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September 30, 2015

Why Flipkart & Snapdeal Can't IPO and Why the Chinese are Invading the Indian Internet Market

The latest $700 million funding for Flipkart got announced not in the form of press releases as on previous occasions, but through leaks and confirmations. Also, the new round does not seem to have attracted any new investors. The closure of rival Snapdeal's $500 million round is reported to have been protracted over mismatch in valuation expectations.

Why the seeming nervousness among investors over India's two E-Commerce poster children?

Is it the crash of Alibaba's stock price in recent months? Or something else?

Media executive-turned-Private Equity investor Haresh Chawla has some answers in his new post at Founding Fuel. Extracts:

On why an IPO is impractical for Flipkart, SnapDeal
Most listed Unicorns in the West eventually trade at earning multiples that range between 40 and 60 times their earnings. Listed Indian internet companies like Naukri, Justdial and Makemytrip trade at similar multiples....Flipkart, now eight years old, to justify its $15 billion valuation should have generated about $300 million after tax this year.  
..So far they have been more ambitious than others and have been able to convince investors they will build value in the future. It seems their idea of innovation is to acquire teams and then hope to integrate them into their larger enterprise. But we are yet to see a single one of those experiments work successfully. Their ability to retain founders post acquisition remains dismal as well. And logistics infrastructure is no longer a source of competitive advantage. The acute pressure to innovate starts now.
Chinese firms as the only potential buyers
They are live examples of how the holding-company model works. Between Baidu, Tencent, Alibaba and a few other players, they control a significant chunk of the Chinese online market. They have seen success in “controlling” large chunks of an ecosystem. They believe they can force network-effects into unrelated businesses. They know an assault on Silicon Valley is difficult and Europe is too small. That leaves India as their next beachhead. They will want these Indian Unicorns. (As I write this piece, Ola, another Indian unicorn, raised money from Chinese strategic investor Didi Kuaidi. The Chinese invasion has begun.)
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.


September 29, 2015

Do VCs need to be "good" guys to succeed?

Y-Combinator founder Paul Graham thinks so. Citing the example of uber angel investor Ron Conway (Google, Facebook, Twitter), he explains why in his recent blog post (emphasis mine):
The startup world became more transparent and more unpredictable. Both make it harder to seem good without actually being good.  It's obvious why transparency has that effect. When an investor maltreats a founder now, it gets out. Maybe not all the way to the press, but other founders hear about it, and that means that investor starts to lose deals. 
The effect of unpredictability is more subtle. It increases the work of being inconsistent. If you're going to be two-faced, you have to know who you should be nice to and who you can get away with being nasty to. In the startup world, things change so rapidly that you can't tell. The random college kid you talk to today might in a couple years be the CEO of the hottest startup in the Valley. If you can't tell who to be nice to, you have to be nice to everyone. And probably the only people who can manage that are the people who are genuinely good. In a sufficiently connected and unpredictable world, you can't seem good without being good. 
...Good does not mean being a pushover. I would not want to face an angry Ronco. But if Ron's angry at you, it's because you did something wrong. Ron is so old school he's Old Testament. He will smite you in his just wrath, but there's no malice in it.
The post also reminded me of a term that's gaining currency recently: Reputation Capital.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

Will InMobi Continue to Rejoice its Spurning of Google's $1-B Offer?

Silicon Valley lore has several famous episodes of acquisition talks that did not materialize: from that of Google by Excite (whose CEO apparently refused to pay up $75,000) and by Yahoo (when the Google founders walked away from a $3-B offer) and that of Yahoo (for $44.6 B) by Microsoft.

In March 2015, the lore extended to Indian shores when,  InMobi - which dares to combat Google and Facebook in the mobile advertising segment - walked away from a $1 billion offer from the search engine giant (according to multiple media reports, sample: Business Insider).

Will InMobi CEO Naveen Tewari's decision to walk away turn out as well as that of Google's own or more Yahoo like? Only time will tell. But questions are being raised as to why, when other Indian startups like Flipkart, Snapdeal and Ola are able to attract investments at  valuations of multiple billions of dollars with seeming ease over the last couple of years, hasn't InMobi (that last raised a reported $200 million in 2011 from SoftBank at a $800 million valuation) joined the "Unicorn" party?

The Economic Times of today (September 29, 2015) has a not too flattering report saying InMobi has attracted $100 million in debt funding from US-based Tennenbaum Capital that would be also used to repay debt that the company had borrowed from other creditors last year.


So, who exactly is InMobi's latest backer, Tennenbaum Capital?

This is how the firm describes itself on its LinkedIn page:
Tennenbaum Capital Partners takes a private equity approach to distressed credit investing. Having invested over $8 billion in more than 160 companies since 1996, TCP is a leader in successfully taking positions in private and public middle-market companies's debt, both in the secondary market and through special-situation private originations.
On its web site, the firm describes its Investment Strategies as two fold:
TCP invests in both performing credit and special situations, primarily in North American middle-market companies. 
Here's hoping that InMobi - an early poster child of India's second startup wave - continues to perform more than just creditably and sail smoothly into publicly traded status that it's CEO believes it deserves.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

Zero in on Cos Seeking Angel Funding in Your City


With enthusiasm for angel investments in India at an all time high, Venture Intelligence is happy to announce a new feature to its Angel Investments database: the ability to search listings of companies seeking angel / seed capital in your city.

