Archive for November, 2009

Solution for Angel drought in India?

Sarah has a good roundup of lack of angel investing activity in India. Lets get to the more interesting part – how to solve it?

I ran into Vishal Gondal on a flight few weeks back and he had a model that is pretty interesting. And may be there are some other thoughts in the community. So let me try and frame the problem.

How do we get 1000 angel funded startups every year with average initial investment of $100K? That’s collective $100M in angel capital – enough to get started. Some key issues/ constraints/ leeway:

  • Any sector
  • The amount may be available through formalized groups or otherwise
  • Mostly to concept stage businesses, sometimes prototype – definitely no revenue threshold
  • No express requirement for mentor, or active investors (yes, this was a tough one for me to let go)
  • Doesn’t include advisory capital, sweat capital, incubation resources, etc – talking cash here
  • Equity investment with profit motive – no debt, no collateral, no grants

The unstated one of course is sustainability and good choice of ventures – which is a decision that markets can make. Again, I have no included ownership thresholds – markets can decide that.

Smart ideas out there?

What are you investing in Today?

Media has followed the boom and tone-down in venture capital over past 4 years. As much as last 12 months saw a dip in venture capital, I have a feeling that some of the enthusiasm from journalists declined as well. Only the most dedicated journalists have survived the theme fatigue! And as many of us in venture capital have been doing, they are seeking to understand how investment themes have changed over past four years.

In my own observation, venture capital has followed a much accelerated hype cycle over past four years, where many themes have come up, quickly rising to hype prominence, and then settled to the golden mean – yes, there is a golden mean even for the most hyped technologies! Sample the following peaks:

  • 2006 – Transactional Internet, Mobile VAS
  • 2007 – Web 2.0, Retail
  • 2008 – Microfinance, Cleantech
  • 2009 – Education, Healthcare
  • 2010 – Rural distribution perhaps? 3G? Other guesses?

I do not list real estate above because its not a “venture capital” category. The thing with hype is that the extent of hypeis only visible post facto, and that some people will actually make money in the hyped sectors (Online travel for example). The short duration of these specific hype cycles is a concern though – VCs operate well in 3-4 year long cycles, not in 1 year long ones.

Our own learnings at Canaan have been more around aspects orthogonal to funding theme – we have more or less stuck with our key areas of focus over past 4 years in India. The relative emphasis on idea versus entrepreneur, for example, has tilted more towards the latter. We have also made some bets in sectors listed above and future will tell us if their golden mean is golden enough for us!

Funding for Real Innovation in India! UNAVAILABLE

If you look carefully at the blue fish in the water below, you can discern INDIA written faintly on the body. Well it is not a fish but India’s first indigenous designed Autonomous Underwater Vehicle (AUV). I have a story about it for you.

I first met Ammar in Delhi after he reached me through the India Brand Equity Foundation. I travelled to the Delhi College of Engineering campus and met the larger team of 8 students.  You should have been there with me to see the kick ass energy this team has. They have gone ahead and built a 4th generation AUV that has been the only Indian participant at the prestigious annual competition hosted by the Space and Naval Warfare Systems Centre, San Diego.

They have not won yet. They lost to the Israelis and the Americans. One reason – the US team has the support of an entire fab for the circuitry right inside the university. The DCE team was building it themselves on a circuit board using a solder.

The kind of applications for such a thing is amazing. It can travel 2km on its own. Can identify objects. Follow a path intelligently. And all onboard, right from the power to the brain. Applications range from security to fish patterns. In any other country, they would have received funding, or would have been kidnapped by the armed forces months ago. In our case, this team is struggling to raise a fund of just Rs. 20 lakhs to buy equipment.

They footed my bill at the College Canteen! So I got them over to meet a couple of international angel investors who were speechless after the meeting about how they were able to see something like this without an NDA. It would be very difficult for the team to raise professional funding as the IP is university controlled. The Dean of Research, Dr. R.K. Sinha is wonderful and has got the Institute to be more outward looking but for those benefits to reach innovators within will still take years after the IITs first get their act in place!

So what happens in the meanwhile? Ammar and his eight muskeeteers will graduate in a year and get picked up by some software company. VCs will continue funding social community startups. Angels will never get to know.

I wonder how we could change it. We have adopted the AUV DCE team as our mascot. I am speaking to every friend, every one I know to get these guys 20 lakhs over one year. If any of you can help, and it is not only money that they need but equipment in kind and mentors, please get in touch with Ammar and the team at auv@dce.edu/9873999040 or me at sanjukt.saha@onebillionminds.com.

At One Billion Minds, we are trying to see if team like this need not go a begging.

