Venture Capitalist competition Avenues 08 held at IIT mumbai

1. P&L Analysis
2008 2009 2010 2011 2012
Growth Projections 0 1 2 3 4
Margins(% of Total Revenue)
Vmukti 1.0 250% 100% 50% 25%
Vmukti 1.1 250% 100% 50% 25%
VMukti 2.0 100% 75% 50%
VMukti 2.5 100% 75% 50%
Hosted(web-conferencing on site) 100% 75% 50%
Cost of revenues (Growth) 150% 150% 100% 75%
Sales & Marketing - Employee costs(growth rate) 200% 200% 100% 50%
Sales & Marketing - commission (wrt to revenues) 14% 20% 20% 15% 15%
Sales & Branding (wrt to revenues) 30% 15% 15% 10% 10%
R&D growth rate 200% 100% 75% 50%
Tech Team - Hiring & training growth rate 100% 75% 50% 50%
Management and admin growth rate 10% 10% 10% 10%
Other General and admin. Exps growth rate 10% 10% 10% 10%
Revenue growth rate 1253% 99% 68% 44%
Gross Margins 54% 91% 89% 87% 85%
Operating Margin 20% 24% 34% 32%
Pre-tax margin 3% 5% 13% 14%
Tax rate( 30% Corp Tax & FBT extra) 30% 30% 30% 30%
FBT (assuming that 2% of total expenses is charged to FBT) 2% 2% 2% 2%
Net margin 1% 2% 8% 9%
Depreciation 40% 40% 40% 40%
Infrastructure 200% 100% 100% 0%
Equipment 250% 100% 100% 0%
Licences 300% 100% 50% 0%
Fixed Assets 100% 50% 50% 20%
Intanglible Assets 500% 100% 0% 0%
PROJECTED PROFITABILITY STATEMENT ( Million USD)
Revenues 2008 2009 2010 2011 2012
Vmukti 1.0 0.13 0.45 0.90 1.34 1.68
Vmukti 1.1 0.02 0.06 0.11 0.17 0.21
VMukti 2.0 0.48 0.96 1.68 2.52
VMukti 2.5 0.06 0.11 0.19 0.29
Hosted 0.90 1.80 3.15 4.73
Others 0.01 0.01 0.01 0.01
Total Revenue ( Million USD) 0.14 1.95 3.89 6.54 9.43
Cost of Revenue (Tech. team salary) 0.07 0.17 0.42 0.83 1.46
Gross Profit 0.08 1.78 3.47 5.71 7.98
Selling & Marketing Expenses
Mktg & Selling - Employee costs 0.05 0.14 0.43 0.86 1.29
Sales Commission 0.02 0.39 0.78 0.98 1.42
Regular Mktg, Sales promo., branding etc 0.04 0.29 0.58 0.65 0.94
0.11 0.83 1.79 2.50 3.65
R & D Expenditure 0.04 0.11 0.22 0.38 0.57
General & Administrative Expenses
Tech Team - Hiring & training 0.02 0.03 0.05 0.08 0.12
Management and admin 0.14 0.15 0.16 0.18 0.20
Other General and admin. Exps 0.25 0.28 0.31 0.34 0.37
0.41 0.46 0.53 0.60 0.69
Total Expenses 0.55 1.39 2.53 3.48 4.91
EBITDA -0.47 0.39 0.94 2.23 3.06
NON CASH EXPS
Product Patent - 1/10th W/Off 0.01 0.01 0.01 0.01 0.01
Depreciation 0.07 0.32 0.73 1.35 1.72

