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IVCJ Conference for

Private Equity for IT & ITES
           Early Stage Financing
     29th April 2009, Taj Lands End, Mumbai
           Atul Khekade
      Director – Netz Capital
Netz Capital Early stage venture capital fund
Company Stages

    Idea                                            $10K - $50k
Business Plan   Seed/Pre-Early
   Team
Working Model                             0.5%      $2M - $5M
                           VC
 Operations
                                 PE      IPO
    Exit                                              >$5M
                                      Acquisition
Fund Structure
                     Idea
                 •Scalability
                 •Portability
                 •Interface
                 •Operational Efficiency
                 •Market Size
                 •Biggest Competitor

Team    Technology              Infrastructure   Early Promotion

<$5K     <$10K                   <$10K               <$5K
                    <$30K
             •Early Customers
             •Self Sustaining Operations - $1M Revenues
             •Gearing up for Next Round
Fund raising Challenges
                          (In recession time)

•   Scalability
•   Operational Efficiency/Low fixed costs
•   Revised Exit Strategy/Profit making as first priority
•   Recession Proof Check
•   Serves a very basic need at ½ x price
•   Serves emerging/recession free markets                Additional
                                                          Evaluation
•   Long term viable and economic model
                                                           Criteria

•   VC/PE Limitations
•   Scarcity of Capital
•   Bad M&A and IPO market
•   Painful Term Sheet, giving away majority control
Strategy: Winning or Surviving?
                                  In tough times
• Highest quality, fair price    • Fair quality, ½ x price


• Fixed cash outflow model       • Negative cash outflow model


• Self funded Growth             • Partnerships/Franchising


• Budget as per market price     • Bootstrapping / Re-inventing
                                   the budget


• Advertising                    • Public Relations


• Find Employees                 • Find/Nurture Entrepreneurs


• Sales start after operations   • Sales first
Moving to the next round of Capital

• Is it absolutely necessary?

• A successful company is the one that makes more profits – not the
  one that raises more capital.

• Thought about raising capital from customers?
    – Long term commitments
    – Pre launch sales
    – Clearer revenue picture of the future.




                                 Raised $100M as   Tata raised $5
       Raised $6.2M              deposits from     million on nano
       from 125,000              customers         forms
       wiki users
Seeding the Leader
                             LEADER
  Process
                                                    Consistency
Business Model
                                                       Vision

       Early
                                                     Role Model
     Customers
                                                   Organized
             Sales Process
                                               Media
                             Presentation
                                            Friendliness
                                 Skills
Growth - A reality?
      • Recession – Greatest Opportunity to rise

      • Opportunity for cheaper alternatives of existing products



Real Estate      Automotive       Travel          Food          Energy         Entertainment

Cost effective   •Second hand     •Full service   Franchising   Green Energy   •Cheaper
housing          cars             to low frill                  sources        theatres
                                  airlines
                 •Electric cars                                                •Movie rentals
                                  •Airlines to
                 •Car Rentals     trains
Exit Strategy
• Profit Making as soon as possible

• Surviving till the markets recover

   – Undervalued M&A


   – Undervalued acquisition bids
Valuation
• “It is better to own 10% of a $100 million company than
  owning 80% of a $5 million company”

• Company’s leader deserves controlling interest

• Valuation Criteria
   –   Revenue
   –   Competitor’s revenue
   –   Early entrant? Or crowded space?
   –   Early customers
   –   Market size
Thank You
• Atul Khekade

• Info @ netzcapital.com

• +91 98203 72810

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Netz Capital Early stage venture capital fund

  • 1. IVCJ Conference for Private Equity for IT & ITES Early Stage Financing 29th April 2009, Taj Lands End, Mumbai Atul Khekade Director – Netz Capital
  • 3. Company Stages Idea $10K - $50k Business Plan Seed/Pre-Early Team Working Model 0.5% $2M - $5M VC Operations PE IPO Exit >$5M Acquisition
  • 4. Fund Structure Idea •Scalability •Portability •Interface •Operational Efficiency •Market Size •Biggest Competitor Team Technology Infrastructure Early Promotion <$5K <$10K <$10K <$5K <$30K •Early Customers •Self Sustaining Operations - $1M Revenues •Gearing up for Next Round
  • 5. Fund raising Challenges (In recession time) • Scalability • Operational Efficiency/Low fixed costs • Revised Exit Strategy/Profit making as first priority • Recession Proof Check • Serves a very basic need at ½ x price • Serves emerging/recession free markets Additional Evaluation • Long term viable and economic model Criteria • VC/PE Limitations • Scarcity of Capital • Bad M&A and IPO market • Painful Term Sheet, giving away majority control
  • 6. Strategy: Winning or Surviving? In tough times • Highest quality, fair price • Fair quality, ½ x price • Fixed cash outflow model • Negative cash outflow model • Self funded Growth • Partnerships/Franchising • Budget as per market price • Bootstrapping / Re-inventing the budget • Advertising • Public Relations • Find Employees • Find/Nurture Entrepreneurs • Sales start after operations • Sales first
  • 7. Moving to the next round of Capital • Is it absolutely necessary? • A successful company is the one that makes more profits – not the one that raises more capital. • Thought about raising capital from customers? – Long term commitments – Pre launch sales – Clearer revenue picture of the future. Raised $100M as Tata raised $5 Raised $6.2M deposits from million on nano from 125,000 customers forms wiki users
  • 8. Seeding the Leader LEADER Process Consistency Business Model Vision Early Role Model Customers Organized Sales Process Media Presentation Friendliness Skills
  • 9. Growth - A reality? • Recession – Greatest Opportunity to rise • Opportunity for cheaper alternatives of existing products Real Estate Automotive Travel Food Energy Entertainment Cost effective •Second hand •Full service Franchising Green Energy •Cheaper housing cars to low frill sources theatres airlines •Electric cars •Movie rentals •Airlines to •Car Rentals trains
  • 10. Exit Strategy • Profit Making as soon as possible • Surviving till the markets recover – Undervalued M&A – Undervalued acquisition bids
  • 11. Valuation • “It is better to own 10% of a $100 million company than owning 80% of a $5 million company” • Company’s leader deserves controlling interest • Valuation Criteria – Revenue – Competitor’s revenue – Early entrant? Or crowded space? – Early customers – Market size
  • 12. Thank You • Atul Khekade • Info @ netzcapital.com • +91 98203 72810