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Internet firms take to venture investing

Internet firms take to venture investing
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First Published: Thu, Jun 26 2008. 12 36 AM IST
Updated: Thu, Jun 26 2008. 12 36 AM IST
Mumbai: Some established Indian Internet companies are beginning to reinvest in the entrepreneur ecosystem they came from.
Two of the three listed Internet companies in the country are investing in start-ups as a strategy to grow their businesses and encourage entrepreneurial talent outside their own teams: Nasdaq-listed Rediff.com India Ltd and Bombay Stock Exchange-listed Info Edge (India) Ltd. (The third is Nasdaq-listed Sify Technologies Ltd).
The latest start-up to benefit from the trend is Mumbai-based short message service (SMS) blogging and sharing site, Vakow Technologies Pvt. Ltd, in which online portal Rediff.com has made an undisclosed early-stage investment
Vakow allows users to post SMS content on its site and share it with others through multiple platforms such as email, SMS or scraps on social networks, such as Facebook and Orkut.
“We want to invest in companies more at the incubation stage when it doesn’t make sense to venture capitalists, (but) their business design is much in line with what we do,” said Venki Nishtala, chief technology officer, Rediff.
This is Rediff’s second early-stage investment. The company, which reported earnings of $32.25 million (Rs138 crore) in 2007-08, had earlier bought a minority stake in Chennai-based language application company Tachyon Technologies Pvt. Ltd.
Earlier this year, Info Edge, whose online properties include jobs classifieds site Naukri.com and matrimonial site Jeevansathi.com, made its first venture investment in New Delhi-based online education company Study Places Inc. and is looking at potential investments of $1-4 million.
Selectively, entrepreneurs such as Rajesh Jain, founder of IndiaWorld.com, and Suvir Sujan, co-founder of auction site Baazee.com, have made angel investments in start-ups, such as mobile payment company mChek India Payment Systems Pvt. Ltd, online search company Guruji.com and legal outsourcing company Pangea3 Legal Database Systems Pvt. Ltd.
Successful entrepreneurs have been chief sources for so-called angel funding—early-stage capital preceding venture capitalists’ money—for Internet start-ups in Silicon Valley, California.
However, India, with about 50 million active Internet users, is yet to see a large number of such successes who can pour money back into the system.
Investments such as those made by Rediff and Info Edge are, however, early indicators of a similar trend.
Such strategic investments also allow for synergies between the investor and the investee, unlike in regular venture capital funding, which looks for financial returns.
“Over a period, we hope to use (Rediff’s) distribution network and large user base to our advantage,” said Rahul Gupta, co-founder, Vakow.
Gupta, along with fellow IIT, Bombay alumnus Amit Upadhyay, founded the company last year. He plans to expand the two-member team and increase its product line-up with the funding.
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First Published: Thu, Jun 26 2008. 12 36 AM IST