bizthinker's blog

A most unusual partnership deal involvng two VC firms - Sequoia and Westbridge partners was consummated recently.

This is the first time ever I've heard two VC companies merging. I don't understand how they reconcile the interests of their limited partners or how the proceeds of exits of their portfolio companies are divided.

Sify.com, a leading Indian news portal reported last week that a U.S based private equity fund was investing in an Indian construction company

This is the first deal that I have read about that pertains to the construction sector. It is heartening to note that U.S based private equity investors are beginning to invest in sectors outside of I.T. services and technology.

YellowPages.com just does not cut it in today’s Web 2.0 world. They have completely missed out on the democratization/folksonomy cultures sweeping the Web. The folksonomy culture ensures that web pages get attention based on what other users think of the page; and not just on how much one is willing to pay to get attention for a page. Thus, folksonomy ensures the playing field is leveled between those with lots of money and those with lots of happy customers but low advertising budgets.

Vinod Khosla, an esteemed Silicon Valley VC and a champion of cleaner energy recently
invested in an India-based startup

The investment highlights a few important points:

1) The continuation of seamless cross-border investments between U.S and India.
2) Growing importance of Ethanol in our energy landscape.
3) Maturing of the Indian market with respect to deal structure for VC investments -- the articles mentions the usage of "preferential shares". I'm not sure if this is the same as "preferred stock" as used in the U.S, but will try and research.

The Indian stock market the Sensex has risen sharply by more than 5% over the last 2 trading sessions alone.

Catalysing this rise was the optimistic forecast provided by Infosys for the next fiscal year.

What has happened(as it often does) is that the entire SECTOR rises along with the market leader. This is because the leader often acts as a bellweather for the entire sector. As a result other I.T majors have also risen sharply over the last 2 days.

Never, in recent times, have two terms been more misunderstood and feared.

Here's what these terms mean...

Outsourcing means letting an outside company execute some part of your daily operations(typically, something non-strategic) for you. Example, working with a hiring agency to find a new marketing manager for you.

Offshoring means moving part of your work to a foreign country to avail of benefits(typically lower costs).

So, this post is going to talk about investing in India. Make sure you read the disclaimer at the end before throwing your hard earned MOOLAH at Indian securities.

The red-hot Indian stock market is perhaps been the best reflection of India's growth story in the 21'st century. While most people hear of India's IT firms, and call centres; there are numerous big players in the chemicals, pharmateutical, energy, retail and infrastructure sectors that have the potential to offer superb returns in the coming years.

Here's a quick post to mull over on the weekend..

The latest reports from the VC community(courtesy: PE week wire, April 3) continue to show a non-flattering picture for VC backed exits in the U.S

IPO: The number of Venture-backed IPO's in the U.S declined from 93 in 2004 to 56 in 2005 to 10 in Q1 of 2006.

M&A: Total value of exit was $15.4 billion in 2004; $15.8 billion in 2005 and $4.8 billion in Q1 of 2006. The number of deals fell from 186 in 2004 to 167 in 2005; and 43 in Q1 of 2006.

The Sarbanes Oxley, passed by both Houses in 2002 is bound to have a profound impact on the VC community in the U.S.

Put simply, the act imposes many stringent regulations on companies that wish to file for a public offering(IPO). For VC's this means that far fewer of their portfolio companies will go public, and an acquisition by a bigger company is the most viable 'exit'. These acquisitions typically do not fetch as much as a firm going public, and hence VC's find it harder to earn returns manadated by their LP'S.

Hi folks

I found this extremely informative article on Private Equity in India (Courtesy: Ernst and Young).

Some highlights:

Reasons for optimism

1.Attractive demographic profile: 54% of population below age of 25
2. Intellectual horsepower: Over 23 million trained professionals – doctors, engineers, lawyers etc, and growing by half a million/year

I read three articles recently(courtesy: Outsource reporter) that vividly depict the GLOBAL nature I.T services and how it is trending towards inevitable consolidation

Donnelley set to buy Office Tiger
Wipro buying U.S based cMango

With gas prices hovering at $3/gallon, global warming showing no signs of abating and hefty price premiums on hybrid cars, investors as well as consumers are wondering if there is a better way out.

Enter Ethanol. A hitherto unknown alcohol traditionally used for alcoholic beverages, Ethanol is now a hot topic for investors.

The Washington Times, yesterday had an excellent article on the Green Technology Boom . The article describes how some ultra-rich VC's and business leaders -- Bill Gates, Vinod Khosla, John Doerr etc are committing some serious cash to investing in what they describe the next disruptive technology.

Any investment advisor will tell you that one should diversify one's investment portfolio. But what exactly does this mean?.

An example: say you have $100 to invest and you are considering two stocks - an oil company and an airline firm. If you put all your money on the oil stock, then you will loose a lot of money if the price of crude oil falls. On the other hand, if the price of oil goes up, the airline stock will fall as it's energy costs rise. If however, you put $50 in each the paper value of your portfolio will fluctuate much lesser with variations in the price of crude oil. If you sell at the right time, you will make profits, while reducing the downside risk to your portfolio.

When a Stock market rises as rapidly as the Sensex , the reporting tends to get polarized. Some business writers become unabashedly bullish - saying India's day in the Sun has finally come; others become unforgivingly bearish predicting that bears will come out of hibernation(mind you most of India, especially Mumbai does not really have a winter).

As promised, this article is going to focus on the proposed full convertibility of the Indian currency(Rupee).

True to form, I'll start with a couple definitions:

Current Account: Arithmetic difference between the money spent on imports and that gained from exports.

Capital Account: Arithmetic difference between investments flowing into and out of a country.