August 2011
 
   
Angel Desk
 
     

Mohit Goyal

IAN  Co Founder, Angel Investor

 

 

 
 
 

 

We all know what we are inherently capable of. Just go back to the IT and ITeS industry that grew from virtually nothing to $60 Bn in 20 years; and that too, in more entrepreneur- unfriendly times. With those artificial constraints now largely removed, the time is ripe to replicate that model across many sectors by letting entrepreneurship and innovation become the key drivers for our sustained economic growth.

However, let us remember the old adage, “as you sow, so shall you reap”. Beyond the rhetoric, there is hard work ahead; there is no shortcut to creating hundreds of new Indian “large caps” in the next twenty years but to seed thousand of startups over the next few years.

Israel, which fosters entrepreneurship as a national mission, understands this model and its underlying maths; unless enough startups are seeded, not enough will emerge from the debris of failures and mediocrity to give entrepreneurship the necessary national momentum. This small country of 7 million people has over 250 government sponsored incubators, besides a thriving but informal angel community. The fact that Israel has more companies listed on NASDAQ than UK, Germany and France combined should not come as a surprise.

IAN has made a great start in playing its pivotal role; its membership has multiplied and so has the enthusiasm of its members to invest in more and more deals. Our ability to scrutinize, and reach a consensus on, deals ranging from E-Commerce to food chains, from education to healthcare, from IP, tech-heavy, propositions to mundane, low cost service offerings, is unmatched anywhere in the angel community. Having successfully navigated its way past its “startup” phase, IAN is now well poised for an exciting growth phase.

All the ingredients are in place….…let’s go for it!

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Investor Desk
 

Sanjeev Bikhchandani

Founder and Vice Chairman,
Info Edge (Naukri, 99acres, Jeevansathi, Shiksha),
IAN member

 
 
 
 

We are seeing a renewed interest in the technology space with investors running after companies in the E-commerce space. Do you think this is another bubble in the making? Is the investment story different this time around?

 

Valuations are rich - in fact many would say excessive. Having said that, for dotcoms the market is real this time around with over 80 to 100 million internet users. In the year 2000 there were only 4 million internet users in India.

Big businesses will certainly be built, however, it remains to be seen how many will be profitable and if they will offer exits soon enough to satisfy VC investors. My thumb rule is that in India it takes a minimum of 10 years from inception, for a dotcom to IPO - so you need 10 to 12 years money. Very little capital has that kind of patience - although you could see the inception to IPO cycle shorten going forward. Blockbuster strategic sales that gave investors good returns have been very few, if any.

As far as E-Commerce is concerned, it is becoming a big money game and you will see companies either succeed massively or blow up in style. What is somewhat worrisome is the tendency of some E-Commerce companies to scale up sales even if they are negative margin, the more you sell the more you lose. Investors also need to ask probing questions about revenue recognition practices. There are some smoke and mirrors out there.

I expect sanity to return to this space sometime in the next two years. Excessive valuations will be corrected. The smoke will clear and dodgy accounting practices will be recognised for what they are. People will not be selling below variable cost anymore.

A few extremely valuable businesses would have been built and others would have lost truckloads of money. But that is the nature of the game.

The premium will be on teams that execute well and are early movers. Access to big money will not do it alone. As my good friend Mani of Justdial once told me when I asked him about emerging competition in his space “Sanjeev - Har ek lamba aadmi Amitabh Bachchan nahin ban sakta hai”(Every tall man cannot become Amitabh Bachchan).

 

As far as business models and revenue streams linked with new internet start-ups, are you witnessing any new trends in the internet space in India?

 
For the most part people are starting off aping successful businesses in the West. You can’t blame the entrepreneurs alone for this, since these are also the models for which funding comes easier because the VC’s feel more comfortable funding stuff that has done well in the US. Having started however, smart teams are morphing the model to suit local conditions and so the Indian flavours start emerging in a couple of years after the first round of funding.
Purely Indian models, in general, need to bootstrap longer and deliver more results in order to get Series-A funding. But they may end up winning bigger in the long run.
 

In a subscription business model that is generating B2B and B2C revenues, how do you go about creating sales targets and executing these targets for both these sets of customers? In the case of Naukri.com what is your primary focus (B2B or B2C)?

