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Indian Venture Capital Association in partnership with European Venture Capital Association is conducting a 2-day Private Equity Management Training Program

Master class on Valuation, Valuation Guidelines & Reporting Guidelines

February 25 & 26, 2009 in Mumbai

The focus of this master class is on getting a better understanding of the “Valuation” principles and to give you an

My posts of late have reminded me of the scene in Monty Python’s “Holy Grail” when, despite being left as rubbish on the side of the road, the old man insists “I’m not dead yet.” That’s my mantra — not dead yet. It may be a stretch to say “I feel like dancing.” But we are definitely not dead yet.

In the tech world, the sector that has perhaps been most left for dead is enterprise software. For some time now the pundits have been declaring enterprise software moribund — they argue that everything worth building has been built. And what little room there may be for innovation, will best be served by the existing behemoths, SAP and Oracle. Bring on the recession and, the conventional wisdom goes, those of us who have invested in enterprise software might as well close down the companies and recover what little cash we can.

I’m here to tell you that the pundits are wrong. Enterprise software is alive and well. But like all other things in this recession, only the truly strong will survive. And strong is pretty easily defined in this economy — the strongest enterprise software companies deliver their customers the biggest Return on Investment.

For most companies today, ROI will be measured in total cost savings. Can I cut fat out of my technology budget? In many instances, the heros of the cost savings battle will be SaaS companies. By now it has been well documented that Software as a Service delivers significant savings in Total Cost of Ownership, let alone cheaper annual licenses. The overall savings are so great that enterprises are increasingly looking to SaaS companies to replace enterprise solutions that they were previously hosting behind the fire wall. And, while it is no insignificant task to grow an enterprise SaaS customer base, once that customer base has reached critical mass, it is the gift that keeps on giving — each month’s revenue starts with the previous month’s revenue and grows from there. [1] Look no further than Salesforce, Workday, and the likes — Strong SaaS solutions are going to continue to prosper in this economy.

SaaS companies aren’t the only enterprise software solutions out there delivering great cost savings. There are a number of next-gen enterprise applications that do more for less. The sales pitch is easy — for fewer dollars than you are paying for maintenance on your existing enterprise stack, you can purchase a modern application designed to address your problems using up to date technology. Take my portfolio company Splunk, for example. Rather than continue to pay the likes of SAP, Oracle, HP huge amounts of money for enterprise management, debugging, compliance and search tools, Splunk will deliver greater functionality and flexibility for a fraction of the cost. So it is not surprising that, despite the economic challenges enterprises are facing, Splunk’s user-base and revenues are growing significantly quarter over quarter. The same story applies to the open source stack as well (mySQL, XenSource, etc. etc.). Companies will pay to save money. Even in a recession, those enterprise solutions that can credibly argue that they will save you more than they cost will continue to grow.

There is one other class of enterprise software that will fare well through the recession. That software is also sold with an ROI story. But the ROI isn’t delivered with cost savings. The ROI is delivered with increased productivity. It’s a hard story to sell in a down economy, but the best companies will manage to do it nonetheless. There is no question that those companies that continue to invest in technology through the down cycles will disproportionately benefit when the pendulum swings back the other way. Perhaps the easiest version of the productivity story is Price Optimization. If you can credibly argue that a customer’s increased profits will exceed the price it will pay for the software, purchasing the software should be a no brainer. Supply Chain and CRM software were sold on a similar efficiency story in the late 90′s and early 2000′s and, in many instances, continue to drive significant ROI for those customers who adopted them early.

I don’t want to sound too Pollyanna-ish as I continue to bang the drum for technology in this economic downturn. But the best companies will assuredly survive and thrive. And that goes for enterprise software as much as anything. I have no doubt that there are still huge enterprise software companies to be built and I am as anxious as ever to fund them.

[1] It is possible for a SaaS company’s revenue to go down month over month, but that would require that its attrition rate be greater than its acquisition rate. For the best SaaS solutions, that is quite unlikely (given TCO, ease of use, etc.) — they have proven wonderfully sticky. The biggest challenge for SaaS solutions is unquestionably user growth. Once acquired, SaaS customers tend to be in for the long haul.

My posts of late have reminded me of the scene in Monty Python’s “Holy Grail” when, despite being left as rubbish on the side of the road, the old man insists “I’m not dead yet.” That’s my mantra — not dead yet. It may be a stretch to say “I feel like dancing.” But we are definitely not dead yet.

In the tech world, the sector that has perhaps been most left for dead is enterprise software. For some time now the pundits have been declaring enterprise software moribund — they argue that everything worth building has been built. And what little room there may be for innovation, will best be served by the existing behemoths, SAP and Oracle. Bring on the recession and, the conventional wisdom goes, those of us who have invested in enterprise software might as well close down the companies and recover what little cash we can.