2. 0.08 0.33 0.74 1.36 1.73
EBIT -0.56 0.06 0.19 0.87 1.33
Interest Expense 0.00 0.00 0.00 0.00 0.00
PBT -0.56 0.06 0.19 0.87 1.33
Less : Provision for Income Tax (On domestic sale) 0.02 0.06 0.26 0.40
Less : Provision for Income Tax - FBT 0.00 0.03 0.05 0.07 0.10
PAT -0.56 0.02 0.08 0.54 0.83
Capex
Infrastructure 0.05 0.15 0.30 0.60 0.60
Equipment 0.06 0.21 0.42 0.84 0.84
Licences 0.05 0.20 0.40 0.60 0.60
Fixed Assets 0.00 0.00 0.00 0.00 0.00
Intangible Assets 0.02 0.12 0.24 0.24 0.24
0.18 0.68 1.36 2.28 2.28
WDV at End 0.11 0.47 1.10 2.03 2.58
PAT + Depreciation -0.49 0.33 0.82 1.89 2.56
Increase in Capex 0.50 0.68 0.92 0.00
Free Cash Flow -0.49 -0.17 0.14 0.97 2.56
DISCOUNTING RATE - Expected IRR 30% 30% 30% 30% 30%
Discounted Cash Flow -0.49 -0.13 0.08 0.44 0.89
Terminal Value 4.47
Enterprise Value (US$ in million) 5.28 US $
Enterprise Value (INR)(exch rate 48) (in crores) 25.33 crore INR
Equity Stake Buyout (40%) 10.131 crore INR
We would fund business But with only 40% common stock stack presently
Segmental Expense (in millions US $) 2009 2010 2011 2012
Salary cost + R&D 0.17 0.45 1.12 2.16 3.44
Revenue Linked Expenses 0.06 0.68 1.36 1.64 2.36
Management/Admin Expenses 0.39 0.43 0.47 0.52 0.57
Total Expenses 0.62 1.56 2.95 4.31 6.37
Salary cost + R&D (% of Total) 27% 29% 38% 50% 54%
Revenue Linked Expenses (% of Total) 10% 44% 46% 38% 37%
Management/Admin Expenses (% of Total) 63% 27% 16% 12% 9%
MOST IMPORTANT
In addition to Equity buyout we also commit the business 50% of Salary cost + R&D expenses (highlighted above) from year 2010 - 2012
If you see logically from year 2011 50% of your total cost is not linked to revenues.
Thus if in case the business is not able to generate revenues the biggest problem would arise in paying salaries and R&D cost.
We would thus commit 50% of the expenses**** for the coming three years
Commitment only if Cash flows are not able meet the expenses (salary + R&D)****
The commitment would only be applicable on us when business would be able to fund the 50% of expenses****
**** salary + R&D expenses
Salary cost + R&D for coming years 6.71 million USD
INR crores (exchange rate - 48) 32.23 INR crore
Commitment - 50% 16.1 INR crore
Example case scenario
Consideration for commitment would be 25% of Equity if funding option used.
Benefits to the entrepreneur
If 25% extra stake is bought today 6.33 INR crore
If 25% is placed using the ablove option 16.1 INR crore
Thus if the scenario abrupts
Total Funding
40% stake - Purchase consideration 10.1 INR crore
25% stake - Commitment 16.1 INR crore
Net Fund available 26.2 INR crore

3. *** we believe in your business and are ready to fund you even if the business is not able to generate revenues as expected.
We are ready to partner your business when the times are bad
Valuation Pre- Money Post- Money
Scanario 1 - 40% buyout
Valuation 15.2 25.3
Inception funding - Cash in business (2,12,500 US $) 1.02
Value of IPR 14.2
Scenario 2 - 75% buyout
Valuation 15.2 41.4 25.3+16.1
Inception funding - Cash in business (2,12,500 US $) 1.02
Value of IPR 14.2
Assuming 1 million shares outstanding 151.96 per share price
As of now our understanding is that 40% stake we will be buying that would be on fully dilluted basis which will include all Esop provisions done by company.
we have chosen to invest in common stocks because we don’t want to limit our upside and we strongly believe in this business.
we have chosen liquidation preference as 1.5
In our case there is an implicit pay to play provision as we have said about salary & employee cost funding.
We will not be charging any management fee because we wont company to reinvest the cash into tremendous growth opportunities it has
Multiple return
Value of company in 2012 61.34 crores
Value of 40% stake 24.54
Investment made in the beginning 10.1
return multiple 2.42
Liquidation preference 15.2
Value of company in 2012 after liquidation 46.15
Value of 40% stake 18.46
Investment made in the beginning 10.1
return multiple 3.32

5. 5 times

6. op provisions done by company.

7. Value Proposition Benefits
Convergence No distortion and data lag
low cost Multipoint video telecast
scalability file searching and sharing
high quality low investment
usability scalability
multi featured
open source
Low Cost, High Quality
Focus Challenges
Sales & Marketing Low brand image
Create brand visibility Low man power
increase employee strength Limited market penetration
increase customer base
target high end corporate customers
Research & development in product improvisation
enter new markets
cost leadership
Points we buy Points we object
Download should be after registration basic version of software licensed and free trial for 1
facility of conferencing on their website
*No mention about Tech team Hiring plans and more importantly sales team hiring looking at the intensive m
*No mention about ESOPs
* you also plan to licence the basic version of Vmukti after trial period of 15-30 days? Do you think this woul
* Products may be cheaper due to inhouse developments but how is your cost of service going to be cheaper
* Do you think that you will have enough resources as a part of sales team to support V-world outlets
* Confused strategy
Strategy Snapshot
V-World
V-World-20 outlets in metros for wireless and broadband service along with gaming, digital music and music d
stores will also be used as the retail shops for selling VMukti branded products like Software’s and Hardware c
Web world, Sify, TATA are major competitors and they also provide the same service.
The estimated cost for this launch is 24 crore

