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Internet VC Activity in India

Posted on Friday, Feb 3rd 2006

InfoEdge, which owns some of India’s hottest Internet properties including the largest job portal Naukri.com, Real Estate search engine 99acres.com, and matrimonial site Jeevan Sathi has got funding from KPCB and Ram Shriram of Sherpalo Ventures. InfoEdge did $10 million last year with profits of $1.8. Revenues are expected to more than double this year, and the company expects to go public this year.

The Indian stock market has traditionally valued outsourcing services companies very high, and for the longest time, it made a lot of sense for relatively small companies to go public in India. Cybermedia, a publishing company that owns some of the top IT related magazines in India like Dataquest, went public last year, also on a relatively small revenue in the range of $12 Million.

I had to raise my eyebrows, however, to read that Kleiner buys into the strategy of an IPO that is so small. Something doesn’t compute. There is some speculation that since both John Doerr and Ram Shriram are on the Board of Google, Google may consider buying them as part of their India strategy, as well as their need to diversify revenues.

Who knows? Good news, however, is that some viable Internet businesses are getting built in India, and they are getting attention from the top rung of US VCs. After all, as far as consumer markets go, in the next decade, India will emerge as one of the top ones!

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[…] alo Investors are investing about $3 million in Cleartrip.com, an online travel portal. Cleartrip is not the only investment KP/Sherpalo are maing in India. They are also investing in Infoedge, which […]

Om Malik on Broadband : » Kleiner Perkins’ Passage To India Saturday, February 4, 2006 at 2:36 PM PT

Thanks Sramana, for the comment on vccircle.com and the link.

I attended the TiE event in Delhi where Doerr, Shriram and Sanjeev Bikhchandani of Naukri were present. I am not paricularly perturbed by the fact the size of the company is small. If you want to bet on Indian consumer internet space, Naukri could be the best option. It makes hard cash etc.

But Kleiner is not taking any risk in investing in Naukri (it’s already a successful model), so the returns can’t be that high.

I am also sure they would have invested at a pretty high valuation, unless Bikhchandani wanted them on board just for the name sake. Bikhchandani said at the conference that he didn’t want money at all, just the advisorial help from Kleiner.

Either way, it’s a learning experiment for both. Kleiner can learn about Indian market without losing money, while Sanjeev can learn working with international class investors like John Doerr and Shriram, and also some help in taking the company global.

Why not Naukri Pakistan, Sri Lanka, Singapore and all?

P V Sahad Saturday, February 4, 2006 at 10:42 PM PT

You miss my point … I don’t have a problem with the company being small either … I have a problem with the fact that they want to *go public this year* with a $10 Million revenue. That doesn’t make sense to me. $10M is too little revenue for a public company. Even $20M is too little.

Sramana Mitra Saturday, February 4, 2006 at 10:44 PM PT

Okay…Naukri’s revenues are expected to touch $22 million this March, and the company is going public only later in the year. Even if we take a conservative 50 per cent growth for Naukri, it will be a $30 million company next year. That’s huge revenues in Indian standards.

Please go to SEBI site (www.sebi.gov.in), you can see loads of companies going public with revenues in the range of $5-10 million.

Why can’t a small company tap public market money to grow?

By the way, Rediff listed in Nasdaq some five years ago. In 2006, the company may close revenues in the range of $26 million. That’s no huge sum. Despite that the company is valued in the range of $500 million.

Naukri is not an unknown entity. It has a huge brand loyalty. People know the company’s management. It has good investors. I would love to invest in Naukri as a small public investor.

From Naukri’s point of view, the company gets even better visibility, market acceptability etc by listing.

I have invited more readers’ views on this here…

https://www.vccircle.com/blog/_archives/2006/2/5/1745333.html

P V Sahad Sunday, February 5, 2006 at 1:50 AM PT

Should Naukri With $10 Million Revs Go Public Now?

Small IPOs like Rediff and many others don’t get any analyst attention. That’s why, it’s usually a problem to manage miniscule companies after they go public. Read this: “IPO Tougher” at https://sramanamitra.com/blog/201.

However, by Indian standards, as you point out, it may be a “Huge Company”.

Rediff’s trading volume is marginal on Nasdaq. That’s the twilight zone where no company should aspire to be, and Kleiner knows better than heading one of their companies into that zone.