 

Our primary revenue is from companies, not from candidates. There is a bit of trial and error here. You figure things out as you go along. The quest early on is to discover a product that is saleable and a sales and delivery model that is both scalable and profitable.

In Naukri our sales were Rs 3 lakh a month when we raised money from ICICI. We were selling job listings to recruiters only by direct mail.

That is when Hitesh figured out the sales and product strategy where we created higher priced products that delivered more value and we put in place a B2B sales organisation that sold these products to corporate customers all across India through a network of branch offices.

Our target at that time was that each sales person should be delivering revenue that was six times his CTC within six months of joining. We expanded gradually, one branch at a time. This is the approach that scaled up Naukri sales more than 600 times between then and now.
 

One of the concern investors often have with start-ups is whether the business idea is scalable. How would you suggest start-ups work around this concern when they approach investors?

 
Every small entrepreneur believes that his business is scalable even if that is not the case. We have a B Grade Bollywood movie line on our wall in office – “Har ek Chipkali sochti hai ki who badi ho kar magarmach banegi”(Every lizard thinks that it will grow into a crocodile).

For the entrepreneur it is an article of faith. We also believed our business was scalable without actually knowing whether it was or not. We used to nod our heads vigorously whenever investors asked that question in the early days. It so happened that our model was scalable and we executed well enough to make it happen. We got a few things wrong but we also got many things right – some by accident, some by instinct and some by planning design.

Today we have a far better understanding of what is scalable and what is not. In general online is more scalable than offline. Products are more scalable than services. Share of transaction or usage based revenue is more scalable than a flat fee in the long run. Offerings where the market is large and where you are providing a solution to an unsolved problem are more scalable than those where you are not. Products where a customer already wants to buy are more scalable than those where you have to put serious effort to sell. Products with no variable cost are more scalable than those with a high variable cost. Self-service is more scalable than a high touch boutique customised service. Offerings with demonstrable product superiority where it counts are more scalable than others. Standard offerings are more scalable than customised ones except where the customisation is done by the consumer and is automated. Innovative early mover is more scalable than a late entry.

It is a good idea for early stage entrepreneurs to get a sense of the DNA of scalability in their market and tweak their offering and their delivery mechanism appropriately when the company is still young.

Finally however you have to make it happen. If Naukri had not put a 500 strong corporate sales team in the market, sales would not have scaled.

It is all about execution in the end. The rest is theory – it doesn’t matter.

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Events
 

IAN Multi City Boot Camp

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India's first multi-city startup Boot-camp initiated by IAN flagged off in Bangalore on 25th March and concluded in Delhi on 5th June 2011. It got an overwhelming response from across the country. Over 13,000 people participated in the camps, which offered entrepreneurs an opportunity to engage with angel investors from the IAN network, successful entrepreneurs and industry experts.  The initiative also included a contest to pick startups most ready for angel funding.

 

Boot Camp Winner, Heckyl Technologies
   
   

Eight startups, selected as the winners of the zonal rounds at Bangalore, Mumbai, Pune, Hyderabad and Delhi respectively presented their business to investors.  

 

Boot Camp Runners up - Flo2go
   
   

India's business capital Mumbai threw up the eventual winner with Heckyl Technologies (which provides real-time news analytics), a venture started by former Merrill Lynch employees, bagging top honours. The first runners up were CoolJunk (a start-up that provides teaching aid for science education) and Flo2go (a company that provides a platform for existing IPTV.

 

Boot Camp Runners up - Cool Junk
Read more>>>
   
   
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WagonR Think Big Challenge

 

Indian Angel Network partners with Times Of India CNBC covers extensively

Country’s leading carmaker Maurti Udyog’s Wagon R ‘Think Big Challenge 2’ held in Delhi on 21st January, called entrepreneurs to share their innovative business ideas and ventures from 19 cities around the country. The campaign began on a pan-India basis with online registrations of business ideas from across the country. Four participants from four zones made it to the national round.
The event was nothing short of successful and the winner of the challenge, Ms. Aparna Bhatnagar, was presented with a WagonR car and a cash prize of Rs 10 lakhs

 
The Jury - IAN Members (L to R) - Yogesh Bansal,
Vinod Keni, Srikant Sastri, Sandeep Goyal
 
