Author Archive for Arun Natarajan

Tall Tales told by Grandmas and Venture Capitalists

“VCs look for Startups going after a Big Market with a Passionate Team and have an ‘unfair advantage’.”
“A startup is an organization built to search for a repeatable and scalable business model.”

If the organization does not yet have a viable business model, how can it have an “unfair advantage”?

“VCs take pure equity risk and, as long as the business pans out fine, their interests are perfectly aligned with that of the entrepreneurs.”
“VCs bury ‘Dangerous Bombs in Share Holders Agreements’ and unless you ‘diffuse them’, they will take away all the spoils.”

Conundrums? Myths?

Certainly Quite Puzzling Questions to an Entrepreneur Seeking the First Round of VC funding.

But, who’s going to provide the answers?

I wish my Grandma was around to help.


I’ve come to realize that, apart from the “school of hard knocks”, the best way to learn anything – that sticks – is through stories. Call it Case Study or Mythology or Grandma’s Tales. Stories Stick. And they bring clarity to seemingly complex issues.

If only I’d paid proper attention to Grandma’s tale of a guy who brought together an army of monkeys (and other assorted creatures) to cross an ocean and conquer an island, I would have probably learnt for keeps that Leadership is about inspiring “ordinary folks” – by setting a “Big Hairy Audacious Goal”, personal example and smart tactics – to achieve “extraordinary results”. The same story also had a bear pep talking a monkey into “realizing his true potential” and taking a “test marketing” leap across the ocean (to ensure that the big battle was going to be worthwhile).

Great. Back to VC Fund Raising.

Where are the Answers to those Tricky Questions?

In Stories!

From Master Entrepreneurs who have fought the good fights and have not only survived, but thrived, to tell their tales.

They’re Lined Up – Only on March 6 at Mumbai – to show the path at the APEX’14 Summit, India’s Premier Investor-Entrepreneur Interface. In Detail. With Drama. So that you’ll never forget.

Are you ready to get armed for the tough-but-definitely-worthwhile climb to startup success?

Click Here to Learn More and Sign up!

See you there!


If only Abhimanyu knew ‘The Art of The Exit’ as well…

“Accelerators should not try and be all things to all people”

At the recent Venture Intelligence APEX’13 Summit, Sateesh Andra of VenturEast Tenet Fund provided what I thought was very useful guidance to entrepreneurs on which type of early stage investor to approach – depending on the type of company they were creating.

Accelerators should not try and be all things to all people. They are great for fast moving businesses – like Internet, Mobility, Cloud-based technologies, etc. – which need things to be put on a fast track. But you cannot accelerate anything for a Retail consumer company. That message is getting mixed up in India. Companies that require longer gestation and diligence (to solidify their business model) – like ventures in Cleantech, Medical Devices, etc – should go to incubators. Angel networks are good for very domain specific businesses where the entrepreneur is fairly seasoned and already knows what they want to do. Seed funds can bet up to a $1 million even on concepts, but need to see full fledged teams.

View more highlights from the summit here

Stars Aligned to Foretell Future of Indian Private Equity & Venture Capital

Dear Colleague,

In 2004, the buzz around one mega exit – of Private Equity investor Warburg Pincus from Bharti Airtel – got institutional investors across the world excited about the Indian Private Equity opportunity. Naturally, there was a boom in PE fund offerings from India- typically focused on minority growth capital type investments – to cater to this rising appetite. And billions of dollars flowed in search of the next big Bharti.

Now, in one forum after another, these investors – “Limited Partners” (investors in PE/VC funds, LPs for short) – have been hyper critical of Indian PE fund managers for their lacklustre returns.

Indian PE sure seems to have hit rock bottom.

Is There Hope?

Admidst a lot of skepticism, the BSE Sensex was the best performer among emerging markets (aka BRICs) in 2012 after being the worst performer in 2011. Recent months have seen MNCs from Europe to Japan and, of course, the US – in their almost desperate search for growth – very actively snapping up companies Indian companies: whether it’s high profile consumption targeting sectors (think United Spirits), the relatively quieter pharmaceuticals ones (think Claris LifeSciences and Orchid Pharma) or the very quiet but very many acquisitions in the Industrials segment. With so many PE-backed companies lined up for exits, the signs on the liquidity front look good for 2013 at least.

The Bloom?

Recent exits in the tech industry – think MakeMyTrip, InMobi, etc. and performance of rising stars like Flipkart, RedBus, etc. – have got even some of the normally wary LPs interested in the Early Stage segment. As a result of which, new VC funds are expected to bloom. Which was exciting enough for 2012 to witness one new Accelerator to sprout up each month: The Morpheus now has Microsoft and 500 Startups for company (competition?). And the original Accelerator – US-based Y Combinator – continues to attract over a couple of exciting Indian startups to flip over to Silicon Valley for each of its batches.

