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March 24, 2011

Profile of wireless home theater system firm Snap

Business Today recently published a profile of Snap Networks, a Bangalore-based maker of an innovative wireless home theater audio system , which is is seeking to raise $3-5 million in venture funding.
The sound system, branded Violet, consists of a set of five wireless speakers, a sub woofer, a transmitter, a micro controller and a remote control. But the coolness factor stands on two legs: one, the speakers can be screwed into a light bulb holder or plugged into an electric source with a bulb holder adapter. Michael Foley, one of India's top names in industrial design, came up with the nine-pin or trophy-like design for the speakers.

Two, it delivers a home theatre feel anywhere in a room unlike the traditional 5.1 speaker set-up. "We have moved away from the conventional equilateral triangle approach used to set up a home theatre system and rely on our chips to build a circle of sound for users, so that the surround sound effect is not dimmed anywhere in the room," Aggarwal says. Snap's speakers use complex chips and a microphone to detect each of the five speakers in a set-up and, using in-built software (rather than more and clumsy hardware) and electronics, build a surround sound experience anywhere in a given space.

...Already, Aggarwal and Bhatia are figuring out revenue streams beyond selling the branded speakers designed by Snap. Bhatia says the firm has had a few employees fly to the headquarters of Loewe, a German firm specialising in consumer electronics, and could also consider manufacturing its speakers as "white boxes" and have thirdparty brands stamped on them for a fee. Snap's rivals aren't exactly quaking in fear, though. "Consumer electronics buying isn't just about a clever idea," says a senior Samsung executive. "People are attracted to a strong brand, unique features and strong customer support.

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

When Venture Capital meets Agriculture

Economic Times recently published an article on the various types of agri-businesses are increasingly attracting VC attention. In an accompanying piece, Sandeep Singhal and Manoj Gupta of Nexus Ventures, provided their outlook on the sector.
The agriculture sector presents a tremendous opportunity, given its size and large-scale inefficiencies, but building a large company is not easy. It requires domain knowledge, as local issues such as weather, pests, soil conditions, and water availability, and global factors such as commodity price swings can play havoc with any plan. On the supply side, their business model has to support a dispersed network, with the support of field activities and the need to work in different languages. Depending on where they play in the ecosystem, the company's systems and processes should be able to handle large numbers of cash transactions and prevent fraud and leakage. All of this is further complicated by the need to manage risks related to government policy/regulatory changes and global commodity pricing.

Agriculture business can be divided into companies supporting pre-harvest and post-harvest activities. On the pre-harvest end, there are opportunities in farm inputs - high yield seeds, speciality fertilisers and pesticides. Given the issues we see on water availability, irrigation is another hot area. On the post-harvest side, warehousing and logistics presents a good opportunity for entrepreneurs, so does contract farming and agriculture processing. Other high-growth areas are information dissemination and market-making. There is also scope for spot exchanges and weather forecasting services.

An agri-entrepreneur should recognise that capital looks for the best risk-return profile, and therefore they are competing with other high-growth sectors. Traditionally, agriculture is seen as a higher-risk/low-growth sector, although the recent spike in commodity prices is focusing interest on the space. For services companies in this space, they need to show that the target market has the ability to pay and is large enough for the company to scale. There is also a need to build market differentiation and ability to scale.


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

Challenges facing Indian Infrastructure Investors

Writing in the Business Standard, hedge fund manager Akash Prakash points out some of the India-specific challenges in investing into this sector.
The reality is that the Indian infrastructure sector does not have the size, financial muscle and market clout to fund the infrastructure this country needs. While power projects may still go ahead, as we have 4-5 large power developers with a combined $28 billion of market cap, $27 billion of market cap has to support everything else from roads to ports, airports, sanitation, etc. Again, the needs dwarf the capital, which can be raised.

