What would be the market entry strategy of a VC entering India?
With the plethora of VC funds coming into India one question that I have been mulling over is what would be the market penetration strategy? Obvious answers would include business plan competitions, entrepreneurship seminars and entrepreneur camps.
Another potential idea is corporate-venture capital partnerships.
Indian companies are cash rich. An analysis carried out by ET of balance sheets of over 1,000 companies for ‘04-05, shows that at least 100 companies have over Rs 1,000 crore each lying ‘idle’, pending utilization. Newspaper headlines scream of foreign acquisitions. In the the first 10 months of 2006, Indian companies cut more than $10 billion worth of cross-border deals, up from about $1 billion in all of 2000.
Will some of this money go in funding new ventures? There are two broad models of corporate venturing. The first model is that of Cisco, GE and Intel where the corporate runs a venture capital fund on its own. The second model is that of Nortel. From 1998 to 2001, Nortel invested in approximately 100 external start-ups through it's partner venture capital firms, acquiring usually from 5 to 20% of each venture. Nortel maintains close ties with and invests through 7 to 8 carefully selected VC firms, focused on the telecommunication space.
There are several advantages of this model with each entity bringing in specialized skills and focused expectations to the table. I think there are various ways this model can work in India. One obvious way is for corporates to participate with the VC in deal screening in areas of their interest and providing operating expertise during venture development. The trick about this is that often corporate executives do not have the necessary skill sets to work in an entrepreneurial environment. Another possible model is that corporates would probably set up an Innovation cell and seek out ideas within their organizations by asking the question: “what if we started new?” and “what would it need to get disruptive advantage?” This would help in idea generation and identification of possible entrepreneurs. Some of these could be incubated in-house and then spun off as new ventures with VC assistance.
If I were a VC in India, I would be seeking Indian companies promoting innovation as strongly as I would be seeking independent business people.
Tuesday, November 28, 2006
Friday, November 17, 2006
Mobile Mania
Internet penetration in India: still not quite there. On the other hand: mobile usage very much there. That seems to be the general consensus of everybody.
Given this, I posed to myself the question: what are possible future mobile applications ? If we could answer that question, may be we will have insight into opportunities that entrepreneurs should be seeking out. Here, I try to answer this question by extrapolating trends in the Internet space into the mobile world.
Personalization
This is Amazon – personalized recommendations based on past behavior. Can we have a personalized “comedy service” – sending me jokes of my favorite genre? Personalized content for the sports lover, the stock broker and so on?
Ecommerce
Financial industry M-commerce is mainstream. As music download is kind of getting there. But it is possible to purchase a variety of goods – flowers for the sweetheart, clothes & CDs for oneself, airline tickets, real estate ….I also believe that auctions could lend themselves easily to the mobile world. Variation of ecommerce is sending money (or money equivalent such as talk time) in communities that do not have access to banking.
Promotion Campaigns
The Shoppers Stop and a hip nightspot in the city that I stay in send me SMSs on promotions and events. What I think is missing is tracking and customization to my individual tastes.
Publishing & Content
News, directories, maps, sports scores and movie reviews are interesting mobile applications with or without GPRS. But there are others. When I heard that the Japanese manga is going mobile, the possibility of Amar Chitra Katha on my i-mate, quickly crossed my mind.
Social Networking
This is interesting. Think of easy ways to build buddy groups and share news and views. Think of rating jokes, content and sharing this within the group. Think of passing recommendations on purchases. Think of organizing events as in Upcoming.org. And of course dating.
Games
Not snakes and ladder as you have today. Real games. Battleships. Bridge. Chess, if you are not too busy blogging.
I think interesting new ventures would be coming up in developing technology platforms for some of these applications. The other area that is interesting is technologies that would allow companies to seamlessly repurpose advertising content for mobile media and to track effectiveness at a user level.
I am researching companies that are developing these technologies and plan to profile them in a future post. If there is any company that you find interesting, send me a mail or add a comment.
Given this, I posed to myself the question: what are possible future mobile applications ? If we could answer that question, may be we will have insight into opportunities that entrepreneurs should be seeking out. Here, I try to answer this question by extrapolating trends in the Internet space into the mobile world.
Personalization
This is Amazon – personalized recommendations based on past behavior. Can we have a personalized “comedy service” – sending me jokes of my favorite genre? Personalized content for the sports lover, the stock broker and so on?
