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.

Report: Mukherjea Stake In INX News Bought By NaiDunia Promoter, Former BusinessWorld Editor

So it’s finally done, and as had been predicted, the Mukherjea’s appear to have exited INX News: Indiantelevision.com reports that Indi Media, a joint venture between Vijay Chhajlani, promoter of the Naidunia Group and Jehangir Pocha have bought the approximately 50% stake held by Peter and Indrani Mukherjea. In this context, do note that Jehangir Pocha, editor of Businessworld, was reported to have put in his papers. So it appears that Chhajlani is putting in the money, and Pocha will manage the news operations. More on Pocha on his site.

The rest of the stake is reportedly held byTemasek Holdings, New Silk Route, New Vernon Private Equity Fund, Kotak Mahindra Capital and SREI. What’s interesting is that Peter and Indrani Mukerjea will continue to hold stake in INX Ltd, which runs the channels 9X and 9XM. Are they next? Remember that news and non-news operations usually operate separately in India because the amount of foreign investment allowed in news media companies is 26%. NewsX has a news site, while 

Over the past month or so, INX has been reported to be in talks with Rajeev Chandrasekhar, founder of Jupiter Capital, as well as the Dainik Bhaskar group, though both were denied. More on this deal as we have it. We’re reliably told that Jehangir Pocha is about to reach the NewsX office to give a little speech.

#Headstart09 : Indian Technology Companies Don’t Get Funded

Note: If any VC would like to respond to this, whether publically or anonymously, do get in touch with me at nikhil@medianama.com or +919810310053 (SMS)

Where Venture Capitalists Are Failing In India - Sujai Karampuri, CEO of Sloka Telecom

Much spleen vented at Venture Capitalists by Sujai Karampuri, CEO of Sloka Telecom at Headstart.in, being held in Bangalore: 

“Venture Capital refers to taking risks, fund ideas coming from people who don’t have their own money, but are first or second generation entrepreneurs…and funding ideas that can disrupt, make things better through innovation and technology. If you look at the most VC investments in the last 2 years, they are staying away from technology companies, and funding Me-Too companies, replicas of Ebay, Netflix, Facebook, Amazon, Travelocity, Monster. 

It appears to have something to do with a safety factor. What happens to a technology company company? The usual reaction is “You Must Be Bluffing”? We have the worlds smallest and cheapest telecom base station. We’ve done this through technology, and yet for the last four years, we remain unfunded by Indian VCs.

Excel sheets do not capture technology. They’re the safety net. In five minutes or 10 minutes, I cannot explain the whole spectrum of the wireless industry to a VC, and then tell where I have the advantage. Tech entrepreneurs and VCs are different - Entrepreneurs have a higher risk appetite; they cannot remove all the risk.  A company is limited by the vision of their leaders. What happens when you meet VCs who want you to do small things, be careful. 

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ValueFirst Raises Around $5 Million From New Enterprise Associates

Update: ValueFirst is listed in NEAs portfolio of companies, as a current investment. 

You’re reading it here first: MediaNama has learned from reliable sources that Mobile VAS company ValueFirst has raised around $5 Million from New Enterprise Associates (NEA). ValueFirst is primarily an enterprise mobility company which had entered the direct-to-consumer space earlier this year with the launch of SMSMEON services via their subsidiary SpotOn Media. They’re best known for their SMS related enterprise services. 

ValueFirst sources have confirmed that NEA has invested in the company, but not the amount of investment. We’ve contacted CEO Vishwadeep Bajaj for more details.

In October, Bajaj had told MediaNama that the company was a couple of weeks from announcing a round of between $5-8 Million of investment. Bajaj claimed revenues of $10 million for Valuefirst last fiscal, and said the company has targets of $25 million this fiscal. He had mentioned that they intend to invest the money into internal processes and IT systems. ValueFirst has an international presense in the Middle East, UK, Nepal, Bhutan and Pakistan, and intends to expand into developing markets where Internet penetration is low, and mobile base is significant.

The investment comes at a time when Mobile has emerged as one of the segments that hasn’t been as badly affected by the economic downturn as others; whether Mobile VAS is equally robust, is anybodys guess. We’lll get indications from the third quarter results, due in January.