What are these Accelerators – who are churning out companies by the dozens each year – betting on? That Angel Investors/Seed Funds will provide follow on funding to their promising hatchlings. The membership at the angel networks is booming with a little “Old Money” folks; some “Been There, Done That” First Generation Entrepreneurs; more “vicarious startup thrill seeking” corporate executives and lots of hope for quick flips – 3x return is the oft used multiple – when the “Series A” (first round VC funding) happens.

The Bottom Line?

It’s all hyper connected. The accelerator phenomenon is absolutely great for entrepreneurs searching for early validation, mentoring and first money for their ideas. And a great feeder for the angel investors and seed funds. Who in turn need a vibrant set of VC funds to provide scale up capital. Who need PE funds to allow them to take some “chips off the table” (via Secondary Sales) and prepare their portfolio companies for the public markets. The IPO markets are of course vital for the PE folks to exit. Which is heavily influenced by the economy.

So, Who Can Foretell What’s to Come? The Stars?

Let’s look at it backwards…

About The Big Picture?

How about someone who was Deputy Governor of the Reserve Bank Of India until last month? And Chief Economist-Asia-Pacific at a top global rating agency before that.

About The Public Markets?

How about the CEO of the Asia’s Oldest and best known stock exchange, the BSE?

About (The Mess in) Private Equity?

How about the founder of India’s Best Known Home Grown PE shop? How about the India Head of the World Biggest PE Firm? The Global Co-Head of Private Equity at a MNC Bank (who no one seems to have informed that any portfolio – especially one constructed in India – should have a few lemons)? How about if we threw in an outspoken IAS officer – a batch topper, Harvard Grad and who is doing his PhD researching Indian PE – to needle the PE Stars?

About Venture Capital?

How about two Managing Directors from the best known VC firm in the World, India included? And many, many more rising stars (from accelerators, seed investors and growth capital funds).

About Starting Up, M&A and the Life After?

How about the founders of a pioneering KPO venture (acquired by Thomson Retuers) and a pioneering assessment services firm (acquired by Manipal Group) who have since turned investors?

Agree that These Stars can (at least somewhat) foretell the future and Connect the Dots in the Indian PE/VC – Entrepreneur landscape? It’s now possible to listen and meet all of them in One Place in One Day!

At The Venture Intelligence APEX’13 PE/VC Summit & Awards

When? February 13 (Wednesday), 2013

Where? Mumbai (ITC Grand Central – Parel)

How can you sign up to participate?

After all, the Stars Don’t Align Like this Very Often!!

Will the record high VC investments, catalyzed by E-Commerce deals, sustain?

Hi All,

The following data points from the Venture Intelligence India Venture Capital Report-2011 report quantifies the resurgence of VC investments in India catalyzed by the well known excitement for the E-Commerce segment:

Venture Capital firms invested about $1.09 billion over 209 deals in India during the twelve months ended December 2011 to touch all time high levels. The amount invested during 2011 was significantly higher compared to 2010 (which had witnessed $699 million being invested across 132 deals) and also compared to the previous record year of 2008 (which had witnessed $980 million being invested across 173 deals).

§ With 111 investments worth about $506 million, IT & ITES companies account for 53% and 46% of VC investments in volume and value terms respectively. Four out of the top five IT deals went to Online Services companies (including especially E-Commerce), which as a sector attracted a record 64 VC investments worth $238 million in 2011 (compared to just 19 investments worth $91 million in 2010). Mobile VAS companies attracted 13 VC investments worth $48 million in 2011. (Since our definition of VC investment caps out at $20 million, these figures do not include the “private equity” rounds in these sectors like the $200 million commitment by SoftBank to mobile advertising firm InMobi or the $40 million rounds raised by e-commerce firms and Fashion and You).

§ Early Stage investments (1st or 2nd round investments into companies < 5 years old, in our definition) accounted for 70% of all VC investments in volume terms and 52% in value terms during 2011

Is this pace of VC investments going to be sustained in 2012 and beyond? What do entrepreneurs and investors – both young and “old” – in this sector feel? I hope to find out some answers at the Venture Intelligence APEX’12 Private Equity & Venture Capital Summit, on February 14 at Mumbai, which features a special panel discussion on the Internet & Mobile sector. The panel includes entrepreneur speakers like Alok Kejriwal, Co-founder & CEO, Games2Win and Vikhyat Srivastava, Co-founder, Groffr and investor speakers like Mahesh Murthy, Founding Partner, Seedfund and Sunil Goyal, CEO of YourNest.

