Sandeep Murthy Of KPCB & Sherpalo Ventures On The VC-Entrepreneur Dance

Sandeep Murthy of KPCB & Sherpalo Ventures, in response to Sloka Telecom CEO Sujai Karampuri’s comments on the apathy of Venture Capitalists towards technology componies: 

Interesting discussion… here’s how I look at our business:

As in all businesses, VCs will look to find ways to mitigate the risks involved in generating returns… a starting point for this is a need to understand the market that the entrepreneur is addressing… in understanding this market there needs to be an alignment of vision between the entrepreneur and the VC that the market has a need, the opportunity exists to disrupt in that market and that the chosen path is the best manner in which to disrupt. This is a large part of what the VC / entrepreneur dance is all about.

I agree that Excel spreadsheets are not the metric for decision making. Excel spreadsheets provide insight into the entrepreneur’s underlying assumptions… what are the revenue drivers, what are the cost drivers, at what pace does the entrepreneur believe the market grow, what are the views on the long term margins in this business, if everything turns out as projected. This in turn gives insight into the factors that the entrepreneur believes are necessary for success. It is not an “end all be all” of understanding the opportunity, nor is it the sole means to learn about an industry; it is a tool that helps align views on what must happen in the world to make the business a success. In addition to the drivers of the Excel model, customer references and validation play an important role in providing comfort that there is market for the product and insight into the pain points… we spend a lot of time speaking to people in the industry in an effort  to understand the market and the opportunity.

The reason “Me-Toos” are attractive is that the market is understood, the execution challenges are clear, so with tweaks (sometimes minor, sometimes major) there is a belief that the risks in these businesses are manageable.

 One way to make the dance between VCs and entrepreneurs easier is to engage with VCs that understand your space… find people that know the industry you operate in (i.e. if you are building a telecom solution, see if you can find the firm, or even better, the partner at the firm who knows about the telecom vertical)… if you find the right person that understands the industry, you will no longer have to worry about helping them mitigate the general industry risk and perhaps they have enough understanding to dig into the core of the product differentiation and have the requisite contacts to be able to get the market validation.

 On the topic of Entrepreneurs as VCs; I agree that more entrepreneurs should go and start businesses rather than become VCs, but the reason many entrepreneurs find themselves valued in the venture community is that they provide comfort that post investing in the business the VC can help beyond just the money… here again this is about risk mitigation… knowing that you can be a part of helping with the end outcome gives some comfort while investing in new areas.

This is a great discussion and I applaud Sujai for taking the time to voice his opinions and frustrations… hopefully through ongoing dialogue we can find a way to make the process of matching money with innovative ideas as frictionless as possible.

Film Based Content Portal Chakpak Raises Funding From Canaan Partners

Chakpak.com, a film based content portal has raised an undisclosed amount of money from VC firm Cannan Partners, according to Pluggd.in, a Yahoo employees blog. We contacted Alok Mittal of Canaan Partners about the investment, who, on being asked for a denial of the investment, said “I’m not confirming it.” Independent sources have confirmed the investment to MediaNama. We have not been able to ascertain the amount of investment.

Chakpak is essentially a content portal around films, covering Bollywood, Tamil and Telugu films., with movie timing, movie information, film reviews, a stars directory, video clips, wallpapers, film news etc. It has social features, but its focus appears to be more on content, though there are social features as well.

Chakpak will compete with the likes of Bollywood Hungama (formerly IndiaFM), Buzz18, ZoomTV, E24Bollywood, MyPopKorn, and 45 million other many other Bollywood and celebrity focused sites. Remember, the ABC of Indian content - Astrology, Bollywood and Cricket - are all rather crowded domains. Among the monetization opportunities that Chakpak has, is a tie-up with a ticketing service. 

For Canaan’s sake, I hope Chakpak has a miracle (or a dozen) up its sleeve. On a brighter note, based on this deal, and the one in VDOPIA that we reported last week, it appears that investments haven’t completely dried up.

Disclosure: I own an inconsequential number of shares of Network18; Buzz18 is a Network18 property 

Sequoia Capital MD Sumir Chadha On The Guruji Investment

We’ve just received a response from Sumir Chadha, MD, Sequoia Capital India, about the prospects of their investment in Guruji.com - Guruji co-founder Gaurav Mishra has left the company and there was word that Sequoia had written off the investment, which Chadha has denied. In an emailed response to MediaNama, he writes:

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“We are very positive on Guruji and invested again in the company in the series B financing round led by Sandstone. If you check out Alexa, you will see that Indian internet users agree with our assessment - traffic for Guruji has been growing very nicely over the past six months — on the back of their launch of India’s first music search product. The company has also seen nice revenue growth in the past few months, and has spent very little of the $8mm series B we raised at the beginning of this year. Their monthly expenses are very modest, and they have built a crack engineering team with lots of IIT Computer Science guys.

We are very optimistic about Guruji’s prospects.”

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Guruji has been searching for the right search to make it big with - they have a web search in 8 languages (7 Indic), City Search, Movie timing search, Music search, and a recently launched Image search. VCCircle had written about a probable investment in Guruji from Sandstone and Sequoia investment last year; in a sense, this confirms it. Any idea of what “nice revenue” means?

Update: Chadha on Guruji revenues - “We don’t disclose revenues for any of our private companies, but I can share with you that they have signed up a lot of top advertisers in India, which you will see in the sponsored links of their search results, and revenues are growing very fast.”

Our earlier story on Guruji here.