Ecommerce
Financial industry M-commerce is mainstream. As music download is kind of getting there. But it is possible to purchase a variety of goods – flowers for the sweetheart, clothes & CDs for oneself, airline tickets, real estate ….I also believe that auctions could lend themselves easily to the mobile world. Variation of ecommerce is sending money (or money equivalent such as talk time) in communities that do not have access to banking.
Promotion Campaigns
The Shoppers Stop and a hip nightspot in the city that I stay in send me SMSs on promotions and events. What I think is missing is tracking and customization to my individual tastes.
Publishing & Content
News, directories, maps, sports scores and movie reviews are interesting mobile applications with or without GPRS. But there are others. When I heard that the Japanese manga is going mobile, the possibility of Amar Chitra Katha on my i-mate, quickly crossed my mind.
Social Networking
This is interesting. Think of easy ways to build buddy groups and share news and views. Think of rating jokes, content and sharing this within the group. Think of passing recommendations on purchases. Think of organizing events as in Upcoming.org. And of course dating.
Games
Not snakes and ladder as you have today. Real games. Battleships. Bridge. Chess, if you are not too busy blogging.
I think interesting new ventures would be coming up in developing technology platforms for some of these applications. The other area that is interesting is technologies that would allow companies to seamlessly repurpose advertising content for mobile media and to track effectiveness at a user level.
I am researching companies that are developing these technologies and plan to profile them in a future post. If there is any company that you find interesting, send me a mail or add a comment.
Tuesday, November 07, 2006
Healthy and Wealthy
Early every morning I drive down to the health club run by a close friend of mine: Azharuddin (not connected to the ex-Indian captain who incidentally also runs a health club in Hyderabad). Azhar loves his gym – he is in the business of transforming people.
Building a business whose objective is to make people happy has always fascinated me. Consider this:
Building a business whose objective is to make people happy has always fascinated me. Consider this:
The VLCC group was started in 1989 by Vandana Luthra and is today a Rs. 1.40 Billion company.
Both the large US health club chains: 24- Hour Fitness & Bally Fitness was started in 1983 as single club locations. Both are currently at over USD 1 billion in revenues. 24-Hour Fitness is still managed by its founder Mark S. Mastrov.
Sid and Jenny Craig founded Jenny Craig Inc., in Australia and over 20 years built out a multi-national business with 655 Centers operating in six countries.
In India, the business of health, fitness & sports has been centered around sponsorship and telecast of cricket. The following strands of business models seem to be now emerging:
Sports Events such as the Hyderabad Run, The marathons in Pune, Delhi and Mumbai.
Sports Tourism – tours for sports lovers.
Health clubs – Talwalkars is the only genuine chain that we have in India at this point.
Recreational Clubs (golf, tennis, dining facilities) funded by membership fees.
Entrepreneurs in India are experimenting along all or some of the above approaches. For example, Saumil Majmudar has founded Sportz Village focusing on the relatively wide portfolio of business lines: sports facilities, sports events, sports tours and sponsorship. Urban Yoga, a brand of the Indus-League Clothing Ltd. (ICICI Ventures and Draper International had originally funded this company which has now been sold to Pantaloon) is setting up Yoga Studios as part of the brand extension of their clothing line.
Is there possibility of building up a local Indian brand in this category to exit out as part of a global M&A deal? – that is a question that arises given the changing lifestyles of the middle class in this emerging companies.
While you ponder that question here are details of some Private Equity deals:
European deals
LA Fitness (owned by MidOcean Partners) and and Total Fitness (owned by Legal and General Ventures) acquired Esporta from Duke Street Capital. Esporta operates more than 50 clubs in UK at a total deal size of approx. £640m in 2006.
Legal and General Ventures acquired Total Fitness which operates 21 clubs in North West England at an undisclosed sum in 2004.
Boundary acquired The Club Company Limited which operates 11 country clubs and golf facilities in England at a sum of £96m in 2006.
Burgolf Investments BV acquired BlueGreen from Duke Street Capital. BlueGreen is a golf club and hotel company in France at a Undisclosed in 2004.
US deals
Forstmann Little acquired 24 Hour Fitness at an undisclosed sum in 2005.
KSL Capital Partners acquired ClubCorp Inc. which operates 170 golf courses and clubs at a sum of USD 1.8 billion in 2006.
Angelo Gordon acquired Crunch Fitness a Health club operator at a sum of USD 45 million (includes clubs acquired from other chains too) in 2006.
Friday, October 27, 2006
A missing category in the Consumer Internet space?
