“Part of the funds raised now will also be used to build the publishing team,” said co-founder Vishal Golia, speaking to newspersons at a teleconference to announce the deal. The company employs a team of 15 developers in Mumbai, and also collaborates with individual domain experts in the US. While Golia did not disclose any growth targets, he said that Jamia, which has been launched in beta test in Turkey, has already received 200,000 registrations. It is also currently developing its second product — Vinashi, which is a real-time strategy game that targets both high-end and low-end mobile handsets.

Gamian was founded in late 2008 by Golia and Burak Balik. The executive management team also includes Sumeet Maniar and Tyler Kim, who oversee strategy, business development and operations. The company follows a free-to-play model and expects to generate revenues from the sale of virtual goods or premium features within the games. The global gaming market, said Maniar, turned in $75 billion in revenues last year, of which $14 million was online gaming. “On an average, about 10 per cent of gamers are willing to pay to play and that is a significant market,” he said. The company’s target markets, apart from Turkey and India, include Brazil and Philippines.

This is Delhi-based IAN’s first investment in the gaming segment. “We think the market in India will grow significantly, especially in Tier II cities,” said IAN member Chetan Shah, who joins the Gamiana board.

Peel-Works was founded in 2010 by Sachin Chabra, a former Hindustan Unilever executive. It offers solutions for very large and medium enterprises in the FMCG, telecom and insurance sectors, which have large indirect sales forces. Even though over four-fifth of the sales in these sectors come in through indirect sales forces, the way companies manage this talent is either completely absent or what exists is not commensurate with the significance of their contribution to business results. This creates a dis-engaged sales force which leads to sub-optimal business results and higher operating costs. Peek-Works aims to address this problem with its solutions.

Following the investment, IAN members Srikant Sastri and Sadeesh Raghavan will join the Peel-Works board, said the press release. Other IAN members who are investors in the company include Harish Mehta and Saurabh Srivastava. In 2011, IAN invested nearly $10 million in ten startups including Jigsee, Groffr, and Vayavya.

What made you turn to angel investing?

I became an angel investor by accident. In fact, I took up my last assignment at Accenture because I wanted to get to know the Indian market and move into private equity investing. Then I invested in a couple of friends’ companies and realized that angel investing was more my cup of tea. Private equity is a very spray and pray business. I can’t deal with that. If I invest in a company, it has to be because I care about the business. I can’t go in thinking that it wont work. I have to get involved in some manner.

Apart from IAN, you’re also involved with Acumen Fund. How did that come about?

I actually got involved with Acumen while I was still with Accenture. CSR (corporate social responsibility) was a big topic at Accenture and I reached out to people in the US to find out more. That’s how I got connected with Acumen. They have an employee internship programme with Accenture. I like Acumen’s for-profit model and I think the real breakthrough organizations in India will come from the bottom-of-the-pyramid. I sit on the boards of several of their portfolio companies and get involved at the micro level on the operations side.

Isn’t the focus of investments at IAN very different?

Yes, many of the angels who invest through IAN are interested in technology. IAN, in that sense, covers the top end of the market. But now it has started moving towards bottom-of-the-pyramid businesses. Young graduates are jumping into these businesses, which is something you would not have seen two years ago. It is an encouraging sign.

What kind of companies interest you in the Indian market?

I’m always interested in companies that address the local market. They may have the potential to go global, but the dominant target market should be India.

Do you have a checklist or process for evaluating an entrepreneur prior to a deal?

If the entrepreneur is just looking for money, then I am most likely not going to be interested in the company. The way I think about it is that if his business is so good and he only needs money, why can’t he find a financier? I like to make an entrepreneur think of what they are doing. This usually involves spending a lot of time talking to the entrepreneur. The good ones will always push back. They will not entirely accept everything that you are telling them.

How long does it take to close a deal?

As much time as it takes to really get to know a business. It could be weeks. You have to do site visits, crunch the numbers and really see the business on the ground.

How many companies have you invested in so far? What kind of stakes do you prefer?

About 20, of which maybe 10 are through IAN. I try to keep the stake small. If you take too much then you become the owner of the company and I know that I will never be a good owner. Better off as an advisor!

