One97 CommunicationsOne97 Communications today announced a fund raising from Intel Capital, with previous investor Silicon Valley Bank also participating. The company operates in the Mobile VAS space, and competes with the likes of OnMobile Global, Bharti Telesoft, Cellebrum, IMI Mobile and ValueFirst. We spoke to Vijay Shekhar Sharma, MD of One97 Communications about their plans. Part 1 of this interview covers where they’re going to use the money, incubation plans, international markets, dependancy on mobile operators, and the threat from International VAS companies setting up shop in India.

The Funding And Where It’s Going To Be Used

How much funding have you raised? Intel has invested $23 Million in 3 companies…
We’ve raised funding from Intel and SVB, in all in 2 digits, but I can’t talk about the exact amount.

When we’d spoken in May, you had said you’ll raise $25 Million. What happened?
It’s less…less than $18 million. We were looking to buy companies, but later decided against it. Our organic plans still remain, and we have commitment for more money from the same fund if the opportunity arises.

Where will you use the money?
We are going to incubate some companies. We are showing tremendous growth, of the order of hundreds of percent year-on-year, and we will continue for the next two years, for which we need this significant investment. Last year we invested around $15 million our business, from the VC investment and internal accruals. This year, we should invest around $30 million. We’ve been able to the raise money by divesting equity, bank loans and internal accruals. Currently we see opportunities in organic deploying our platforms at more places for more purposes. Our business is about reaching a larger audience and increasing services. We are currently at $25 million in revenues and are targeting $100 million by 2010.

Where is that kind of growth going to come from?
The logical growth is that we should be able to increase our revenues, reach and transactions.  The number of services that consumers and operators need are increasing. We now do a significantly large number of paid transactions on our platforms – last month we would have had 200 million unique users on our network and more than 1.5 million
billion paid transactions on our platform. We are expecting it to grow to about 300 million in next 6-9 months.
We are among the few who have telco-grade enterprise services, and are able to offer the same platforms on a business model which is disruptive – the managed service model. We don’t sell anything as a CAPEX, it’s all about OPEX and managed service, for which we are paid per transaction. We were deployed on a per SMS basis, instead of a one time sale. 

 

What did you use the last round of funding for?
Entirely for organic growth. We showed about 400-500 percent of growth.

Around $10 million in the last round, and around $18 million in this one. That’s a fairly significant burn rate…
We’re in a business where we are deploying a generic platform that is targeting a large market. If my platform is successful, I need to enhance the platform capacity. I’m growing in two ways – the market growth and the number of services. So we actually invested more than $10 million, because $10 million came from equity. Even in this round – this doesn’t mean that this is we will only invest the amount we have raised, because we have internal accruals.

Why did you raise funding if you have internal accruals?
We are on the road to deploying a ubiquitous platform and own key services on it. In that quest we have to accelerate our plans and establish our dominance.

What about your hiring plans?

We are on a significant hiring spree. We currently have around 580 people, and our target is to hire about 1000 people by the year-end.

How much money are you allocating to incubation, and how much to the organic growth?
I personally believe that the incubation size, ticket size will not be more than $1-2 million. We’ve already done an investment in a company called Oorja, and are incubating another plan – Oc2ps. Oorja does customer analytics and discovery applications for services. The second is a niche social application in the stealth mode.

International Markets

Are you looking at International Markets?

We believe that India offers a very large opportunity. Once we are able to get maximum out of this market, we will take it internationally to similar markets like China and other South East Asian markets, which are our favourite. We remain focused on India.

What percentage of your revenues is from India and what is from outside?
Around 1-2% is from outside, and the rest is from India. We are not about one application that we have to deploy to the rest of the world. We are about a bouquet of applications addressing consumers, enterprises and a set of telco needs. We are more focused on a large number of products and technology evolution, ratjer than one product.

Operator Relationships  

What about your dependancy on mobile operators – aren’t you limited, in a sense, by the number of operators in India?
That is a myth – that VAS is only about making money via operators. We make money not only because mobile operators pay us. I can’t give you a break-even of operator and non-operator. We have our own media plan and budget. We spend millions of dollars on promoting our own services on Telecom Media.These are branded as One97 services. Oorja is a mobile advertising company. We look at our relationship with operators more as a partnership than a vendor relationship. They do squeeze us for revenue share, I won’t say no to that, but there is a value that we deliver. We are not extraordinarily pressurised. The challenge is not from operator revenue share, but wannabe VAS companies.
Are you seeing any threat from any of the international VAS companies that have set up here?
The operator does not necessarily differentiate the value from various VAS companies. New VAS companies may not get the business, but they challenge the pricing from the operators. The operators still don’t go with them. There is a lot of noise in the market. You will have a content company bidding for a telco grade platform, and they will quote in a tender, a number that they need to just about survive. I wish they did their calculation better for survival, because if they get it, they may not survive.