Ideas|Products|Startups|VCs

At various stages of the company’s growth and development you as founder will attract different kind of investors and they will have different expectations.

Strong ROI

• To begin with generally founders raise money from 3Fs (friends, family and fools). 3Fs have sole intent in helping the founders and have faith in their capability.  Then comes the angel investor who is taking on the most risk by investing when the company is in early stage and has yet to generate much revenue but prototype is made or and have beta users or few paying customers.Angel investor looks to make 10-20x for their investments and its justified since they take major chunk of risk. In general angel investor will sell out during one of the subsequent financing periods. Very rarely does an angel investor stay on board until the company reaches maturity.

• Venture capitalists come in later but still before the company is cash flow positive or about to breakeven. Therefore, they typically want returns of 5x for a period of 5-7years. Mezzanine financiers provide a mixture of debt and equity to more stable and established businesses so they expect blended returns of 30-40%.

2. Pay off time –

• Very few investors wish to wait indefinitely for their money. They are investing not to make you feel good but because they believe in you and your business and the ability of the business under your management (and sometimes with their additional efforts) to generate enough revenue and cash flow and/or grow large enough in value to return them their investment and their expected return within a specific time frame.

• This varies based on the investor. Angel investors prefer a shorter period of time (3 years). Private equity funds typically expect 3-4 years. VCs tend to  derive a number of benefits, so their investment are longest with a period of 5-7years.

3. Management Team

• Investor looks for great team and founder who can spearhead the vision. There are many great ideas out there. It’s not so much the idea that counts but the ability of the management team to capitalize on that idea.  The management team is the most important component. A great management team can make a good idea or a so-so company into a great company. But a great idea may never make it off the ground with poor management and a great company can go rapidly downhill with mediocre management.

4. Company Valuation

• You shouldn’t look like a fool while approaching investors without knowing the worth of your company. Spend some time do some homework, check with your fellow entrepreneurs or hire a finance consultant to evaluate the base valuation of your company. Would you know if the investor is proposing a good price for the portion of their investment? Sometimes angel investors aren’t highly financial savvy and can’t do their own valuations. You need to demonstrate how their investment will help move your business to the next level and they will be keen to know how  requested investment amount was deduced. VC firms will do their own valuation but you should be ready with yours and this will facilitate your negotiations with these firms.

5. Business Plan

• Business Plan is a critical component and investors look into it quite seriously. Good business plan should cover an overview of the market, Gap/Paint points in the market, your proposed solution to address the gap, background on the business, industry and competitor assessment, management overview, sales and marketing plan, risks, financial snapshot, goals, and the strategy to accomplish these goals. Some investors only want to see an Executive Summary – 3-5 pages – to determine if they’re interested. Then, once they’ve expressed full interest, they’d like to see the complete business plan.

Visionary RCM (VRCM), an ambitious services company specialising in healthcare revenue cycle management, announced that it has received funding of Rs 150 Million from leading venture capital company IndoUS Venture Partners (IUVP), which provides early and mid-stage funding to new and growing businesses in India. VRCM will primarily use the capital to acquire US based companies in the coming year. With this funding the company is looking to aggressively scale up its processes to become a leading player in this space.

VRCM was started in the year 2006 by a first generation entrepreneur Mr. Rajesh P Surana, along with Mr. Sundararajan, advisor to Shriram Group and Mr. Abhaya Kumar, Joint Managing Director, Shasun Chemicals and Drugs. The company has a state of the art delivery center in Chennai. VRCM is very keen on growth and has grown from strength of 6 people to 185 as of this day. VRCM is a new age technology company focusing on providing customer focused Healthcare Revenue Cycle Management Services. We enable healthcare organizations to develop sustainable technology solutions that improve their productivity and minimize costs.

Rajesh Surana, CEO of VRCM, said “US Healthcare offers a huge spectrum of opportunities for innovative companies like ours for organic and inorganic growth. Our focus is on creating brand equity for VRCM in Healthcare Services Space and partnering with IUVP would help us in working towards our vision. With this we expect to continue on our high growth path by tapping newer markets and attracting quality talent.”

Kumar Shiralagi, Managing Director of IUVP said “Our keen interest in Visionary RCM comes from the scope of growth and the track record of the company in the healthcare space. VRCM with its strong service proposition has not only offered customers better value but also driven them towards higher productivity and margins which are clear indicators of the commitment that it has towards its business. We hope that with this partnership VRCM is able to leverage the enormous opportunities that the US market offers in the healthcare space and build a growth trajectory for all associated”

-Hitesh, vcBytes.com

Wishing all the readers a very happy friendship day.This week is marked as friendship week, so this post is all about analyzing VC and entrepreneur relationship. Can VC and entreprenur be friends? it’s a little tricky question and don’t have straight answer for it.