We have requested the speakers to provide, apart from their outlook for the sector over the next 3-5 years, actionable takeaways in terms of “what works, what doesn’t” – on important aspects like execution, fund raising, etc. – in the Indian context. The event will also feature other interesting panel discussions including “Big Debate: Majority Control” in which speakers will provide their perspective on the advantages and problems associated with investors holding controlling stakes in the ventures they fund. Other PE/VC Firms participating in the event include Ascent Capital, Exponentia Capital, FootPrint Ventures, Gaja Capital, Headland Capital, India Value Fund, Matrix Partners India, Peepul Capital, Sequoia Capital India, etc. A more detailed agenda of the APEX’12 Summit can be viewed at

Hope some members of this forum will be able to join us at the event. For participation details, please email or call Gaurav at +91-44-4218-5180



PE/VC-backed cos. outperform their peers: Study

PE/VC-backed companies fare better in terms of growth in sales, profitability, wages, exports and R&D investments, a study by Venture Intelligence shows. The full report can be downloaded from Extracts from the Press Release:

According to a new study by Venture Intelligence, a leading research firm focussed on Private Equity and M&A activity in India, PE- and VC-backed companies are growing significantly faster compared to their non Private Equity-backed peers as well as market indices like the Sensex, Nifty and CNX Midcap.

The Venture Intelligence Private Equity Impact report also shows that profitability, wages, exports and R&D investments at PE/VC-backed companies are growing at a significantly higher rate compared to their peers which are not PE-backed.

– Sales at publicly-listed PE-backed companies demonstrated a CAGR of 25% over the ten year period 2000-2010, a significantly higher rate compared to the 15.1% at non PE-backed listed firms, 17.9% at Nifty Index companies. 19.2% at Sensex companies and 15.3% at CNX Midcap companies.

– PE-backed companies showed 31.5% growth in Profit-After-Tax, significantly higher than non-PE backed companies (22%), Nifty (23%), Sensex (21%) and CNX Midcap (22%).

– Wage bill at publicly-listed PE-backed companies grew at 26.4% over the ten year period, a rate of increase greater than that of non PE-backed listed firms (13.9%) and also that at the major indices – Nifty (18%), Sensex (19.4%) and CNX Midcap (13.8%).

– While the growth rate of exports at PE-backed companies (at 27%) lags that of large cap companies, it is still higher than that at non PE-backed companies (23%) and Midcap companies (25%).

– Growth in R&D investments at PE-backed companies (at 30.6%) is significantly higher than that at their non PE-backed counterparts (20%) and also higher when compared to the major indices – Nifty (25.8%), Sensex (26.1%) and CNX Midcap (27.2%).

The report also features case studies of successful PE/VC-backed companies showing how these organizations benefited from PE/VC investments. “The common thread that emerges from the study is that Private Equity / Venture Capital investment, when chosen and leveraged well, can help Indian companies scale up rapidly and accelerate growth in several ways that add significant value to the Indian Economy,” said Arun Natarajan, CEO of Venture Intelligence. “The case studies in the report demonstrate how PE and VC firms are forging active partnerships with their investee companies to improve capital efficiency, business strategy and corporate governance, besides opening up new markets.”

The Private Equity Impact study, first conducted in 2007, measures the impact of PE and VC funds on the Indian economy using quantitative and qualitative methods – the only such initiative in India. This year, again with advice and guidance from Prof. Amit Bubna of the Indian School of Business-Hyderabad, the study revisited the theme of comparing PE- and VC-backed companies vis-à-vis their non PE/VC-backed peers using quantitative parameters.

The full report can be downloaded from

Speakers List at APEX ’11 PE/VC Summit; Feb.10, Mumbai

I am happy to announce the list of Investor and Entrepreneur speakers for APEX ’11, the annual conclave of the Indian Private Equity / Venture Capital industry, scheduled for February 10 at Mumbai. The event will have a special focus on Cleantech, Logistics and Real Estate.

Private Equity: The Road Ahead

Raja Kumar, Founder & CEO, Ascent Capital
Alok Gupta, Managing Director – India, Headland Capital
K Srinivas, Managing Partner, BTS India*

Cleantech Panel

Dr. Vivek Tandon, Co-Founder, Aloe Private Equity
Inderpreet Wadhwa, CEO, Azure Power
Vinod Kala, Managing Director, Emergent Ventures
Siddhartha Das, General Partner, Ventureast

Logistics & Transportation Panel

Ashis Nain, MD, Expressit Logistics Worldwide
KK Iyer, MD, India Equity Partners
Sankalp Shukla, CEO, Inlogistics
Mohit Bhatnagar, MD, Sequoia Capital India

Real Estate Panel

Sunil Rohokale, ED, ASK Investment Holdings
Sanjeev Dasgupta, President, ICICI Venture*
P. S. Jayakumar, MD, VBHC

To view the more detailed event agenda Click Here

Happy to organize discounted participation rates for VentureWoods entrepreneur members. To request the special rates, Click Here

The Guy who sold 2 Cos. to Flextronics

At Venture Intelligence, we recently did a podcast with K.V. Ramani, Founder of Future Software and Co-Founder of Hughes Software Systems – both of which were acquired by Flextronics in 2004. KVR’s story is a fascinating account of the tribulations and success of an early mover in the Indian software industry, who chose – in the mid-1980s – to tread a different path than the common “body shopping” route.