Image Courtesy: IAN

“We’re now entering the second phase of our growth,” says CEO and co-founder Shirish Deodhar, in an interview with Startupcentral. Sapience allows companies with large workforces to measure and analyze how employees are using computer-based applications such as Excel or PowerPoint. This helps companies to better monitor individual productivity and improve the overall productivity of the organization. The software, which is currently patent pending, can be installed at the customer’s data center or hosted on InnovizeTech’s cloud-based servers. In its second phase of growth, the company roll out Sapience across significantly larger workforces, going up to over 10,000 people per customer.”We currently have pilots running with some of the country’s top ten information technology services firms,” says Deodhar.

Demand for the software, says Deodhar, has scaled up rapidly in the past few months. About six months ago, it was still working with customers whose workforces ranged between 100 and 200 people. Three months ago, companies with between 300 and 500 employees started to sign up for the product. “The product business is very different from services. Once customers start coming in you have to scale up quickly,” he says. To support the increased demand from the market, the company has recently inducted Avinash Sethi and Ranjit Nambiar into its management team. Sethi earlier spent several years at TCS and Intel, while Nambiar comes to InnovizeTech after a six-year stint at Dell India.

For the founder team, though 2012 promises to be a demanding year, scaling up will not be an altogether new challenge. Deodhar, Bhatia and Joshi earlier co-founded software services firm In-Reality Software, which was acquired by Symphony Software in 2004. Deodhar had also founded another software services firm, Frontier Software, in 1988, which was acquired by Veritas Software in 1999. Swati Deodhar, who came up with the idea for Sapience, has earlier held several leadership positions in companies such as Symphony Services, Ruksun Software, Mafatlal Consulting and PricewaterhouseCoopers.

InnovizeTech is currently not profitable though Deodhar says that the company expects to post $100 million in revenues in five years. Last July, the company raised seed funding of about $350,000 from Indian Angel Network (IAN) and over $850,000 in Series A funding from Seed Enterprises this November. Onward Group founder Harish Mehta represents IAN on the company’s board, while Seed Enterprises is represented by Mitesh Bohra. It currently employs 23 people, of which 17 are engaged in product development and support.

Image Courtesy: InnovizeTech Software

Though it will compete with organized angel investor networks such as Mumbai Angels and Indian Angel Network, HeadStart Ventures’ functioning style will be a cross between an incubator and a venture capital firm. Individuals who want to invest in the fund will be required to make a minimum commitment of Rs 50 lakh. Each individual investor will become a limited partner in the fund. While Rs 25 crore is the target corpus for now, the founders have not set a hard cap yet on the final fund size. It will have an investment committee which will vet and close deals. This will be supported by an operations team which will be involved in activities such as workshops and managing mentors and industry partnerships. Borah and his co-founders will man the operations team and probably also be on the investment committee, though he says, “I think we will end up having a different set of people on the committee.”

The investment strategy is to park anywhere between Rs 20 lakh and Rs 2 crore per startup and for now, the focus will be on communications and technology startups. The fund will remain invested in a startup for 2-4 years. Each startup will have a mentor, who will be embedded in the startup after being identified and matched through an 8-day workshop (which begins in early August). “Apart from having relevant experience, mentors should be in a position to spend an hour per startup per day,” says Borah. This is usually the part that fails in any startup mentoring programme. Borah and his colleagues hope to address that problem by creating an incentive-linked mentoring programme. Each mentor will receive cash or stock or both in the startup that he/she mentors. However, this is not new. Bangalore-based Morpheus Venture Partners, for instance, takes a 7-10 per cent stake per company in lieu of mentoring.  It has also recently raised a seed fund to invest in startups — read a WSJ-Venture Capital Dispatch post here.

The HeadStart Ventures team has several other value-added services planned for startups. However, much of what it outlines as differentiators — results-oriented mentoring, access to markets, etc. — is already out there in various forms. For instance, there are several successful entrepreneurs who already work closely with young entrepreneurs in these areas either on their own or through organized angel investor networks. HeadStart Ventures’ real value proposition lies in being able to consistently raise seed money in the long term and stay true to its intentions. It will be a tough fight, especially in India, but a worthy one.

