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Follow UsThere is a specter in the
air – the specter of
venture capitalism! Hardly being the types to ignore the lure of lucre, channel
partners ranging from systems integrators to distributors, are waiting, watching
and plotting to have a slice of the VC pie. Why shouldn’t they, especially
when Internet usage in India has crossed the half a million mark?
Like everywhere else, there are leaders and followers. Some
hurry, while others are patient. Among those who are in a hurry, there is Nitin
Shah, MD, Allied Digital Services Pvt Ltd, who has already registered
www.oldpcindia.com, a C2C site which is already at the beta testing stage. He
has even got the revenue model worked out. Allied Digital will step in once the
transaction is carried out. The second hand machines bought or sold or auctioned
through the site would need servicing and Allied Digital has 35 such service
centers throughout the country.
"Customers in India don’t mind buying old PCs. There are also
businesses that would like to go for newer models.
So there is a market. Around 30 million people will surf the
Net in the coming five years and not all of them can pay Rs 35,000 for a PC. New
PCs can’t fill the vacuum. So someone will have to try and sell PCs within the
Rs 9000 to Rs 12,000 price band. Selling second hand PCs is not enough.
Somebody has to guarantee that the machines will work.
Besides, they have to serviced. That is where we come in. We will also be
providing rare components and spare parts," Shah says. Currently, the site
will be happy selling nationwide.
He has already bought premises at Vashi, where old PCs will
be warehoused. What’s more, Allied Digital is open to the ides of VCs taking
stakes in it. In fact, Nitin Shah is short-listing VCs right now. He too does
not want to wait until the capital market picks up. So he sees VCs as the best
bet to launch his site as soon as possible.
Waiting and watching
Also, there’s another Shah quietly observing all that’s happening — the
suave and
savvy Paras Shah, MD of Neoteric Informative Pvt Ltd, one of
the leading IT distributors in the country.
"We are thinking of a B2B site which will bring more productivity for
our business. We
are looking at it to inform where various schemes stand. We are looking at
everything from audit processing to warehousing, to putting orders on the web.
Neither are we plan
ning large investments, nor are we looking at big budgets,
but an effective solution which can take care of our business and channel
partners," Paras confirms.
"We are not actively looking for VCs. But if there are any angel investors or VCs, they
are welcome provided our conditions are met," Paras says candidly. Clearly,
he is not desperate for VC funding.
Has he sold the idea to his channel partners? "We don’t
intend to do so until we are ready with the site. We have not set any deadline.
We are in talks with people who can provide solutions," he adds. "We
are also not discounting the ASP route. Basically, our site and the solution
should be able to take of tomorrow’s growth. We plan to set up our site
through internal accruals only and we have no plans for IPOs. One reason that is
holding him back is his skepticism about existing payment gateways.
Benevolent benefactors
In the meantime, VCs have already been benevolent to a few.
The Delhi-based software developer-cum-distributor, Radix Infotech Ltd (RIL) has
been sanctioned Rs 1.1 crore by the Risk Capital and Technology Corporation to
promote its ERP package Visipak 2000 which is based on a technology called Rapid
Customized Toolkit (RCT).
Says Ajit Sirohi, MD, RIL, "RCT saves as much as 90
percent of cost and time, on the development, implementation and customization
cycle of the product. With RCT, even non-technical people can maintain our ERP
package." Of course, there were some who were reluctant to divulge their
plans to CI.
Among them is a software developer-turned-distributor who is
in the process of becoming a software developer again. He was keen on VC money
— something to the tune of Rs 8 crore — to develop web-enabled software.
Keen on anonymity, he reveals that he is interested in VCs because the capital
market is not in a position to fetch him the money.
However, there exist a few renegades who care two hoots for
VC funding, at a time when VCs are hot property! Meet Ketan Sheth of Orient
Infotech who bought CyberITMall.com for Rs 40 crore. The site has tied up with
distributors like Tech Pacific and Ingram Micro for supply of products and HDFC
Bank for loan and finance options.
"We don’t want VCs. We don’t want money from anyone.
Unlike other e-commerce sites, in 2001, we will have a green balance
sheet," Sheth claims.
Thus spake the VC
So what do VCs themselves have to say? Over to Mahesh Murthy
(of MTV’s ‘QuickGun Murugun’ fame), who runs the Passionfund.
"To me a business has to make money. How does it matter whether you are a
phonecasting company or an e-commerce company? Everyone has got onto the dotcom
bandwagon. Right now there are a lot of companies which spend Rs 100 crore in
advertising to generate Rs 1 crore worth of sales. I think it should be vice
versa," he observes.
Mahesh Murthy’s Passionfund has invested in seven start-ups
— five in India and two in the US. "What I am looking for is humility and
desire to make money. There should also be nothing limiting the scope of the
business, whether it is B2B or B2C," he continues.
He thinks that trends have definitely changed. "There
was this term called ‘disintermediation’. That has now changed. What is
happening is re-intermediation. So there is still a channel. Manufacturers
cannot address servicing-related issues, which are directly relevant to the
customer. Take the case of Dell.
When you go to the Dell web site, delivery is guaranteed in
six days. In fact components are ordered only after 100 percent advance payment
by credit card. Dell keeps zero inventories. Also the component seller is paid
only 45 days later. Which means Dell is earning interest on the customer’s
payment. Dell also delivers the latest technology," he informs.
Dear channels…
Does he have anything to tell channels? "You have a huge
opportunity to win. The huge opportunity is customer service. Believe me, buyers
want to buy only from a single vendor. They want somebody to take
responsibility. So surround the customer with services. Become an extension of
his company," is what he advises.
"Do remote monitoring or remote diagnosis of PCs. If you
have an interface on the site, at the other side, there must be human engineers
tracking your PC 24 hours a day to see if everything is okay with it. If
something is wrong, through remote diagnosis it is possible to know that the
customer’s PC has a particular problem even before he knows about it. So the
engineer can reach the customer’s premises without being called and tell the
customer that his PC has a problem.
As of now, there is no site that does this in India. Such a
service can be implemented only through channels. Today, products have become
commodities. Only services sell. So channels should reinvent themselves to
become the re-intermediary. SIs can either go the service route or they could
become the next Dell, he elaborates. Surely, this guy has a lot of ideas.
"Let me give you an example of re-intermediation. There
is this online retailer called hamarashop.com, which has gone to traditional
retailers for a mandate to sell their goods. In return for this mandate, it has
promised them revenues. We must understand that channels are being re-invented
all the time. I am looking at companies that can change the world. For me yet
another software company or hardware company is hardly exciting. I guess other
VCs will look at them," says Mahesh.
CI can vouch for the fact that Mahesh opened his heart out about what
exactly VCs expect from channels. The ball is clearly in the other court. But
are the channels listening?