Sramana Mitra Sunday, February 5, 2006 at 12:05 PM PT

Recently Jim Cramer of CNBC sided with Rediff and the stock price shot up. Was he misguided by somebody 🙂

Read this…

https://indiastockblog.com/article/6265

P V Sahad Sunday, February 5, 2006 at 12:20 PM PT

Sahad, May be you need to read the article 🙂 It is not exactly supporting Cramer’s recommendation, and for good reason too!

Sramana Mitra Sunday, February 5, 2006 at 12:30 PM PT

Sahad, are you a shareholder of Naukri or a consultant on fee?

Nikhil Wednesday, February 8, 2006 at 4:28 PM PT

I know Sahad, he is no lackey for anyone.

But the point is I have severe doubts about Kleiner model working in India. To my mind if the Co has invested in cleartrip a travel portal for INDIA, then they have to work within that legacy environ. Also, several travel sites have got funded, with more or less the same value proposition viz. metasearch in that vertical. The point is my crawler/request for a search may not be necessarily entertained by many airlines proprietory reservation systems. the proverbial walled garden, worse in legacy driven Indian businesses which have a lala approach to capitalism.On the contrary (a)I see huge resistance from many brick n mortar and internet travel businesses, who will do anything to discredit/deny emergence of new channels. Even if the channel is new, they will insource that. (b)there are too many guys trying to create a oneview on bookings, therefore comissions structure will get adversely hit, as each tries to outdo the other in offering the airline,travel,tour operator the best value proposition(c)I think kleiner WILL not be able to add any value to this feet on the street, street smart way of doing Indian business.I think this is the beginning of the Internet 2.0 flameout, if KPCB thinks they can substitute brainpower/McKinsey strategy for street smartness, relationships,’flexi’ approach.

I have met the KPCB guys-this in not Europe or Moth America. They dont ‘get it’over here. Have the wrong staffing, and WILL not be able to add any value to young cos.

Anon

Sandeep Friday, February 10, 2006 at 8:13 AM PT

[…] Earlier this year, the Indian equivalent of Monster and HotJobs got a lot of press. Naukri got a chunk of money from Kleiner Perkins and Ram Shriram. […]

Sramana Mitra on Strategy » Blog Archive » Concept Arbitrage: Monster Saturday, June 24, 2006 at 9:01 AM PT

No doubt Naukri is doing very good and now as Google is hovering over Naukri it will go very fast UP

Naukriyan Sunday, August 27, 2006 at 6:26 AM PT

Any idea on how to do the valuations of a small portal in a niche area in India- the visitors are large but revenues are not ?

Preeti Misra Thursday, October 5, 2006 at 7:35 AM PT

That depends entirely on what portal, what segment, how much traffic, the monetization path or other leverage, scalability options. Send me the details off line …

Sramana Mitra Thursday, October 5, 2006 at 12:44 PM PT

Sramana,
For purely academic reasons lets assume a portal in rental services space .The expertise is HUGE but revenue streams have not built up.
I am working on the valuation model for portals – I’ve been talking to many people but the valuations vary (even to the extent of 5 times) which is appalling.
How have the deals happened in Naukri, 99 acres etc. ?Please advise on the model – are there any thumb rules for portals that are different from other companies.
Please also name any sites which could help.
Preeti

Preeti Misra Monday, October 9, 2006 at 6:50 AM PT

Preeti,
Valuation is derived on a very complex set of variables, especially for early-stage ventures, where a revenue-multiple is not the right formula. We assess team, market size (Total Available Market, Serviceable Available Market), scalability, capital requirements till break even, exit options & price gauges, and a lot of business-specific factors, in your case – demographics of the traffic, etc.
I’m afraid, I cannot point you to an algebra equation to do this. As I said before, if you send me private email with your specifics, I can try to help.
Sramana

Sramana Mitra Monday, October 9, 2006 at 5:03 PM PT

hey…

yes for sure india soon going to be power in terms of economy…with its large work force and great heritage…

india travel agent Saturday, January 20, 2007 at 6:23 AM PT

hi , there is also one more growing website by the name https://www.propertyindex.co.in

Tapan Friday, January 26, 2007 at 7:15 AM PT

Real Estate in india is becoming a professional field these days which are resulting in devopment of high end real estate portals.

Ravi.
https://hyderabadrealguide.com

Ravi Danthuluri Friday, May 25, 2007 at 12:43 AM PT

No doubt Indian companies are slowly overtaking the international market. Specially IT Companies are making good revenue.

India Jobs Monday, July 11, 2011 at 3:14 AM PT