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JUNE 3, 2007
 Cover Story
 BT Special
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Trillion-Dollar Club
India has joined the elite club of 12 countries with GDPs in excess of a trillion dollars. The country's GDP crossed the trillion-dollar mark for the first time when the rupee appreciated to below Rs 41 against the greenback. According to a report by Swiss investment bank Credit Suisse, India's stock market capitalisation has risen to $944 billion (Rs 39,64,800 crore), which is also closing in on the trillion-dollar mark. An analysis of the Indian economy.

Minding The Monsoon
The India Meteorological Department's prediction that the total rainfall in the coming monsoon season is likely to be 95 per cent of the long-period average, with an error margin of 5 per cent, is good news for agriculture. But experts say there's a need to revamp monsoon prediction so that the region-wise and timing of rainfall patterns can be forecast much earlier. A look at the credibility of monsoon models and their impact on agriculture.
More Net Specials

Business Today,  May 20, 2007

Vertical Limit
Some verticals such as jobs, travel and matrimony are beginning to pull in big money. Problem: They also are the most crowded.
"All the spaces that are making money are connected to the demographic profile and the economy of the country"
Murugavel Janakiraman
CEO/ Bharat Matrimony

When Yatish Diwakar, 29, a software engineer at Wipro, Bangalore, tied the knot with Sukanya Kulkarni, a Pune-based advertising professional, in January this year, it was very much a traditional affair, involving family and friends and all the customs. Yet, when it came to finding a bride in the first place, Diwakar followed anything but tradition. He simply searched online-on, where Diwakar had posted his profile and Sukanya hers. "Although both of us belong to the same caste, we come from vastly different backgrounds. If it were not for the net, I doubt if I would have married someone from Pune, since I hail from Mysore and live in Bangalore," says Diwakar.

A happy marriage for the two families, and welcome business for Murugavel Janakiraman. A decade ago, when this MCA from the University of Madras launched Bharat Matrimony, the idea was to play a matchmaker for the NRIs in the US. It was a different internet age in India then. There were just 3 million users and all of them trawled the net on painfully slow dial-up connections. Text-based e-mails were the primary means of communication in cyberspace. Things are very different today. There are more than 45 million internet users in the country, broadband has penetrated the metros, and an entire generation of consumers is comfortable doing many things online-finding a spouse, included. As for Janakiraman, his online business empire spans not just matrimony, but jobs, real estate and auto. Yahoo and venture firm Canaan Partners have invested Rs 40 crore in Bharat Matrimony.

"The pervasiveness of broadband has meant that people can do much more on the internet"
Sanjeev Bikhchandani

Another such entrepreneur is Sanjeev Bikhchandani, who also started his net venture 10 years ago and today owns a clutch of portals, including flagship,, and Two years ago his firm, Infoedge, had Rs 45 crore in revenues; today, it does Rs 150 crore. Its market cap (it listed in November 2006) is an impressive Rs 2,000 crore, putting Bikchandani's own net worth at Rs 1,198 crore. Unsurprisingly, the success of Janakiraman and Bikhchandani has inspired several others to seize opportunities online in everything from social networking to gaming to matrimony to real estate to tutoring to search. The problem: "Not everybody or every business vertical will succeed," says Sumir Chadha, MD, Sequoia India, a leading VC.

It's Different

The spectacular dotcom crash of 2000-01 is still fresh in market memory, but veterans aver there's much more sanity in the space this time round. "Web Ver 1.0 in India failed because of two reasons. One, some of the businesses were not viable and, two, access was limited and user base small," says R. Ramraj, former Managing Director of Sify, who now is an advisor to Sequoia Capital. "With 2.2. million broadband connections and 45 million users, the game has changed dramatically and going forward, it will only accelerate." It's an estimate that others such as Bikhchandani agree with. "The rules have completely changed over the last couple of years and the pervasiveness of broadband has meant people can do much more on the internet," he says.

"The restriction to growth is the limited number of people online with credit cards."
Deep Kalra
CEO/ MakeMyTrip

However, it is also becoming clear that it is only a handful of verticals that have succeeded in making money in the Indian marketplace. Jobs, matrimony, real estate, travel, search, and auctions are the major ones. Janakiraman of Bharat Matrimony has an interesting take on what makes a vertical viable. "If you look at all the spaces that are making money, they are connected to the demographic profile and the economy of the country," he explains. "In a country of one billion, search for a job, especially a suitable one is an on-going quest. The moment you have one, matrimony is a natural corollary, which in turn leads to purchase of real estate. As earnings and, consequently, spending power have risen, today's Indian is on the move."

Dinesh Wadhawan, CEO, Times Internet, says that as the digital divide shrinks and consumers discover deals online, e-commerce and m-commerce will only grow. Rajan Mehra, Country Manager, eBay India's, agrees. "In India, ecommerce is growing at 51 per cent and eBay is growing faster than that. eBay has around two and a half million registered users in India and it already covers 670 cities," he says.