Let’s investigate few scenarios -

a) There is no guarantee that VC will invest in company which is run by his/her entrepreneur friend. One instance its worth mentioning here is a prominent VC based out of Bangalore had long discussion with entrepreneur friend who runs a prominent F&B chain. VC didn’t find the value in that deal and was convinced exit won’t be easy with 7x-10x kind of returns. Running a 8-10 fast food chain has different kind of problems than running 80-100 fast food centers.

b) There are instances where entreprenuers have become good friends with on boards VCs just be their sheer execution capability, and entrepreneur have become Partner in the same VC firm after successful exit. Mark Suster became general partner at GRP partners after successful exit of his venture backed by GRP partners.

c) Sometimes founder can be displaced out of the company day today’s operation if VCs perceive founder is thinking VC money as his/her own money and performance of the company is quite mediocre. Entrepreneur founder is always in a impression that they are indispensable which is a big mistake they commit.

-Hitesh, vcBytes.com

SKS Microfinance which gives small loans to poor borrowers, founded by Vikram Akula is coming out with Initial Public Offering (IPO) of 16.8m shares with a fixed price band at 850-985 rupees/share. Thus SKS microfinance is all set to raise $353M from the IPO process.

SKS Microfinance is India’s biggest microfinance institution with a loan book of Rs. 4300 thousand Crores is well funded by  Sequoia Capital, Kismet Capital, Unitus, venture capitalist Vinod Khosla and Catamaran.

SKS Microfinance plans to use the share sale proceeds to augment its capital base to meet future capital requirements that is likely to be fuelled by growth in the business, the company said in its offering prospectus.

Vikram Akula, the founder and the chairperson, who owns 3.8 per cent in the company as employee stock options, said he had sold 25 per cent of his stake to a private equity firm.

Sequoia is going to make around 15-18x returns from its investments and Catamaran has also hit the jackpot with their first investee company going public.

-Hitesh, vcBytes.com

In what could be a defining milestone in Indian entrepreneurial development domain – Grow VC, the ‘Virtual Silicon Valley’ software platform and world’s first-ever ‘Crowd-Funding’ and interaction platform for startups announced the launch of a local funding network in India, in association with Springboard Ventures – an ensemble of experts dedicated to promoting start-ups. Based around the same model as the existing global funding network Grow VC offers, the Indian local funding network will be the first of many “local” networks the company looks to launch within its wider global network in the coming months. Grow VC’s community platform for entrepreneurs who are looking to grow their early stage startups through the “crowd-funding” has already gathered considerable interest with hundreds of new sign-ups each month and active participation of investors, startup service providers, advisors and entrepreneurs within the online community.

Grow VC works to create a “Virtual Silicon Valley” community and develop new models for more efficient early phase funding. Grow VC just announced the Virtual VC Co-investment Fund to enable VC’s to participate in Grow VC’s seed investments. IndiaCo a leading investment management firm from India is the first partner to come aboard the fund and has committed to invest $5 million to the virtual fund will pave the way for other VC’s to join the fund. The local network in India will be spearheaded by Springboard Ventures creating a tailored network suited to Indian needs and culture.

The launch of Grow VC India will pave the way for many ‘firsts’ in the innovative start-ups domain within the country as pointed out by Satish Kataria – Managing Director at Springboard Ventures. “It would be the first ever single platform to bring together the various entities which revolve around the creation and growth of start-ups while allowing them all to interact and work together with each-other. Besides uniting angel investors and entrepreneurs, this platform offers a first-time opportunity to various experts and consultancies to now come forward and offer their services to start-up community through innovations such as ‘Service Investments’. “ says Satish. This will essentially help enhance the ‘funnel’ or ‘bandwidth’ of support to Indian entrepreneurs bringing into the system not just funders, but experts, advisors and other resources which can help create and grow successful start-ups.

Indeed, as a significant start towards this journey of bringing all key Indian entities together, Indian Angel Network – India’s first and largest network of Angel Investors – having more than 125 members throughout the country, have agreed to associate with Grow VC India – in order to further strengthen and boost Indian start-up eco-system.

“We see that India is very important market for Grow VC, because it has a strong entrepreneurial culture and also nowadays, more investors that are interested in investing in local but also international companies”, says Jouko Ahvenainen Founder & Chairman at Grow VC. “India also has a lot of experience in crowd-funding and other innovative finance models. We have already now seen a lot of Indian users also in our global service.” he adds. Local networks will play an important role in Grow VC’s strategy to build a strong global start-up funding community and the company aims to offer options and freedom to its users allowing them to operate on a local level or operate on a global level too if they choose to.

PubMatic the sell-side ad platform, has raised $7.5 million in a third round funding.The series C is round led by existing investor Helion Venture Partners. Existing partners Draper Fisher Jurvetson and Nexus Venture Partners also participated. In all, Pubmatic has raised $18 million.

The new funding will be used to accelerate the adoption of PubMatic’s  set of new offerings, including: an impression-level ad auction with real-time bidding; global demand representation; audience analytics and monetization; enhanced brand control and data safety; guaranteed inventory yield management; and enterprise ad operations support. For the first time ever, sales and ad operations teams can manage all ad revenue from a single dashboard and gain new insights into inventory and pricing across non-guaranteed and guaranteed inventory channels. This will allow publishers to find new ways of selling existing inventory and improve the value of the inventory sold by their direct sales force.