Integrating company and investor profiles from the world’s best known angel deals platform - AngelList - the Venture Intelligence Angel Investments database allows its users to further search and filter listings by company name, city and amount of funding sought.

To look up companies seeking angel capital in your city right away, just login to the Venture Intelligence PE/VC Deal Database. Don’t have a login? Contact Us for a demo.

Zoho Founder on Competing with Companies Raising "Series QE" Funding

From the article by the Zoho founder Sridhar Vembu in Economic Times:
Another day , another hot tech company raises $500 million (or is it a billion?) in Series D, Series E -I propose we just call all of it Series QE, because that is where all the money comes from anyway , right?  
..If you are in one of those hot companies burning cash, enjoy the ride as long as it lasts--and make sure you have a safety net if, heaven forbid, something bad happens. But what about companies that cannot or don't want to raise that kind of money? 
...In the world of business and finance, following fashion is the path to the poorhouse. Avoiding the fashionable location, the fashionable field and, dare I say , fashionable employees, may be the best way to survive a bubble.
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

September 21, 2015

Why Angels & Seed Funds Might Be Better For Seed Rounds

With Tiger Global and other global investors straying into VC territory in the hunt for the next set of Unicorns, the ( Lee Fix(el)ated ? ) Indian VC firms - whose fund size mathematics earlier disallowed them from "writing cheques" of less than $1-2 million - have been actively foraying into seed funding zone competing and often co-investing with angels and seed funds.

But what type of investor should entrepreneurs prefer for their seed round - if they have the luxury of a choice between angels, seed funds and VC firms? Mukund Mohan, the former head of Microsoft Ventures, recommends going with angels and seed firms. Extracts from his post titled "Does raising institutional money at the seed stage help or hurt?":
If you are looking to raise money and you have an interested later-stage VC investor willing to put money in your company, by all means you should take it. Assuming they will invest later is a big leap of faith. There are, like most things in the startup world pros and cons to this approach.  
The pros include the “name brand” value of the VC firm on your cap table early on, the ability to tap into the expertise of the VC investors and also access to their network and connections. The downsides are the signalling effect if they refuse to invest in the follow on round, the likelihood of them investing in other competing startups in the same space in later round (since they understand the market) and finally the smaller pool of investors available for you (since many VC’s wont invest if a lead VC investor passes on the follow on) in the next round. 
While I dont think there are many options in India for entrepreneurs, the best bet I would still recommend is to get the right investors at the right stage of your company. At the early stage, angel and seed stage firms make sense, and later on using their help to get VC’s is a good approach.
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

September 16, 2015

Is Mr.Tata Risking Too Much Capital on Startups?




Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

September 06, 2015

Is Angel Investing Worth the Bother?

Haresh Chawla, an angel investor in Housing.com, has a list of do's and don'ts for fellow angel investors in Founding Fuel. Extracts:

2. Don’t do it for the money. Most angel portfolios won’t beat returns on Indian small-caps and mid-caps. Plus you’ll save a mighty load of your time. So learn to play the guitar if you are bored.
3. If you still persist, choose a style or a combination from here:
Spray and Pray: Put in Rs 5-25 lakh—do tens of deals. Eight angels in a start-up means you are hardly going to have a say, or the inclination to spend time. But sure you’ll meet interesting people, and be covered in business newspapers. Sometimes you’ll also be mentioned in the same breath as *trophy* investors.
Consortium: A new structure that has cropped up lately—everyone can be an Angel now! One guy fronts 20-30 of you investors. It works. Downside? The front is usually too busy monitoring than mentoring. Oh, and you’ll miss out on the PR as well.
The Real Deal: You’re ready to lose both your money and your time. If that is the case, what follows here is for you. The rest of you can go back to sipping your single-malts.  
16. Misalignments will happen. The next round investors will drive some of the misalignment—on rights, on size of the Employee Stock Ownership Plan (ESOP) pool, on secondary price etc. Founders will be torn—they will act only in the interest of the business and their stake holding and that’s only fair. You can get very sensitive, but don’t. In times like these, remember what I spoke of in Point #5. You’re in it for the ride.
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

September 04, 2015

Will the Education Sector Throw Up a Billion Dollar Company? Yeah, Fine "Unicorn".

Siddhartha Jain has a nice analysis on why we haven't seen an Indian Education Unicon emerge yet. And why we still might.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

Forbes India "Hidden Gems" List

 

Forbes India has put out its latest "Hidden Gems" Cover Story profiling 13 interesting businesses -from bus operator Prasanna Purple to lifestyle brand Hidesign, jewellery maker Kalyan Jewellers to coaching firm Resonance Eduventures and pharma venture Laurus Labs. For the fourth year running, we at Venture Intelligence, are happy to have partnered Forbes journalists in putting together this list by leveraging our databases on Private Company Financials, Transactions their Valuations.

September 03, 2015

Healthy Sign: IPOs Do Well Despite Shaky Secondary Market


Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.