I’m here to tell you that the pundits are wrong. Enterprise software is alive and well. But like all other things in this recession, only the truly strong will survive. And strong is pretty easily defined in this economy — the strongest enterprise software companies deliver their customers the biggest Return on Investment.

For most companies today, ROI will be measured in total cost savings. Can I cut fat out of my technology budget? In many instances, the heros of the cost savings battle will be SaaS companies. By now it has been well documented that Software as a Service delivers significant savings in Total Cost of Ownership, let alone cheaper annual licenses. The overall savings are so great that enterprises are increasingly looking to SaaS companies to replace enterprise solutions that they were previously hosting behind the fire wall. And, while it is no insignificant task to grow an enterprise SaaS customer base, once that customer base has reached critical mass, it is the gift that keeps on giving — each month’s revenue starts with the previous month’s revenue and grows from there. [1] Look no further than Salesforce, Workday, and the likes — Strong SaaS solutions are going to continue to prosper in this economy.

SaaS companies aren’t the only enterprise software solutions out there delivering great cost savings. There are a number of next-gen enterprise applications that do more for less. The sales pitch is easy — for fewer dollars than you are paying for maintenance on your existing enterprise stack, you can purchase a modern application designed to address your problems using up to date technology. Take my portfolio company Splunk, for example. Rather than continue to pay the likes of SAP, Oracle, HP huge amounts of money for enterprise management, debugging, compliance and search tools, Splunk will deliver greater functionality and flexibility for a fraction of the cost. So it is not surprising that, despite the economic challenges enterprises are facing, Splunk’s user-base and revenues are growing significantly quarter over quarter. The same story applies to the open source stack as well (mySQL, XenSource, etc. etc.). Companies will pay to save money. Even in a recession, those enterprise solutions that can credibly argue that they will save you more than they cost will continue to grow.

There is one other class of enterprise software that will fare well through the recession. That software is also sold with an ROI story. But the ROI isn’t delivered with cost savings. The ROI is delivered with increased productivity. It’s a hard story to sell in a down economy, but the best companies will manage to do it nonetheless. There is no question that those companies that continue to invest in technology through the down cycles will disproportionately benefit when the pendulum swings back the other way. Perhaps the easiest version of the productivity story is Price Optimization. If you can credibly argue that a customer’s increased profits will exceed the price it will pay for the software, purchasing the software should be a no brainer. Supply Chain and CRM software were sold on a similar efficiency story in the late 90′s and early 2000′s and, in many instances, continue to drive significant ROI for those customers who adopted them early.

I don’t want to sound too Pollyanna-ish as I continue to bang the drum for technology in this economic downturn. But the best companies will assuredly survive and thrive. And that goes for enterprise software as much as anything. I have no doubt that there are still huge enterprise software companies to be built and I am as anxious as ever to fund them.

[1] It is possible for a SaaS company’s revenue to go down month over month, but that would require that its attrition rate be greater than its acquisition rate. For the best SaaS solutions, that is quite unlikely (given TCO, ease of use, etc.) — they have proven wonderfully sticky. The biggest challenge for SaaS solutions is unquestionably user growth. Once acquired, SaaS customers tend to be in for the long haul.

As part of its cover story on software products, Businessworld had organized a roundtable discussion featuring, among others, Subash Menon, CEO of Subex Systems and Sudhir Sethi, chairman and managing director of IDG Ventures India. Excerpts:
Subash Menon: Products have a life of their own. Services go around the products. One cannot stand in for the other. You have a delivery model that is SaaS

The Indian market is trading cheap, but not yet at distressed levels, says Akash Prakash in an article for Business Standard.
Investors are uncomfortable using earnings-based valuation tools as there are worries on what is the real earnings power of companies. I am not talking about fraud here but simply the fact that earnings have risen as a percentage of GDP, and as is typical in strong

China is manipulating the value of their currency, the yuan renminbi. At least that's what Obama's new Treasury Secretary, Tim Geithner says. The statement came as part of his 102-page…

Big day for Israeli start ups today as two companies announce funding from unexpected sources. No VC money? no problem!

Modu Mobile, Dov Moran’s mobile company aiming to create the world’s smallest cell phone, gets an oxygen injection today with the announcement of a $7 Million dollar round from chip manufacturer Qualcomm. The strategic agreement signed between the companies also gives Qualcomm the rights to make the chips inside Moran’s cell phones.

