Clearstone Ventures: Financial Services in Focus.

Among the several cross-border funds operating across the Silicon Valley in the United States and India is Menlo Park-headquartered Clearstone Venture Partners, which has some well-known successes from its portfolio that includes Paypal and Overture. But the fund says it doesn’t follow a copycat approach and has kept its investment focus in India different from its strategy overseas. 

While oversees investments focus more on consumer internet and enterprise technologies, in India, says managing director Sumant Mandal, the fund is interested in consumer facing services covering a broad spectrum of sectors ranging from financial services and retail to telecom and entertainment. 

The Fund

Clearstone has three global funds under its management. Indian investments are being made out of the third $215 million fund raised in 2005. So far around $15 million has been invested cumulatively in three Indian firms and an equal amount set aside for follow-on investments in these firms. 

Its portfolio is pretty diverse compared to the average Silicon Valley fund, and its investee companies in India are BillDesk, a payments service provider, Digibee Microsytems, a mobile phone maker with facilities in Chennai and Bangalore, and Games2Win India, an online gaming company founded by serial entrepreneur Alok Kejriwal. Kejriwal is among the few entrepreneurs who made a success of their internet business when dotcoms were going bust in 2000. 

Clearstone has co-invested in all three companies. In Games2Win, its most recent investment made in March 2007, it has co-invested with Silicon Valley Bank which is a minority investor. In Digibee, it has co-invested with SIDBI and in Billdesk along with State Bank of India. “Where the other investors bring some complementary value, we are not against co-investing. In Digibee, we saw value in co-investing with SIDBI because it brings credibility with banks here,” says Clearstone director Rahul Khanna. 

Currently, the fund has offices in Mumbai and Bangalore in India. Khanna is based in India. Sumant, who works from California, travels to India every quarter. The fund is expanding its team in India. Apart from the US, it has operations only in India. 

The Sweet Spot 

The fund, while looking out for investment opportunities in business and entrepreneurs with potential, doesn’t confine itself to any single sector or sectors. “While we have a global fund, the themes are quite different,” says Khanna. 

The fund prefers to invest in consumer-facing industries, be it in electronics or lifestyle, because it believes they have the capacity for scale and high growth. 

One of the areas which it is currently exploring for potential investments is retail financial services. Apart from the sector, it looks at the track record of the entrepreneurs and whether they have relevant domain experience. The average period for which it stays invested in a venture is about five years although it could be longer in some instances. 

It expects to make another one or two investments out of its global fund in India. Its next fund, which it plans to raise in early 2008, will have around $100 million earmarked for India. This fund will also be global fund with a corpus of $300 million - $400 million. 

Mandal says the Clearstone is open to smaller investments as well in early stage companies and the investment size could range from half a million dollars to $20 million. In the US, its fund has helped build many companies right from the idea stage, although that has not been the case so far in India. 

Sumant Mandal Managing Director Clearstone Venture Partners 

Company Overview

Clearstone Venture Partners is a venture capital firm specializing in seed and early stage investments. It also prefers to make later round investments in highly successful companies already backed by other venture capital firms with whom it has prior relationships. The firm seeks to invest in technology markets, including software, consumer, enterprise infrastructure, enterprise computing, storage, communications, optical communications, data center, enterprise software, security, wireless, micro-processors, imaging and transformative infrastructure, semiconductors, advanced optics, and consumer and business Internet sector.

With in enterprise software it focuses on New application models & service oriented architectures (Web Services), open source solutions, web-based application delivery models including “software as functional media”, and Microsoft exchange as a platform for enterprise collaboration. In consumer sector the firm seeks to invest in mobile phone applications, wireless multimedia, social networking applied to commerce, and where there is a broad intersection of technology & consumer activity. 

Within communications it focuses on IP telephony, seamless wireless: integration of cell & WiFi, and services. In data center segment the firm seeks to invest in virtualization & utilization for scalability and performance. It prefers to invest in companies located near its offices. For earlier stage businesses, the firm seeks to invest in companies located within a one-hour plane flight of its Bay Area or Southern California offices and for later stage companies, it prefers to invest in Continental United States. 

