“In India our strategic goal is to play the role of a catalyst and accelerate the growth of the overall market.”

Atul Vijaykar



Director, South Asia, Intel

“I think that the  biggest

value Intel has brought in, apart from the funds, is paranoia.” 

Anil Bhakt 



CMD, Eastern Software Services

In India, Intel has been in the news for more

reasons than its processor business. One of them has been its venture capital investments.

As of now, the chip giant has invested in about 6-7 companies and many more are in the

pipeline. One of its recent investments has been in Eastern Software Services (ESS), the

company behind Makess–an ERP product for the SME segment. Recently, ESS launched an

ERP product on the internet.

DATAQUEST spoke to Atul Vijaykar, Director,

South Asia, Intel, and Anil Bhakt, CMD, Eastern Software Services, to get both the

investor as well as the investee standpoints. Excerpts: 

What is Intel’s approach toward its

venture capital investments?



As one of the largest technology venture capitalists, our approach is consistent

across the world. There are two fundamental things we look for before making investments

in any company. Firstly, whether the company is in a strategic technology area, as this

blends with our strategic viewpoint. Secondly, companies which are uniquely situated from

a market standpoint to drive the market in any such direction that is consistent with our

medium-term vision. Also, in markets like India, one of our key strategic goals is to play

the role of a catalyst and accelerate the growth of the overall market. 






 A key factor of your venture capital investment is ‘strategic fit’.
Does this ‘strategic fit’ has to be in terms of application or technology?




It is usually a mix and match of both–application as well as technology. Let me give
examples for both the cases. As a company, our vision is to become the leading supplier of

building blocks to the internet economy. However, over and above the services and

products, we also work closely with software developers, who in turn deliver solutions to

the market place. This is the application part. In recent times, a lot of our investments

have been in internet-related companies, some of these are software companies. But there

are other examples also, not in India, where enabling broadband access technology to the

internet is a high priority for us. 






In the Indian context, how does ESS fit into your investment strategy?



We see the internet as something which is shaping and changing things. So, more and

more of our investments are–and will be–in internet-related companies which will

help in accelerating the net adoption rate. One of the other key goals in India is to push

the growth of the overall market and, given ESS’s focus of enabling SMEs, we feel

that this is the segment that is growing rapidly and also holds the biggest potential. So

from both the standpoints, the strategy they were on was of interest to us. 






How much does a venture investment from a company like Intel help a company like
ESS? 




I think that the biggest issue for a small software product company like us is answering
the question: “Are you going to be around five years from now if I am trusting my

data and my backbone to your software?” However, with an investment backing from a

company like Intel, the above and many more such questions are no longer asked. The fact

that we have a world technology leader like Intel backing us makes it obvious that we are

going to be here for a while. Another issue is that since we are bringing our own ERP on

the net, the biggest difficulty for us is to sell the concept to the various ISPs. And

telling them to host a small company’s application becomes a big physiological

barrier for the ISPs. 






Does being in the investment portfolio of a company like Intel imply certain technology
imposition on ESS? 




I think that the big advantage of working with Intel is that they don’t treat you
like a small company. At the end of the day they are more of our partners and less of

investors. After signing the agreement, they have opened up their labs for us, allowing us

to integrate their technology with our software without imposing the same condition on us.

What Intel is offering is a wide gamut of possibly 1,000 technologies and ask us to choose

the best five, seven, or ten or whatever we like and integrate it with our product.

Moreover, the best part is that they give us the technology even before the Alpha and Beta

testing stages. So we have their hardware in our offices and our software in their

offices. Their managers review our software and may suggest a particular technology

fitting well with our product, but again there is no question of them imposing the

technology on us. It is more of an equal partnership that we have. 






Regarding the terms of the agreement, were there any technology, developmental or
financial plans or milestones set for the company by Intel? 




At the end of the day, we are two independent companies. Moreover, since we are minority
investors and also our core competency is not in, say, ERP in the case of investments in

ESS, we cannot decide on the milestones for the company we invest in. But we develop some

tools, certain hardware technologies and we share this information with the companies if

we feel that they have an advantage of some of them. 

Like Atul has said, they are shareholders and

the first question is why we are working together. It is not the question of some plan or

milestones but of Intel’s strategic vision of a billion connected computers and we

fit into that strategy extremely well. We were saying we would have 10,000 SME customers

on the net by the end of the second year of our product’s launch. Intel is more

interested in this kind of thing rather than our balance sheet. On the other hand, they

would say instead of 10,000 get 100,000 customers and now you tell me what you want. 






How did the investment process take place for ESS?



