Structuring Venture Capital and Other Investments in India

Many U.S. and other foreign investors are evaluating alternatives for structuring investments into software development, business process outsourcing, drug discovery and other tech and non-tech companies based in India.

Here's a whitepaper from Fenwik & West, a Cali based legal firm covering 2007 update to Structuring Venture Capital and Other Investments in India.

The primary structures for investing in India are:

1. Direct investment in an India company from outside India(usually through a Mauritius or a Cyprus subsidiary fortax reasons)
2. Investment in a U.S. company with a services fulfillmentsubsidiary in India
3. Investment in a Cayman Islands or Mauritius companywith a services fulfillment subsidiary in India
4. Direct investment in an India company from outsideIndia through a venture capital fund registered with theSecurities and Exchange Board of India.

The primary business considerations in determining how tostructure such an investment are:

1. Relative valuations in the U.S. and India capital marketsfor the type of investment in question, particularly aservices business;
2. Ease of IPO exit including any currency exchangerestrictions, the impact of Sarbanes-Oxley in the U.S. andoverseas company listing requirements in India;
3. Ease of acquisition by the likely set of acquirors as an exit-strategy
4. Investor “comfort” with the limitations on preferenceshares under the India Companies Act of 1956, asamended (the “Companies Act”)

It also covers the IPOs, Company act, Mauritius Financial Services Commission strategy, Cyprus and other key areas. Download the paper here

Nasscom to launch Venture Fund

Nasscom is set to launch a Venture Fund along with Hyderabad-based ICICI Knowledge Park, an arm of the ICICI bank.

Rajdeep Sehrawat, vice president of Nasscom, said the new Venture Fund will be under the trade body but will run as a professional Venture Fund.

“We have earmarked Rs 100 crore ($22million)to fund IT start-ups in India, which are involved in IP-creation. These companies could be anyone who is working on automotive electronics, wireless and broadband, life sciences, medical devices and the like,”

he informed.

Stating that the venture fund will be in place by October this year, Sehrawat said the fund will be looking at disbursing seed capital or angel funding, which other venture capital firms hesitate to enter.

“We will be financing early start-ups, in their ideation stage, as this is where money is a problem. When the idea takes the prototype stage, then other VCs will be interested and we will be exiting,”

he said.

“We have not limited on the number of projects, but have earmarked Rs 100 crores. Our vision for the Venture Fund will be on long-term, high-risk categories,”

he added.

via: CIOL

Launching pad for new start-ups?

Like many venture capital firms, the people at General Catalyst Partners don’t like to talk about themselves - at least not publicly.

The firm’s partners prefer to keep the attention on the businesses they back.

But General Catalyst in Harvard Square is quickly becoming a top player in the world of new media and marketing. Only seven years old, the firm has invested in some of the most-talked-about start-ups to come out of the Boston area.

From online video distributor Brightcove to word-of-mouth marketing agency BzzAgent, from Jeff Taylor’s Eons - a baby boomer social networking site - to online travel company Kayak.com, General Catalyst has played a role in some of the more intriguing companies to launch in recent years.

General Catalyst was one of the top three venture capital firms investing in Web 2.0 companies last year based on the number of deals it made, said Valerie Foo, research manager at Dow Jones VentureOne, which tracks venture capital firms. That would put General Catalyst at the top of the Web 2.0 heap in the Northeast.

Many of the companies General Catalyst have backed have been born out of the firm’s own office. A recently launched company that provides text-based music reviews and news to cell phones, 80108 Media, used office space at General Catalyst. But not everyone has come from the inside.

IBM VC group eyes India

IBM’S venture capital group which works with venture capital firms to build an ecosystem of start-up partners for developing innovative solutions and products, is now eyeing India as a potential geography. The group is in the process of identifying four-five VC firms in the country for the programme.

“Innovation in India is growing at a rapid pace, in fact faster than how it was in China when we went there a couple of years ago. So we are looking to tie up with a few VC firms including a couple of local VC players to help us identify innovative companies and technology,’’

IBM Venture Capital Group MD Claudia Fan Munce told ET. She was speaking on the sidelines of the company’s first India Innovation Forum held on Wednesday in Bangalore.

read the Economic Times news here

Reliance Entertainment’s Social Networking Portal Big Adda Goes Live

Reliance Entertainment’s social networking portal "Big Adda” has gone live. The company ran a series of polls over the past few months, ever since ContentSutra broke the story of it’s impending launch, asking users to select logos and templates.

On the face of it, the site has addas (forums), photos, videos and blogs. Nothing spectacular so far. Looks like they didn’t go with my choice of logo. (Bah!) Update: It’s a closed beta, by invitation only, I’m told.

However, there is an overview available here. More importantly, do take a look at the terms and conditions, particularly the parts in bold, dealing with user generated content. An excerpt:

You are solely responsible for the content...that you post on or through the BigAdda Website, and any material or information that you transmit to other Members and for your interactions with other Users...

BigAdda makes no warranties, express or implied, as to the Content or to the accuracy and reliability of the Content or any material or information that you transmit to other Members.

Orkut, MingleBox, DesiMartini, Fropper, now BigAdda - Ohhh - Please No! btw Myspace entered china last week, targeting India soon - Please!!!!

