For a man who sparked India’s dot.com goldrush Rajesh Jain sounds unfashionably old-economy. “It’s not easy being an entrepreneur in India. When you don’t have enough money, then you get really creative. People [read dot com entrepreneurs] are not thinking hard enough about how to make money; having a proWt model that works is still the key.” Seven months ago, in November, this 32-year-old Indian engineer sold his four-year-old internet portal, IndiaWorld, to an Indian internet service provider, for an audacious $115 million cash.
The buyer, Satyam Infoway, seemed to have overpaid but its shares soared on Nasdaq soon after, adding more than $600 million to its market capitalization.
That had scores of young Indian entrepreneurs scrambling to set up dot coms. High-Xying executives, bankers and consultants in Mumbai are trashing their prized jobs for a shot of adrenaline and, hopefully, a pot of gold. In a country where businesses are largely family-owned and selling equity is akin to hawking family silver, the deal caused a stir.
TV Raghunath, an investment banker, says: “The new Indian entrepreneur is completely devoid of emotion when it comes to selling his company and that’s a big change.” Musing in his pokey, nameless oYce (opposite parking lot 13) in south Mumbai, Jain shrugs that one oV: “When you are young (only those between 25 and 35 years old qualify) you’re willing to take a bet on two or three years of your life.”
After earning an engineering degree from one of the premier Indian Institutes of Technology and a masters from Columbia, Jain worked on high-speed data networks with Nynex in New York. But having decided that he wanted to live in India he returned home in 1992 to try selling a software product in image processing.
“I couldn’t sell the product commercially – it was ahead of its time – so I went back to the US in 1994.”
There he spent a couple of months in a friend’s apartment browsing the internet and that sparked an idea. “I could see that it was hard for an Indian to get news from India – things like newspaper headlines, stock quotes, their favourite cartoons or cricket scores. It seemed a good idea to set up an internet news and information service targeted at expatriate Indians that could grow into an electronic marketplace for them.”
A clutch of internet sites – samachar.com, Khoj.com, bawarchi.com and Khel.com – targeting what Indians living abroad are obsessed about;Indian news, cricket and food, were launched in 1995 and were an instant hit.
After a spat with the company hosting the sites in the US, he shifted them to India in November 1996. Jain claims that 150,000 people log in every morning and advertising revenues are easier to come by.
But though his company earned proWts, mainly by setting up web pages for companies, the big venture funds such as Bank of America, Chase, DLJ and Walden whom he approached would not bite. They found fault with the business strategy, capital structure and the management team in the company.
“That was my Wrst brush with Wnanciers,” recalls Jain, “More than someone who could write out a cheque, I needed help to build the business. It seemed like a Catch 22 situation – I couldn’t get the money because I didn’t have a management team; and I couldn’t get that because I didn’t have the money.”
In November came the Wrst glimmer of hope. An American portal, Mail.com, sent feelers to Jain to buy a majority stake in IndiaWorld.
Meanwhile, Satyam Infoway, India’s Wrst private internet provider, had just made its spectacular debut on Nasdaq in October. DSP-Merrill Lynch, Satyam’s investment banker, was also advising Jain and got the two to the table. Ernst and Young came in to value IndiaWorld and the deal – India’s Wrst internet buyout – was clinched.
Amit Chandra of DSP-Merrill says: “It’s a great Wt. Satyam needed content and IndiaWorld needed access. Both partners got what they needed.”
But did Satyam overpay? Jain concedes that the oVer from Mail.com helped bid up the price but argues: “Look at it this way – Satyam paid less than 2% of its market capitalization for IndiaWorld and the deal added nearly $700 million to its market cap.”
Apart from a commitment to Satyam that bars him from working for competition, Jain runs the company much as he used to, battling India’s woeful infrastructure.
“I’ve applied for a lease telephone line three and half months ago and I’m still waiting,” he grumbles. But now the thought of $100 million in the bank makes that wait easier to bear.