I was reading Mark Sherman’s blog which has a very useful listing of US consumer Internet companies in the various categories. He has also started plotting the Indian consumer Internet companies against each category. Anurag Gupta’s latest blog also provides a more comprehensive listing of Indian companies in the various categories of the consumer Internet space. You can go to both from the Links section of this page.
What was stark to me was the lack of “Learning” as a category in the 2.0 reincarnation of the Web. So much for the “killer app” of five years back. However, I strongly believe that interesting business opportunities will emerge in this category. Consider this: if Web 2.0 is really all about collaboration, how do we really learn? By doing and collaborating. A lot of Internet businesses in learning have focused on content delivery and tracking. But if you look at the way we learn: we pick up information from courses just in time and then we ask around and collaborate with others on real projects, learning most often on the fly.
There are early signs of ventures emerging in this space. Dimdim is building a free web meeting application based on open source. Agreed, their target is not the consumer internet space and nor does the application supports learning requirements, completely. But consider an idea where this could lead to: a free Internet service that allows users to log in and work on projects together. It should have features that allow users to share and edit documents and code (standard content management software features) with a few web-conferencing tools thrown in (share & store presentations, questions and answers …). Finally, the key feature: for each participant to request for and rate the skills of others and the ability to search for people based on skill sets.
Can this be monetized? I think it can. Companies and universities can run specific targeted campaigns for recruiting is one obvious way I can think of.
The recent Economist survey on Talent laid emphasis on career management and continuous learning in an era of global shortage of skilled workforce. Given this, it is hard to believe that Learning has disappeared for ever from the list of interesting Internet opportunities.
What was stark to me was the lack of “Learning” as a category in the 2.0 reincarnation of the Web. So much for the “killer app” of five years back. However, I strongly believe that interesting business opportunities will emerge in this category. Consider this: if Web 2.0 is really all about collaboration, how do we really learn? By doing and collaborating. A lot of Internet businesses in learning have focused on content delivery and tracking. But if you look at the way we learn: we pick up information from courses just in time and then we ask around and collaborate with others on real projects, learning most often on the fly.
There are early signs of ventures emerging in this space. Dimdim is building a free web meeting application based on open source. Agreed, their target is not the consumer internet space and nor does the application supports learning requirements, completely. But consider an idea where this could lead to: a free Internet service that allows users to log in and work on projects together. It should have features that allow users to share and edit documents and code (standard content management software features) with a few web-conferencing tools thrown in (share & store presentations, questions and answers …). Finally, the key feature: for each participant to request for and rate the skills of others and the ability to search for people based on skill sets.
Can this be monetized? I think it can. Companies and universities can run specific targeted campaigns for recruiting is one obvious way I can think of.
The recent Economist survey on Talent laid emphasis on career management and continuous learning in an era of global shortage of skilled workforce. Given this, it is hard to believe that Learning has disappeared for ever from the list of interesting Internet opportunities.
Wednesday, October 25, 2006
A Tale of Two Indias
I went to Shirdi for this Diwali-Eid holidays. I flew down from Hyderabad to Pune, and from there my friend and me drove down the State Highway to Shirdi via Ahmednagar. I had gone down this route twelve years back. In these last twelve years, parts of the State Highway has been converted to a spanky 4 lane highway – a toll road – while the rest of the highway remains pothole laden. The scenery on the road was as beautiful as you would expect: the rains have been excellent this year and the fields are green and yellow with sugarcane and mustard crops.
I have always fascinated by the faith that brings people together to the Sai Baba of Shridi. There were Hindus, Muslims and Sikhs, in the multitudes that thronged his Samadhi on this long weekend. To me this was Indian secularism at its vibrant best: a strongly emerging middle class praying for a future. What has changed in Shirdi is that there is now a large temple complex: complete with gardens, waiting halls, wonderfully designed silver layed sanctum. The town remains the same: crowded streets and haphazard buildings.
On the way back, we took a different route: the Pune-Nashik National Highway. In much better condition than the State Highway, it was double lane all throughout except for the last stretch near Pune. Predictably the last 4 lane portion of the highway is a toll road too. Altogether the toll costs were nearly 10% of the costs of fuel on the whole journey: too high a cost levied on account of years of neglect. On this route, the scenery was beautiful in a completely different way: the land is largely barren and the landscape is miles of grassy grazing lands dotted by the occasional tree and centuries-old igneous rock-faces.
