Epiphany Ventures today announced that it has successfully led and closed a Series B investment in MotorExchange, India's leading used vehicle online marketplace. Also participating in the round, is existing investor, Canaan Partners.

Launched in December of 2009, MotorExchange is an online platform for transacting used vehicles. It enables businesses (financial institutions, fleet owners) and consumers to sell their pre-owned vehicles. It provides Sellers the most efficient price, defined timelines and complete transparency. Buyers on the platform are used auto dealers (including dealers of cars, trucks and two wheelers) who gain access to a large pool of vehicles. It is a unique combination of B2B and C2B business models and the company also owns CarTradeIndia.com, a leading auto classifieds site.

Launched in December of 2009, MotorExchange is an online platform for transacting used vehicles. It enables businesses (financial institutions, fleet owners) and consumers to sell their pre-owned vehicles. It provides Sellers the most efficient price, defined timelines and complete transparency. Buyers on the platform are used auto dealers (including dealers of cars, trucks and two wheelers) who gain access to a large pool of vehicles. It is a unique combination of B2B and C2B business models and the company also owns CarTradeIndia.com, a leading auto classifieds site.

Commenting on the development, Gaurav Saraf, Director, Epiphany Ventures said, "MotorExchange combines all the key elements of a great business venture i.e. a unique business model, a market that is growing exponentially (the Indian used vehicle market is estimated to double from current levels to USD 40bn in the next 5 years) and an experienced management team. The business lends transparency and credibility to a transaction which has traditionally been arbitrary, hence, adding immense value to its customers."

"We're looking forward to working with Epiphany Ventures and are confident in the value that they bring to the table. We are also delighted that Canaan Partners has participated once again in this round of investment. This latest investment will enable us to expand our Fleet and Consumer businesses. Our goal will be to establish a platform which will bring scale, transparency and convenience to the used vehicle industry", said Vinay Sanghi, Chief Executive Officer, MotorExchange

"MotorExchange has built a platform for transacting in used vehicles, and represents a key shift in the used vehicle ecosystem in India. We are excited to have Epiphany as a partner in helping realize the immense potential of this business," said Alok Mittal, Managing Director, Canaan India

"MotorExchange has built a platform for transacting in used vehicles, and represents a key shift in the used vehicle ecosystem in India. We are excited to have Epiphany as a partner in helping realize the immense potential of this business," said Alok Mittal, Managing Director, Canaan India

About MotorExchange
MotorExchange is India's largest used vehicle online marketplace providing sellers and buyers a structured platform for transacting used vehicles. It brings together qualified sellers and buyers of used vehicles. Sellers include banks, insurance and leasing companies, corporate, automotive dealerships and consumers. Buyers are used vehicles dealers located throughout India. This is enabled by an accurate certification process and world class technology. The marketplace provides customers with speed, transparency, convenience and scale

MotorExchange is promoted by Vinay Sanghi, the former CEO of Mahindra First Choice. Rajan Mehra, venture partner at Clearstone Venture Advisors and former country head of eBay India is a founder-director in the company.

About Epiphany Ventures
Epiphany Ventures Private Limited was incorporated in 2008 by Gaurav Saraf, and focuses on investing in early-stage businesses in India and abroad. Seeded up to $25m, Epiphany Ventures identifies motivated, creative and focused groups of people, driven by determination and perseverance to create 'the next big thing' in their sector of operation. Epiphany Ventures will look to invest in the range of $0.5 - 3 million in companies whose business models meet its criteria, and are backed by strong and far-sighted management teams.

About Canaan Partners
Canaan Partners invests in visionary entrepreneurs and provides them the networks, insights and operational guidance required to build high-performance technology and healthcare companies. Founded in 1987, the firm has raised eight funds and completed more than 82 acquisitions and 52 IPOs. With $3 billion under management and a worldwide footprint, the firm is committed to catalyzing the growth of innovative digital media, communications & mobility, enterprise and clean tech companies. Among its successes are Associated Content, the people's media company; VOIP equipment supplier Acme Packet; Commerce One, the company that pioneered B2B ecommerce; Double Click, the leading online advertising solution; Match.com, the most popular online dating site in the world; and Success Factors, the global leader in on-demand performance and talent management solutions. Other Canaan investments include 3Crowd, Active Networks, blip.tv, Blurb, Cardlytics, iYogi, KABAM, Lending Club, ON24, OpenSky, Prime Sense, SOASTA, Tremor Media and Zoosk. Canaan maintains a presence in California, Connecticut, New York, India and Israel.

Investors have swapped the spray-&-pray approach for a more qualitative route via collaboration and building ecosystems.

It's a classic example of how the Indian private equity industry has matured. One India-focused PE firm raised its third fund with a corpus of $350 million early last year, taking its total assets under management to $1.2 billion. But by the end of the year, it had made only one investment of around Rs 150 crore, and is in no hurry to sign any more cheques. "We are looking very closely at deals and spending much more time with businesses, even before we reach the stage of due diligence. We, as general partners, and our limited partners are pretty sure about the roadmap and we do not want to hurry, just to have a number of deals," said the managing partner of this fund.

Notching up investments is relatively easy. But working closely with businesses, helping them grow and timing an exit - the barometer of success for a PE investment - is far tougher. The Indian PE industry has slowly but surely over the past year weaned itself away from the spray-and-pray approach, which is visible in the improved quality and value of deals. According to investment bankers and industry experts, big-ticket deals are set to dominate venture capital (VC) and PE transactions in the next three quarters.