Carwale Raises $7 Million From Sierra; Isn’t Looking At Another Round

It’s been over 7 months since we first heard about Carwale.com raising $7 million from Sierra Ventures, and almost six months since CEO Mohit Dubey first publicly disclosed the funding at a Startup Saturday, though he didn’t mention the investors then.

The money appears to have taken a long time coming, and Carwale has now announced that they’ve raised upto $7 million from Sierra Ventures, in a Series A round of funding. So the money’s in the bank now. Remember that Carwale had reportedly sold 30% stake to SeedFund, an early stage investor, and it is worth noting that Sierra Ventures is one of the investors in SeedFund; Dubey told MediaNama that SeedFund had introduced them to Sierra Ventures.

Have promoters sold out majority stake?
Industry sources put Carwale’s valuation at around Rs. 48 crores, and suggested that they’ve sold around 25-30% stake to Sierra. Dubey declined to confirm the valuation and how much stake they’ve sold, but said that this has been a fresh issue of capital. He also declined to comment on whether the promoters still hold a majority stake in the company, and refused to disclose Seedfunds current holding in Carwale.

On revenues, targets and leads:

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Midcourse Correction For Minglebox: Now A Career Focused Social Network

Sequoia Capital funded website Minglebox.com appears to have gone in for a mid-course correction, writes Pluggd.in. Minglebox was built as an online alternative to a “college hangout” (more on that here) featuring college events but now is being positioned as a “College, Education and Career” site.

The site now features:

– Educational content for preparation for MBA
– Country specific information for studying in UK, USA, Canada, Australia and Singapore
– Counlelling: They’ve also added a segment for counselling from the head of test preparation from IMS, an MBA training institute. 
– Courses Database: for MBA and IT courses

Advertisers on the site include colleges like the Asian Institute of Gaming and Animation, and foreign education counselling agencies like “The Chopras“. 

With this, Minglebox will be competing head-on with other sites in the education space like Pagalguy.com, and Info Edge’s Shiksha.com. 

Minglebox isn’t the first social networking site to go in for a mid-course correction - early last year, People Group owned Fropper.com repositioned itself as a social networking site. It had been launched as a dating site. What’s interesting is that Sequoia Capital India has invested in both People Interactive and Minglebox.com

Myntra Revenues At Rs. 4-5 Crores; Break Even By End FY10

I just spoke to Mukesh Bansal, CEO of Myntra, who told me that the company intends to expand first to Mumbai, Pune, Hyderabad and Chennai. They currently have offices in Bangalore and Noida, and will be setting up mostly sales and marketing offices in a new city every 3-6 months. They’re in expansion mode for 2 years, and expect this round of funding to take them to break even by the next financial year, and last them around 2.5 years. Myntra also intends to expand their team from a current size of 50 people to 100 by June 2008.

I was wondering why they’d need to expand offline - ideally, an online merchandising business should be operating primarily online, with a small team, and leveraging distribution. Bansal said that they don’t look at it at just an online business - there’s a fair amount of supply chain management, which needs to be automated and scaled. Myntra works with over 20 vendors, and will also have to invest in setting up their own operations for new products that they intend to bring into the market - including sports and fashion accessories.

Myntra currently claims to have a client base of over 150 companies and over 50 colleges. Their business has two segments - Individuals, which account for 1/3rd of the revenues (and affiliates and parters account for 1/3rd of that), and Institutions, which account for 2/3rd. A few months ago, they crossed around $1 million (Rs. 4-5 crores), and are growing 10-30 percent every month. The raw material costs are high, so I asked Bansal about their EBITDA margins - he declined to comment, but said their gross margins range from 25-60 percent, depending on the product.

Related: Myntra Raises $5 Million From NEA-IUV, IDG Ventures and Accel

Myntra Raises $5 Million From NEA-IUV, IDG Ventures and Accel

Update: Just confirmed from Myntra, it appears that the Mumbai Angels have not exited in this Series A round of funding.

Myntra, a site for for personalised and on-demand consumer products has received $5 million in investment from NEA-IndoUS Ventures and IDG Ventures, with previous investors Accel India Venture Fund II (which had previously backed Myntra as Erasmic Venture Fund). Myntra had also received backing from the Mumbai Angels. With this funding, Vani Kola from NEA-IUV and Sudhir Sethi from IDG Ventures will join Myntras board.

Myntra will use the funds to expand their geographical base, and hire senior management. Myntra essentially provides designers the opportunity to create designs that they can further sell for a commission. They claim to have published 20,000 designs, and what’s interesting the affiliate model they’ve taken to to building a user base:

To affiliates, Myntra offers 10% commission on banner placement, 17% commission if affiliates allow users to purchase content on their own sites, and 10% royalty for sites who set up shop on Myntra.

Earlier this year, the company had tied up with Holiday IQ and Ibibo (MIH India), and I noticed today, co-branded sites for UTVs Bindass and Cricket site Cricinfo. They’re probably getting a 10% commission. Update: Rahul Agarwal of Myntra informs us that roughly 1/3rd of their revenue from the Individual segment comes from partners, with whom they’ve inked long term deals. Offline, Myntra also offers personalised solutions to corporates like TechMahindra.

Other sites that Myntra has partnered with include “Cool Hanuman“, Kotak Life Insurance, ChakPak.com, Proto.in, Ammas.com, needgrub.com, caclubindia.com, umaad.com (IIM B), fairglow.com, puneripatya.com. From Myntra’s perspective, the more the better.

In this context, also read our coverage of eYantra’s funding. eYantra has a significantly offline model - eYantra Sells 18% Stake For $3.1 Million To Ventureast, Argonaut; To Develop Foostor.com