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May 27, 2010

Quick Book Review: Finally, an How To on Raising VC in India



While Private Equity and Venture Capital gets more than adequate coverage in the general business and entrepreneur-targeted media, there has been a surprising lack of "how to” manuals for entrepreneurs who are serious about raising this type of capital. For instance, while entrepreneurs might have heard of terms like “term sheets”, “due diligence”, etc., it is not very easy to research online on what exactly is these involve in the Indian context. (Most of the material available is typically US-centric).

Which is why New Delhi based consultant and entrepreneur Pankaj Sahai's “Smooth Ride to Venture Capital – How to get VC Funding for Your Business” stands out. Published by Vision Books; and prices at Rs. 495/, the book is also well laid out on good quality paper.

Key sections in the book that entrepreneurs can benefit from significantly (typically stuff the popular press/online sources don't cover):

Chapter 15: Understanding Ownership, Dilution and Rounds of Financing


Which covers the implications (both mathematical and legal) of raising external equity capital.

Chapter 22: Negotiating the Term Sheet


Covers the list of key terms and delves into the specifics. For example, the pros and cons of using a “full ratchet” vs. a “weighted average ratchet” formula for the anti-dilution provision. This chapter also explains lucidly the security/instrument used to structure PE/VC deals in India, typically the Optionally Convertible Cumulative Preference Shares (India).

Chapter 23: Managing the Due Diligence and Chapter 24: Closing the Deal


These chapters covers what exactly the Due Diligence process involves and the legal agreements that are entered into once the DD provides the green signal – only after which, the entrepreneur gets to the end goal: money. Whew!

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

May 25, 2010

Private Equity in Infrastructure: What's Needed?

Sanjay Sethi, ED & Head of Infrastructure Group, Kotak Investment
Banking has an article in the Economic Times on the current challenges in raising PE funding for infrastructure projects and what's needed to boost such transactions.

What India needs:
India could well do with more pure-play specialist infrastructure funds with long-term investment horizon and reasonable return expectations (in the midto-late teens).This may attract infrastructure developers who would otherwise consider listing themselves,most of them somewhat prematurely,and raise capital even at the cost of higher dilution.

SPV-level investors in greenfield projects:
Most PE as well as infrastructure funds are currently focused on entity-level deals with a mix of operational,under implementation and under development projects with clear visibility of an IPO in the next 3-4 years which provides them an exit opportunity.While a couple of SPV-level investors are currently operating in the country,there is room for more such players.Internationally these funds list themselves to provide an exit opportunity to their investors without the fund having to exit the underlying investment through an IPO or otherwise.

Yield investors: These investors typically look to invest in operational projects with stable cash flows and expect yields in the midteens,enabling sponsors to take out capital from mature assets and use it as growth capital to develop more Greenfield projects and create value.Some offshore investors are already eyeing this segment in India and more investors will likely step in once the universe of commissioned projects reaches a critical mass over the next 2-3 years.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

May 21, 2010

Can Premji and Narayanamurthy alter the Indian VC landscape?

In the context of Azim Premji of Wipro and N.R. Narayananayamurthy of Infosys carving out funds for VC-type investments from their family offices, here is an extract from an article in Institutional Investor on how Family Offices in the US are now preferring to directly invest in private companies and the benefits of such an approach.
The tectonic shifts in the venture economy are placing a heavy premium on new investment. The drought in funds, combined with the need among family offices for uncorrelated and outsized returns, is creating a perfect landscape for those with the ability to implement a solid venture strategy.

...Having suffered market losses in 2008 and early 2009 from investments in supposedly safer asset classes, family offices are focusing on venture capital and private equity. Rather than rely on external managers, family offices are now investing themselves, rapidly becoming a critical source of new venture capital.

This is not a new idea. The great founding industrial families of the United States were among the first venture capitalists in this country. The Rockefeller family, the Hillman family and several others were the critical backers of the VC firms, starting after WWII and continuing through the emergence of Silicon Valley in the 60s & 70’s. These families shaped the VC industry we know today, prior to being supplanted by pension funds, endowments, insurance companies and other institutional players as main source of VC funds. So, in many ways, this trend is really about venture capital getting back to its roots.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Rise of video ads

A slightly modified version of the longer article that appeared on WSJ's India Chief Mentor Blog:

An article in IBD's Investors.com highlights the strong rise in the popularity of video advertising among brand advertisers in the US as well as the potential headroom for further growth. (Hat tip: Paul Kedrosky)

Online video ads are more engaging than other types, say ad executives. Woolford says a good example is Toyota's "Swagger Wagon" ads for its Sienna minivan. In one, a father and mother relate, in rapper style, about how cool their minivan is. It's a viral hit, nearing 1 million views on YouTube in two weeks...The rise of more portable devices such as Apple's (AAPL) iPad tablet computer will only accelerate the amount of video viewed online, which should boost ad rates, says Retrevo co-founder Manish Rathi.
This strong growth trend should spell good news for Indian VC funds Helion Ventures and Nexus Ventures, which have, among them, invested into three cross-border companies that operate in the online video ads space.