Software Architect

There is a partially VC funded start–up which has had a pilot going on for 2 years in Delhi which  caught the personal attention of Bill Gates when he visited Delhi in Nov 2OO8 leading to partial funding by him to keep the fires burning. Bill Gates has a financial inclusion mission which is dear to his heart and to his Melinda Gates Foundation and saw synergy in this companys innovative mobile banking business idea and possibility of a Melinda-Gates led CSR association.

 There is an absolutely committed co-founding team. They have gone through ups and downs financially till Bill came in as a saviour and gave them funds and also put them in touch with VCs with whom they are working on funding to help them scale beyond the pilot. The company also has two prestigious corporates — Indias largest bank and a telecom provider, who are helping them incubate the mobile banking vertical.

 Till now they have worked with an Open source program based software called MIFOS which acts as the bridge between banks and the  extended arm reaching out to the mobile customer ..but MIFOS is not suitable for millions of transactions.

 Hence the need to have another co-founding team member as an Architect. 8-1O yrs experience in Architecture and preferably on financial product related programs would be ideal.

 The Company is entreprenurial and ideal only for an entreprenurial person who would grow with them and have wealth creation opportunities.It is not a regular 9 to 5 company or a blue chip MNC. Each co-founder has invested from Rs 1 crore to Rs 4OOOO each, to become a co-founder. They also have ESOPs. The next person coming in –the Architect — is not expected to invest — but could be given ESOPs. Hence pl do not expect cash compensation increases as the driving force for you to look at this position though wealth creation opportunities through ESOPs will be there.

 Apart from an innovative business initiative which has support of people like Bill Gates or rather his Foundation , they are keen to incubate a culture and DNA in the organisation which is unique and like google. Looking urgently for an Architect who fits the bill and keen to be in Delhi with this exciting venture.
If any of you know someone who would want to be the next founder team member when the company is about to scale up and if Delhi, then do let me know on ranjit.jatar@novaedge.in

Ranjit Jatar

www.novaedge.in

9922888599

Barcamp Chandigarh @ 22 Nov

The startup ecosystem in Chandigarh, the city beautiful, is buzzing with activity. On 12 November the results of Business plan competition, Enterprize – organized by TIE Chandigarh & Chandigarh Administration, were announced. The winners got place in the EDC setup by the Chandigarh Administration, in the IT park.

Continuing the good news for start-up folks, Fountainhead School of Business is organizing BarCamp Chandigarh – an extreme popular unconference, on 22 November. It will be a day long event that provides you the opportunity to attend some interesting sessions, meet like-minded folks, network and peek into the startup scene here. Barcamp Chandigarh is also inviting folks who would like to conduct a session. Go ahead and signup to attend the event or to conduct a session at the Barcamp.

MVP is a supporting partner for the the event and we are doing our bit to make the event a good one.

Seeyou at the First BarCamp Chandigarh this Sunday!

Book Review – Getting to Plan B

Just finished reading this book by John Mullins and Randy Komisar. It outlines the importance of iterating on the business to evolve the plan continuously – in many cases, the initial plan that entrepreneurs start with doesn’t work as it is.

This is something that people in the venture space have known intuitively. John and Randy do a good job of motivating it with examples, and outlining a broad framework of what to watch out for. In some sense, the book is broader than just getting to Plan B – the initial portions on analogs and antilogs (as ways to find patterns that can fit your business) could be an independent topic. The degree of discipline that the book brings to those is limited, in that its a matter of judgment as to which analogs and antilogs one must choose out of many that are available – hindsight (as in case of many examples in the book) make it obvious, but thats not of much use when planning a business. Similarly, many case examples, such as Apple, are really about how a business will need to evolve even after it is successful (diversification, if you will).

The portions of the book I found most interesting are the ones that genuinely outline examples of companies that learnt somthing important along the way that significantly altered their plan along the same line of business. Examples like African Leadership Academy, or Shanda. From an operating discipline standpoint, I wholeheartedly agree with the approach to define dashboards, keep listening to the data, and continuously refine the model. Global Giving seems to be a great example of where this was done systematically. In some of the companies I have been involved with, the same approach has helped us make shifts sooner than would be obvious if the dashboards were not as explicit.

The importance of dashboards and thinking upfront about risks is also interesting because in most cases the Plan B can not be preconceived – there is inherent risk in startups. Many examples in the book illustrate this – Silverglide, Google, Pantaloon, amongst others. Hence the process becomes more important than the content.

Overall a great job. In the middle, the book deviates into a primer on startup financials which could have been skipped here.

Israel: Leader in Business Innovation

CNBC has this interesting video on what makes Israel business innovation tick