This may well be the defining element of the industry as it stands on the cusp of change. "What we're seeing is a change in the investment approach. While VCs initially parked funds in multiple places with the hope of reaping high returns from at least a few of them, they now prefer a more focused strategy. Rational investing has accounted for higher quality of deals. It is an encouraging improvement," said Harshal J Shah, CEO at Reliance Venture Asset Management.

The global economic slowdown also brought more sanity and clarity to investing, with company valuations the world over plummeting due to an adverse impact on their fund-raising plans. Furthermore, a shake-up in the erstwhile cluttered VC industry led to the emergence of select serious players.

"Resultantly, the market is seeing a lot of good and valuable deals at the right valuations. The year gone by also saw homegrown VCs raise their second funds - a sign of confidence shown by limited partners in India. Therefore, I believe India will form an important element of the global fund flow, in line with - and perhaps even exceeding - estimates," Shah said.

With infrastructure and its chain of allied industries hogged a majority of investment in 2010, PE & VC industry players indicate that in coming years, the industry will see more collaboration and syndication among peers. "The effort will be to create an end-to-end ecosystem around the technology and business model, rather than over-investing in one or two 'hot' areas that soon begin to lose their financial attractiveness. This is particularly true when we look at something like cloud computing that needs a strong demand side and a stronger supply side to achieve sustainable growth," said Joydeep Bose, managing director of corporate business development investments & acquisitions at Cisco.

The primary objective is to create a consortia approach. Though this is not new in mature markets, it is long overdue in India. This will provide start-ups with early market access and a test-bed for concept and product validation. The absence of a local market has long impaired the growth of product companies in this country, forcing VCs to shy away from risk-capital exposure. Hopefully, this will bring about much needed changes to the Indian ecosystem.

One of the reasons for the low uptake in early-stage investing has been the lack of success in certain key sectors, which has lowered risk appetite. "For instance, sectors such as mobile value-added services and education, which have seen tremendous investment activity over the last few years, have not yielded the supernormal returns that VCs ideally aim for. Regulatory issues and a high degree of fragmentation have increased uncertainty in these sectors. Therefore, early-stage investors had to tread cautiously," said Gaurav Saraf, director at Epiphany Ventures.

That said, industry players are putting in place the foundation of early-stage investment. "The sprouting of angel and early-stage investment funds and networks are being planned, and are set to be launched. The pipeline for investments in the growth stage will dry up unless early-stage investments pick up pace. Hence, funds that are active in later stages are looking to support early and angel investments. City-based angel networks are being launched, as are incubators at educational institutions. In addition, some of the larger funds may look to invest in small deals, which can absorb more funds as they grow," added Saraf.

In the PE space, 2011 could also see the implementation of the proposed takeover norms. This has the potential to make a significant impact on the industry. An important outcome of this change will be that the average deal size will increase, and that it will bring with it greater transparency. Of course, it could negatively impact dissenting shareholders; however, it is a step that will bring us to international standards.

Sharing his views on the pain points, Shailesh Ghorpade, CEO & MD at Azure Capital Advisors said there is a lack of flexibility on convertible instruments. "However, since May 2007, preference shares with a conversion option have been treated as external commercial borrowing, which raises several limitations, including sectoral restrictions. On the other hand, in real estate, FDI has a minimum holding period requirement of three years. There has been growing demand to do away with this regulation to catalyse investment flows to the sector. Pragmatic legislation that takes care of speculative concerns could be a solution," he added.

While venture capital (VC) activity picked up in 2010 after a year's lull, some investors refrained from making any deal-only to point to a potential increase in activity by them next year.

Many of these firms cited the end of their fund-raising cycles as the main reason for the inactivity.

"We are near the end of our global fund and we have to be careful about where we invest," said Rahul Khanna, director, Clearstone Venture Advisors, one of the funds that did not make any deal through the year.

"In (the) early stage, one can't do investments at the end of the fund cycle as investee companies may need more capital as they grow," he said.

Experts say this points to additional activity in 2011. Firms with freshly raised funds, along with new investors, are expected to increase overall VC deal flow in India next year.

Khanna, in fact, said that while Clearstone does not have an India-specific fund yet, it may consider one next year. "Fund-raising opportunities exist for India and a lot ofcapital is available in Asia now. We will explore the option of having an India-dedicated fund.

SAIF Partners, an otherwise prolific early- to late-stage investor that makes seven-eight deals a year, made just one deal in 2010-investing `100 crore in kidswear retail chain Catmoss Retail Pvt. Ltd in August. The firm closed its latest fund in August and will be more active in 2011, said Mukul Singhal, senior associate at SAIF Partners.

"In 2010, a lot of funds were at the end of their investment cycle. New fund-raising didn't happen. So there was a discontinuation between the existing fund getting exhausted and the new fund-raising process," he said.

"In 2011, we will see the same cycle of 2006-07, when people started investing from the funds raised and there was a spurt in deal activity," said Singhal, adding that valuation continues to be high in the growth-stage and series-B levels-a second round of fund-raising by a start-up in an early growth stage.

Competition, too, played a role in hampering deals, as it did for Lightspeed Advisory Services IndiaPvt. Ltd, the local arm of the US-based firm.

"We closed one new investment but had a high level of interest in another two, which were eventually done at substantially higher valuations," said Bejul Somaia, managing director of Lightspeed in India. Its US parent typically makes one-two investments per partner a year globally.

"In India we have one partner, so making one or two investments per year is normal," he said.

The firm expects to see more early stage deals in the country in 2011 compared with the previous couple of years. "B- and C-round (third-round of fund-raising in a growth stage) valuation expectations for companies have moved up significantly (while considerable risk remains), so one of the ways to counter this is by making early stage investments," said Somaia.

