Jishnu Bhattacharjee, Nexus Venture Partners: “We’re very bullish about product tech companies in the cloud & mobility space.”
We’re catching up after Nexus’ biggest exit till date. What are your thoughts post Citrix Systems’ acquisition of Cloud.com?
(laughs) Clearly, it’s a great outcome. I mean, it’s an exit in about two years of investing in Cloud.com and honestly, if it wasn’t sold now, then it would’ve definitely been worth several billion dollars over the next few years. But Citrix made a very compelling offer. And I think the best bit about this acquisition is that there was no pressure from our end to sell. I think Citrix also saw that waiting could prove costly. And it’s a deal that’s turned out to be very meaningful for all the stakeholders. It all happened so fast. Cloud.com attained market leadership at a blistering pace. They built such a robust product in such a short span of time and I think those factors helped their case.
Nexus got into Cloud.com in Q2 2009, when “cloud” wasn’t such an integral part of technology parlance. What did you see in that space and in Cloud.com?
See, Cloud.com isn’t consumer play. It’s heavy-duty enterprise play. Look at their customers. Tata Communications’ InstaCloud is entirely based on Cloud.com’s offerings. Their customers are businesses running machine critical stuff. Zynga is one of their largest customers. Now, Zynga used to be heavily dependent on AWS. They went looking for alternatives, spoke to everyone and selected Cloud.com. And within a couple of quarters, Cloud.com was beating all forecasts.
Actually, Netmagic, one of our investee companies, pointed us out to Cloud.com. On-demand storage and computing was becoming big and AWS came in from nowhere to capture the space. I mean, the benefits were very clear. With on-demand storage and computing, capex requirements fell and it was best for spiking, unpredictable requirements.
We began to see traction in the space as well. As you mentioned, cloud wasn’t a fad then. AWS had the brain power and a huge lead time of two to three years. So, we set out to find alternatives as to who could do what they did, quicker and better.
They had some seed funding. So, we waited for a while for them to be series A-ready. We invested in May 2009. And I think it really helped that Sheng saw the public cloud as low-hanging fruit. They targeted that and then, they made their move on to the private cloud, which is an even bigger market.
According to you, what are some of areas where Cloud.com managed to get it right?
If you look at how cloud solutions are built, there’s a virtualization layer and then a management layer. That is very different from building it holistically or organically. Cloud has to play roles in both sets. Everything has to scale seamlessly. When the cloud is getting provisioned, user requirement also has to be kept in mind and Cloud.com understood that. In addition, they opensourced a part of the stack, which really drove adoption. And they had a proprietary stack as well in terms of the management layer. These are some of the things that worked for them.
Nexus has invested in a number of cloud companies like Gluster, Aryaka, etc. The figure is about $50 million in cloud alone. Clearly, it’s a space that you’re betting on. Can we expect to see more such investments in this domain?
Well, when we invest, we put in some money and commit some more. The figure that you mentioned is a summation of that. At Nexus, we’re trying to find answers to some very interesting questions. For instance, how would you scale petabytes of unstructured data like photos or music files? We’re always looking at interesting solutions. You had mentioned Gluster. They’re open-source. So, scaling is easy. That’s the genesis that we saw. We’ve been spending quite some time with infrastructure-level cloud companies like Gluster & Aryaka. Now, we’re also interested in platform-level cloud companies. For example, a cloud to run PHP or Ruby on Rails apps is something we’re looking at. We’d like to see innovations that help turn apps that run on static infra to run on-demand. There are also interesting SaaS apps on the radar.
What’s really exciting is cross-platform. We’re very kicked about cloud and mobility. But there’s synergy there. We’d be very happy to see stuff at the intersection of both. We’re also looking at social media technology. Social-within-enterprise is also something that’s very interesting.
What are your views about the product technology startup scene in India?
There’s no doubt that some great product companies are being built out of India. But what we’ve noticed is that building something of global scale might make more sense, simply because the indigenous market might not be large enough. We’re an India-focussed fund. We invested in Cloud.com because, honestly, we saw scope for it in India. DimDim (open source web conferencing platform that Nexus funded, was acquired by Salesforce.com) was built out of India and sold outside India.
India isn’t an early adopter market. We go for the tried and tested stuff. So, if you’re doing something out of the box, how would you validate it here? I mean, if you can do it, nothing like it. Our advice is, try to test it in the market here and try to go global as soon as possible. Of course, the product has to be robust and you’ll have to figure out the best market for your product.
But there’s no set method to zero in on the best market, is there?
Bouncing off the idea to people will help you find the market for your idea. For that, there are people like us and angels from the US. Once you figure that out, you can see where it makes sense to focus your resources. If you see adoption outside India, then you can structure things accordingly. I mean, look at Israel. The indigenous market is so small that it doesn’t work for them from day one. So, by default, they try to head out and set up sales offices abroad as soon as possible.
So, “make it in India, sell it abroad” seems to be catchphrase, with respect to product companies.
The question is, why not? Five to seven years ago, only services attracted cross-border investments. But that’s changed. We at Nexus are very bullish about product tech companies. And for that world to develop, we need a more qualified angel ecosystem here in India.
And with respect to building products in India, I can give you examples out of our own portfolio. Gluster is being built out of Bangalore. In the case of Eka (which provides software that helps companies trade in commodities), almost everything’s built of India and most of their customers are overseas. Pubmatic (real-time bidding platform to enable publishers to optimize revenue across their non-guaranteed inventory) is being run out of Pune.
We’ve been in the business for about four and a half years. There are several examples of great product companies being built out of India and selling abroad. And cost arbitrage is not the only reason, any more. It can’t be. That’s simply not sustainable. There’s a need to differentiate on the core IP. One of our portfolio companies, Sedemac (which provides mechatronic solutions for small engines) is finding decent traction here in India itself and they’re also doing well abroad.
With Cloud.com, DimDim & OLX, Nexus has had three exits so far. How does the roadmap look? Are more exits likely in the near future?
In the next 24 months of so, we’re going to see a few interesting exits. Having said that, exits are far more difficult to predict than, let’s say, funding. But a good trend here is that many US companies are cash-rich today, having really tightened their purse strings during the recession. And now, with things looking up, they’re willing to buy. If you look at the big guys, Google, VMWare, Cisco, Oracle, etc. are all acquiring companies. There’s definitely a lot of appetite for innovation.
Exit scenarios have improved in India. The MakeMyTrip IPO has given a huge boost to the internet market. The IPO market would continue and should do well. In the product tech space, most of the exits will be via strategic acquisitions. The buyers will come from abroad and considering that they’re all more willing to spend now, it’s a good time to be out there.
We at YourStory are extremely excited about the buzz around product tech companies in the cloud & mobility space and we believe that this could be the tipping point for more such deals and eventually, global scale for Indian tech products.
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Sriram Mohan | YourStory | 19th July 2011 | Bangalore