Technology: e-Venture On Ice Pg.[2]

[Contn.]
e-ventures On Ice

The companies eVI invested are in various stages of development (See E-ventures: Portfolio I & II). A handful have died, but that's not unnatural in the great tech cycle of the world where many VCs lose half or more of their companies. The others are struggling along, many hopeful of the right noises coming at them from eVI's partners.

But market watchers say most of these companies simply got too much money. ''They invested $2 billion in each venture, like US VCs do-in the US,'' remarks Mahesh Murthy, Partner in angel investor Passionfund.com. ''That's far too much money for a start-up in India, especially when revenues are not on par with the US. The entire sense behind starting a company in India goes out of the window.''

There's a classic case of eVI spraying money when the fund, along with another VC, rafNet Ventures, put up $ 25 million in January 2000, for chaitime.com. Headquartered in Philadelphia, the portal was aimed at the Indian diaspora. When it set up Indian operations, staff salaries were calculated by simply converting dollars into rupees. Less than 11 months later, the Indian operations were history. As one of the managing partners said carelessly at a cocktail party: ''It was bleeding badly, so we slit its throat.''

Another failure was Netpilgrim, which was sold for a token Re 1 to media-owner Ashok Advani of the Business India group. eVI had invested $1 million in Netpilgrim, an e-recruitment community portal for tech professionals and clearly repeated cash infusions weren't working. ''Netpilgrim needed a media partner to take it to its fullest potential,'' says Jog.

Market sources express disquiet about eVI's portfolios, saying it made the mistake of backing start-ups with good concepts, but not strong business models. Were there wrong financial valuations or misjudgements? The partners don't agree. ''We have a series of very good investments in our portfolio, with strong entrepreneurs and sound business models,'' says Singhal, 34, a veteran of Silicon Valley and McKinsey New York. ''eVI had a strong focus on providing operational support to our companies.'' Bhargava is more non-commital. ''It's too early to figure out how things will work for the entire portfolio,'' he says. ''We feel most of our investments are in good shape.''

Now looky here.
I did not say I was a millionaire.
But I said I have spent more money than a millionaire.
Cause if I had kept all of the money I had already spent,
I'd woulda been a millionaire a long time ago.

There are no millionaires in eVI's portfolio, and given the money it has spent on many companies with low-earning capacities, it's unlikely there will be any for some time to come. But some solid companies have attracted second-round funding and acquired strategic investors. And at least for now, they're hopeful that eVI will stay with them.

''We were concerned when eVI announced no fresh investments,'' says K. Ganesh, CEO, CustomerAsset, a global ecrm (customer relations management) company that closed a second-round of funding at $9 million from three VC, besides eVI. ''But the fact that they did follow-on (second round) investments in CustomerAsset in July 2001, proves that they have intentions to invest in existing companies.''

He says eVI has told him it will support the ventures as long as it takes to liquidate investments. How long is that? ''Typically the life of a VC fund is four to five years and we are just two years old,'' says Bhargava.

The companies that can attract second-round investors have a good chance of making it through. As such companies mature, eVI may not be required to hand-hold such entrepreneurs as it did not so many months ago. ''eVI may not make further investments but we continue to get strategic inputs,'' says Raju Wadalkar, CEO of 3Genesis, a wireless application development company servicing European wireless and consulting companies.

Even though they are cagey about their future plans (apart from Jog), the partners insist they are in for the long haul. Realistically, that might be for a year or two. ''Venture capital is a life-cycle business-it is important to make the right investments, nurture them, and then help them find the right exits,'' says Singhal. ''When I started eVI with Neeraj and Rajesh, it was my goal to be involved across the entire life cycle. Therefore, the decision to stay.'' Jog too says he is still on the boards of various portfolio companies and attends board meetings regularly.

One thing is for certain, eVI is just the first. The age of the VC shakeout has just begun.

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