Interestingly, ValueFirst is the second company from Rajesh Jain’s Emergic Ecosystem to have raised money from NEA - the first was Novatium, a low cost computing company based in Chennai.

Yahoo Picks Up 30% Stake In Local Info Company INMC

Yahoo has picked up appoximately 30% stake in Info Network Management Company, a Chennai headquartered phone directory search service. Yahoo will appoint one director to INMCs board. The amount invested has not been disclosed, nor has Yahoo mentioned whether it is a cash deal, or a stock deal. [Via release]

About 
According to their website, INMC was set up in 1998, and launched a portal Indiastudentinfo.com. The tele information business, Call Chennai, was established in 2005. The company is a part of the Unicard Group of Companies, which consists of Unicard Marketing, Unique Farms and Holidays, apart from INMC. 

Revenues and Targets
INMS claims to have generated revenues of Rs. 4 crores in 2007-08, and plans to achieve double that revenue by the end of the 2008-09 fiscal, and Rs. 24 crores by 2009-10. The company employs around 450-500 people, and plans to increase headcount to 2000 by the end of next year.

Operations
Call Ezee is present in 14 cities in India, and plans to expand its network to 26 cities by 2010. They claim to generate 10,000 calls per day, which appears to be very low - an average of 715 calls day per city, or just around 60 calls per hour per city if you assume a 12 hour call center.

More on synergy, business model and competition

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Video Ad Network VDOPIA Raises Funding From Nexus India Capital

You’re reading it here first: MediaNama has learned from multiple, reliable sources that online advertising network VDOPIA has raised a first round of funding from Nexus India Capital. According to some industry sources, the deal is upwards of $3 million, though we’re not sure of the exact amount. We’ve contacted Suvir Sujan of Nexus India Capital and Saurabh Bhatia from VDOPIA, and are awaiting a response.

VDOPIA competes with Jivox, which has raised a total of $10.7 million from Opus Capital and Helion Venture Partners. Ozone Media, which had reportedly raised around $4 million from IDG Ventures, also has a video ad network.

At a time when advertising appears to be emerging as the key source of monetization for Indian video content on the Internet, the role of advertising networks cannot be overstated. VDOPIA powers advertising on several video content sites including NDTV, NDTV Profit, IBNLive, Josh18, Indya.com, Starboxoffice.com, Cricket Nirvana, SpiceZee, BigFlix, My Popkorn, Rajshri, IPLT20.com. Advertising has also been drying up.

Update: We haven’t heard back from Sujan, and Saurabh Bhatia of VDOPIA has declined to confirm or deny the funding. 

In this context, also read the following posts on video content:

– TinselVision’s Closure Should Serve As A Warning For Video Content Portals
– Times Now On Nautanki.tv; Thoughts On Video Content Online

Suzlon CMD & Family Pick Up 49% In You Telecom Subsidiary

Suzlon Chairman and MD Tulsi Tanti and his family have picked up 49% in Digital Outsourcing, the cable TV subsidiary of broadband company You Telecom. According to Business Standard, the deal size is estimated to be around Rs. 100 crores. You Tele had entered the cable TV business in January this year, with the acqusiition of 50% stake in Bangalore based cable operator Digital Infotainment; a deal that was done through Digital Outsourcing. Interestingly, You Telecom is a case of an ISP entering the Cable TV business…there’s probably more money there, than in the ISP business.

At that time, You Tele held 51 percent stake in Digital Outsourcing. According to the BS report, You Tele now owns 36% in Digital Outsourcing. Citigroup Venture Capital owns 85% in You Telecom, while the Times Group (BCCL) owns 5%. Over the past year or so, I’ve read a few reports of You Telecoms plans - of a Rs. 300 crores expansion and a Rs. 400 crores expansion…Any idea when we can read about a Rs. 500 crores expansion for the company? Expansion aside, You Telecom, earlier this year, also entered into a 50:50 JV with Red Snapper, a Malaysian wireless and VoIP operator, which owns a Widea Area WiFi technology.