Alok Mittal, Sunil Goyal, Naresh Kumra and Ashwin
Chaddha at the event
 
Padmaja Ruparel, IAN President, with Ajai Chowdhry,
IAN Member, HCL Founder at the Event
 
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Recent IAN Investments
 
     
Groffr.com  
 
Indian Angel Network invests Groffr.com, a real estate group buying pioneer. IAN's investment will help GrOffr expand to other cities in India.
Co-founded in 2010 by management school classmates and colleagues at a large financial services firm Sandeep Reddy and Vikhyat Srivastava, GrOffr helps customers in getting attractive price offs on their planned purchases of Real Estate, Cars and other high value assets. By leveraging the power of group buying, GrOffr allows the customers get lucrative deals from builders in the primary real estate market
Commenting on the investment in GrOffr, IAN member, Krishna Jha, who also serves on the board of the company said, “In GrOffr, Indian Angel Network, found a differentiated business idea in the real estate asset category with large potential for savings for end customers. The Engineer-MBA duo Sandeep Reddy and Vikhyat Srivastava bring valuable relevant experience in the real estate sector.”

 

Reed more >>>

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Vayavya Labs  
 
IAN invested US$1 million in Belgaum based company, Vayavya Labs, an embedded software tool developer. IAN's investment will help Vayavya expand its toolset suite for electronic systems level design, and strengthen its sales and marketing effort.
Co-promoted in 2006 by a team of four engineers with extensive industry expertise–RK Patil, CEO; Venugopal Kolathur, CTO; Uma Bondada, VP Engineering and Parag Naik, who along with RK Patil also serves on the Board--Vayavya Labs counts global Electronic Design Automation (EDA) Tool Vendors and large Systems Design Houses for its EDA adjunct tools to architect solutions.
By using Vayavya tools its customers can optimize time, effort and cost involved in Embedded Software Design and Development. Currently, Vayavya has about 20 engineers supporting this area. Vayavya Labs’ software facilities in Belgaum and Bangalore are staffed with about 70 professionals.

Read more>>>

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Entrepreneur talk
 
   

Ankur Sharma

Chief Executive Officer,
Span Across IT Solutions,
IAN Investee company

 
 
 

Can you walk us through the process of raising funds from IAN?

 

When we started out as a company we were very certain that we needed to take the business model and the idea to a certain level before even figuring out whether we needed funds or not. Since the company’s valuation depends on what stage the business is in, we had decided that we would go out and seek funding only when we see revenues coming in from customers. We invested the first two and a half years in building the service, invested our own funds and took the product to the market. By the time we approached IAN, we already had 50,000 paying customers to prove our revenue model.

While raising funds the key aspect is to communicate to investors what the future holds. We did have a history to back our numbers and it finally was a matter of convincing investors that the market was big enough and that we could scale up the business continually where the incremental cost of acquiring and servicing a customer would keep on decreasing over the years.

We knew one of the angel investors and had called him to pitch our tax products for his company. He got interested and asked us what we needed to grow the business to a higher level. When we discussed the funding requirement, he introduced us to Indian Angel Network.

In the very first presentation session with investors, we were asked to describe what TaxSpanner was all about in half an hour. Once we were done we came to know that there were 45 Angels interested in funding TaxSpanner.

 
You operate in a very competitive industry. How do you plan to create value in such a space?
 
There are a couple of fundamental principles that we have imbibed in the organization from the very beginning. We believe that the user experience that we offer has to be the very best. While there are competitors who are still trying to get the customers through the physical route like paper filing and putting up help desks, we are focused primarily on the online user experience. Income levels are increasing in India and the way internet penetration is rising, people will soon move to the online delivery of tax service. We already have more than 100,000 users last year and this number is increasing every year.

Customers are also realising that their tax data is used by agents, banks and insurance companies to further sell them insurance policies or mutual funds, which they don’t need. The confidentiality of customers gets compromised in the process. We neither sell our customers data nor do we give it to the any of the marketing companies. We also never push other financial products to them. We believe that our value proposition lies in the online user experience.

TaxSpanner is the safest, fastest and the easiest way to file tax returns online. Over the last three years we have been rated #1 by various independent publications; such as Economic Times, Mint, and Money Today.