For investors such as Caspian Advisors Pvt. Ltd, which invests in microfinance institutions (MFIs) and other social ventures, the trouble in the micro-loans sector in the second half of the year brought deal-making down to half.

Its India Financial Inclusion Fund (IFIF) did two deals in 2010, against three in the previous year and four in 2008.

"In 2010, we were beginning to sense that a gradual shift in MFI business will have to take place from group-lending to individual-lending methodology and wider definition of MFI business," said Mona Kachhwaha, director, investments, Caspian Advisors, adding that the firm's focus now is on finding companies with an ability to calibrate and change to new business models.

India's previously thriving microcredit industry is going through a rough phase, especially after the government of Andhra Pradesh, the country's biggest market for such small loans, moved to curb allegedly coercive practices by MFIs and the high interest rates they charge, in October.

Sanjay Anandaram, an industry expect and mentor on the boards of start-ups such as Redbus.in, sees an increase in early stage deals next year as many new firms are set to become active and existing ones are likely to resume investments.

"The single, biggest driver is also the fact that a lot of capital in available now," he said. "A lot more professionals are turning entrepreneurs. Investment will go up by 20% on the back of these new investors and back-into-action VCs."

NEW DELHI: They are the newest entrants in the entrepreneurial sweepstakes unfolding across the country. In Ludhiana, Jaipur, Ahmedabad and Kolkata, scores of new companies are using technology to reach out to customers across the world, proving that geography is no bar in the pursu it of enterprise.

This growing trend of globally-competitive businesses emerging out of India's tier-II and tier-III cities is best exemplified by niche software firm InfoSoft Global.

The creator of flash charting suite, Fusion-Charts, for data visualisation, counts US president Barack Obama amongst its user list of 17,000. This 30-member outfit based out of Kolkata caters to Fortune 500 clientele across 110 countries.

In Ludhiana, Kayako Infotech builds web-centric customer support solutions for a customer base of over 30,000. Salaree.com in Jaipur builds business solutions for payroll applications, employee support services, and automation of perquisite payments within large companies.

"Technology entrepreneurship is growing in tier-II and tier-III cities, largely because it is cheaper to set up enterprises there, while the rate of attrition is also comparatively lower, making for an assured talent base," says Pradeep Udhas, head, IT & ITes, at consulting firm KPMG. "Moreover, in this age of internet and advanced communication systems, one can do business from anywhere," he added.

The spread of business into these cities is also creating a vibrant investment ecosystem that could create huge ripple effects in future. For instance, InfoSoft's Pallav Nadhani has just launched an angel investing and incubation facility in Kolkata, Seeders, in partnership with another entrepreneur Abhishek Rungta, founder of Indus Net Technologies.

"The growth of technology entrepreneurship in Kolkata is nowhere near compared to tech hubs like Bangalore, Pune, Chennai or even Delhi," says Rungta, who feels the primary reason for this is the very nascent level of mentoring and support for new ventures. It is this gap that the two young entrepreneurs are now aiming to fill with the launch of their incubation and mentoring network.

"Seeders Venture Capital will provide seed funding and incubation facility to technology start-ups in Kolkata. This is our way of contributing to the ecosystem," says Rungta.

"Nasscom is also organising Emerge Out, a programme primarily targeted at the start-ups , which will further act as a major booster for start-ups in the region," says Nadhani.

It's not only Kolkata that is seeing this growing spurt in tech entrepreneurship. Tier-II cities like Jaipur, Ahmedabad, Chandigarh and Ludhiana are also emerging as a part of this growth story.

"Kayako Infotech builds the world's leading helpdesk and customer engagement solutions which help organisations deliver better customer support. Though these start-ups are based in tier-II cities, they are doing extremely well in their own fields," says Avinash Raghava, regional director, northern region of Nasscom.

Amrita Therapeutics in Ahmedabad is a biotechnology start-up , which is pursuing a dual programme of advanced pre-clinical research and identification of additional priority candidates for early research. While RapidRadio Solutions provides services for identification and tagging with products such as readers, antennas, tags, evaluation kits and biometric readers.

Both these start-ups have raised venture capital financing from Gujarat Venture Finance Limited, which is seeing heightened entrepreneurial activity across the technology sector in the area.

Industry watchers also point to the global ambitions of start-ups from cities that are not traditionally a hotbed for technology entrepreneurship. In Kolkata, A1 Future Technologies, a firm set up by Srish Agrawal in 1997, is looking to acquire a graphic design company with operations in the US and UK.

The firm works in the domain of logo design, graphic design and print design and has 100 fulltime designers who cater to a client base of 10,000 spread over 50 countries. "The overseas acquisitions will help us reach closer to our clients. We also are planning to increase our sales and marketing related investments. We are also planning to set up a 20-30-seat call centre," said Agrawal.

Apart from overseas locations, these start-ups are also moving to smaller cities within India. Virtual Infocom , a gaming and animation start-up in Kolkata is setting up facilities in Jaipur and Allahabad. It is a trend that a host of investors are now keen to back.

Kolkata-based company Orion Edutech has raised funds from early-stage VC fund, VenturEast. Orion focuses on the skill development of unemployed youth, mainly from non English medium background for which it has raised $4 million from VenturEast in July this year.

"Next time, we will look for investment at time of IPO within next three-four years," says Manish Agarwal, director of Orion Edutech. The company plans to have 300-plus centres in India within next two years. "We have plans for international expansion in countries of Asia Pacific and Africa like Vietnam , Indonesia, Malaysia, Sri Lanka, China, Kenya, Nigeria," he adds.

