India Technology Fund

Intel Capital is an arm of Intel Corp which invests worldwide in technology companies which are strategially aligned with Intel's plans for creating more IT growth/spend. It is , in a sense , a corporate VC whose aim is not only handsome financial return from its investments but more importantly newer/bigger markets to sell products from the parent company.

Intel Cap has a 250 million dollar India Technology Fund aimed primarily at companies targeting the Indian IT market. See the link :
https://www.intelportfolio.com/cps/portlist_fund.asp?fund=itf

From optical networking to media/entertainment to rural e-governance , the range of investments by ITF is impressive.

Interested entrepreneurs can contact them at http://www.intel.com/capital/submit.htm

A document which could be very useful to entrepreneurs approaching Intel Capital is at
http://www.intel.com/capital/download/Talking%20_to_a_VC.pdf

This doc goes into a bit of detail about points to keep in mind while raising VC money

Key issues and steps in the investment process include the following:
• Raising capital with venture capital is about growing a business.
• Put yourself in the investor’s shoes and criticize your own proposals.
• Know your audience.
• Prepare a business plan and an executive summary.
• Value your business and set your negotiating boundaries.
• It costs time and real money to raise capital.
• You will likely need experienced legal advice.
• Get ready for a road show.
• Be prepared to start the negotiation and open your company for external scrutiny.
• Be prepared for changes in governance.
• Understand the different roles of the entrepreneur, the CEO, and the shareholder.

More inside the doc.

OnYoMo

No , this is not a Japanese horror flick. It is the name of a search based startup incubated at IIT-Delhi and stands for , quite simply, On Your Move. See www.onyomo.com for more details.

I like the fact the problem(s) this company is trying to solve is a)real and b) relevant. With a growing economy , people travel more , for shorter periods, and to places which change and become unfamiliar at a rapid pace. So , if I am in Delhi for a 2 day trip and have the evening to myself , I might want to go and have a drink in a nearby bar. Or have a relaxing(!) bungee jump. I have tried such searches on google and yahoo and have never got good responses within my attention span which , admittedly, is quite short. But I guess that is the case with most people who use search engines. How many of you really go on to the next page of search results unless you are a) an academic or b) a geek or c) your life (or job) depended on it or d) all of the above ?

I think it is also a myth that most people know their cities - you might have heard of "parathe waali gali" in chandni chowk but you wouldn't know of every such street in Delhi. Even if you are a Delhiite, you probably wouldn't know that QBA is probably the only classy lounge in Connaught Place. Most of our cities are already headed towards becoming gigantic urban agglomerations : Delhi and Mumbai are already there and Bangalore is getting there too. There is too much information out there which I don't know and don't need to know until I want a drink :) .

A clincher for this product may be that they are ramping it up to work on mobiles through sms ,which is the way to go for an average Indian city user. After all , most people don't have/use GPRS on their mobiles ( to connect to web) nor would they want to look for a PC while they are out on a metro station. I also think that this market is quite niche and not big enough for the googles and yahoos to chase. They are addressing global problems.

All in all , a good idea and I hope it creates some solid momentum.

Virtualization

Virtualization in computer parlance is the abstraction of real resources into virtual ones. One of the first steps in virtualization was taken when the Operating System was invented. The OS allows multiple applications to share the resources of the computer - microprocessor as well as peripherals.

Virtualization in the current scenario is targeted towards the data center that houses a company's information. It makes much more sense today because the advent of multi-core chips makes available as much computing power on one chip as was available on a mid-range server a decade ago. The optimal sharing of physical resources allows possibility of greater power savings in the data center translating into lower cost. If done correctly , it can also make the job of IT administrators easier by presenting a single unified operating environment.

Virtualization comes in two flavors - software virtualization and hardware-software virtualization. The first type allows multiple Operating Systems to run on a virtualization software which fools the OSes to think that each OS is in full control of the machine. In reality , the virtualization software runs on a native OS (Windows , for example) and isolates the higher level OSes from one another. Thus you could run multiple copies of Windows on one machine. VMWare is the biggest player in this market. (www.vmware.com) . Java virtual machine(JVM) is another example of virtualization software which allows java code to run on any platform.

The second type is more comprehensive and more ambitious. SW virtualization is not very efficient due to overhead of multiple software layers. SW-HW virtualization provides a hardware operating environment which allows multiple OSes to run simulataneously with each OS isolated from another. This requires support in hardware , both in the processor as well as the peripheral controllers. IBM,Sun,Intel and AMD , all microprocessor makers, now provide support for virtualization. I called this SW-HW virtualization since depending on the implementation , the OS also needs to change to support it. This is clearly possible for Sun and IBM since they make OS for their own computers but next to impossible for x86 makers -Intel and AMD- who have to contend with an independent and humunguous Microsoft. This also explains the somewhat different approaches taken by Sun and IBM on one hand and x86 on the other. Intel also has Itanium but as of now , it is nowhere as important as x86.


