Archive for May, 2007

VC boom in Russia?

BW piece on how the VC scene is hotting up in Russia:

To encourage such investments, the Russian government has set up a trust that matches investments from private venture capitalists. Already, it has agreed to dispense nearly $100 million to three groups of investors. Among them: Asset Management, run by legendary Silicon Valley venture capitalist Franklin “Pitch” Johnson, which has secured $52 million in matching funds from the Russia government for a new investment vehicle called Bio-Process Capital Partners. The Russia-based fund will scope out investment opportunities in biotech.

Other experienced tech hands also are piling in. Roel Pieper, a seasoned industry executive now based in the Netherlands, has set up a new fund primarily targeting Russian opportunities, including hydrogen technologies and light jets. Alexander Galitsky, a well-known Russian entrepreneur-turned-investor is planning to launch a new Russia fund later this year, in partnership with unnamed Western venture capitalists. And in April, Boston-based OpenView Venture Partners teamed with Moscow-based ABRT Venture Fund to form a “partnership for Russia” investment program targeting information technology companies in Russia and Eastern Europe.

“This is just the beginning,” says Joe Bowman, a U.S. venture capitalist working for Russian Technologies, a Moscow early-stage $50 million venture fund. “We’re entering a new era for Russian venture capital.”

Customer Fulfillment

I am going to spend a few weeks in the US in June and decided to see if I could rent a cell phone in India which would work in the US. Matrix provides such a service.

The rental is $30 for the handset. This includes 400 minutes of talk time ( 150 Peak) and after that 30 cents/min for outgoing within US and on all incoming. Outgoing calls to India are 99 cents per minute.

I will use the phone rarely so I think I will end up paying Matrix $30. Maybe I could get a slightly cheaper deal in the US but I am pretty positive the difference would not be much

What I liked was that they gave me a full kit with charger/handset and an adapter plug for US sockets.

This was the second time I used their service ( first was for Europe where they just give you SIM cards).

What was not so good was that even though I was a returning customer they did not have me/my data on file so they again had to take paperwork etc.

As a customer if I find a product well designed I will post it as I think we all could use better products.

Tinker Level Ideas

The world is madly chasing the convergence dream. I believe however the future lies in breaking some of that convergence into basic products – tinker level. The market possibilities are endless in the emerging world. Think of a GPS device that just gives you location and not mp3 and other bells and whistles. Think of a Rs 400 mobile phone with only 2 buttons – receive a paging and send a SOS. The possibilities are endless.

Are any of you working on ideas like these, rather than Web 2.0 conveniences?

Perils of Forecasting

The genesis of this post is the forecasts on online media spend. I tend to agree that this may be slow to grow in India but I would want to know when it took off in USA and/or China and what triggered takeoff. I remain optimistic on advertising by persons and SME to get business. This may not be cost per impression or cost per click but more like cost per order.

I am also wary of the perils of forecasting as the anecdotes below illustrate.

Tom Watson the founder of IBM stated once in the early days of mainframe computers that he saw a world market of just five mainframe computers.

When PayPal launched in Dec 1999 the total online accounts at all financial services companies in the US were 250,000 ( the leader was Wingspan Bank). By Feb 15, 2000 PayPal alone had 250,000 accounts.

Designations and mapping a startup

A few of us were discussing startups, and the point/purpose of a designation arose, and what it actually meant in a startup.
So far in life I have been a Founder, Co-founder, CEO, CTO, Vice president, Chief product Officer, Chief of Business Strategy,Executive Vice president, Director, Founding member, Advisor, Board Advisor, and a few other names I am sure I have been called :-) The only one I haven’t been is a CFO and COO, both of which seem to make little sense in a startup.

Anyhow the point being, irrespective of these titles, the role (except for 1 or 2) has remained the same, get the damn idea, convert into a business and make some money. I have done the same job in all, i.e build a business/team which delivers.

Which brings me onto the second point, when you have a designation in a startup, does it actually mean anything, who actually makes the decision in a startup. How when you sell/discuss with a startup do you know if you are talking to the correct person, a CEO maybe the one with a rich dad, he may have no idea about business, and COO, maybe just the second person in the team, but operations wise, no clue.

Are there better ways to actually designate startup teams ?, is it better to have no designations?, and does having designations too early cause team problems, imagine your friend is the COO, but 1 year down the line can not deliver, then what?, and why should the founder always be the CEO, at what point should he not? I know VC’s have their take on this, and will ask CEO’s to move aside, BUT what if their is no VC, what happens then, what is the criteria for a CEO/COO/CxO in a startup…or are they all on the same page, and should be all called “Startup team”?

Really interested to know how other startups deal with this, and when performance measurements which are done in fully fledged companies should come into play.