I also wonder what this spells for Google’s revenues as and when it decides to get more aggressive with advertising on YouTube (which it acquired for $1.65 billion in 2006.)

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports.

May 16, 2010

How cleantech cos can borrow funding models from biotech cos.

In an article for AltAssets, Charles Fletcher of US law firm Taylor Wessing describes how, in the absence of VC funding for capital intensive projects, cleantech compannies can look at alternative financing sources, including state-sponsored finance, licensing techniques and other models of co-development, which take their cue from the biotech sector.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

May 11, 2010

Deal Alert: Fidelity invests in Punj Lloyd's Engg & Design subsidiary



Fidelity Growth Partners India (FGPI), the private equity arm of Fidelity International, has taken a significant minority stake in PL Engineering, a leading engineering services outsourcing player with a focus on oil & gas, power and infrastructure. PL Engineering is a subsidiary of Punj Lloyd Limited, a leading global engineering, procurement and construction conglomerate.

Through this investment, Raj Dugar, Senior Managing Director of FIL Capital Advisors (India), the private equity advisory company for FGPI, has joined PL Engineering’s Board of Directors. “We believe PL Engineering is well positioned to benefit from the strong growth in offshoring of engineering services to India. The company has a solid platform, an outstanding management team and strong track record in the attractive process engineering services segment. We are delighted to partner with PL Engineering as the company enters its next phase of growth” said Mr. Dugar.

Mr. Sanjay Goel, CEO, PL Engineering said, “PL Engineering has developed a marquee client base over the last few years with high quality delivery on a range of projects including some very complex engineering design projects. Our clients are our best ambassadors. Our goal is to enhance our engineering strength substantially over the next few years across multiple sectors with the growth coming from a combination of organic and inorganic strategies. This funding will help us expand our business development efforts in North America and the Middle East. Given our track record and the strong backing of Punj Lloyd Group and Fidelity, we are confident of scaling up rapidly”.

PL Engineering provides a full spectrum of design and engineering services that cover all stages of the project and product lifecycle. The company was initially set up to provide high end engineering and design services work for its parent company. Over the last few years, the company has extended its service offerings across verticals and aggressively built up its third party client base.

About Fidelity Growth Partners India

Fidelity Growth Partners India (FGPI) is the private equity arm of Fidelity International focused on growth capital investing across sectors. FGPI seeks to invest in high-quality, high-growth companies in India across a broad range of sectors with a typical investment size in the $10 million to $50 million range. FGPI is committed to making the companies it invests in, leaders in their industries through access to patient capital with a long term investment mindset, a powerful network of resources and its team of investment professionals with a proven track record of success.

About PL Engineering

PL Engineering, a Punj Lloyd Group company, provides a full-spectrum of design and engineering services in the oil & gas, chemical & petrochemical, power and infrastructure sectors, covering all stages of the product and project life-cycle starting from concept design to commissioning. Services include feasibility studies, front end design, detail design, analysis and stimulation. The company currently has 800 employees across delivery centers in Gurgaon, Hyderabad and Abu Dhabi working in a global work share environment, enabled by state-of-the-art IT infrastructure. Over the last few years the company has aggressively built up its client base, which includes global companies across North America, Europe, Middle East and India.

May 06, 2010

Deal Alert: Nexus Ventures participates in Cloud.com's $11-M 2nd Round

US-based Cloud.com, formerly VMOps, has raised an $11 million Series B round led by new investor Index Ventures. Current investors Redpoint Ventures and India-focussed Nexus Venture Partners also participated in this round, bringing the company’s total funding to date to $17.6 million.

Cloud.com provides the latest and the most advanced software platform to bhttp://www.blogger.com/post-edit.g?blogID=5421892&postID=8828431598215020283uild highly scalable, highly reliable cloud computing environments.

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