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.

Cleartrip Promotes Crighton To CEO; Lays Off 42

Cleartrip, an Online Travel Agency (OTA) has appointed Stuart Crighton as CEO, taking over from investor Sandeep Murthy of Sherpalo Ventures and KPCB. Murthy is now Chairman. Crighton is one of the founders of Cleartrip. The company has also laid off 42 of its 300 employees - around 11 percent. VCCircle has the details.

Over the past few months, OTAs have come under tremendous pressure because of a decline in their commissions. That situation is expected to worsen with zero percent commissions from October onwards.

There is hope, though: crude prices have been gradually declining from their peak, and are now near $100 a barrel, down from over $140 a barrel in June, which is when Airlines went in for cost-cutting, citing high Aviation Turbine Fuel costs. With a decline in crude Oil prices, airlines might just go back on their decision to cut commissions. More on the impact of Zero percent commissions here.

Related:
–Yatra Launches In US, UK; Impact Of Zero Percent Commissions
– IRCTC Does $102 Million In Online Transactions In August; Payment Trends; HDFC, ICICI, Cash Cards Significant

PayMate Closes $9 million Round Of Funding From Mayfield, KPCB And Sherpalo Ventures

Mobile payments company Paymate announced (BS) today that they had raised a second round of funding of $9 million. The funding has been led by Mayfield Fund, and Kleiner Perkins Caulfield and Byers (KPCB) and Ram Shriram’s Sherpalo Ventures have also returned as investors. Coruscant Tec co-founders Ajay Adiseshann and Probir Roy will retain majority stake. There are a couple of things to note here:

– The timing of the announcement: There have been reports that the RBI will release guidelines for mobile payments on the 15th of June, and I’m told that there was a seminar in Mumbai last week focused on the implications of these yet-to-be released guidelines. KPCB and Sherpalo have a history of investing in companies, and announcing the funding the time is right, so it’s possible that Paymate received funding a while back, but with all the expected buzz around mobile payments, it’s a timely press release.

– Where’s Citibank? Paymate had launched initially with Citibank on board, but if you go through their redesigned website, you’ll notice that Citibank isn’t a partner bank anymore. So while they added ABN Amro last month, and are in talks with SBI (India’s largest public sector bank), Paymate appears to have lost their first big banking partner. 11 banking partners are still on board, including Standard Chartered, Canara Bank, Cosmos Bank, HDFC (among India’s largest private sector banks), South Indian Bank, etc. Paymate also has operations in Sri Lanka, and a tie-up with Bank of Ceylon.

The Burn Rate, KYC issues and (more…)