Indus Net Technologies is another Kolkata-based start-up in the digital marketing and technology space, with operations in Chennai, Delhi and Warwick in the UK. It has a global workforce of 425 professionals and a client base of Fortune 500 companies, governments and digital agencies around the world.

This decentralisation of innovations is one of the main reason why there is an exponential increase in private equity and venture capital investment say industry watchers.

"These cities are being recognised as hotbeds for innovation - successful-start ups are not merely restricted to the metros and we have seen path-breaking ideas emerge from the Indian hinterland," says Harshal J Shah, managing director, Reliance Ventures . "We take special care to scope out opportunities across the world and especially within India in smaller cities," he added.

Ecosystem-building measures by entrepreneur networks such as Tie and industry bodies such as CII and Nasscom have also contributed to the rise in entrepreneurship in these areas.

"We've been getting a greater percentage of proposals from these areas than we did 12 months ago," says Gaurav Saraf, director , Epiphany Ventures. There is now greater understanding by aspiring entrepreneurs from these centres on the process involved in raising funds and attracting investor attention, he said.

Also, a contributing factor is the rise in the number of colleges that focus on entrepreneurial education and incubation of start-ups. "The rise of several boutique investment banks catering to the needs of early-stage entrepreneurs have also helped bridge the gap of entrepreneurs with investors," says Mr Saraf.

New Delhi-based lawyer Ankur Singla practised for two years with the UK law firm Linklaters Llp in London before he returned home to launch Akosha, an Internet start-up that helps users tackle everyday legal matters-from filing a consumer complaint to preparing a rental agreement or writing a will.

To make a will, for instance, a user has to go to the website (http://www.akosha.in), respond to the questions asked and put in the details sought, including those about beneficiaries and division of assets. The will is then prepared and couriered to the customer.

The service costs up to `3,499, inclusive of all costs, according to the website, which says it wants to simplify the law for the common man.

"The information on the Internet is not accurate and detailed with regards to legal issues and so people have to turn to lawyers for small issues like even filing a consumer complaint," says Singla, a graduate of the National Law School of India University, Bangalore, explaining the rationale for Akosha, which means unravel.

"The information on the Internet is not accurate and detailed with regards to legal issues and so people have to turn to lawyers for small issues like even filing a consumer complaint," says Singla, a graduate of the National Law School of India University, Bangalore, explaining the rationale for Akosha, which means unravel.

Take the case of Robin Moses, a Chennai-based chartered accountant who, after practising his vocation for some years, started Reach Accountant, which helps small businesses file tax returns and maintain their books without the hassle of hiring accountants and spending hours on paperwork.

The client simply has to scan and upload the receipts and other documents on to his online account. The output is generated online and verified by a virtual accountant.

"Earlier, small businesses had to prepare accounts once a year at the time of filing taxes but once VAT (value-added tax) came in, they had to maintain accounts month on month, so the conventional method of sending bookkeepers was not a scalable model," says Moses.

Siddharth Shastri, a mechanical engineer with a master's in hybrid vehicles and power trains, started PhiTesla Advanced Technologies Pvt. Ltd, a Bangalore-based start-up that specializes in developing innovative solutions for the automotive industry, in 2008.

"Big manufacturing companies don't spend time on research and development on electronic solutions, so there is a difference in the architecture of our products and theirs," says Shastri.

Its products, such as digital display units and on-board diagnostic computers, are designed keeping in view technology and cost.

"A lot of niches are emerging and that's why professionals in a particular area are starting up companies," says Aditya Mishra, co-founder and director of Headstart Network Foundation, a not-for-profit company that promotes entrepreneurship.

According to Sameer Guglani, co-founder, The Morpheus, an incubation firm, such entrepreneurs are receiving exposure late in the day.

"The whole genesis of Indian start-ups started in the Silicon Valley in the US where, after working for a few years, people came back (to India) and started companies in different domains. So I was an IT guy who, after working for four years in the Valley, started a media company," says Guglani, who founded Madhouse, a DVD rental start-up, and later sold it to Seventymm.com.

Though such entrepreneurs have the first-mover advantage because they can spot the gaps in the market quicker, they need some technological support to begin with.

"For a non-techie, it's a bit difficult to start out without hiring a tech guy," concedes Singla of Akosha.

Even venture capital firms in India seem to understand the importance of such start-ups and look to invest in them.

"We are bullish on non-tech areas and start-ups backed by entrepreneurs who have domain expertise," says Gaurav Saraf, director at VC firm Epiphany Ventures.

According to him such start-ups may, in fact, carry a lower risk. In terms of growth and value, a tech start-up may go from 1 to 100 or even 1 to 0, but non-tech start-ups may go from 1 to 50 with lower risk, says Saraf.

According to data from research firm Venture Intelligence, there were 24 VC investments worth $132 million (around `625 crore) in non-tech sectors in the period from January to August. That was out of total VC investments of $367 million spread across 71 VC deals in the same period.

Every Friday, Pallav Nadhani takes time out from running his own company, to sift through proposals received by Seeders, Kolkata's first ever technology incubation centre.

At the new facility set up by the 26-year-old entrepreneur and his partner Abhishek Rungta, entrepreneurs eager to raise cash and find space have been plying the duo with business plans, in sectors ranging from e-commerce to healthcare services, information and infrastructure management.

Seeders, with an initial corpus of Rs 2 crore, is part of a slew of such networks springing up across the country that aim to provide money and mentoring for very early stage companies. This includes a 40-member group of angel investors in Hyderabad as well as technology product incubator, i2India, which has kicked off operations in Bangalore.