 

The Central Board of Direct Taxes has ruled that tax payers with an income below Rs. 5 lakh are exempted from filing income tax returns. How has this affected you?

 

On the face of it, it looks like a very significant impact, but if you look deeper into the particular notification, you will see that the notification is not benefit more than 2-3 lakh tax payers as there are a lot of strings attached.

For example, employees who are exempt from filing return under the income of Rs. 5 lakh should not have any income from any other source other than a savings bank account. If you have fixed deposits and earn interest from it, then you are not exempt from filing tax. A few tax payers will, however, continue to file returns in spite of the notification because filing returns would help should they need to obtain other financial services like loans or credit cards.
To make it easier for tax payers to find out whether they need to file their returns, we have an inbuilt tool in our FAQ section. Users can answer objective questions and find out whether they should file their tax returns or not. This notification does raise a lot of questions in the minds of tax payers.
 
During the early days of your start-up, was there a point where you felt you were not going to survive?
 
I must admit that in the first two years of our business there were several such moments, not just one, when we felt that we were going to fail. What helped us get over such moments was the fact that we were a team of four co-founders. Whenever there was a low phase in the business, the team members motivated each other.

In 2007, the very first year of launch there were only 500 online customers. We expected to attract 10,000 online customers, but it didn’t happen. It was disheartening but the team believed in the business model and the revenue model because tax return filing and tax planning was an established business.

Over time we realised that  we had to tweak the overall service delivery process. If we had become a pure online service provider we probably wouldn’t have reached this stage today. We decided to provide tax return filing service physically also to help customers transition to online services.

Therefore, in the month of July, over the last two years, we have more than 500 people on our roll, who set up helpdesks in organisations like Google, HCL, HP, Oracle, Accenture, and SAP among others with large employee base.

 

How has the funding from IAN helped you?

 

Obtaining funding at this point has certainly been helpful both financially and mentally.

Financially, we now do not have to constantly worry about sustaining a great team. Funds have given us the assurance that the company is not going to die due to lack of great talent.

Mentally, the belief that the angels have in our business model, really boosts our confidence. Even after the government came out with the Rs. 5 lakh ruling, none of the angels doubted the success of our model.

Everybody believed that the government ruling was more of a passing phase and that every business sees certain setbacks while getting established.

IAN Members Sunil Kalra and Priyank Garg along with the advisory panel from IAN have helped us fine tune our business strategy. IAN members in keeping with the motto of ‘By the Entrepreneurs, For the Entrepreneurs engage deeply with TaxSpanner on a regular basis in helping us achieve our goals and focus on adding value to customers.

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Investee Updates
 
   

Zensar partners with InnovizeTech

   
     

Zensar Technologies, a leading Global Technology and Business Process Company today announced an agreement with IAN's Investee company based in Pune, InnovizeTech Software, for licensing their patent-pending software product, Sapience.

Sapience is an automated software solution, designed to help organizations boost people efficiency by over 20%, directly impacting total output, client satisfaction and profitability. This solution will be integrated into Zensar’s internally developed Business Intelligence Platform for Effort Analytics and Estimation.  

Sanjay Marathe, Senior VP and CTO of Zensar, said, ”Zensar is deeply committed to client delight by exceeding performance expectations, while at the same time delivering the highest value to our shareholders. These objectives require that we provide best in class quality solutions and keep improving internal efficiency. While quality of service delivered is being accomplished through CMMi and other quality standards that we follow, Sapience will plug in and help us meet the challenge of accurate effort measurement using high level of automation, something that has not been possible so far.”

 

 

Shirish Deodhar, InnovizeTech co-founder, explains, “Sapience transforms the way organizations can track work efficiency, Product companies can reduce time to market, services companies will improve profitability on fixed price projects, and meet client SLAs on managed services and T&M deals. The agreement with Zensar is unique because Sapience will be embedded into their existing IT platform. This opens up new possibilities for us to tie up with large enterprises who have already invested in existing IT infrastructure, and who will license Sapience only if it can add more value to their current solution”, he added.

Sandeep Suryavanshi, CIO of Zensar, observed that “Our IT team has built a strong platform to support the quality and operational needs of the company. However, we are always on the lookout for technologies that can accelerate the value addition to our business. We are happy to partner with InnovizeTech and tap into their exciting new technology. This is also consistent with Zensar’s goal of encouraging the emerging software product ecosystem in India.” 