8. All this money is invested on target segment which predominantly use free downloads whose customer loyalty
Brand visibility will be limited only to few cities and that too competing against existing players.
huge investment
Social Networking Site
partnering would require huge amount support service staff for service which is not going to earn revenue dire
Moreover Facebook, linkedin will not tie up for a period they would rather have permanent tie up which may n
Risk of product becoming copied.
also this may occupy huge bandwidth which might be required for more important corporate customers.
developing new social networking site is altogether diversion from main business and hence may not turn out
5 crore revenue expected at 100% growth
Developing new site would lead to huge investment in terms of infrastructure, branding and sales, support and
orkut, facebook, linkedin etc--people get used too and bored very fast and then the site becomes outdated.
customer switching cost is very low
Hardware business
People tend to prefer already popular software which has no compatibility issues and easy to use software alo
high quality branded Hardware manufacturer may not agree to provide vmukti software untill it is successful
Expected revenue of 25 crore growing @100%
Cost of service around 5 crore
Micro Small and Medium Enterprises(MSME)
Reliance is a big name vmukti is not
Product to service
web conferencing facilities
0.5 crore revenue growing @100%
Partnerships
Chip, data quest
institute tie upsa
Outsourcing
marketing firms for marketing ofproduct
recruitment & hiring
BPO
In our opinion it makes sense to have marketing deparment of our own because it is growing company and it i
BPO can be outsourced definitely
Recruitment can be outsourced but HR deparment should be der

9. Concerns
Finance raising money
marketing established players
cost value chain engineering
operations customer retention & loyalty
innovations
competitors sustainable competitive advantage
employee satisfaction
employee strength
Vision Strategy Snapshot
market leader V-World
discover new markets gaming
positive NPM by 2009 SNS
$100 million revenues by 2010 Hardware business
sustainable business model Micro Small and Medium Enterprises(MSME)
Employers/job seekers
Media & Software industry
Educational institution
Product to service based
Cost leadership-learning curve effects
Partnerships
Outsourcing
Mergers & Acquisition
magazine
job consultants partnering
matrimonial partenering
IIT, ISC partnering for research
Entering New markets-local & global
ware licensed and free trial for 15-30 days
hiring looking at the intensive marketing strategy
30 days? Do you think this would work where you have yahoo, skype providing free download of software.
st of service going to be cheaper in compared to reliance web world and Sify.
support V-world outlets
aming, digital music and music downloading etc will be offered to create brand awareness.
s like Software’s and Hardware compatible with the Software

10. wnloads whose customer loyalty is very less considering emerging technolgies.
t existing players.
is not going to earn revenue directly. So we end up making huge support for free.
ve permanent tie up which may not be profitable for Vmukti
rtant corporate customers.
ess and hence may not turn out to be good venture for the company at this stage.
branding and sales, support and upgrade and maintenance of site.
n the site becomes outdated.
ues and easy to use software along with hardware.
i software untill it is successful
se it is growing company and it is an investment and not an expense.

11. Applications
• E Learning
• Tele Medicine
• Web Conferencing
• Team Collaborations
• Remote Security and Support services
• Social Networking
• VoIP PBX
• Inbound/Outbound Call center
• Live Webcasting Video Library
ses(MSME)
free download of software.

13. its core features having online Video conferencing, Audio conferencing, Chat, File search, Whiteboard, F
web conferencing
India saw revenues increase over 53% to US$7 million in 2005, and the market is expected to grow to U
video conferencing
$6B audio conferencing revenue opportunity
$1.3B web conferencing revenue opportunity
$53M video bridging services opportunity
IPTV
E-learning and Tele Learning
The telecom/ conferencing costs for the end users are still very high
Costs are very high not because of the product but because of bandwidth requirements
By 2010, Web conferencing will be available to 75% of corporate users as a standard facility
By 2009, 40% of all Web conferences will be operated using on-premise deployments
Gartner estimates that Web conferencing was a $935 million market in 2006, growing at 19.5% compou
Software as service
integrated telecom PBX
Using Singapore as a gateway can help reduce entry barriers to the sensitive regional markets
8 to 200 employees at growth rate of 125% in 5 years
The overall revenues are expected to touch $153 Mn
the company has achieved Break Even at 17 months
Ø As per the cash-flow projection, the payback period being less, the IRR (Interna
We have assumed discount rate to be 11% and thus calculated the NPV (Net present value)

14. File search, Whiteboard, File-sharing, Presentation, Remote monitoring/controlling/sharing, Scheduler -- all at use very low Bandwidth us
et is expected to grow to US$48 million by 2008
Products Challenges Strategy
Presentation delivery Technolgoy Demand
IPTV HR issues product
Desktop and application sharing Product differentiation target
andard facility text chat Distributino price
shared whiteboard 2-3 cities In india and then south as
growing at 19.5% compound annual growth rate through 2010.
basic security
integrated public switched network
VOIP
videoconferencing
regional markets file sharing
less, the IRR (Internal rate of return) for the company is really excellent (nearly 43%).
et present value) by discounting the future cash flows; the NPV figure comes out to be USD 46.07 Mn.

15. use very low Bandwidth usage
In india and then south asia
USD 46.07 Mn.

16. VMukti's seed funding of $62,500 was provided by the
Indian Government through CIIE @ IIMA. Additionally, VMukti has received $150,000 of
Angel Funding