Some highlights from the podcast:

# KVR’s story emphasizes how the founding idea – especially for an IT product company – should be based on something that is likely to become popular 3-5 years ahead. He believes the founders should focus on the vision for the company in the next 5 and leave the job of managing the next few quarters to the operational managers.

# The podcast has an interesting account of how KVR converted the huge problem of its largest customer, Hughes (which accounted for 30% of the business), wanting to set up its own shop in India, into an opportunity.

# KVR also highlights how Flextronics acquired and stitched together what is today Aricent by acquiring 5 Indian communications software companies (including Future Software)

You can view more highlights and download the full podcast from

Hemu Ramaiah – Story of an Indian Retail Pioneer

At Venture Intelligence, we recently had a great experience interviewing Hemu Ramaiah, founder of the Landmark bookstore chain (in which the Tatas acquired a majority stake in 2005). For me, the interview (which is part our Entrepreneur Podcast series “Entrevista”) served as a confirmation that a customer facing role is the best start to an entrepreneurial career.

Other key takeaways from the podcast:

* “Make Your Own Mistakes”
o Trust Your Gut (based on your understanding of customer needs)
o “Don’t let Accountants take over your business”
o Examples: Deciding to get software designed by a start-up firm (which made the effort to understand her requirements better), deciding not to charge extra for courier delivery for Internet orders, deciding to buy (rather than rent) space for the stores, etc.

* Importance of Growing the Market vs. worrying overly about competition
o Amazing story of how she decides overnight to start supplying books to her competitors (in order to boost volumes for the import orders)

* Choice between Private Equity and Strategic Investors

* Planning the Personal Exit
o Because “business is a treadmill” and “life shouldn’t pass you by”
o Basing the decision on an age cut-off (rather than some target corpus)

* Converting Problems into Opportunities
o When she learns that her daughter’s schoolmate has never visited a bookshop, Hemu decides to turn the problem (of parents not exposing their children to books), by “taking the bookstore to the school”.

You can download the full podcast from the Entrevista blog at

What does 2010 hold for PE & VC Investing?

As you would be aware, after falling-off-a-cliff in late 2008, Private Equity & Venture Capital investments in India have displayed steady signs of recovery since mid-2009. The environment for exits too has clearly improved with sharp up-tick in IPO and M&A activity. However, the scenario for new fund raising still remains murky. In this context, my firm Venture Intelligence is bringing together key players in the Indian PE and VC ecosystem at the APEX ’10 conference next month to introspect and brainstorm on the way forward.

The event, scheduled for February 4 at Mumbai, will feature high power panel discussions on the year ahead for Private Equity and Venture Capital in India. The event will also feature special panel discussions on PE/VC investments in various sectors including Telecom, Education, Financial Services and Healthcare & Life Sciences.

Speakers at APEX’10 include:

• Varun Sood, Managing Partner, Capvent
• Vani Kola, MD, NEA Indo-US Ventures
• Raja Kumar KEC, CEO, UTI Ventures
• Hari Buggana, MD, Evolvence India Life Sciences Fund
• Manik Arora, MD, IDG Ventures India
• Sunil Kanoria, Director, Quippo Telecom Infrastructure
• Mahesh Choudhary, CEO, Microqual Techno
• Dr. Bala Manian, CEO, ReaMetrix
• Chetan Tamhankar, CEO, SIRO Clinpharm
• S. Nandakumar, CEO, Perfint Healthcare
• Swapan Bhattacharya, MD, TCG Lifesciences
• Padmaja Gangireddy, MD, Spandana
• V.P Nandakumar, Chairman, Manappuram General Finance
• Madhusudan Menon, Chairman, Micro Housing Finance Corp.
• K. Ganesh, CEO, TutorVista
• Rajesh Bhatia, MD, Tree House Education

More information about APEX ’10 is available at

I would be happy to organize a few complimentary passes for the conference for entrepreneurs from this group. Interested members can email their name, designation, company name and contact no. to Please make sure to include “VentureWoods” in the subject line. Look forward to interacting with a few VW members at APEX’10.