1. Venture Intelligence interview with Mr.Bob Kondamoori
N. Sriram interviewed Bob Kondamoori, Founding Managing Director of Sandalwood Partners for the US-IVCA/Venture Intelligence quarterly report. Some extracts:[MONDAY, October 15, 2007]
What differentiates Sandalwood Partners from other VCs?
We are focusing on early stage investments. Most of the VCs we see here are doing later stage investments where valuations are very rich and competition fierce. We are looking at investing in companies at product development stage so that we can help them tune the product to the world market. Secondly, we are also more product-centric than service-centric. We are not going after IT Services companies or BPOs.
Are you looking at India and China together as one block for investments?
We are really India-centric. But since we are product-centric company and one of our partners is in China, we look at China for support in manufacturing, until Indian manufacturing takes off.
What are the revenue requirements for a company to seek support from you?
Out first investment was based on just a PowerPoint presentation. We committed $10 million and in two years, the company had $40 million in revenues. If you look at the track record of our partners, we have invested in concept-stage companies and taken them through the growth curve till acquisition or IPO stage.
Are you open to investing in any sector?
We invest in areas where we can add value. So we are very specific about our sectors. Our partners and advisors should have deep domain knowledge of the sectors in which we are investing. Right now we are focusing on two sectors: technology and alternative energy.
You have chosen to invest in semiconductors segment, which doesn’t seem to be a hot among too many VCs. What drives you to invest there?
If you look at the track record of our partners, we have invested in more than 40 semiconductor design companies and returned more than $20 billion. So we are very comfortable in that space.
When you go into semiconductors, the key thing is you have to be very technology savvy. You cannot be only an investment banker to identify companies in that segment. Our backgrounds lend us the advantage of being comfortable in this niche market. And we know India’s strengths in this area. For example, the microchip that runs Apple iPod was made in India.
There is very little tolerance for flops in this segment. At the board meeting level, we go into excruciating details about the product. You should have been a designer to be an investor here. The company is looking for your inputs on selection of tools, design, etc.
You also seem to have got involved in policy making in semiconductors segment. Does that give you an advantage?
We are early market players and understand the market. It helps to understand the government’s views about the business segment, to work with the government and build relationships there. It also gives a certain advantage to our portfolio companies.
Have you made any investments in alternative energy yet?
We have not made any investments yet. But we are definitely evaluating companies in that space.
What is your outlook on the Indian VC market for the next 3-5 years?
The market is incredibly hot. The people are very entrepreneurial, very talented and sharp. I wouldn’t be surprised if in the next ten years, the next Google or Microsoft is born out of India.
How did you get into the VC business?
I was born in India, went to the US to study, stayed and then joined the workforce. From 1995 onwards, my luck changed. I acquired a sort of Midas touch. Every company I was associated with, did extremely well. The first company went public notching up $300 million in market cap.
Then I invested in two companies, each was acquired by Intel for cash. So one after the other, the luck continued to be good, people were taking notice. Since the VC world is a ‘by invitation only’ business, I got invited to join a fund which was a seed investor in Ramp Networks. After several interviews, I decided that it was something that I wanted to try out and hence joined them in 2000. I was a partner with Charter Venture Capital, a $ 400 million fund, for nearly five years. Charter Ventures was involved in more than 150 investments across four funds, and about 60 of them have been gone for IPOs.
Do you have any role model in business?
Not really. I am from the school of Hard Knocks. I had founded a handful of companies which were all successful. So entrepreneurship runs in the blood. But I wish I had a role model. It would have perhaps made my life much easier.
Having said that, I have tremendous respect for anyone who is an entrepreneur. I admire Narayana Murthy, a tremendous person.
What according to you is a perfect investment?
You don’t invest in business plans and companies. You invest in people and their ability to execute and deliver. Perfect investment is nothing but a perfect team, the right gene pool. At the early stage, we have a board meeting every 30 days. If the team commits itself to doing something in the meeting, they have to get it done. It is all about saying and doing it.
Typically, when we invest in a company, it is a company that does not need investment. The entrepreneurs involved have it all in them to build the company. All they are looking for is a catalyst and a little mentorship.
If someone comes to us only for money, we usually don’t invest. The team should have deep experience and knowledge. If a first time entrepreneur insists on being the CEO, we back out, unless we are convinced that he has the experience.
We are also keen that the entrepreneur acquire our expertise and our networks to grow the business because we are confident that he will not embarrass us. That is the true value that we bring in. The entrepreneur also sees the point that our dollar is equal to five of someone else’s dollar.
What are the key lessons you have learnt in the time you have spent in this business?
When I was in Charter Capital, I used to see about 5,000-7,000 business plans a year. I would filter them by 10X based on the sectors that we wanted to invest in. So after the first filtering, the number would stand at 500 or so. It would be reduced by another 10X based on the gene pool, the team, etc. That would bring the number to about 40 of which we will invest in about 8 companies.