Chadha of Sequoia says that only those online ventures that can address the pain points, or cater to a need of either business or individuals, have a good chance of succeeding. Take the case of the online travel market, which is pegged at around Rs 5,000 crore this year and estimated to touch Rs 8,200 crore in 12 months. In the last 18 months alone, it has seen the entry of a dozen or more players, although Deep Kalra's continues to be the leader. "There are at least 10,000 travel agents in the country today and we've just begun to tap into this market," says Dhruv Shringi, CEO,, a travel portal funded by Norwest Venture, Reliance Capital and tv18.

While most travel portals started out by offering what they claimed was the cheapest air tickets online, they have slowly begun to diversify into other areas in search of broader business opportunities and, more importantly, wider margins. "The margins on air tickets are not more than 5-6 per cent, while hotel rooms can give us 20 per cent or more," says Ashwin Damera, CEO, Travelguru., on the other hand, has tied up with Lonely Planet to offer local city search on its site.

"There are at least 10,000 travel agents in the country and we;ve just begun to tap into this market"
Dhruv Shringi

Too Much Clutter

With too many me-toos, differentiating oneself from the others has become an issue for the portals-especially in travel. Most people tend to use them as fare aggregators and then go on to book the ticket on the airline's own website. At any rate, says's Kalra, the big stumbling block is the limited number of people online with credit cards. The situation is better in matrimony, where India's complex caste and community structure seems to be helping. For instance,, based in Chennai, is said to attract primarily south Indian browsers, while, owned by the Times of India Group, gets NRI visitors. "People have begun to differentiate between portals based on geography, community and the kind of profiles uploaded," says Bikhchandani.

In jobs, there's a virtual fisticuff between Naukri and Timesjobs, which claims to be the #1 portal. However, according to Comscore (it tracks web traffic), Naukri got more than 2.3 million unique users in February as compared to slightly more than 1.3 million of Timesjobs. While not part of this fight yet, Arun Tadanki, President and MD of Monster's India operations, claims his site is better. "Nearly 3,000 companies use our services one way or the other every month. We have grown our customer base by a whopping 120 per cent in the last one year," he says.

Given that finding workers is harder than finding cheap air tickets, it is reasonable to assume that the first dotcom victims will emerge from the travel space-possibly in another two-three years. But no one's losing sleep over it, or the internet's ability to throw up newer opportunities. "There are emerging opportunities in the convergence of BPO and the internet as well as the mobile phone and the web," says Ramraj. "These opportunities will take off over the next two years as broadband penetration grows and the use of the internet (from more than just e-mail) increases." So, hang in there.

VCs Still Love Dotcoms
Last year, VCs invested $166 million in 27 internet companies, compared to $17 million and 2 dotcoms the year before. What's got them interested all over again?

"We will soon have a full-fledged office in India to deal with the huge surge in interest"
Promod Haque
Managing Partner/Norwest Ventures

Overlooking an 18-hole golf course and just off Bangalore's Outer Ring Road, the offices of Helion Venture Capital have been buzzing with activity over the last few months, as executives at the firm try to keep up with the flood of business proposals coming their way every day and the dozens of eager entrepreneurs who queue up to meet them. "We've got over 100 proposals since we started off in late 2006," says Ashish Gupta, MD, Helion Ventures.

A couple of kilometres away at the ornate Leela Palace, Promod Haque, Managing Partner, Norwest Venture Partners, is busy fiddling with his BlackBerry as he tries to juggle schedules between investees and his office in the US. "We will soon have a full-fledged office in India to deal with the huge surge in interest," he declares, "we've made investments in companies like (travel portal), but there are dozens of other opportunities." Agrees Sumir Chadha, MD, Sequoia Capital India, who's visiting Bangalore from the us to review recent investments: "Anybody who is somebody in the VC world, wants a piece of the internet action happening in India."

What sort of dotcoms are the VCs still interested in? Start counting: It must be one that addresses a customer pain point or fills a market gap. It must be differentiated and unique, and most importantly scaleable. VCs themselves say that start-ups in education, financial services and healthcare are some of the most attractive areas. Finally, you'd better have a top-notch team that has worked together for some years if you want to make raising money a cinch. "There's so much more you can do on the internet, now that the old backbone that most companies relied on will soon be redundant," says Haque.

Start-ups such as Minglebox, a social networking site launched by IIT Delhi grad Kavita Iyer and two of her classmates, and online tutoring outfits TutorVista have of late attracted blue-chip investors. "There are many interesting opportunities in hybrid areas that combine the internet with BPO or the mobile phone," says Gupta, who points to Helion's investment in JiGrahak as an example of this trend.

Rajesh Jain, famous for his $115 million (Rs 494.5-crore then) sell out to Sify in 1999, says VCs are not being imaginative enough. "There are two problems: Indian entrepreneurs want to imitate success stories in the west and VCs also feel most comfortable investing in them. But how many success stories are there in a given vertical? There's only one YouTube, MySpace or an Orkut," he says.

Alok Mittal of Canaan Partner agrees that VCs have been cautious, but says that a maturing market will demand investment in more locally-focussed companies. "As the ecosystem matures, you will see VCs invest more heavily in early stages given the potential in the Indian market," says Mittal. Let's hope he's right.