A less mentioned aspect of virtualization is the ability to virtualize peripheral resources - commonly called IO virtualization. An important subset of IOV ( not to be confused with an intel technology of same name) is storage virtualization. I think SV is the hottest market opportunity in computer world today given the exponential growth of information to be stored and the flux in the SV technologies with no clear leader and no established standards. HP,EMC(which acquired VMware) and the traditional storage players like LSI logic and Adaptec are curently slugging it out here.

Looking into the crystal ball, I see virtualization picking up pace in the cellphone space as well with power savings ( and increased ON time) as the major driver. Virtualization could also maket things easier between incompatible software and cellphone vendors. A lot of mobile games and apps are Java based so a single interface , similar to a JVM for mobiles, may be the next killer idea.

Cricket World cup 2007

Like most Indians, I am a cricket fanatic but I prefer to play football these days due to time contraints. Now that the world cup is on , I will be hooked on to cricinfo and/or the telly for the next 1.5 months. However , I find the articles on cricinfo much more interesting and insightful than the kind of drivel that TV commentators dish out.

Which makes me wonder if I can watch live cricket/highlights on my cellphone while sitting in a Wi-Fi enabled Barista or coffee day. Thoughts? What about just commentary on the phone? Like the good old radio days. Sounds pretty good to me. Or what about watching an MMS based on subscription - remember "that" six Sachin hit off Shoaib Akhtar in 2003 world cup. Or the "cup" that Gibbs dropped in 1999.

Information on Indian VC space

These are some of the blogs and links for those interested in the Indian VC space.

http://www.vccircle.com/blog
http://ventureintelligence.blogspot.com/
http://www.venturewoods.org/

There is some pretty useful information out there to be mined. Also , check out
http://www.indiavca.org/
and
http://www.us-ivca.org/

http://www.nvca.org/ is the equivalent of indiavca in the US.

Introduction to Venture Capital

A very concise and effective slideshow on VC by Will Price of the Hummer WinBald Venture partners.
http://www.slideshare.net/pricew/introduction-to-venture-capital/

What exactly is Private Equity?

VC is one of the types of private equity - as opposed to public equity- where an individual or a group of individual funds your business to reap a much better return later through sale or IPO. To understand VC , it is important to understand the larger PE picture.

An excellent note detailing careers in Private Equity is found here :
http://mba.tuck.dartmouth.edu/pages/clubs/peclub/pdfs/Private_Equity_Careers.pdf

In typical PE language , General Partners are the folks who raise a fund and Limited Partners are folks who invest their money in the fund. The PE firm charges fees for fund management during the lifetime of a fund, the fees being typically 1-3% , and when an investment is sold or publicly listed , LP's share is returned at hurdle rate : 8-10% . Profits above the hurdle rate are split between GP's and LP's according to a prior formula. The GP's share is called Carried Interest or just Carry. Usually , non-partners in a PE firm receive a salary but minimum to no carry.

A quick summary would describe different PE investment types as :

VC - Early stage companies , typically these companies would have already raised seed funding through a wealthy individual , also known as an angel investor. Few VC's invest directly at the seed stage.

LBO/Leveraged Buy Out - Mature companies with a recent history of underperformance or business groups which are not directly relevant to a company's goals anymore. PE folks expect to add value and then sell it to another company or to the public via the stock market.

Mezzanine - These funds usually invest in companies with strong growth potential. Its basically a kind of compound interest loan where the investee does not have to pay full interest until maturity - say 5 years. On maturity , the interest repayment rate would be higher than a straight debt instrument , so typically Mezzanine funds invest in companies which will have excellent cash flow in near to mid term future.

Secondaries/Funds of Funds - These are firms/organizations which invest in other funds - including both VC and LBO - by buying a stake from Limited partners before the fund matures.
This generates some short term cash flow for LP's since lifetime of a fund can be upto 10 years.

The Holy grail of Indian VC

Why? Everyone I have spoken to so far shakes his/her head when they hear I aim to ride the VC wave in India. This blog is an attempt to understand the entire VC scene in India , not just tech VC. No , what you read about in businessworld is the PE(Private Equity) boom. PE folks typically invest in mature companies looking to expand/grow. In contrast , a venture capitalist invests in early stage companies. And if you have just an idea and/or a business plan , you are looking for angel investors - individuals who will bet their own little fortune on you.

Seed funding is still hard to come by in India. A report by Rafiq Dossani at Stanford University, sponsored by TiE, puts the percent of total risk capital invested in early/seed stage firms in India at 6.9. (FY2004). The corresponding figures for Israel,UK and US are 32,39 and 29. Even China's figure is nearly double - 12.5.

Read the report here :

http://aparc.stanford.edu/publications/accessing_earlystage_risk_capital_in_india/

The aim of this blog is two fold. First , discuss what prevents the emergence of the truly innovative startups from India. Second, challenge the conventional/classical model of VC as it exists today and discuss what model would be better suited to the Indian ecosystem.

More than the numbers or the theories , which you can find in the report above or elsewhere, I would attempt to discuss this with real examples - early stage startups,entrepreneurs,VCs ,deals which went through and which didn't. Any implicit networking would be an added bonus , ofcourse.