We had heard about Intel’s readiness to invest in Indian IT companies. Since we

were looking for funds, we sent a fax to their Singapore office. Nothing happened for two

months, then somebody called up from Intel and wanted to meet us. During that time our net

initiative was just on the drawing board. We were not even clear as to what will be the

technology and other factors for our product on the net. That’s how we got talking

and, I guess, it made sense for Intel as we wanted to create a new market, as no foreign

ERP company was chasing this market. 





What benefits do a VC like Intel bring to a small company like ESS?



I think that the biggest value Intel has brought in, apart from the funds, is a sense

of paranoia in our company. When we were talking to them and had received the investment
from them, we told them that we are going to launch our product on January 1, 2000. They

disagreed with us on a simple rationale that the date is too far and as every room in this

country has a software company running who knows how many people may be working on ERP on

the net. We had to shave off a few months. They made us actually paranoid and we ended up

working overtime with a goal to launch our ERP product in September at the India Internet

World. 



And I feel that this paranoia really helped us as they know the world a lot better than a
small software company like us. Moreover, I think that the biggest thing for a company in

India with lack of access to funds is the inability to dream big. However, if you get a

partner like Intel, then it doesn’t matter if they give you a rupee or a million, but

I think they fan your aspirations and help you dream big. They tell you to focus on the

global market and not exclusively on the local market. Like for ESS, why should it be just

10,000 customers and not 100,000 customers. 



One of the first things we did after Intel came in as our partner was to put a structure
in place by which the company runs without my intervention while I take care of the

strategy. So paranoia, dreaming big and the ability to continue dreaming big despite a

shortage of funds are the luxuries that have come in with Intel.






So, can one expect to see more such investments in companies like ESS who are porting
on their applications on to the net and will that be the role model you are putting before

the other companies to emulate?




I guess yes. In fact, that’s where the strategic match lies between us and Intel.
Intel feels that there is a reasonably high probability that this would be the model for

the next few years to come. We also think that there is a huge value and probability of

success for companies who can port their applications on the net.



This is one of the trends. In fact, I don’t even want to suggest that this is the
only model but certainly it is the way the trends are visible. Another thing is that there

are always multiple things that drive a market successfully. One is the technology or the

computing model and the other is quality of the product. Even if you have the right

model—the product can end being driven out of the market. Also, you need the right

management team in place. That is a part of the due diligence procedure we would follow as

an investor—the technology part, the management part and the financial part—and

then you make the assessment of the overall fit. 






What is Intel’s venture capital corpus? And is there anything specific for
countries like India?




There is no finite bucket that’s defined and available for the VC investment. As of
date, the rough number in the current portfolio is about 200 companies with a market value

in the region of $4 billion. These are only our VC commitments and not our acquisitions,

which is not a part of the VC corpus. We don’t have any country-specific corpus. It

is completely driven by the opportunities that we identify in a region or a country. We

even don’t have a numeric target, it is more a question of finding the right

opportunity.






Intel has tied up with many small players like CAD/CAM design outfits and internet
solutions providers in the country. Do such tie-ups have some VC interests or is there

some other kind of arrangement?




As part of our strategic vision, in the last half-a-dozen years, we have worked more and
more with software developers. In the current phase, the internet solutions providers have

become more important for us. We are working with a few dozen ebusiness solutions

providers where there aren’t any venture capital investment, but we share some level

of technology and do some marketing or training activity with the company. 






Your tie-up or partnering with companies subsequently result in VC investments in these
companies or are they two different sets of relationships?




Any company where we have invested in has by definition already met our criteria of
‘strategic fit’. Moreover, unlike a banking firm, it is not our philosophy to

have a hands-off attitude in our VC investments. So certainly we would have a deeper

relationship with them. However, the reverse doesn’t necessarily follow. So if we

have tied up with some company for some program, it does not follow that we will also

invest in that company. But there would be some companies that we get in touch with and

get to know them through some other program and find them to be a good investment

opportunity for Intel. 






Do you think that India too can house as many start-ups as Silicon Valley? 



In the past, you must have heard stories about Indians making it to the big league in

the Silicon Valley. What’s special about Silicon Valley is not the technology access

but the abundance of venture capitalists and the general environment. The environment is

so charged up and the need to be entrepreneurial so widespread that one has seen so many

start-ups and success stories about Indians as well as the others. However, the good thing

which I see in India is that some of this fever is seeping in here too. People are no

longer just saying that their dream is to go to the US, but are saying that venture

capital is here and so are the opportunities. This is a very exciting trend. So I expect a

lot more start-ups in India, at least in the IT field, and this is a very healthy trend.

Arun Shankar, Abhay Singh and Yograj VArma 



in New Delhi