...Thirdly, markets have ignored the sector, given the poor economics demonstrated. Most infra projects/developers generate no-free cash flow, have low ROE’s and are very susceptible to project delays and policy risk. Investors are tired of projects stuck in red tape or subject to the whims and fancies of ministers. Most of the large infra projects are also seen to be disguised bets on real estate, as their entire economics depend on the monetisation of some land parcels bundled along with the project. Unless these project characteristics improve, money will not flow. Investors currently feel that only those developers who can manage the system, can make money in this space. This perception has to change.\

...India is attempting to implement one of the most ambitious public-private partnership programmes ever conceived. Driven by a lack of resources with the government, we need the private sector to step up and fund/develop $500 billion of investments over the coming five years. In a market with ROE’s of 20 per cent, investors will not give capital to the infra developers, unless their projects can be seen to deliver similar returns (adjusted for leverage). Will our public policy framework allow private developers to earn these type of project returns, on the scale needed and will the public be willing to pay the prices for infra services needed to deliver these high returns? This is a fundamental contradiction and policy dilemma. We are not a capital surplus country, our high cost of capital and high corporate returns, much lauded by investors is actually a disadvantage when trying to build out infra projects. Investor hurdle rates are too high. We need a new set of investors, satisfied with steady 12-15 per cent annuity type returns, and willing to sit through multi-year project implementation cycles.

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

Infrastructure Investing: Advantages and Pitfalls

At a time when India- and Asia-focused infrastructure funds are being announced at a rapid clip, Jay A. Yoder, Partner and Head of Real Assets at fund-of-funds firm Altius Associates, provides an analysis of the advantages and downsides of this asset class in an article published in AltAssets. Extracts:

The advantages
Adding infrastructure to an existing portfolio can be expected to provide investors with several important benefits, including attractive returns, moderate risk, diversification, and inflation hedging.... We believe that the best private infrastructure managers can provide net returns to investors of 10 to 14 per cent... At the same time, we expect the volatility to be moderate; somewhere between equities and fixed income. Infrastructure assets are likely to provide a good hedge against inflation. Most infrastructure-related contracts contain clauses that allow for price increases tied to inflation....Our view is that an overweight to the energy subsector greatly increases investors’ likelihood of success by enhancing diversification and increasing the return profile of the portfolio.

The Pitfalls
* Infrastructure assets are not immune to the economic cycle. Utilisation of, and revenues from, many assets will decline during economic slowdowns....

* Very few infrastructure managers have track records of any kind and there have been very few exits...In fact, we believe that many, maybe even most, managers are likely to disappoint their investors...

* New infrastructure funds are being set up all the time, often as spin-outs from the project finance arms of large banks. These folks can sound very plausible in pitches, but there is a world of difference in financing large scale infrastructure projects through bank franchises and judging the best investments for risk capital.


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

March 18, 2011

Mushrooming of Mentors

Deepak Srinath of Viedea has an interesting post on the subject:
...the trend that has left me partly amused and partly concerned is the rapidly growing breed of entrepreneurs who are in the “business of mentoring and incubation”. I have interacted with many such “mentors” over the last few months and barring a few exceptions most have left me with the feeling that they do not have adequate experience or skills to mentor a startup. Some of them are barely out of college themselves and many of them claim to be serial entrepreneur s (on closer inspection, it’s more like ‘serial company starters’, none of which have managed to last beyond a year). It’s extremely worrisome that young entrepreneurs with smart ideas could be signing up such mentors, giving them equity and wasting a lot of time in the bargain.

A good mentor is a critical part of an entrepreneur’s journey. A few tips for entrepreneurs from my own experience –

... 2. You may need multiple mentors on your entrepreneurial journey, for different stages of your venture or for different domain skills. It is likely that you will outgrow a mentor as your business evolves and takes different shapes. Make sure your relationship with the mentor is flexible and not joined at the hip.
3. Decision making should never be delegated to the mentor. The mentor’s role should be to give you perspective and advice, not to make decisions on your behalf.


articleArun 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

March 14, 2011

Deal Alert: SCIOinspire acquires US healthcare audit firm National Audit

SCIOinspire, a provider of healthcare payer cost containment solutions, has acquired Florida, USA-based National Audit. Technology Holdings was the exclusive advisor on the transaction.