Also being set up is the country's first crowd-funding network by Springboard Ventures, called GrowVC, which will aggregate capital from multiple investors and channel it to very young start-ups across sectors including retail, clean technology, IT, telecom and social entrepreneurship.

These new ventures aim at a gap in the Indian entrepreneurial ecosystem, where less money is directed at start-ups who are looking to turn raw ideas into functioning businesses. In developed markets such as the US, around 3.5 lakh angel investors have put in up to $ 30 billion every year. In India, only about 1% of the total funds invested makes it to early stage companies.

"There is no one to give the first Rs 1-2 crore to a young company," says Dr B Ramesh Babu, managing director of Medwin Hospitals and a founding member of the Hyderabad Angels.

The problem is also exacerbated when entrepreneurs baulk at ceding significant control over their companies at a very early stage in return for such cash. "At pre-revenue stage, the investor is taking a lot of risk, and expects to get control over 30-40% of a company that he funds," says Gaurav Saraf, director of Epiphany Ventures, an early-stage venture capital firm that typically invests about $ 2 million in such start-ups.

Entrepreneurs, wary of giving away control at an early stage, fall-back instead on a network of family and friends, a move that can stymie future growth. "Angels operating individually can mostly invest up to Rs 25 lakh in a single company," says Mr Babu, who feels most start-ups that need further assistance, such as contacts, mentoring and cash to reach the next stage of growth , are left floundering at this stage.

The new models of funding now being launched, including consortium funding, where many angel investors band together, and lab-to-market models being offered by i2India, are expected to bridge this gap.

For instance, Seeders is set to invest between Rs 8-15 lakh in two technology product start-ups that will give away only a fifth of their ownership (approximately 12-20%) in favour of the fledgling incubator. "Money is the cheapest thing we bring to the table," says Mr Nadhani, who will offer start-ups mentoring from a board of advisors and linkages to networks of venture capitalists to fuel further growth.

Epiphany Ventures today announced it has co-invested in iLevel Solutions, a leading provider of private equity software and reporting solutions. Swift River Investments, Egis Capital and Epiphany Ventures, have together invested $6 million in this round.

Commenting on the development, Gaurav Saraf, Director, Epiphany Ventures said, "Post the economic crisis, LPs and GPs keep a much closer watch on investment performance. iLevel offers a path-breaking solution, which has the potential to become the industry standard for investment monitoring and analysis. A proficient management team of the highest pedigree and a largely untapped market, make this a business with high growth potential over the coming years."

iLevel was established in January, 2009 as a technology spin-out from The Blackstone Group (NYSE: BX) in order to commercialize a number of proprietary technology solutions developed at Blackstone. "The PCRS platform was originally developed internally by Blackstone five years ago to establish a structured process to automate and streamline the collection, analysis and reporting of portfolio company data for the firm's private equity portfolio," stated Harry Moseley, Senior Managing Director and Chief Information Officer of The Blackstone Group. "Blackstone had invested substantial time and money into the development of PCRS which we believe can provide tremendous value to the alternative investment industry far beyond deployment within Blackstone. With iLevel's new investors and ownership, Blackstone has fulfilled its commitment to establish iLevel as an independent company focused on developing strategic solutions for our industry."

The typical process of collecting, managing and analyzing data across portfolio investments is manual, complex, labor-intensive, and prone to errors and misinterpretation of critical information. Through the use of PCRS, investment professionals are able to access critical fund and portfolio investment data along with key financial and operating metrics with ease and speed. Information is available through flexible Excel dashboards, which leverage data stored in the underlying PCRS relational database, pre-defined reports and user-defined analytics for instant insight into critical metrics. With PCRS, the focus of finance resources, analysts and deal teams shifts from data collection to analysis, reporting, risk mitigation and investing in new opportunities.

"iLevel Solutions provides a comprehensive technology platform that has already delivered substantial value to a number of the world's leading private equity funds and their limited partners," stated Robert Chefitz, Managing General Partner of Egis Capital Partners. "iLevel's combination of proven technology and domain expertise in the alternative investment market has fueled its early growth and adoption. This investment will help the company continue to solidify its position as a leader in portfolio analysis and reporting through deeper business alliances, innovative application development, and aggressive expansion."

"In today's increasingly dynamic business climate, private equity professionals and limited partners alike require rapid access to high quality investment metrics, performance information and actionable analysis," stated David James, Managing Partner of Swift River Investments. "iLevel's PCRS platform is a breakthrough for private equity firms looking to achieve greater visibility into their investments while providing greater transparency, speed, and frequency of reporting to their investors."

"In today's increasingly dynamic business climate, private equity professionals and limited partners alike require rapid access to high quality investment metrics, performance information and actionable analysis," stated David James, Managing Partner of Swift River Investments. "iLevel's PCRS platform is a breakthrough for private equity firms looking to achieve greater visibility into their investments while providing greater transparency, speed, and frequency of reporting to their investors."

About iLevel Solutions
iLevel Solutions' flagship offering, the Portfolio Company Reporting System (PCRS) is an innovative, highly secure Software-as-a-Service technology platform that automates the collection, storage, collaboration, analysis, and reporting of portfolio data. PCRS provides the seamless platform that integrates all information for GPs and LPs to monitor investments, prepare and report valuations, and exchange information. This comprehensive, end-to-end platform serves as the backbone to completely integrate reporting, analytical tools, and dynamic information sharing, and includes components for Private Equity, Real Estate, Debt, and LP Reporting. For more information, please visit www.ilevelsolutions.com.

