Those Who Dare Win

In August-end 1996, a four member
group from BFL Software Ltd, led by Anant R Koppar decided to do something on their own.
When they found their creative abilities and talents hitting saturation point at BFL, they
opted to start a company-motivated by the idea of being employee owners. With just ideas
and a team of two technical, two HR and one marketing personnel, they knocked at the doors
of some big companies for some projects. "We found that the big software companies
had the traditional bankers’ attitude. Moreover, we had no collateral to offer, just our
skill set," says Koppar, looking back at Kshema Technologies’ beginning.

Deciding that there was no other
option left, they took the VC route. They submitted a proposal to Bangalore-based Sivan
Securities with an original plan for Rs8.5 crore seed capital. "It took Sivan nearly
a month to get back to us. But once they decided to fund the project, the rest of the
formalities were completed in quick succession. Within three months we had closed the deal
and were on our own," says Koppar. And probably it was the first of its kind of deals
in India, where a VC funded the seed capital for a software start-up.

Taking the
plunge

On August 1, 1997, Kshema Technologies Ltd was born with a staff of eight. Four of the
eight were Koppar; Anand Mutalik, VP, Technical; B Joseph Louis, Head, HRD &
Facilities; and Sampath of Arpita Consultancy. The negotiations, meetings and discussions
with Sivan resulted in the original fund plan of Rs8.5 crore being pruned to Rs3.5 crore.
The result-Sivan pumped in Rs2.5 crore and the rest Rs1 crore came from a term loan from
the Global Trust Bank. Sivan was instrumental in arranging the bank loans and even
standing guarantee. "The money we took was for infrastructure development, while
within four months we were able to manage the working capital from internal accruals. In
the first eight months we were able to repay Rs10 lakh of the term loans," says
Koppar. The deal was structured in such a way that 27% was with the partners, 12% was kept
aside for an employee stock option plan, 12% for a marketing partner and 49% for Sivan.
The money was basically for infrastructure development, marketing expansion and to expand
the floor space. Here, too, Sivan played an important role by identifying the building and
helping them occupy it.

On October 1, 1997, Kshema bagged
the first project worth $3,500. It was a small step for the big leap forward. A contract
worth $140,000 was signed in December 1997.
Inherent strength

The company that started off as a
pharmaceutical warehouse with a single mobile phone as their communication link and six
customers in its first fiscal year, grew by leaps and bounds. With a 128Kbps satellite
link and 18,500 square feet of fully built-up floor space, the company recorded a turnover
of Rs9.15 crore in the 1998-99 fiscal. The first six months of the current fiscal has
shown a turnover of Rs9.73 crore with over 30 customers. Its target is to achieve Rs25
crore by the end of the current fiscal. Its growth of a phenomenal 810% proved to be an
advantage when they went for the second round of VC funding. The IL&FS Venture Corp
and Citicorp Finance (India) together picked up a 17% stake in the company with an
investment of Rs15 crore. Kshema plans to use these funds for market expansion and for
acquiring a US-based company. The second round of funding was in the form of preferential
shares to be converted at the end of the current fiscal, subject to the company achieving
the set target of Rs25 crore. Kshema also plans to go public in 2000.

Sivan Securities were attracted by
Kshema’s people, their experience, the team concept, their marketing and delivery model to
give the complete seed capital. "The industry was growing and this team had inherent
strengths with past experience that made us pitch for it," says Monish Gopinath,
Director, Finance, Kshema. The VC brought in the financial strength, while the team had
the technical and marketing skills. Kshema plans to increase its workforce from 250 to 450
by the end of this fiscal. "A company that is based on human values, integrity and
honesty is what we have envisaged. And that is what we are trying to strive for,"
says Koppar candidly.

Kshema’s success story scripted by a
VC is an eye-opener. Another VC-funded success of a knowledge-based company with a strong
team and inherent strength
.

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