Pubmatic’ management technology combines an impression-level ad auction, the most comprehensive brand protection tools, and enterprise ad operations support to give the Web’s top publishers the most control over their revenue and brand. Some of the world’s most respected online publishers have chosen to work with PubMatic, including IAC, The Huffington Post, eBay, United Online, TV Guide, and the majority of the comScore Top 10.

-Hitesh, vcBytes.com

Reliance Venture Asset Management is proud to announce its strategic collaboration with two of the most prestigious universities globally – the Massachusetts Institute of Technology (MIT) and Stanford University.

In doing so, it looks forward to abetting their efforts to discover the next breed of budding entrepreneurs through their flagship competitions. The aim of this partnership is to strengthen the entrepreneurship collaboration between India and MIT and Stanford University.

Reliance Venture Asset Management’s association with MIT is to sponsor their annual MIT $100K Entrepreneurship Competition, which makes it the first Indian venture capital to forge a partnership of this nature. With a legacy of 20 glorious years, the legendary competition awards $100k for business startup services to outstanding student entrepreneurs. Through the years the competition has facilitated the birth of over 120 companies with aggregate exit values of over $15 billion captured. The winning companies have generated over 2,500 jobs and received $700 million dollars in venture capital funding.

On similar lines, Reliance Venture Asset Management has also collaborated with Business Association of Stanford Entrepreneurial Students (BASES), one of the largest student entrepreneurship organizations in the US; institutionalized under the aegis of Stanford University. As their sole Indian venture capital partner, the company will associate with ‘e-challenge’- their business plan competition and will play a pivotal role as a jury member to decide its winners. The company will also participate in one of BASES’ flagship programs titled e-Bootcamp; a 3 day intensive entrepreneurship workshop. Stanford BASES has helped create a number of innovative and successful companies over the last few years, such as LightBit [acquired by Arasor], Ingenuity, Gigabeat, Pandao, Penguin Computing, T-RAM, Scalable Life, Xagros, Epitrope, and Voltage Security (formerly IdentiCrypt).

-Hitesh, vcBytes.com

2009 was tough year for companies in raising venture capital since most of the VC firms were averse to taking risks. However VC investments and deals took place.  Here are the top 5 VCs in terms of investments -

• Intel Capital invested in One97 Communications, IndiaMART.com, Global Talent Track, FINO,  ItzCash and BuzzInTown.
• Matrix Partners India invested in FIIJEE, Ver se Innovation Private Limited, Siesta Hospitality, ItzCash and  Quikr.
• NVP invested in  PubMatic,  MapMyIndia, Eka Software Solutions, VMops, OLX Inc,  Deccan Healthcare and mCheck.
• Helion Ventures invested in Pubmatic, YLG, Brand Calculus, GETIT infoserve and Global talent track.
• Aavishkaar invested in Waterlife India Pvt Ltd, Zameen Organic, Swas Healthcare, Saraplast, Suryoday and Utkarsh Microfinance

-Hitesh, vcBytes.com

Reliance Venture Asset Management, India’s first and largest corporate venture capital firm and an arm of the Reliance ADA Group, today announced that it has successfully led and completed the Series C round of venture funding in Tessolve Services, a leading independent full-service semiconductor test and product engineering company. The announcement comes close on the heels of the company’s recent investment in Reverse Logistics and reflects the broadening of its investment canvas to partner with companies that are pioneers in their spaces with innovative business models.

Founded in Bangalore in 2004, Tessolve Services is India’s first independent full-service semiconductor test and product engineering company with an employee size of over 400. Since its inception the company has grown exponentially in its domain and counts some of the world’s largest semiconductor companies as its clients. The association with Reliance Venture Asset Management and the latest round of funding is aimed at taking the company into its next phase of expansion with a focus on both organic and strategic inorganic growth.

Tessolve provides experienced engineering capability to support and manage all functions from Design for testability (DFT) through package design, test development, charaterization and optimized production to lower cost throughout the life of the product. As semiconductor product companies have to increase the number of new products to maintain or grow, they can take advantage of the scalability, cost and engineering expertise of Tessolve.

-Hitesh, vcBytes.com

Quikr, India’s leading horizontal classifieds player, has raised $6 million in series C funding round led by Norwest Venture Partners (NVP), and returning investors, Omidyar Network, Matrix Partners India and eBay Inc. With this round of financing, Quikr has raised in excess of Rs 50 crore since inception. Norwest Venture Partners, which led the round, has invested about $4 million.

Quikr offers a web-based classifieds platform that addresses the needs of local communities in 40 cities across India. More than 8 million consumers visit Quikr every month to buy, sell, rent or find things.

Above figure compares the traction at Quickr, Sulekha and ClickIndia.

Interestingly NVP is an existing investor in Sulekha, another classified portal. Local classifieds portals are becoming hot favorites for investors. Earlier Helion invested in GETIT, Sequoia capital raised their equity in Justdial and NVP invested in OLX.

-Hitesh, vcBytes.com