The firm also seeks to invest outside its region, with a local partner with whom it has previously invested, if it receives a promising proposal. The firm prefers to invest between $3 million to $15 million and could go for further investments in special situations. It seeks to be the lead investor and take a board seat on its portfolio companies. Clearstone Venture Partners was founded by Bill Elkus in 1998 and is based in Santa Monica, California with additional offices in Menlo Park, California and Maharastra, India.

Microfinance Management and Investment Advisory

M2i Founders Chase A Dream; Set Up Firm To Offer Advisory Services To Microfinance Companies.

M2i consulting has been set up to catalyze the growth of microfinance by bringing in more professionalism in the sector. Towards this mission, they endeavor to work with start-up as well-established MFIs, entrepreneurs, investors and donors and provide such services which facilitate integration of microfinance with the economic mainstream.

They bring in best application of modern management principles to microfinance, by continuously assimilating knowledge from diverse fields and by building on the body of knowledge within the microfinance domain. They use rigorous analysis to solve complex management problems, while maintaining absolute clarity in the recommendations they make. Their processes are designed to ensure an intellectually rewarding experience for their clients, as well as, for us.They interact closely with their clients to provide customized solutions. While they emphasize on innovations, they follow them up with rigorous validation and standardization to ensure sustainability of these innovations.

Imagine building a business plan by combining a love for travel, desire to see development in villages, financial acumen and college friendships. That’s what three students at the Institute of Rural Management, Anand (IRMA) did in 2001. Deepak Alok, B Atul and Rajeev Kumar used to discuss how market forces could aid development. One compelling area to look at was the fledgling industry of microfinance, banking for the marginal sections of the society. It was not yet mature, but had all the ingredients of any mainstream industry, they believed.

DEEPAK ALOK CO-FOUNDER, M2I CONSULTING

Microfinance Management and Investment (M2i) Consulting came into being in March 2006and quickly landed a client in ESAF, Thrissur. The start-up advised ESAF on capital structure and conducted training. The success of the first assignment was noted and ICICI Bank soon signed up as a customer.

The company got its first international assignment from Microfinance Investment and Support Facility for Afghanistan (MISFA). M2i assessed the financials of an MFI called Parwaz, which later became its client. More projects came from southeast A s i a n countries and the team had to travel to places like Indonesia, P h i l i p - pines and Cambodia.

Today, M2i’s client list includes Rashtriya Grameen Vikas Nidhi (RGVN), Sadhan, Development Alternatives, ESAF, Cashpor, BISWA, Nirmaan Bharati and Appropriate Technology India (ATI). M2i trains, provides support and management consultancy to MFIs. It also helps these institutions in designing products for their clients — the villagers who borrow money from these MFIs.

Microfinance institutions often find raising capital a difficult proposition, given that the rural banking mechanism is unfamiliar to most investors, including private equity and venture capital firms. Making money in microfinance is itself a challenge and providing corporate advisory services could have been even more so, but M2i navigated through the early difficulty of winning clients by leveraging the prior contacts the partners had. “Initially, we were apprehensive, we weren’t sure how it will work. But, we had the confidence that it was all that we wanted to do,” Mr Bist says.

RAHUL BIST CO-FOUNDER, M2I CONSULTING

The company, which now employs 11, has made profits from the first year of operation in 2006-07. It had a revenue of about Rs 15 lakh in the first year and Rs 40 lakh in the nine months of the current fiscal. It has a profit margin of 10%.

Entrepreneurship makes you an all-rounder, feels Mr Alok. Initially, he had to do everything from writing the books of accounts to ensuring numerous regulatory compliances and most of his time was spent on them. “But, it’s only when you go through this experience that you realise how very discouraging complex regulatory requirements can be for a start-up. Thankfully we now have fairly standardised and streamlined systems.”

Article Resource:
The article appeared in The Economic Times, Mumbai in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".

M2i Consulting