This is one of the many examples where the IAN members help the IAN investee companies leverage the power of their networks to bring real business benefit to them.

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IAN Incubator’s Journey So Far
 
 
IAN incubator launched in December 2010 has in a short span of 7 months achieved amazing progress. Here are a list of achievements.
 
  • Three of IAN incubated companies IRTEX, Styleme and India College Search are about to secure Angel Financing

  • 200 + Direct and Indirect Jobs generated by IAN Incubatees.

  • 22+ venture are engaged with 15 Angels as chief mentors.

  • Cumulative Revenue generation by IAN Incubatees is Rs 4.1 Cr.

  • 250+ mentors’ network  engaged in various One On One & Group Mentoring activities linked to the Incubator.

  • 1000+ entrepreneurs, Angel Investors, Technologists and Students attended the series of multi-city Capacity Development Program

  • Launched go to market deal Identification Boot Camps.

  • Online Incubator platforms established.

  • Tie-ups with 1M/1M for training content, law firms, CA Firms and host of vendors.

  • Unique One-One mentoring through Online/Offline platforms.

  • Very engaging monitoring and advisory mechanism due to chief mentor’s engagement with start-ups.

 
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Incubatee talk
 
   

Kiran Reddy


Chief Executive Officer,
Saagam IT Services,
Incubated at IAN Incubator

 
 
 

How would you describe Saagam?

 

Saagam.com is an educational portal that aims to help students with their admissions into professional colleges across the country.

Currently the admission process for NRI/ Management quota seats in colleges is run by a few admission consultants rather than the college management. We are looking at introducing an online platform wherein students across the country can search for the detailed profile of the college of their choice. The details would include a complete college profile, current fee structure, and the number of vacant seats available.

Once this model is successful we can eliminate consultants who currently add no value and end up pocketing a huge margin on admissions. For instance, in a medical college, consultants end up selling admissions that are on offer for Rs. 20 lakh to eager parents and students for up to Rs. 30 lakh, thereby cornering a Rs.10 lakh margin.

 

When and how did you decide to enter into the education sector?
 

In 2008, I was searching for admissions for my siblings around Hyderabad. It was difficult to make progress because, I was working at Bangalore. By searching online, I was able to locate a few colleges and secure course details.

When I arrived at Hyderabad, during admission season, consultants were charging higher fees than the rates I had obtained earlier. Furious by the huge increase, I met the college management personally to obtain the fee details.

To my utter surprise I was informed that there were no seats available, whereas, consultants were offering the same college seats with a high markup in the open market. The process of obtaining the real fee structure in all the colleges was tiring and it took me more than a week to capture all of them. Once my siblings gained admission, I decided to create a platform for students to resolve all admission related issues.
In 2010, I finally decided to go ahead with the idea and launched an SMS campaign to if there was a genuine need in the market for my services. I sent SMS’s to all students who had just completed their 12th exams. The response was so overwhelming that I could not handle calls for at least a month. There were 100-150 calls from students daily to know the fee details across colleges in India. Seeing the response I received, I started working on the idea immediately.
By March, 2010 we started developmental work on the portal and completed it by November. From November until April 2011, we were signing up colleges. We have already collected data and registration information from approximately 65 colleges in Bangalore and Hyderabad.
 
Has your business model changed since inception? If so, in what way?
 

No, the business model has not changed at all. From the start, we were focussed on bringing transparency in the admission process. Our aim is to bring down the fee for deserving candidates and improve the quality of the students in each college. I am also interested in preventing colleges from increasing their fees regularly.

 

What are the major challenges you are facing today?

 

We initially thought obtaining students through our online portal would be the major challenge in our business model. But currently we are seeing that getting in touch with colleges and convincing them of our value is the major challenge. The colleges want us to book seats for students and guarantee them that the seats would be taken. They are not easily willing to try out a new admissions model, even if they like the concept.

The second major challenge is breaking the collusion among admission consultants in a college. Even top ranked colleges drive their admission process through consultants. These consultants end up blocking seats by paying a nominal fee and create an artificial demand to raise the admission fees for a college.

The Third aspect is marketing. As serious discussions are mainly held with heads of institutions, I have to personally engage in marketing meetings and travel.