About Epiphany Ventures
Epiphany Ventures Private Limited was incorporated in 2008 by Gaurav Saraf, and focuses on investing in early-stage businesses in India and abroad. Seeded up to $25m, Epiphany Ventures identifies motivated, creative and focused groups of people, driven by determination and perseverance to create 'the next big thing' in their sector of operation. Epiphany Ventures will look to invest in the range of $0.5 - 3 million in companies whose business models meet its criteria, and are backed by strong and far-sighted management teams.

October 2008: Barely a month after the US investment bank Lehman Brothers filed for bankruptcy protection, Hitendra Chaturvedi, 40, managed to secure his first seed fund-a sum of Rs 10 lakh- on a flight to Bangalore from Delhi. Over the next few days, even as the global financial crisis brought down more hallowed names in the West and as liquidity dried up, Chaturvedi succeeded in pulling in another Rs 75-odd-lakh from 13 angel investors for his two-month-old start-up, Reverse Logistics, a company that allows for quick and efficient return of merchandise from customers to distributors or manufacturers (hence the name reverse logistics). "This year, I secured funding from Reliance Venture, Sherpalo and Kleiner Perkins Caufield & Byers," grins Chaturvedi, the Founder and CEO of Reverse Logistics, who had just quit as head of a $400-million unit of Microsoft India.

Around the same time, a 30-year-old Kranthi Vistakula was looking to make good on his brainwave of making "functional apparel" at the National Institute of Design, Ahmedabad. Vistakula's obsession with clothes designed to protect the wearer from inclement weather led to the birth of an idea, a business plan and, eventually, the starting up of Dhama Innovations in Hyderabad, in January 2008. The unsparing business climate of the global recession didn't prove a wet blanket for Vistakula. "The slowdown was the biggest blessing in disguise. I ended up finding good people looking for jobs- something which has gotten tougher now," points out the Founder and CEO of Dhama Innovations.

Chaturvedi and Vistakula are just two entrepreneurs who shrugged off the economic slowdown to flag off businesses-not just any common-or-garden business, but well-differentiated models that are an investor's delight. The two represent a growing breed of start-up artists who are eschewing me-too ideas to create a prized platform of intellectual property (IP) on which resides their business objectives.

Vistakula hatched his plan while studying at the Massachussetts Institute of Technology, quite by happenstance. Finding Boston's biting cold winters an ordeal, he desperately longed for clothing that could keep him warm. Soon, he found himself working on a prototype jacket fitted with a control panel equipped to take the temperature from 18-degree cool to 40-degree hot (depending on what the user wants), which managed to win him the MIT Entrepreneurship competition in 2006. With his confidence boosted and the prize money in place, he moved back to India and incubated his venture with some grant aid; by end-2008 he had funding from Reliance Venture and was on his way to making climate-control apparel.

The Indian Army is one obvious big client that Vistakula would like to have-but typically, government contracts take time. Before that, he is test marketing two of his products-ClimaWare Scarf and ClimaWare Wrap-aimed at the golf market. The products promise to keep players cool even when it is a sizzling 45 degree Celsius on the greens. Vistakula, who has patented technology for his clothing range, says he is "not averse to tying up with sports apparel multinationals".

Like Vistakula, Chaturvedi, too, is putting in place a cracking proprietary information system as well as a complex logistics process that is the backbone of his business. Reverse Logistics comes into play when a product has to move back from the consumer to the manufacturer for re-use or disposal. This is a complicated process, as it includes co-ordination, repairing the faulty product and then selling it again.

"Most companies in India have little clue about the percentage of product returns they face from customers, what this entire process costs them and what is the recovery rate from a returned product," says Chaturvedi, who has also launched a website (www.greendust.com) that sells certified pre-owned products at a discount-which comes with the added assurance of aftersales-service and warranty to boot.

Entrepreneurship is alive and kicking, downturns and liquidity crunches notwithstanding. To be sure, entrepreneurship is as old as the hills in India, with millions of self-employed individuals and families running selfsustaining businesses that cater to neighbourhood needs. Yet, the entrepreneur as an innovator, as one who launches a revolutionary product or service, or who opens up a new market or identifies a new opportunity is a relatively new phenomenon- a post-liberalisation phenomenon.

Suddenly, as new opportunities opened up-and even today keep opening up-ideas emerged in plenty. What was needed was the funds to bankroll these ideas. Enter the angel investor and the venture capitalists (VCs). By the turn of the century both local and global VCs- like Actis (earlier the Commonwealth Development Corporation), ICICI Venture and Warburg Pincus-were ready to fund entrepreneurs in their growth phase.

Some famous examples: Warburg Pincus invested close to $300 million in Bharti Airtel between 1999 and 2001; Actis, which held Glenmark Pharmaceuticals' hand through its growth phase, and ICICI Venture, which did the same with Pantaloon Retail. Doutbless, though, most of the initial funding went to tech start-ups and dotcoms, until the tech-wreck of 2000-01 took many of the VCs and most of the dotcoms down.

The funding and start-up scenario today is more evolved and saner. Sketchy and me-too business plans fly out of VC windows, and business models are more mature and welldifferentiated. Innovation is less of a mere buzzword and more visible in the market, visions of entrepreneurs are more concrete and enduring, and slowly but surely the true essence of entrepreneurship is coming to the fore. And, yes, execution today matters more than an impressive but largely academic business plan.

"There are fewer people today with romantic notions of entrepreneurship. Most know that it is tough and that they need to execute quickly to get customers on board," says Aditya Mishra of Headstart, a volunteer-run, not-for-profit network that hosts meets and events to promote an innovation ecosystem. The network includes entrepreneurs, startups, researchers in academia and industry, adopters of new technologies/products and investors, who hold Startup Saturday meets every month.