What is the lesson that I learnt in that kind of universe? Entrepreneurs have incredible passion. The first reaction when they see a model that is working, be it a search engine or a chip design, is that ‘I can do it better’. They dissect an existing model in thousand ways and we get a hundred business plans on how they will be able to beat Google. They are also fantastic salesmen. It is easy to get carried away. But I have to remain pragmatic and very, very objective when it is very difficult not to get swayed.
If I invest in a concept that is unlikely to succeed, then the entrepreneur is going to chase a dream for five years of his life and he could completely fail. What we lose is some money, but he loses something vastly precious – years of his life. Saying ‘no’ to a passionate entrepreneur is very, very difficult but we have to do it, if we think it is in their own good. Not to get sold to passion is the biggest lesson I have learnt as a VC.
2. Sun is shining on photovoltaic biz
SHELLEY SINGH - TIMES NEWS NETWORK [ THURSDAY, JUNE 07, 2007 01:43:09 AM]
New Delhi: When former IT and communications minister Dayanidhi Maran announced the much-awaited semiconductor policy in February, the idea was to give a fillip to chip making in India by wooing global giants to set up chip fab units in India. However, it's not chip makers like Intel and AMD that are betting big on India as a manufacturing hub, it's the solar photovoltaic (SPV) players. No wonder, SPV fabs will be far bigger in India over the next few years.
Consider this: On Thursday, US-based Signet Solar will announce an SPV facility at Greater Noida. This comes close on the heels of Moser Baer's SPV plans announced recently. Another US-based company, Solar Semiconductor is setting up an SPV unit in Hyderabad. Besides these, about 7-8 more SPV units will come up in the next couple of years with an investment of approximately $5-$6 billion, compared to about $2-billion investment in semiconductor manufacturing.
``Initially it will be the solar photo voltic fabs which will get a boost. There is a huge demand for energy worldwide and SPVs offer a cheap and eco-friendly way to meet it. Also, the cost of production of SPV cells has fallen by over 50% in recent years, making it an attractive option,'' says Bob Kondamoori, managing director of Sandalwood Partners, a venture capital firm which has invested in the ATMP facility (a chip testing facility) of SemIndia.
Basically, chip making is far more capital intensive with investments to the tune of $1.5-$2 billion compared to about $300 million for a SPV unit with 100 mega watt capacity. Also, which the process for making both chips and SPV cells is the same the latter is far less complicated and requires fewer steps. Chip fab making units involve at least 40 separate steps while for SPV it is less than 10.
``Solar photo voltic will be bigger in India than chip making," says Franz Janker, executive vice-president of the $9-billion Applied Materials which is partnering both Moser Baer and Signet Solar in India. However, he declined to confirm the partnership with Signet Solar. "We already have a partnership with Moser Baer and expect to have some more tie-ups over the coming months,'' said Mr Janker.
3. India is hot...and the VCs know it
- Richard Wallace, Courtesy of EE Times Europe - [Posted on 02/07/2007 7:44 AM EST]
HYDERABAD, India — The money well for VC capital for electronics funding in Silicon Valley may be looking parched these days but "there's a tsunami of VC money rolling into Asia Pacific," according to Michael Scown, the managing director of Intel Capital.
Scown and three other VCs with deep pockets and their eye on Asia presented at the ISA 'Vision Summit' in Hyderabad, India this week on a panel moderated by EE Times entitled: "The road ahead for technology start-ups: new and evolving models on a global platform."
The other presenters were: Nikhil Jain, chief advisor, Qualcomm India; Kiranbir Nag, VP SVB India Advisors; and Bob Kondamoori, managing director, Sandalwood Partners.
The findings? India is hot.
And why is India so hot these days?
The key reason is the explosive potential of local market. It's no longer just a "Designed in India" story. Today everyone is talking about chips, boards and systems, designed and built in India for the local market.
The design and back-end outsourcing-to-India trend of the past few years has helped put India on everyone's short list of destinations in Asia Pacific, but the market there is now shifting into a new and much different mode and the new game plan is to go after India's huge, untapped local market for everything from mobile phones, to PCs, to consumer electronics devices, and IT hardware. It's about to take off.
"It's a huge market and you have to manufacture domestically," according to Sandalwood's Bob Kondamoori. This makes India doubly attractive for investors, venture capitalists and the growing list of global electronics and semiconductor makers that have beat a path to India over the past few years. It's a great platform to address the global market, but the local market is where the future action will be, and it's taking off, BIG time.
This changes everything, as they say.
4. Felicitation of Mr.Ajay Jalan by ISA
BANGALORE, India — Mr. Ajay Jalan, CFO Sandalwood Partners, has been recently felicitated by India Semiconductor Association for his sincere and committed efforts , in providing the financial, legal, industry and country statistical analyses on behalf of ISA to the Ministry of Finance and Department of Information Technology. This information provided a clear, concise and compelling argument to the Government of India and has played a major role in the decision by the Government of India to announce the historical Semiconductor policy. This policy will be a milestone in seeding as well as the growth of Semiconductor and Nano technology design and manufacturing in India in many years to come.