Internet bootcamp for consumer marketing professionals

Canaan and TiE are organizing an event for consumer marketing professionals in packaged goods, media, financial services, telecom and other such consumer industries – people who might be interested in entrepreneurship but don’t know where to start. Specific focus is on internet related opportunities. If you can think of people you know who might be interested, please feel free to pass it along. There is a registration process but no fee. We are keen to keep it as a limited group of very relevant people with about 8-15 years of consumer experience.

The event is scheduled on 26th May at the India Habitat Centre, Delhi.

The agenda includes understanding of the opportunity space, capital ecosystem, and how to navigate risks and opportunity costs. The event will be highly interactive, and hence limited to a few participants. Participants would include myself, Sanjeev Bikhchandani from Infoedge/Naukri, and Sanjay Anandram from Jumpstartup.

Please contact digbijoy@tienewdelhi.org for registrations.

Online Media spend India

Motley fool did a write up on Rediff. The interesting items to me were

Users – 53.6 million Revenues: $30MM annually ARPU annual : 0.56 cents.

10 advertisers accounted for 55% of revenues. Maybe all revenues were not advertising related. If say Rediff has 10% ( wild guess) of all online ad media spend then total online ad media spend in India would be $250MM.

Does this look high or low and how does it compare to other countries.

These numbers seem to suggest that the market for ad backed plays in India is limited. Will these numbers grow exponentially. How much will total media spend in India be in 2012 and of that how much online.

Does anyone know of reasonably credible estimates.

Entrepreneurs who are trying to pitch ad backed critical mass plays will need to address what share of the media spend they hope to get and how will they get it.

Delighting Customers/ Time

This post builds on the Dhando Investor post which with 20 comments was getting a bit cumbersome. Deepak Nadiger made an interesting comment and I wanted to respond and decided to do it with a fresh post. The hurdle rate discussion is an opportunity to be innovative and delight customers. In the businesses I have built in the past these have been central themes and I believe that there is an opportunity to build interesting plays that scale fast using the approach of innovation and delighting customers. In 1985 in India we used this approach and in four years built a business which had revenues of $12 million.

Time is the enemy of IRR which is why startups need to work extra hard to create value quickly. In the case of PayPal start to IPO was two years ( four is a hard par for the course). The PayPal IPO was post dot com bubble. In fact it was in late 2001 which was really dot com winter and a very tough time to IPO.

As usual please chime in with your views.

Dhandho Investor

I just finished reading “The Dhandho Investor” by Mohnish Pabrai ( the man behind Dakshana). I enjoyed it and it stimulated some new thinking.

I also looked at my investing in India over the last two years. On a portfolio with 85% exposure to equities I managed a 45% CAGR(cumulative annual growth rate). I guess that may be just about okay. ( this is all in just a few boring stocks)

Will my angel investing give me anywhere close to that. I doubt it. This is what makes angel/seed investing tough in India. I hope to by investing both time and money improve my odds. I have abandoned the “spray and pray” approach where you put small amounts if you like the idea or team and trust the entrepreneur. This approach also relies on if xyz and pqr are also investing then I feel good about investing.

An excerpt from a quote from Kahlil Gibran ( full quote in book)… “You give little when you give of your possessions. It is when you give of yourself you truly give”

The full quote is more about giving selflessly to the needy ( I am atleast ten years away from that phase if I ever get there) but the first few lines lead me to think more of a heavy involvement model and not a “spray and pray” model.

Unrest behind the scenes in the VC world

The NYT has an article on how LPs are unhappy with US VCs – most of them, anyway – and has some interesting bits to it.

Some limited partners, whose billions of dollars help fund the investments made by venture capitalists and who pay their fetching salaries, are unhappy. They say the industry is far less healthy than it advertises and that but for the most successful venture firms, it is struggling.

Chief among the troubles, they say, is the little publicized but continuing fallout from the dot-com bust coupled with a public market that is wary of embracing technology start-ups.

The complaints took on an unusually public flavor last month at the National Venture Capital Association trade meeting, an otherwise chummy affair in Washington. At the meeting, a handful of experienced limited partners gave a pointed presentation to a room of several hundred top V.C.’s.

Most directly, some said that venture capitalists on the whole have not made meaningful payouts for years to their limited partners.

“It’s been almost a decade,” said Eric Doppstadt, director of private equity for the Ford Foundation, which invests in venture capital firms. “I find it shocking that an asset class that has provided so little payback continues to attract so much capital.”

Of course, the VCs weren’t going to take that one lying down:

Mark G. Heesen, the president of the National Venture Capital Association, countered that the views stand at odds with the growing sums that limited partners continue to push at venture capitalists.

“Limited partners may have their complaints, but the demand for participation in the venture capital asset class remains extremely high,” Mr. Heesen said. “This is a high-risk, high-reward game — not only for the venture capitalists but for their investors as well.”

This graphic gives some data to help make your own mind up.

Returns to LPs from VC funds