National Audit is a leading healthcare claims audit and overpayment recovery services provider to large commercial, Medicare & Medicaid payers and Pharmacy Benefit Managers (PBMs). National Audit works with 3 of the top 7 healthcare insurance payers in the United States. SCIOinspire is a premier provider of cost containment services and technology solutions to over 40 health plans including care management analytics, disease management support, underwriting & actuarial support, and third party liability & recovery services.

SCIOinspire's investors include Sequoia Capital, Health Enterprise Partners and Silicon Valley Bank. Technology Holdings was earlier the sole advisor on SCIOinspire's acquisitions of Socrates (healthcare payer subrogation) and Solucia Consulting (care management analytics).

For more information, please visit:

http://www.nationalaudit.com

http://www.scioinspire.com

March 09, 2011

Deal Alert: StanChart PE invests Rs.85-Cr in Privi Organics



Edited excerpts from the Press Release:

Standard Chartered Private Equity (SCPE) has invested Rs.850 million in Privi Organics, one of India’s leading aroma chemical manufacturer and exporter. Mumbai-based Privi exports its products to over 25 countries and has established itself as a key supplier to several of the world's largest fragrance and flavours companies. This funding will part finance the growth plans of the company’s business through expansion of manufacturing facilities at Mahad, Maharashtra and also support key backward integration projects.

Rahul Raisurana, Managing Director, Standard Chartered Private Equity, said, "The aroma chemicals space presents significant opportunities for Indian companies, as India emerges as a key manufacturing center for aromatic and speciality chemicals. We have found Privi Organics to be the right partner because of its strong chemistry skills and quality manufacturing strengths that are well recognized by its global customer base."

Mahesh Babani, Managing Director, Privi Organics, said, “Privi Organics is at an inflection point as it builds on its leadership position among aromatic chemical companies globally. Even as we are driving sustainable growth through new products, the focus is also on deploying innovative Green Initiatives in our business processes. We are delighted to have Standard Chartered Private Equity as an investor at this stage of our growth.”

For more information on Standard Chartered, please visit www.standardchartered.com

Deal Alert: Inventus Capital invests in search marketing tech firm Sokrati



Edited excerpts from the Press Release:

Sokrati, an US- and India-based Digital Marketing Technology Platform founded built by three ex-Amazon executives, has raised Series A funding from Inventus Capital Partners. John Dougery and Samir Kumar of Inventus will join the Sokrati board. The funds will be utilized to Sokrati's reach internationally and build a unified, scalable and intelligent Online Marketing platform for Advertisers and Agencies alike.

"The funds will be utilized to expand our reach internationally and build a unified, scalable & intelligent Online Marketing platform for Advertisers & Agencies alike", said Ashish Mehta, CEO of Sokrati.

Sokrati was boot-strapped in January 2009 and over time, has built an automated Search Marketing technology. It delivers & optimizes over 15 million Impressions per day within the Paid Search Marketing channel. Its advertisers range across e-Commerce, Travel and Classifieds space.

The Managing Director of Inventus Advisory Services (India), Samir Kumar, added, “We liked the passion of these entrepreneurs to build a large company in the Digital Marketing space. This, coupled with their Amazon background and their considerable traction with advertisers, makes us sanguine about their prospects. We believe they will emerge as a leading global player in this space".

About Sokrati:
Sokrati, founded by ex-Amazonians, offers automated & scientific Paid Search (SEM) & Social Media Marketing (SMM) technology. It powers Search Marketing efforts for several well-known brands in India and the US. Sokrati's niche is in managing large campaigns for cataloged driven sites in the Shopping, Travel, Classified segments. Advertisers leveraging Sokrati's platform and services have seen over 40% increase in efficiencies within 6 weeks of Campaign transition to Sokrati. The company has bases in Seattle, US and Pune, India. For more information on Sokrati, please visit: http://www.sokrati.com

