Nov 23, Mumbai: Do you have a genuine idea? Look around. You will find 10 venture funds vying to invest with you. "There is more capital chasing fewer ideas," says Haresh Tibrewala, the promoter of Home India site on the Internet. The question today is not just get money, but to choose a partner who would add value. "You should go in for a venture capitalist (VC) or an angel financier even when he puts a low value to your venture, provided the value added by him is high," adds Tibrewala. Value added could be seen in one way from the assistance the VC or angel can provide during the subsequent round of financing.For a good valuation, "Be a global player" says Shankaran Raghunathan, Blueshift Inc. It took 40 years for IBM to go global in the early part of this century. In the '80s Microsoft took 2 years, Apple took just one year in the '90s. Today you have to be born global to succeed, opines Raghunathan. This is the first step towards a successful valuation strategy.
The second step according to Ragunathan is to focus on the three 'S' -- specialisation, then achieving scale of operation and standardisation. This, however, does not mean that the business plan does not change dynamically as opportunities arise, points out RC Gupta, RCTC. Out of ventures Gupta invested in during 1994, four of the most successful ventures have no longer limited their business for which the equity was sought.
The next step in a high valuation strategy is the acquiring of online real estate. In an Internet driven economy, even the name of the Internet site and the accompanying electronic real estate like the toll free telephone registrations have assumed considerable importance. For instance, says Raghunathan, an Internet startup White Shirt Company got numerous hits on its site whiteshirt.com and enquiries on its toll free number 1-800-whiteshirt even before it started doing business, only because its name signified what it sells. "The first mover advantage does not only mean that you are the first one to sell, but it depends more on how you sell," advices Raghunathan.
Touching upon the potential of funding information technology related ventures, Raghunathan said that only 14 per cent of the VC investment in India is in computer software and related areas and that the average deal size in India is just $0.58 million against about $9 million in the US. On legal angle in venture capital funding J Trivedi, CDC Advisors, said "As a VC investment is sort of a partnership, success depends on the smooth functioning of the relationship". A well designed and clearly understood agreement does not need to be used, he added. On the question of whether the Internet market is already capitalised, Raghunathan claimed that in the US alone out of a potential Internet market of $1.6 trillion, the current market capitalisation of Internet companies is only $800 billion. A long way to go.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.