The fourth and most important challenge is finance. We require funds for brand building, customer acquisition and developing technology. A strong brand makes the student confident while applying for admission through Saagam.

 

Is Saagam looking at earning revenue from institutions by recommended candidates for admissions? If yes, how would you account for the cyclic nature of your revenue stream?

 

Yes, our revenue model is designed in such a way that institutions pay Saagam for each successful admission closed. The volumes are low but revenues are high.

Our business model is cyclic but we are occupied all throughout the year. Admission season across India starts in March and continues up to November. Management courses run throughout the year as they have three intakes per year. During the non peak months we focus our efforts on marketing, campaigning, and customer acquisition.

 

Are you also looking to set up an offline presence or venture into other auxiliary education services?
 

An offline presence is definitely required. Students do require face to face counseling on which colleges to pick during admission.

We are also looking at offering online tutoring services. There are a few companies like Tutorvista that are offering online tutoring for students. We are studying various models and will roll out our value added features to students.

 

There are over 40 technology business incubators across the country. What attracted you to IAN’s incubator?

 

It was by chance that I became an IAN incubatee. I was initially not aware of Angel or VC funding and I had boot strapped with a capital of Rs. 20 lakhs. I thought that it was all I ever needed to run the business.

Last year I heard about Phanindra Sama, CEO of Redbus.in and the support he got from TiE. Soon, I became a member of TiE and met one of the delegates from IAN during a conference. She briefed me about IAN and the mentorship services provided to entrepreneurs.

I explained my idea in detail to the IAN team and later applied to be an incubatee. I got through the selection process and have been an incubatee of IAN for the last seven months.

Mr. N.K.Balasubramanian is our chief mentor and our online mentors include Anurag Gupta and V.P. Rajesh. The market expertise of our IAN mentors has added great value in shaping the business model and marketing strategies. We are sure we will achieve our targets with IAN’s support.

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Sector View: Ecommerce
 
 

E-Commerce: Online Payment Solutions

 

With the successful listing of Makemytrip on Nasdaq and the soaring valuation estimates of Groupon, the US based group buying website, e-commerce seems to have definitely become the hottest sector amongst the investment community. In India too, the past six months has witnessed a minimum of two deals in e-commerce per month.

E-Commerce in the Indian market is currently pegged at over Rs 30,000 crores, with online travel market contributing three-fourths of the total E-Commerce market. The online travel market in India is growing at a CAGR of 25% and is expected to grow at 50% this year. Financial services, such as online insurance premia and share trading transactions account for almost seven percent of the total market. Online retail has also seen a surge in investment activity as well as growth; currently valued at Rs 2000 crore; it is expected to grow at over 60% by the year end.

 

KEY CONCERNS IN E-COMMERCE

 

Undoubtedly, E-Commerce offers unparalleled opportunities, but low broadband penetration, low usage of credit cards, high costs associated with payment gateways, existence of fly-by-night web stores, and unreliability of logistics companies are some of the factors limiting the growth of E-Commerce and online retail in India.

 

ELECTRONIC PAYMENT SCENARIO

 

The payment service providers in India consist of four main types:

1. Payment Gateway Providers

2. E-Wallets/Cash Cards

3. Banks

4. Mobile Payment Services

 

The payment gateways in India aggregate various payment options and provide a single platform through which payments can be made online. These payment gateways cater to both SMEs as well as large corporations.

Compared to the west, where payment systems have matured, Indian service providers still continue to charge online merchants unusually high transaction fees (ranging between 2.5 - 7.5 percent).

Financial payment majors like MasterCard have their own higher security controls in addition to the security checks undertaken by Indian banks. A thorough analysis and background check of the merchant’s business is carried out before the online facility to permit MasterCard payments is provided to the merchant.

Some of the top payment gateway providers in the market are:

 
1. CC Avenues
2. E-Billing Solutions (EBS)
3. DirecPay
4. Atom
5. TechProcess Solutions (previously known as Bill Junction)
 

It is interesting to note that these service providers do not have their own payment gateways but instead use the gateways provided by various parent banks (such as Citibank, ICICI Bank) and market them to the online merchants. The transaction cost borne by the merchant is shared as profits between the payment gateway service provider and the parent bank whose payment gateway is utilised.