Such initiatives help. VCs aver that they're inundated with at least 1,000 new business plans a year-compared to less than 500 five years ago. Sensing the change, VCs are repositioning themselves as well: "Earlier we tended to invest exclusively in tech and power ventures. We have now added consumer services as a lot of India is underpenetrated. There are many opportunities in specialty retail, financial services and education," says Sanjeev Aggarwal, MD, Helion Advisors.

Aggarwal recently invested in a venture called YLG, or, You Look Good, a chain of beauty saloons. And yes, there is money-lots of it-to be had for the deserving few. "There is plenty of capital available for deployment in India in pure venture capital as well as later-stage private equity. There is no dearth of capital," says Mohanjit Jolly, Executive Director, Draper Fisher Jurvetson (DFJ) India. To be sure, in the January-March quarter, VC investments (including growth) swelled up to $128 million, up from $73 million in the first quarter of 2009.

Like Helion, DFJ too is shifting its focus away from technology. With good reason. "We realised that at this stage of India's own venture and entrepreneurial lifecycle, it's more about execution with top-notch teams than about earth-shattering technology," says Jolly. He feels there's great potential in areas such as education, health care, logistics and rural enterprises, among others.

That more investors are entering is even more encouraging. As recently as 2008, The Morpheus, for instance, co-founded by Sameer Guglani (who sold off his Madhouse Media to Seventymm) took seed funding to start a venture to fund and mentor start-ups in India. There are others: "When we forayed into early-stage venture capital in late 2008, the future seemed uncertain then, but the last few months have witnessed a rebound in economic indicators. There is more visibility into the future potential of early-stage companies," says Gaurav Saraf, Director, Epiphany Ventures.

Business Today's package on 16 GenNext start-ups-which begins when this feature ends-brings out the evolution in entrepreneurship through the nature of the ideas of the start-ups, the sharper focus on execution, the increased involvement of the investor community, and the increased relevance of these ideas in the marketplace. (All but two are less than three years old.) "What has changed is that people are taking more pains to align their ideas with a real need rather than being carried away by a buzzword," says Mishra.

"Earlier start-ups were (and perhaps still are) concentrated in the technology space; now they're spreading into areas that touch the lives of consumers. We see a lot of business plans from tier-II cities; the earlier phase saw very metro-centric players," adds Helion's Aggarwal. One example: Husk Power Systems seeks to generate electricity from alternative sources such as rice husk in villages in Bihar. It has been funded by the Switzerland-based Oasis Fund and the Hyderabad-based Acumen Fund. Investors specialising in such social ventures, like Aavishkaar Fund and VenturEast, to name just two, are also rapidly mushrooming.

So, who are these extraordinary gentlemen with a nose for the novel and an eye for detail-at least true for most-and where do they come from? "We notice three kinds of entrepreneurs are coming up on a consistent basis: The serial entrepreneurs, the former senior executives who leave their cushy jobs and, finally, those who have lived abroad and have a great track record of starting ventures," says Harshal Shah, CEO, Reliance Venture Asset Management.

Consider, for instance, Rajnish Dhall, who has co-founded Micro Housing Finance Corporation, a housing finance firm for low-income households. Dhall quit American Express to work for an NGO before setting up the housing finance venture. Interestingly, there are also a select few who prefer to start up without doing long years of the corporate grind: Adhil Shetty has founded Bankbazaar, an online loan marketplace, because he's convinced that the market is crying for a service like his.

A remarkable shift is that many of the start-up artists are not just catching on to what's popular globally (yawn, social networking, anybody?) but are also seeing opportunity at their doorstep. "There many ventures that seek to tap into opportunities that are unique to India, education and microfinance being just two of them," says Mohit Bhatnagar, Managing Director, Sequoia. The VC firm, which spans a spectrum of funding from early to late-stage, has been in the Indian market for over a decade now; recently, Sequoia exited from Manappuram Finance, which, among other things, seeks to offer consumers loans against gold.

The equation appears promising: More investors plus more startups should equal more contribution to the Indian economy from entrepreneurs. But, then, entrepreneurship by nature is about risk, and there will be flameouts. "There are many entrepreneurs whose plans lack refinement and thoroughness in terms of a go-to-market strategy and use of funds," says Alok Mittal, MD, Canaan Partners. DFJ's Jolly admits that there has been a trend of earlystage VC firms either bleeding in laterstage investments or just totally moving out of the growth stage.

But as long as more opportunities emerge, and more money chases these budding ideas, the chances of today's fledglings emerging as tomorrow's Infosys or Bharti Airtel or Biocon can only get brighter.

Epiphany Ventures is a Mumbai-based venture capital firm, incorporated in 2008. It focuses on investing in early-stage businesses looking for value-driven and innovative enterprises with clear differentiators and scalable business models. Gaurav started his career working as a consultant at Diamond Technology Partners, a strategy consulting company, headquartered in Chicago. After his return to India in 2004, Gaurav has been involved in making proprietary investments in various industries. Gaurav has a B. Sc in Electrical Engineering from University of Pennsylvania, and M. Sc in Finance from City University, London.

