Raising Money in India

By Arun Natarajan, Guest Author, reporting from Venture Intelligence Internet & Mobile Connect conference in Mumbai.

The third panel featured an interactive discussion on “Raising & Leveraging Venture Capital” and was moderated by Manik Arora, Managing Director of IDG Ventures India. The entrepreneurs on the panel – Nitish Mittersain, Founder & CEO of Nazara Technologies and Probir Roy, Co-founder & Director of Paymate – described how they went about raising venture capital for their companies and the challenges during the process.

Saying that it took Paymate a total of 10 months from the time of active scouting for VC funding and eight months from the first meeting with the eventual investors, Roy broke down the time it took for various stages of the capital raising process. “The initial meeting to term sheet took 10 weeks. From the term-sheet to definitive agreement/shareholders agreement took six months,” he said. The money remittance however happened within four months of the terms sheet – prior to any formal agreement being signed up. “Don’t be daunted by paperwork, there is nothing you can do about it,” Roy added.

Pointing out how even a leading VC firm like Kleiner Perkins does not carry much name recall in India, Roy emphasized the importance of the VC investor being on the ground full-time in India. He advised VCs to turnaround quickly with their decisions to the entrepreneurs – even if their answer is a no. Mutual respect is very crucial aspect in the entrepreneur-VC relationship, Roy said.

Sandeep Murthy, Partner at Sherpalo Ventures, agreed that the VC process takes significant time, but there is no short-cutting it since investors needed to clearly understand the dynamics of the start-up venture in which they are considering an investment and make a serious commitment to the entrepreneurial team behind it.

Nazara’s Mittersain gave an interesting example of how his company took the initiative to catalyze GPRS activations by giving away a mobile game featuring Sachin Tendulkar in association with one operator in the Karnataka circle. “Consumers just had to activate GPRS to fetch the content. In three days, we got 39,000 GPRS activations just in that circle.”

Mahesh Murthy, Managing Partner of Seed Fund, said his firm preferred to invest in consumer-targeting businesses since it was much easier reaching out directly to consumers than selling to multiple layers in an enterprise. He bemoaned the fact that there were not enough companies using advertising-based business models, even though advertisers are keen to spend on the online medium.

Ravi Adusumalli, Partner at SAIF and Eric Young, General Partner of Canaan Partners, presented their perspective of investing in multiple countries. Adusumalli said the current level of Internet penetration in India did not augur well – in the near term – for some of the applications and business models being proposed in this space.

Young said his firm was keen to invest in companies that tapped into significant changes – whether they occurred among consumers or in enterprises. Saying Canaan was very excited about companies in the video space, Young emphasized the need for entrepreneurs to create a hard-to-duplicate technology core in their products and services.