E-wallets in India are a relatively new concept and in their infant stage. Some of the noted E-wallet solutions are:
 
1. Paypal
2. Timesofmoney
3. OxiCash
 

Though Paypal does not have a substantial market share, it generates a lot of revenue from the Indian shores, as it is the most preferred e-wallet payment method of exporters. Timesofmoney e-wallet solution was launched amidst much fanfare in 2006, but its growth was scuttled due to new rules laid down by RBI immediately after its launch. Paypal has also come under heavy scrutiny by RBI and it has been specifically instructed to obey guidelines relating to India’s foreign exchange management.

Banks in India also provide their own payment solutions. Some of the top banks providing payment solutions to the Indian market include:

 
1. ICICI Bank
2. HDFC Bank
3. Citibank
4. Axis Bank
 
These banks have a rigorous screening process for merchants and high set up costs, but they do provide competitive transaction rates compared to payment gateway service providers. The only drawback is that they do not provide real time banking solutions (online web transfers) of other competing banks in India.
 

Mobile Payment Services in India are relatively new, but industry experts are betting high on these solutions as it holds the most promise. According to Gartner, 80% of the 1.2 billion Indian population would have mobile phones by 2014. Banks have entered this space through the recently developed IMPS services by the central bank (RBI), but currently, it is restricted only for the customers of the bank. The IMPS services enable customers to transfer money across India directly, thus reducing the bank’s cheque processing costs. Some of the top mobile payment platforms are:

 
1. Oxigen
2. Mchek
3. Obopay
 
All these payment providers have a strict policy of undergoing ‘Know your customers’ (KYC) checks on the merchants and routine audits by MasterCard and Visa.
 

COMPETITION

 
Master Card and Visa operate the largest payment networks in India. But they are expected to face fierce competition from National Payment Corporation of India (NPCI), a Government of India enterprise, which has recently launched its own private payment network named as ‘Rupay’. Currently, all the local card transactions go through the Visa and Mastercard network (with combined share of approximately 90% of all the card transactions). Rupay is being aggressively promoted among the merchants by the Indian banks and might eventually replace Visa and Mastercard as the preferred payment network for domestic processing. The NPCI also wants to ensure that all the Indian Rupee Transactions which happen abroad, go through the Rupay network and to accomplish the aim; they are aggressively promoting the network through alliances in other countries. The Government would surely like to make Rupay; what Union Pay is for China. It has already gained access to 550,000 Point Of Sale terminals across India.
 

THE WAY FORWARD

 

With introduction of 3G, broadband penetration is expected to reach even the remotest of areas. A recent study by McKinsey predicts that the number of Indian internet users will reach 450 million by 2015, out of which 340 million will have mobile internet.  

As the number of internet services catering to the domestic population steadily increases, netizens from India will begin to experiment with e-commerce options online that give them access to a larger variety of products with better cost benefits. At this juncture, we can safely assume that most of the key concerns mentioned will eventually disappear as the Indian market evolves and matures.

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Sector News
 
 

Digital steps up with fashion and footwear

While the uptake of retail in the digital space remains limited to just a few players at present, such as the travel vertical or service providers like group buying sites, a few companies have been able to establish a role for themselves in the online space, such as Flipkart.
 

Top 10 Digital Media Trends & Bets For 2011-2013

After showing promise of exponential growth for almost a decade, I strongly believe that finally internet in India is on the threshold of inflection. In this scenario what will be the big trends and bets over next 3 years? List of my Top 10 is given below.

 
Broadband Connectivity, Regulatory measures to drive e-commerce growth
Increase in broadband and mobile reach and strategic regulatory measures will drive the growth of electronic commerce in India. This viewpoint was put forth by Jean-Francois Van Kerckhove, Vice President – Strategy, eBay Inc. “India is presently at a major inflection point as far as e-commerce is concerned.
 

Internet businesses in India are surely on the growth path – Deep Kalra

“Internet is just a medium; you have to figure out what value you want to deliver”

Celebrated entrepreneur Deep Kalra now is soaring high. The MakeMyTrip.com founder has suddenly become the poster boy of Internet business in India following his company’s stellar listing on Nasdaq. As one among the early birds of Internet business in India, he is reaping huge rewards for his patience, persistence, and believing in Internet business in India.

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