About Inventus Capital Partners
Inventus supports ambitious entrepreneurs building the next generation of technology powered companies, particularly software products, services, embedded software, consumer internet, semiconductor and mobile services companies. They play active mentoring roles on company boards. Inventus has made 12 investments to date in the US-India corridor, including TeliBrahma, Insta Health Solutions, redBus, FundsIndia & Vizury. Inventus had its first exit recently, when Hitachi Consulting acquired portfolio company - Sierra Atlantic. For more information on Inventus Capital Partners, please visit: http://www.inventusvc.com

March 06, 2011

The Mast Kalandhar Formula

From the Forbes India profile of VC-backed North Indian restaurant chain.
Today, Mast Kalandar has 22 outlets and a clear plan to reach 100 before the end of next year. And then, 500 more. And all this using the almost bland cuisine positioning: “Authentic, vegetarian, homemade style North Indian food.” Wasn’t eating out all about escaping homemade food? Increasingly, there’s a new category of customers frequenting restaurants: They eat out or order in because they don’t want the hassle of cooking at home. They include working professionals who don’t have the time or knowledge for everyday cooking, or newly married working couples who don’t want to deal with dirty vessels, maids and grocery. That is the primary market Mast Kalandar is targeting.

...Its decision to offer freshly cooked meals is both its biggest differentiator and its biggest execution risk. “Over 30 percent of our customers dine more than six times a month with us,” says Gaurav. The restaurants seat 55-60 people, who spend Rs. 80-100 per person on a meal. This adds up to Rs. 85 lakh to Rs. 90 lakh in revenue at one restaurant annually, delivering cash profits of 25-30 percent in steady state. With 22 outlets, this translates into revenues of Rs. 18.7 crore.

...But can it maintain this while scaling from 22 to 100 outlets? Or 500? Successful restaurants are good sources of profit, but venture capitalists need a few dozen of them in order to justify multi-million dollar valuations that will sway later-stage investors. Caught in the numbers game, new entrepreneurs often end up taking their eyes off the nitty-gritty of daily profitability at a single restaurant level as they rush to put up newer ones elsewhere. Two chains that got caught in this vicious cycle over the past few years were Delhi-based Yo! China and Bangalore-based Kaati Zone.

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

March 05, 2011

Vocational Training - Teamlease Style

Forbes India has an article on how staffing services firm Teamlease is transforming the vocational training firm IIJT that it acquired in March 2010.
If the term “university” evokes images of quadrangles, high ceilings and large windows, perish the thought. IIJT centre in Bangalore is a three-storied building not far from the bustling shops of Brigade Road. Inside, students in their late teens or early 20s occupy the classrooms — some so narrow that each row seats only four. The small, sparsely furnished offices behind the reception double up as interview rooms for visiting companies.

Not your typical university campus. Yet, this could do what some of the colleges have failed to do — produce employable students. The centres would be small, functional, located close to students and most importantly, cost less. TeamLease has centralised common functions (such as HR, legal, finance and IT) even to the level of trainers. Star trainers are hard to get in the hinterland, and expensive to hire anywhere. From its centres in Bangalore and Delhi, these trainers interact with students in multiple centres.

Centralisation and use of technology will not only bring the cost down, but also help in quality. The secret sauce of quality however comes from the staffing business. Over the years, TeamLease has developed a framework which looks at the specific skill sets that an ideal candidate needs for a specific job profile. It tweaks the syllabus every three months to keep it relevant to the job market. “Here we all pray to only one God, and that is Jobs,” says Davluri P. who is in charge of academics.


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

Ashish Dhawan to move on from ChrysCap in 2012

Leading India-focused Private Equity firm ChrysCapital - two time winners of the "Best Private Equity Firm of Year" award at the Venture Intelligence APEX Awards - has announced that its founder Ashish Dhawan, will transition out of the firm in mid 2012 to pursue work on social issues.

Also, Brahmal Vasudevan, one of the firm's managing directors who has been at the firm since 2000, will be leaving ChrysCapital later this year. Going forward, the ChrysCapital team will be led by the remaining six managing directors – Ashley Menezes, Gulpreet Kohli, Kunal Shroff, Ravi Bahl, Sanjay Kukreja and Sanjiv Kaul.