We had taken this alternate route to stop at the Indage winery. The Nashik area has at least two major wineries: Sula Wines and Indage. Sula is run by Rajeev Sawant, a first generation entrepreneur who used to work in Oracle, California before he came back to India about 5 years back. The Indage is run by the Goa-based Chowgule group. Nashik is always known for its grape cultivation but it really took Rajeev Sawant to convert this advantage to a lifestyle business. In his early days, I had once emailed to Rajeev Sawant and he had promptly mailed me back. That is one sign of an entrepreneur who is likely to succeed: quick response to email. We did a wine tasting session at Café Indage. It helped me that the guy at the bar was from Bengal too. I am not a connoisseur but I do think that the Merlot and the Chenin Blanc were as good as I have tasted anywhere else in the world.
When I had planned the trip, I had imagined it would be the contrast of the traditional India at Shirdi and the modern India at the winery. Now that I have done the trip, the enduring image in my mind is that both institutions – the religious trust and the wine industry - have surged forward with the tide of their respective markets. And they are struggling to emerge out of a poor social and physical infrastructure. That is really the story of the two Indias.
Incidentally, the benefits of infrastructural investments, is evident in the story of my friend, Pankaj, with whom I made this trip. His company Scope T&M, India’s leading producer of test and measurement equipment for the power industry, is experiencing significant growth over the last few years in tandem with the investments in the sector. Scope is among the select few manufacturers of similar equipment across the world and has by far the lowest cost. They are now planning to introduce a electric powered wheelchair, their first consumer product. As I listen to him I think” “Is there still a story for Indian manufacturing?”. Perhaps the answer lies in a niche and specialized market with strong configuration and design components.
But then the heady concoction of all successful early stage ventures is a specialized skill, a gap in the market place and dollops of faith. It is the last where Shirdi comes in.
I have always fascinated by the faith that brings people together to the Sai Baba of Shridi. There were Hindus, Muslims and Sikhs, in the multitudes that thronged his Samadhi on this long weekend. To me this was Indian secularism at its vibrant best: a strongly emerging middle class praying for a future. What has changed in Shirdi is that there is now a large temple complex: complete with gardens, waiting halls, wonderfully designed silver layed sanctum. The town remains the same: crowded streets and haphazard buildings.
On the way back, we took a different route: the Pune-Nashik National Highway. In much better condition than the State Highway, it was double lane all throughout except for the last stretch near Pune. Predictably the last 4 lane portion of the highway is a toll road too. Altogether the toll costs were nearly 10% of the costs of fuel on the whole journey: too high a cost levied on account of years of neglect. On this route, the scenery was beautiful in a completely different way: the land is largely barren and the landscape is miles of grassy grazing lands dotted by the occasional tree and centuries-old igneous rock-faces.
We had taken this alternate route to stop at the Indage winery. The Nashik area has at least two major wineries: Sula Wines and Indage. Sula is run by Rajeev Sawant, a first generation entrepreneur who used to work in Oracle, California before he came back to India about 5 years back. The Indage is run by the Goa-based Chowgule group. Nashik is always known for its grape cultivation but it really took Rajeev Sawant to convert this advantage to a lifestyle business. In his early days, I had once emailed to Rajeev Sawant and he had promptly mailed me back. That is one sign of an entrepreneur who is likely to succeed: quick response to email. We did a wine tasting session at Café Indage. It helped me that the guy at the bar was from Bengal too. I am not a connoisseur but I do think that the Merlot and the Chenin Blanc were as good as I have tasted anywhere else in the world.
When I had planned the trip, I had imagined it would be the contrast of the traditional India at Shirdi and the modern India at the winery. Now that I have done the trip, the enduring image in my mind is that both institutions – the religious trust and the wine industry - have surged forward with the tide of their respective markets. And they are struggling to emerge out of a poor social and physical infrastructure. That is really the story of the two Indias.
Incidentally, the benefits of infrastructural investments, is evident in the story of my friend, Pankaj, with whom I made this trip. His company Scope T&M, India’s leading producer of test and measurement equipment for the power industry, is experiencing significant growth over the last few years in tandem with the investments in the sector. Scope is among the select few manufacturers of similar equipment across the world and has by far the lowest cost. They are now planning to introduce a electric powered wheelchair, their first consumer product. As I listen to him I think” “Is there still a story for Indian manufacturing?”. Perhaps the answer lies in a niche and specialized market with strong configuration and design components.
But then the heady concoction of all successful early stage ventures is a specialized skill, a gap in the market place and dollops of faith. It is the last where Shirdi comes in.
Subscribe to:
Posts (Atom)
Posts
