Avenues for getting ~$1M funding in India

I am curious about opportunities to get funding in the $1M range for start-ups in India.

1. Most of the VCs in India seem to be interested only in deals over $2M. The average size seems to be $4M-5M. I believe this is a direct consequence of VCs raising funds over $100M. Even if you write $5M checks you still need to manage 20 companies! So cannot afford to make and then manage small investments. Also, with the valuations of many established companies falling to ground levels, with a $5-10M investment, VCs can now get a good stake at low risk. So more VCs seem to be doing PE type deals.
2. $1M is still a big amount in India. It cannot be raised from Friends, family and fools. Angel investors also balk at that number. Are there any professional investors who fund in this range? What are the options available for companies planning to raise in this range? (Of course, if there are no options available, we can always wait till we have greater investment needs)

Navigating through the Economic Blues

Like many other small to medium companies we are also being tested in the economic conditions – delayed payments, delayed sales decisions, delayed cash inflow. I would like to share some thoughts on how we can counter this situation. We are implementing many of the following to gear up for the rough weather. I hope others find this useful and hopefully some others can provide better suggestions:

1. Dont put complete faith in investors for cash flow
Its good to be a funded company in this environment. However, I would like to caution my fellow entrepreneurs that unless you have the money in the bank dont count on it. Many investors release payments in tranches over a period of time (say 5-6 months). Assume the worst case – investors may not able to release the latest tranche when the time comes. Its not because they dont want to give, its just that may not have the cash to give. Remember, investors (such as VCs) themselves raise funds from other investors. With the current cash crunch, its better to be prepared for the worst (and given the current economic uncertainty “worst” case is quite likely to occur). Dont make the mistake of planning your execution based on cash you “definitely” expect to get next month (or even next week). Treat investor cash as an added “bonus”. This particularly applies for services based companies which usually should be able to do well without investment as well.

2. Laser Focus on BD
Sales is the life blood of business. Put all your energies on actually meeting sales targets. Have daily sales update calls. Change the incentive structure – reduce the base salary and instead add two layers of bonus structure. Maybe if they achieve 50% of their targets they will get their original salary. When they achieve 75% they get more. When they achieve 100%
their total payment is actually much more than what they would have got before. The idea is – your competitors are as desperate as you are, without concerted sales efforts there is no way you can tide this crisis. In fact increase mktg/ sales budgets. If something is working in mtkg double the investment in that – of course make those investments in the right areas and in the right people.

3. Everyone should sell
This is an offshoot of the previous point. Think of ways where everyone (including admin, technical) contributes to sales. Often it takes an yr or two for small companies to consistently predict revenue flows. During this time everyone is figuring out the right value prop that sells. You will invariably find a few sales people who are actually meeting their targets and many who are not. Follow the 80/20 rule and cut down the sales team which is generating only 20% revenues. Instead rope in admin, development to augment the star sales people. Admin can make calls, fix up meetings. Technical folks can accompany sales and provide compelling arguments to convince the customer. This will ensure that your number dogs get more time to actually focus on meeting numbers and not on how to convince customers.

There are other obvious mantras to be implemented. They have received wide coverage and everyone knows them so I wont expand on them:
1. Cash is king
2. Prepare for the worst
3. Cut your workforce to the bone. Its better to cut more than cut less. In fact cut so much that you have money left to hire the best.

Hope this helps.

Reposted from http://www.venturewoods.org/index.php/2008/11/06/navigating-through-the-economic-blues/

Online and offline classifieds – Disconnect in traditional media

I have been thinking about this for sometime: All of us know, classifieds is big business. Both online and offline. In the offline world traditional media like newspapers are the big gorillas – they basically built the classifieds industry. In the online world we of have craigslist, networks such as google adwords, vertical classifieds such as magicbricks, trulia etc. Though newspapers have gone online and online classifieds are proving to be successful businesses, I feel that there a distinct disconnect between the offline and online worlds. Why aren’t newspapers (or any other traditional media) integrating their offline classifieds with their websites? Online classifieds of all newspapers (thehindu, timesofindia, local papers like deccan chronicle, eenaadu) suck big time – they have minimal/obsolete content, search/usability features are non-existent. What could be the reason for this?

I feel newspapers have everything going for them 1. They have a captive customer set (who give them offline classifieds). So content (and revenues) is not an issue. Pricing could be different for online. 2. They have a decent online reader base. So integrating the online and offline worlds should be the most obvious thing to do. But this definitely is not happening. Even newspapers in US (NY Times etc) dont seem have integrated their online and offline worlds. Only google (who buys a lot of print ad slots) seems to be bridging this.

I would like to understand the reasons for this disconnect. Are they purely cultural – sticking to the existing cash cow and under estimating the online effect? Or is it more than that?
Are there any traditional media which have successfully embraced the online classifieds model – can anyone point some examples? It would be great if someone can throw some numbers – typical revenues made through offline classifieds. How much can online classifieds effect the overall revenues for the business etc.

I feel there is a business opportunity here – enabling traditional media to broaden their pie. If you want to collaborate on this pls comment or directly contact me.

regards,
Vamsi

Article reposted from here

Content Aggregation sites in India: Legal problems ?

There have been quite a few content aggregation sites that have cropped up in the recent past – both in India and US. ixigo.com, Yahoo Farechase, zoomtra for travel, Yahoo Jobsearch, bixee etc for jobs, spoteazy for electronics and there are many others in US in this space. My question is: What are the legality issues w.r.t content aggregation? Can the host websites sue the content aggregator for using their content for “commercial purposes”?

For example: I build a car portal aggregator from carwale.com, carzoo.com, carsalesindia.com etc. When a user searches on my website, he/she is presented results from any of these websites (with a brief summary) and when he/she clicks the link, they are taken to the host website. My revenue stream is sponsored ads. Once I get sufficient traffic, I may also open up the site to take listings directly.

Can carwale.com etc sue me on the basis “I am using their information for commercial purposes” or “I am using copyrighted content” etc – and yes, its written in the terms and conditions of all the content websites that their content cannot be used for commercial use without their explicit approval.

Atleast with travel, jobs the main revenue stream for the host web sites is not ad based (they are getting paid for subscription or when a transaction takes place). So content aggregators may not be perceived as direct competitors. But for free listing providers such as directory services, car listings, yellow pages, real estate websites where their primary revenue stream is also ad-based, content aggregators can be perceived as direct competitors (even though they drive traffic to the host site). CAN the host websites sue content aggregators? What about the “fair use” clauses – can they protect the content aggregators (in India)?

First of all, is this a big issue? How are the current content aggregators (in India) dealing with this issue? And should start-ups be worried about this? And how should they deal with this?

(this article is also published here)