Ashish Dhawan of ChrysCapital receiving the Best Private Equity Firm-2009 Award from Ajay Piramal of the Piramal Group

Excerpts from the ChrysCapial Press Release:

ChrysCapital prepares itself for management transition to a collective leadership based on equal partnership ChrysCapital Investment Advisors, one of India’s leading investment advisors, is preparing itself for a well-planned leadership transition over the next 18 months. Ashish Dhawan, senior managing director, will continue to lead the organization till July 2012 and he will thereafter pursue his long-standing desire to work on social issues. Ashish commented, “Nothing changes until July 2012. Even thereafter, I will continue to engage with any activities that pertain to any investment recommendations made till then. I have full confidence in our ChrysCapital team and know that the firm will be in good hands after I leave. I plan to eventually focus my energy on not-for-profit K-12 education in India.”

Brahmal Vasudevan, one of the managing directors, will be leaving ChrysCapital later this year. He has been at the firm since 2000 and plans to return home to Malaysia and will focus on investments in South East Asia and India. Brahmal said, “Our senior team has enjoyed working together for a decade and I have no doubt they will continue to be successful in the years to come.”

Strong cohesive team to lead ChrysCapital in the future

The remaining six managing directors are fully committed to leading the firm going forward and have been at ChrysCapital for an average tenure of ten years. This is one of the most cohesive and experienced teams in the private equity advisory industry with a diverse mix of skills and sector expertise. The present responsibilities of Ashish and Brahmal will eventually be redistributed amongst the six continuing managing directors, whose roles will be as follows – Ashley Menezes will lead client services, due diligences, finance, legal, compliance, industry representation and human resources; Gulpreet Kohli will manage client relationships and cover the real estate and consumer services domains; Kunal Shroff will oversee the infrastructure and power sectors; Ravi Bahl will manage the financial services vertical; Sanjay Kukreja will lead the business services and manufacturing verticals and Sanjiv Kaul will oversee the telecom, pharma and healthcare sectors.

The management team said, “We take great pride in ChrysCapital and the entire organization is excited about the opportunity to take the firm forward.” The new leadership structure for the firm will be based on an equal partnership with well-defined responsibilities and empowerment, thereby driving better accountability. ChrysCapital will continue to have a sector focussed strategy for advising future funds. The firm expects the next ChrysCapital fund to be raised in mid-2012 with a smaller corpus, as there is a better risk-reward in mid-sized deals.

About ChrysCapital Investment Advisors
(www.chryscapitalinvadvs.com)

ChrysCapital Investment Advisors is one of India's leading private equity investment advisors. The firm has been advising five funds that manage over $2 billion. With over 60 investment recommendations since 1999, ChrysCapital has valuable experience in evaluating investment opportunities across a breadth of sectors that leverage growth in the Indian economy.

March 04, 2011

Profile of Pharma Retail chain Guardian Lifecare

From the profile in Economic Times:
According to him,45,000 crore worth medicines are sold by largely fragmented small pharma shops controlled by about 7.5 lakh chemists across the country.I found that a small retail shop that can offer all medicines under one roof will help attract customers, he says. He started the business in 2003 with 10 crore pooled in from family members,friends and his own savings. The first outlet was set up in the NCR region and later opened another one in Delhi.

What changed the future of the business was its exclusive master franchisee agreement with GNC in 2004,considered to be the worlds largest chain for vitamins and health products.Subsequently,it has also partnered with Yves Rocher,a France-based natural beauty company.

...In 2008,Guardian received its first round of funding from Samara Capital.It had invested 100 crore in the company. Though started as a company focusing on northern market,Guardian now has a presence in southern markets including Tamil Nadu and Karnataka.Currently,it has 230 outlets and revenues to the tune of 110 crore. It expects revenues to touch 155 crore next year. It also achieved breakeven this financial year. The pharma retail market is over $10 billion and is a growing opportunity in India. The high growth,evolution of consumers and under penetration (less than 4%) of modern formats is attracting organised retailers.


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