Having exited Network18, and with apparently no non-compete clauses Raghav Bahl is looking to start an online news business. While Bahl is no stranger to taking risks, the Internet is a completely different beast because of no barriers to entry, free distribution (hi Airtel) and the kind of fragmentation that is a nightmare for most media publishers. Like I had mentioned earlier, profits for most Internet publishers are a distant dream, but Bahl has built media businesses at scale, through partnerships, and raising money via debt and equity. I think he should buy VCCircle (Mosaic Media Ventures) for the following reasons:

1. It’s in a familiar domain: Bahl launched TV18 in partnership with CNBC, and business news is a segment that he is familiar with. For Network18, Moneycontrol.com, it’s financial news portal, has been a cash cow. VCCircle doesn’t cover the stock markets, and focuses on areas of interest to institutional investors, and venture capital and PE funds. However, it does have breadth when it comes to business coverage – covering Pharmaceuticals, IT, Media and distribution, Technology, Education, Banking, Retail, Healthcare, Real Estate, among others. Add stock market coverage to it to bring in a new audience base, and with the right sales team, it’s ready for monetization. So far I haven’t seen many advertisements on VCCircle, but they appear to be picking up now.

2. It’s a well rounded business, in terms of revenue streams:

– A subscription model: VCCircle was the first among our peers to launch a subscription based model, and from what we’ve heard, is also monetizing online well via emailers. The company charges Rs 4030 per year for subscription.
– A database business: It has a paid database business called VCCEdge, built on the lines of CapitalIQ, and has recently launched a free company search service called BizCircle.
– An events business: With 10 events this year, and another 10 till March 2015, VCCircle looks like an events organizing machine. That appears to have been its primary source of revenue so far, before the subscription and database business kicked in. Their events have ranged from Agriculture and foods, to retail, education and other segments.
– A training business: We’re not sure of how this business is doing, but it does appear to have a fairly busy training calendar as well.

TechCircle, its tech news site, in my opinion, will be better off becoming StartupCircle, and expanding its mandate beyond the tech and IT business. From an editorial perspective, it is the weak link, because tech news has evolved to being more than just news. It is also the only business in the portfolio that has a niche mandate. Once that happens, with coverage expanded from startups to listed companies and stock markets, VCCircle would get the breadth it needs to play in the same space as MoneyControl, Economictimes.com and perhaps even the likes of Reuters and Bloomberg.

3. It’s stable, it’s running, and it’s online: My definition of a startup is a company that cant run smoothly without its founder, because adequate systems and processes arent in place. On the face of it, VCCircle doesn’t appear to be startup.

It is also a running business, with a team of over 60 people (from what I’ve heard). It takes time and/or lots of money to build a recognizable brand online, and while Bahl’s Network18 did manage to do that with FirstPost, Bahl doesn’t quite have the support of the existing setup like FirstPost did with Network18. He has to start from scratch, and that is never easy in an enormously fragmented Internet space where you’re competing with scrappy upstarts and already-scaled incumbents.

It is also an audience business that primarily has its audience online. The Internet is unfamiliar territory for Bahl, and I found it quite amusing when Deap Ubhi, whose company (Burrp) was acquired by Network18, left a comment saying that Bahl needs all the help he can get. As I’ve said before, Web18 wasn’t very well thought out either.

4. General News businesses won’t cut it for a while: I’m bearish on general news businesses online. Today, journalists are looking to shift to an online news business in order to be future-ready, and more and more businesses are looking to start up. There’s competition, with international news businesses looking to provide news in India via the Internet. Unless there is sufficient capital backing this, it won’t last. A niche site can afford to charge a premium, but when advertisers are looking at impressions as commodity, and paying a pittance as CPM, it’s hard to build an online news business that you can value at a few hundred million dollars, leave alone a billion (like Web18 was once trying to do). Hope to be proven wrong, but I don’t see it happening. VCCircle, in comparison, is in a monetizable niche that Bahl understands.

Some notes from the RoC filings for VCCircle:

– Loss after Tax in FY13 was 51,36,859 (as compared to a profit of Rs 3,21,175 in FY12), and accumulated Losses till date of Rs 48,63,344. Cash and cash equivalents was Rs 1.75 crore. We couldn’t find topline numbers for FY13 and FY12 (no P&L appears to have been submitted to the RoC), but in FY11, the company reported revenues of Rs 3.82 crore, and a profit of Rs 17.75 lakh. This was before it began its subscriptions business. VCCEdge was launched in 2009.

– In FY13, VCCircle received Rs 2,21,754 as foreign remittance for its subscription service, and Rs 5,22,313 for the VCCEdge database. In FY12, it received Rs 29,332 as foreign remittance for VCCedge, Rs 12 lakh as sponsorship, and Rs 8.2 lakh for advertising.

– The business had sufficient reserves, at Rs 2.09 crore as Reserves and Surplus at the end of 31st March 2013, down from Rs 2.5 crores at the end of FY12. Current liabilities at the end of FY13 were Rs 1.2 crore, up from Rs 87.24 lakh.

– According to filings with the Registrar of Companies, Mosaic Media Ventures had raised Rs 1.48 crore in FY12 from 9 investors, including Gulu Mirchandani, Gopal Srinivasan, Shantanu Surpure, Arun Duggal, Suresh Shanmugham, Ashit Ranjit Lilani, Suresh Raju, Siddharth Mehta, and Essay Commercial Services (which put in Rs 50 lakh).

Essentially what I’m saying is that VCCircle appears to be an operational base on top of which Bahl can build a financial news business online, even though it’s fairly old-skool for an online news business.

Disclosures:

– When it comes to tech and tech related events, VCCircle and Techcircle compete with MediaNama.
– I worked with Sahad PV, founder of VCCircle, for a few months at ContentSutra, before he switched to running VCCircle full time in 2007.

(updates: added inputs from the filings that I had forgotten to include in the initial post)