Innovation Axis

Mittal leads Canaan's investments in India

Folks from Canaan Partners — co-founder Eric Young and Brent Ahrens — were in town a couple of weeks ago. They are a US-based, early stage VC that works out of the east and west coasts. The firm started out in 1987 in Connecticut when it was spun out of GE Venture Capital and set up an office at Menlo Park, California, a few years on. They’ve had an office in India (Gurgaon) for over a year now. Alok Mittal, who co-founded online jobs portal Jobsahead (sold it to Monster in 2004 for $9.6 million), leads Canaan’s investments in India. You might recall that they co-invested $8.65 million with Yahoo! in online matrimonial services portal BharatMatrimony last year. I was curious about where the name Canaan came from. Turns out, it’s a small town in Connecticut and was one of the suggestions that stuck on the whiteboard when the co-founders were debating on a name for the firm back in ’87.

What’s most interesting about Canaan, to my mind, is the fact that it straddles the new global innovation axis — Silicon Valley, Israel and India. In fact, Canaan set up offices in Israel and India at the same time (around December 2005). Now Israel has had ties with Silicon Valley for a while — most Israeli technology startups have a front-end arm into the US market. But in the last five-odd years, Silicon Valley has built a robust corridor with India as well. This has primarily been driven by the need to cut costs. Silicon Valley startups now keep front-end operations and core product development in the US and outsource back-end R&D to India, mostly Bangalore. VCs like Canaan, who have put resources into both India and Israel, are betting on the three nodes converging at some point to drive innovation. Some of it is already happening but that’s a discussion for another day.

Some quick pointers on Canaan for startups and early stage companies here:

• Invests between $2-5 million per deal. This may come at one go or over a period of time. So a seed stage company may start with $100,000 and scale up to $5 million over a period of six years.
• Focus in India is on Internet and wireless, software products and export-oriented services (read: BPO and KPO). They’re pretty open to fresh teams coming out of established jobs to startup on their own.
• The India team is still small but having a former entrepreneur at the helm, Mittal, helps. He’s backed up by investment analyst Mukul Singhal (worked with Gujarat Venture Finance Ltd prior to this). What helps is the fact that Canaan is not entirely new to investing in India. One of its Menlo Park-based partners, Deepak Kamra, invested in e4e and Aztec Software back in 2000. Kamra maintains strong links with India.

That’s the lowdown on Canaan for now. You’ll read about them soon enough in the news. They’re closing their second deal and it’s in the broadcast services space.