Report On Opportunities In Indian Electronics Manufacturing

If you are an investor or if you are a potential entrepreneur looking to start up in electronic manufacturing, the UK-based consulting firm Plan B Manufacturing has released a free 83-page report titled - "Indian Electronics Manufacturing: Where are the startup opportunities?"

Download here (3MB)

Social Networking Site Minglebox Receives $7 Million In Funding Fron Sequoia Capital

Indian social networking site Minglebox has received $7 million in funding from Sequoia Capital India. Minglebox was started by three IIT Delhi alumni - Kavita Iyer, Sanjay Aggarwal and Sushma Abburi, who have previously worked in companies like Yahoo, i2, ICICI, Wipro, HLL and Infosys. R.Ramaraj, ex-CEO and co-founder of Sify has joined the board of Minglebox.

The company has apparently adopted a different approach to populating its social network - they’ve focused on creating communities for colleges and trying to emulate a college hangout online, which is one of the things people use Orkut (yeah, we keep going back to Orkut, don’t we?) for.

Minglebox has a bunch of other usual stuff: blogs, photos and videos. Most videos are from YouTube, and there is (again) some copyrighted Bollywood content embedded from YouTube...I wonder who’s liable in this case - the user who uploads; YouTube, which publishes and facilitates sharing; or Minglebox, where the video is embedded...that’s a problem that many social networks with video content are facing today.

Canaan Partners, SVB Invest $3.1 Million In Remote Computer Support Company iYogi

Canaan Partners, along with SVB Financial Group, has invested $3.1 million in a Delhi-based computer support startup iYogi. The company provides live computer support on the phone and via remote access for home and small businesses.

The investment will be used to expand iYogi’s service offerings, sales and marketing programs, and to enhance delivery operations in India, a release said. Alok Mittal, Canaan’s Executive Director in India, will join the board of iYogi. This is the second investment in India for Canaan. It had earlier invested $8.5 million in BharatMatrimony.com alongwith Yahoo India.

Canaan is focused on early stage deals or Series A investments in India. iYogi is headquartered in Gurgaon, near Delhi, and provides computer support via phone and remote access for home and small business users globally. It charges $9.99 for a single incident and $89.99 for an annual subscription or unlimited incidents.

--Canaan Partners is close to making its second investment in India after it set up shop in the country last year. The Silicon Valley venture fund has zeroed in on a Delhi-based start-up that provides remote desktop services for US and UK customers. The firm may invest about $2 million-$5 million. A Business Standard report says the firm has invested in an unnamed company. When VC Circle contacted Alok Mittal, Executive Director, Canaan Partners India, he confirmed the development but the deal was yet to be closed. He did not reveal the name of the company or other details. Canaan, along with Yahoo, had last year invested $8.65 million in BharatMatrimony Group.

--Every telecom company is or have demerged their tower businesses, and they are offloading stake to private equity funds. Tata Teleservices (TTSL) is reportedly in talks with Singapore’s Temasek Holdings, besides other private equity players to sell stake. It may sell up to 20 per cent stake in the subsidiary which will hold all wireless towers and other related telecom infrastructure. Temasek already owns under 10 per cent in TTSL. Bharti Airtel and Reliance Communications have already hived off their tower businesses, but are yet to sell stakes.

--Mobien Technologies, a provider of enterprise mobility solutions for last mile connectivity, is raising venture capital. The company, founded in 2003 by Logitech Systems India, recently launched iNotify, a mobile solution that integrates an organisation's ERP systems with the mobile devices used by field staff. The company has clients like ITC, Nagarjuna Fertilizers and Dr Reddy's. It has recorded revenues of $6,00,000 in FY 2006-07. (Via Business Standard)

Citi, Macquarie And Three Other Foreign Firms In Race For Stake In UTI Securities

A big chunk of stake in broking firm UTI Securities is up for sale. The seller is Securities Trading Corporation of India (STCI), which holds 100 per cent in the company. STCI has put 49 per cent on the block.

There is interest from several foreign broking houses in this semi-government undertaking. Citigroup, Macquarie Bank, Standard Chartered, Societe Generale and Kuwait-based Global Investment House are believed to be in the race, according to a report in Business Standard.

In April 2006, STCI bought 100 per cent stake in UTI Securities for Rs 265 crore last year from Specified Undertaking of UTI (SUUTI), which was the administrator. According to this deal, STCI has a minimum lock-in of three years for 51 per cent stake, which ends in 2008. It can however, hawk the rest any time. Interestingly, STCI prefers a foreign player as a strategic partner. UTI Securities started as an institutional brokerage firm. Now it has moved to retail broking too. It also has an online broking division - Usectrade.com.

Broking business has been a very active sector from the M&A and private equity point of view. Recently, BNP Paribas bought 33.35 per cent stake in Geojit Financial Services for Rs 207 crore. E*Trade and SAIF Partners are investors in IL&FS Investsmart. Citigroup Venture Capital International recently acquired 19.9 per cent stake in Mumbai-based Anand Rathi Securities. General Atlantic, Intel Capital and HSBC Private Equity are investors in Sharekhan. Motilal Oswal Financial Services, which had sold 9.48 per cent stake to New Vernon Private Equity Ltd and Bessemer Venture Partners last year, is going in for an IPO now.