACs to list on its market. SPACs have become increasingly popular vehicles to raise capital in the US - including by LBO firms which are unable to raise debt for acquisitions in the current environment.

Given that recent years have seen several India focused SPACs launched on the American Stock Exchange and the London AIM, Nasdaq's move should interest investors from here as well.

Extract from IDD Magazine's article on the Nasdaq move:
High profile financiers like Bruce Wasserstein, Joseph Perella, Thomas Hicks, Nelson Peltz and Ronald Perelman have all formed new blank check companies as SPACs are also called. Besides the cachet these marquee names carry in the financial world, SPACs accounted for 25% of IPOs in 2007 and made up more than $10 billion of issuance volume. Nowhere was the new issues action hotter than on the American Stock Exchange where 50 blank check companies went public.

...The AMEX is, without a doubt, the 800-pound gorilla in US exchange SPAC offerings. It was the first major exchange to pioneer the public listing of blank check companies in the US. In 2006, the AMEX listed its first blank check company, Community Bankers Acquisition, and followed a year later with its second listing, Shanghai Century Acquisition.

Despite its strong market position some SPACs that have executed acquisitions have switched their listings over from the AMEX to the Nasdaq because of its highly liquid electronic trading platform and strong brand name. The Nasdaq lists 3,200 companies and handles trades of around 2 billion shares daily.

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 Professionals turning Angel Investors"

Business Today has an article profiling some successful professionals who have turned angel investors.
All of them are professionals who’ve tasted success in their chosen fields. But bitten by a bug, or perhaps, just chasing the joy and excitement of playing midwife and mentor to start-up companies, they have all ventured out of their comfort zones. For some, like Ranjan Kapur, Country Manager, India, WPP, it’s the opportunity to spar with young minds engaged in ideation and channel the creative outflows, while for others, such as Praveen Chakravarty, COO & Acting Head of Equity Research, BNP Paribas India, it’s the adrenaline rush of taking risks and earning rewards. Of course, money is a big motivator. The six angels featured here are not professional venture capitalists or angel investors—we have purposely excluded members of the Band of Angels and other such individuals from this report. But all of them do precisely the same thing— financing and mentoring start-ups with passion.

...“Getting involved in start-ups gives me a high and you need to have a passion for it as it takes a huge toll on your time,” (Chakravarty) says. Plus, angel investors need to have a lot of gumption. “Only one out of 15 ideas will work and justify your faith in start-ups, but potentially, that one profitable idea can cover up the losses on the 14 others that don’t work. It’s a pretty skewed risk-reward spectrum— but greater the risk, more are the rewards,” he admits. The adrenalin rush of risking everything for possibly nothing, given that a majority of the startups, like Bollywood movies, bomb at the box office. Plus, he says, there’s the excitement of getting involved in a new business.

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.