You have raised money from high-profile investors such as the LN Mittal family. What is the mandate that you have from them?
The mandate is to look for businesses that are scalable, there is large opportunity in the market and there are clear differentiators in the business, where it is not very easy to go and replicate the business. This would ensure sustainability in the margins. If you do something where there is not much differentiation, everyone will eventually do it if it is profitable. The idea is to invest in companies where there is clear differentiation, there is scale to be achieved and there is a market that is large enough, so that the company can keep growing. So when I exit the business, even then there should be scope for the company to grow, otherwise the other people coming in the business whether it is a strategic investor or a purely financial investor will not come and buy my stake. Most importantly, work with the team of people who have strong ability to execute and strong business acumen.

Usually investors identify certain sectors that they understand very well and that is where they invest. Isn't being sector-agnostic quite a challenge for you? It's not so much of a challenge, it is being opportunistic, given that we have not seen massively big-bang exits in technology. Businesses in education, healthcare, rural development could be more scalable. When we came in and started looking at these areas, we thought there are opportunities almost everywhere.

There is a broad canvas on which you want to work, but have you identified a few sectors on which you are bullish?
We are bullish on education and healthcare-we think there is probably a lot of business models emerging out of these two areas. Also, sectors like rural development, where the government is allocating a lot of money. There are going to be a lot of companies that would be benefiting from this, especially smaller companies, if they come up with business models to develop supply chains which reach these places.

What about stage?
Ideally I come in at an early stage. It is where the company has established a proof of concept, started generating revenues. So let's say they have about a million dollars in revenues already. And they have got a pipeline of orders, which may not be contracted, but which may be in various stages of being contracted, and the company is looking to scale up. But if there is a seed opportunity where the team is very experienced in a particular sector, I don't think I would dismiss it.

Besides the business plans that you get, do you actively search for businesses that you can invest in?
We do go out and visit incubators. Let us say I like the clean energy space, and If I come to know of an interesting company in this space, I pick up the phone and try to talk to them. I do go to the incubators to see what the companies there are doing and if they are right for us to invest in.

How much money do you plan to put into a deal?
Typical investment ideally would be $2 million but we do anywhere from $0.5 million to $3 million.

How long do you plan to stay invested?
Typical investment horizon is about five years.

Your plans on exit?
You ideally want a company where it has the ability to go public on its own strength. I think that is the most ideal scenario because that mean you don't have to rely on somebody else to come and buy you out. But if there is a good exit available as an acquisition or another company or an investor wanting to come, that would be great as well.

Is there a time-frame during which you have to invest the entire fund?
We would like to invest these funds in the next two years but we have not agreed to any time-frame.

Is there enough awareness in the country about the availability of venture capital?
India is one of the most entrepreneurial countries in the world. People have the will to do something on their own, and they go and do it, even if it is a small business. But the knowledge that is lacking is how do you recognize this better to make it a large business. There is not enough knowledge about how venture capital works. There is a lot of knowledge about entrepreneurship. The lack of knowledge is about how you organize your business to make it scalable.

How much stake do you plan to take in a company you invest in?
The idea always is to invest if we can get a board seat. The stake depends on the stage of the company, the sector, valuations, etc. Our minimum threshold for a shareholding in a company would be that we have a say and the board seat in the business. For some companies might say that below 10 percent they would not want to give a board seat while the others might say that with even 5-6 percent they would want to give a board seat. We don't look at it in that sense. We look whether we are getting a fair deal and are we getting a deserved return on the investment in the next five years or so. On this basis we decide whether we should invest and on what value we should invest.

MUMBAI: Early stage funding for promising start-up firms appears is set to receive a boost with local and foreign venture capital (VC) investors lining up investment plans as the economic recovery gains strength both in India and abroad.

Over 30 new VC funds have started putting money in start-ups across various sectors such as clean technology, micro finance, rural technology and genomics apart from conventional segments, a marked contrast to the bleak days of 2007-08 when the global financial crisis hit these investors hard.

The pace of economic recovery now coupled with factors such as higher investment returns and easier exit options have triggered off fresh interest among both domestic and foreign VC firms to invest in India. Amongst foreign VC (FVC) firms, funds such as Artiman Ventures, BAF Spectrum, ATEL Ventures, Blue Orchard, Mercatus Capital and Foundation Capital have already made the initial investments in Indian start-ups.

Newly-set domestic venture capital (VC) funds such as Aavishkaar Goodwell, Ambit Pragma, Axis Holdings, Rabo Equity and VC Hunt are also cutting deals across sectors, according to data maintained by private equity tracker- Venture Intelligence.

"The economic slump has not hit India as badly as it has impacted the West. Early-stage investing is a risky proposition in indecisive markets. This is where India scores well over other markets. Venture funds are seeing limited downside potential while investing in Indian start-ups," said Harshal Shah, CEO, Reliance Technology Ventures.

Companies such as Gayatri Bio-organics, First Solutions, Excel Glasses, ESS DEE Aluminium. Punj Lloyd , Motilal Oswal Financial and Gujarat State Petronet have seen an exit of VCs from their shareholding scrolls. Companies such as Compulink Systems and Spanco and groups that recently came out with public offerings such as Pipavav Shipyard and Indiabulls Power still have VC holdings between 7% and 20%, according to ETIG's database.

Most VC funds expect a return of 25-30% on their investments annually. VC funds that invested in listed companies - or had investments at the time of going public - exited these stocks at high prices when markets were climbing in mid-2009.

Companies such as Gayatri Bio-organics, First Solutions, Excel Glasses, ESS DEE Aluminium. Punj Lloyd , Motilal Oswal Financial and Gujarat State Petronet have seen an exit of VCs from their shareholding scrolls. Companies such as Compulink Systems and Spanco and groups that recently came out with public offerings such as Pipavav Shipyard and Indiabulls Power still have VC holdings between 7% and 20%, according to ETIG's database.