Canaan Partners

Making Angel Investing Work

By Alok Mittal

Canaan Partners hosted a roundtable discussion with over 30 angel investors. This note summarizes the key discussion items.

Individuals & Groups

The participants included members from angel groups (Indian Angel Network and Mumbai Angels, each of which have made 18 investments till date) as well as individual angel investors. Many participants also reported that they invest both individually and through these groups. Members of the groups pointed out to several advantages of organizing themselves, including:

• • Ensuring adequate capital availability through syndication
• • Sharing the effort involved in making investments as well as managing them
• • Availability of wider domain knowledge within the investing group

Time, Not Just Money

Most participants agreed that angel investments entail high level of involvement and time commitment. While there was consensus that the operating team needs to be given enough operating freedom, investors mentioned a wide range of involvement from finding office space, to recruiting talent, to helping find customers. Some of the investors emphasized on the need to define concrete value-add before making the investment, such as a specific list of customer contacts that could be useful to the company. Some participants reported spending as much as two full days a week with investees.

There was emphasis on defining and working towards milestones that can be achieved with the often meager angel capital. Some of the suggested milestones were towards business progress; others towards ensuring that the next round of financing can be secured.

More Than Just IT

While the earlier stages of angel investing witnessed a bias towards information technology oriented investments, angel investors are now looking at a wide range of sectors. There was a view that sometimes brick-and-mortar businesses have a wider set of potential acquirers. At the same time, many participants pointed out that since angel investee companies need to raise their next round of financing from venture capitalists, the sectors are limited by where follow-on investments are expected to be available.

Profile of Entrepreneurs

Majority of the group indicated a growing preference for entrepreneurs with strong domain expertise and operating background. Both the lack of compelling differentiation in ideas, as well as the difficulty in building strong operating teams under inexperienced entrepreneurs were cited as reasons.

There were differing views on the importance of pedigree of the entrepreneurs. While principally most people agreed that there was a lot more talent than just from top engineering and business schools, there was also a view that entrepreneurs with pedigree stood a better chance of raising follow-on venture capital, hence being better bets for angel investors.

Suggestions for the Development of Angel Capital

There was consensus that there is very little seed stage capital available, and there were several suggestions that could be taken up on a collective basis, and in collaboration with organizations such as TiE:

• • Tax breaks for accredited investors, similar to those prevalent in other countries
• • Devise investment structures that allow for returns even when the investment turns into a lifestyle business, with no acquisition or initial public offering in sight, and with lower dependence on future rounds of financing.
• Expand the themes and geographic spread of angel investment, perhaps by attracting local capital. Case studies of successful angel investments, as well as training on investing and portfolio management could be useful.
• Devise management structures to allow distinct roles for passive investors and active members, to allow maximum leverage to engaged investors.

This is as per numbers collated from deals reported by various media and announced in press releases. Not all these deals are verified and in many cases the announced/ committed money will flow into the respective companies in tranches over an extended period. The actual total investment, therefore, would be much lower.

There are other numbers floating around as well. Venture Intelligence puts investments till November at $332 million across 68 deals, against $839 million and 155 deals for the full year 2008.

Here are our key numbers from 2009:

Investments: $147 million

Deals: 59

Top Dealmaker

This one is a tie. Nexus Venture Partners and Aavishkaar Venture had the most number of deals in 2009, notching six each. It was not possible to select the top dealmaker by quantum of investment because several deals have been done in concert (two or three investors teaming up) and the break-ups are not available. However, to get a sense of who the top venture capital investors in India are at present and where they are investing, read a recent Businessworld story here.

A small note on Aavishkaar: This one is a special kind of investor. It backs startups that address ‘bottom-of-the-pyramid’ opportunities. Many of its portfolio companies address the rural markets and disadvantaged sections of our society. It has three funds, of which Aavishkaar India Micro Venture Capital Fund has made the most investments this year. This fund typically invests between $50,000 and $500,000 per company.

Deals