The investment is strategically important for Modu at this point in time. After laying off 35% of its workforce, and raising only $65 million out of the intended (and ambitious) goal of $100 million (Gemini and Genesis are among investors), Modu seemed to have hit the rocks. The company’s absence from CES this year was mentioned by Israeli media outlets as a potential sign of trouble.

Dov Moran was the founded of M-Systems, inventor of the flash drive that we all love.  His previous company was sold to Sandisk for one and half billion a year and a half ago. Modu’s flagship product is a tiny phone weighing only 40 grams, which serves as the ‘brain’ in additional products such as navigation devices, digital cameras and mp3 players, through the use of ‘jackets’.

Exclusive source in Hebrew can be found here and previous coverage on Modu is here.

Next in line was Ginger, a small start up developing spelling check software. The Israeli start up founded by Yael Karov and Avner Zangvil has announced a first round of $3 million led by private investors in Israel and the US. Ginger distributes a free program that helps users with Dyslexia by providing automatic text correction English using patent pending technology.

The target market of Ginger is apparently 15% of the western world (see learning difficulties organizations here). There are 50 million people suffering from Dyslexia in the US and UK alone.  and the company claims it has the potential to correct 95% of their errors. Even though word processing software is already equipped with spell checkers, Ginger says it can correct heavy misspellings that are far from the ‘right’ word, as well a full sentence correction.

Started in 2007, Ginger has raised $4 million from private investors to date, including Yoni Hefetz, a serial entrepreneur and a partner at Lightspeed as well as Zohar Gilon, an angel investor who also founded B-Hive and Oberon.

To download the program, sign up for Ginger here.  Source.

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2. Bitesize Monday: Israeli startups in the news Seems like we had a little breather this past week….
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iLogon Inc., an Internet Startup focused on aggregating and managing online subscriptions, announces company formation and prepares for product launch in Q1 ‘09.

 Phoenix, AZ — January 21, 2009 – Anthony Argenziano today announced the launch of iLogon Inc. ILogon will provide the first end to end solution for aggregating and managing online subscriptions. The iLogon application provides single sign-on, consolidated billing, and discounts on subscriptions to premium content and service websites. iLogon has been in stealth mode for eight months while developing the Beta solution and building the partner portfolio. The application was developed for internet users who subscribe to multiple fee based premium websites. iLogon gives discounts to the sites and services these consumers are already using. Anthony is announcing the company now to closely precede the launch of the public Beta release. According to CEO, Anthony Argenziano, “This is a growing market that has not been adequately addressed with aggregation or consolidation tools. The Social Media space has seen a plethora of tools and services for managing and aggregating accounts or accessibility. We believe there is an untapped opportunity in the aggregation of the premium content and services market.” iLogon will be launching an industry leading application for aggregating and managing online subscriptions to premium content and service websites. The application will provide single sign-on, consolidated billing, secure account/password transmission to subscribed sites, user reviews of subscription based sites, as well as many Web 2.0 styled features. iLogon allows a user to create a single account, then pick only the subscription based services they want, and “package” these services into a single discounted bundled account. Users will then use their iLogon account to sign-on once and have access to all of their subscriptions. The iLogon solution has already been well received by both the early Beta users and Site Providers (Partners). Consumers who pay for content and services on the web have been looking for a solution like this for a long time now. Beta user Morgan Reed stated “I’m continually looking for ways to manage all of my usernames and passwords for the sites I subscribe to. I also lose track of what services I have purchased and where I’ve entered my credit card number. It’s a mess! iLogon solves these problems, and saves me money in the process.” iLogon Partners are also excited about the service and upcoming launch. When Chris Watson, Founder and CEO of FitnessJournal.com first heard of the iLogon solution his immediate response was “this is the future of premium content and services on the web, we need an application like this.” Signing up for the iLogon service is free, and consumers will only pay for the subscriptions they select. iLogon promotes this customization of services as a key differentiator from their competitors. Argenziano explained the model as follows, “We don’t lock users into a pre-configured package of services at a standard monthly fee. Our belief is that very few if any of our customers would use all the sites in a package, and therefore not get the full value. That’s why we let our users choose only what they want. They’re building their own package, and still saving money.”  About iLogon Inc.  iLogon, based in Phoenix, Arizona, provides a web based solution for aggregating and managing online subscriptions to premium content and service websites. The company was founded by Anthony Argenziano in May, 2008 to meet the growing need for managing access and billing for premium content and service websites. The solution, launched in January ’09 provides single sign-on, consolidated billing, reviews and recommendations, and many other features to manage online subscriptions. To contact iLogon, go to www.ilogon.com or email info@ilogon.com. # # #  For more information or to schedule an interview with Anthony Argenziano, contact him at pr@ilogon.com or (888) 828-8503.