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.

#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.

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

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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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