Feb 23, 2015

There is little that can withstand a man who can conquer himself Louis XIV

BLUME VENTURES FUND I + IA ~ QUARTERLY INVESTOR LETTER

Investment Scheme:
Report Period:

Multi-Sector Seed Capital Fund

Jul 1 to Dec 31, 2014

This Quarters Investor letter comprises of A) Market Commentary, B) Fund Update,

C) Portfolio Companies Update and D) Investment Details
Schedule for 2015 Quarterly Reports
I.
Feb 15 H2 2014 Report (ending Dec 31, 2014)
II.
May 15 Q1 2015 Report (ending Mar 31, 2015)
III. Aug 15 H1 2015 Report (ending Jun 30, 2015)
IV.
Nov 15 Q3 2015 Report (ending Sep 30, 2015)
Half-yearly reports will layout a more detailed state of the Fund (part of which is
purposed for wider circulation) while Quarterly reports will focus on financial
performance of the Fund and Mark-to-Market (MTM) etc. (meant for the Funds
investors Only)
A) Market Commentary
B) Fund Update
C) Portfolio Companylevel Business Updates
D) Portfolio Investment Details
Investment data: Funds deployment of capital into each of the portfolio companies,
including bridge / follow-on rounds
Section D) is strictly confidential and meant for Investors ONLY there will be 2
independent Reports for Fund I and Fund IA investors

Note: We appreciate and respect investors feedback and continue to work towards incorporating it
gradually into the reporting process, to enhance the quality and quantity of information for all Investors.
Please send us feedback regularly.

kvaa3@yahoo.com

Dear Blume Investors,

SECTION A: MARKET COMMENTARY
Indias Chance to Fly

Borrowing from the Economist cover this week, its apt to suggest that this present
moment is Indias Chance to Fly.
It comes with a giant pre-condition: the Government has to allow the innovation-led
economy to break free from the shackles of its onerous rules of doing business. The
rank #142 in ease of doing business across its global peers is but a shame for an
economy thats aspiring to be in the top 3-5 countries (within 3-5 years) in Total
Internet users, GDP growth, Mobile (& Smartphone) penetration.
As the Economist suggests, if the government made it easy to draw local capital and
local talent and not burden them with wasteful regulation and layers of taxes, the
entrepreneurial spirit and technology prowess of the country can transform the country
across many sectors over the next 10-15 years.
If there is a possible pecking order in economic savvy, its probably:
Indian consumer > Indian SMB owner > Indian Startup > Indian Enterprise > Indian
investor > Indian Government
And we can hazard a guess that this will hold true for quality of Technology Adoption
as well since its a good proxy for how each of the above market participants optimize
time and economic benefits.
More powers to the above order = more accelerated the progress of Indias flight

kvaa3@yahoo.com

Learnings from 2014 and Outlook for 2015

Go BIG or Go HOME
This is pretty much the theme for the year across the Blume portfolio. While it was
touted in the popular press and credited to Vijay of PayTM, Valerie of Zipdial in our
portfolio was also a proponent of the phrase for a few years now and it became the
rallying cry for the portfolio at the beginning of the year. It helped that Twitter has
now purchased Zipdial!...and given credence to what Val set out to achieve with Amiya
and their team.
The idea was NOT to suggest that there are only two polar outcomes i.e. GO BIG = a
multi-$100 million sale of the business or GO HOME = the painful alternative of
shuttering down. It was to suggest that everyone think afresh and push limits to
achieve their best possible outcomes.
Go BIG was to push our founders to play for the outsized outcome and their stretched
capabilities. Imagine disruption and scale as one possibly can without cash as a
constraint (humor yourself for a fleeting moment) and then see if one were executing
their ideas to their fullest potential or shortchanging the opportunity that they
themselves created. This was the Go Big theme.

The second variant of the Go Big theme was to be cognizant of the current market
environment and maximize / optimize gains for all stakeholders. Zipdial made it so
easy to explain this by scripting their exit story. It was not a multi-$100 million
outcome perhaps, but it was near perfect on many counts.
-

kvaa3@yahoo.com

the founders discovered last year that only a Strategic investor can see the true
potential of the idea and the scale at which it can impact its audiences
ZD worked with several such partners, most prominently Facebook and Twitter
It demonstrated that the missed call was but a calling card for the company, but
not the business model any more and it took forward-thinking emerging marketfocussed giants like TWTR and Facebook to get the Big picture
On the back of a commercial partnership, the conversation became much more,
and eventually led to an acquisition
It meant that most of the ZD team gets to work with a world-class company and
builds innovative solutions as it did but to audiences that are larger by a huge
factor
The founders will earn their rewards in the short, medium and long-term in
more ways than monetary
All shareholders made smart returns with large multiples on their cheques

The Go Home message is a little bit more nuanced. Its easy to be cynical and simply
assume that the minute the bank account gets depleted, its time to pack up and leave.
However, weve seen that 2-3 years of effort means that there are enormous learnings
at the founder level, great teams have been built and sometimes, great products. Is
there a way to salvage that value and absorb it into a Bigger Home rather than killing
all of it and walking away with just the experience? We think so and were proud to see
a lot of our founders at least attempting to do so.
These are not choice sets for just Blume founders. I think every early stage founder
(and at times, even post-Series A/B/C companies) would benefit from constantly
reviewing his or her startups within this framework.

The Vinglish Internet

The Fund Investment team believes in the rapid movement to everything needing to
Mobile-first and, in some cases, even perhaps Mobile-Only. This thesis is further
strengthened by the fact that 200-300 million first time Internet Users will be added on
the mobile device directly and a large percentage of them will not have the benefit of
English as a primary language. This calls for a new chapter in Indian Internet and
content. The Vernacular-English blend is what we term the Vinglish Internet.

Blog related to this @

http://yourstory.com/2015/01/india-2015-english-internet-vinglish-internet/

The Surge of (Foreign) Capital for Consumer Internet

A staggering amount of capital is being brought into the country, not just simply to bet
on the teams that are building very interesting solutions around consumer problems in
India but the capital is arguably ahead of the curve in terms of valuations and capital
required. This, in some parts, has the characteristics of what would be termed as a
bubble.

kvaa3@yahoo.com

We think that there are some shades of the bubble but the charge is simply not being
led by hedge funds and hot money. The surge is being led by strong constituents like
Alibaba, Softbank, Google Capital and Tiger, looking to replicate the successes of
similar stories in China. Some of them are setting up physical offices here (see above)
What these players are able to do is fundamentally accelerate the pace of adoption and
user behavior change in markets like local commerce, local delivery, micropayments,
services marketplaces such as cabs and temporary labor etc. Coupled with the advent
of powerful handsets and imminent upgrade of networks, we think the Mobile will
become the most powerful consumer good ever.
This in-house infographic gives you a sampling of this frenzy - Witness the surge of
valuations and the belief in the India Internet story. 15 months ago, half these
companies didnt belong in these circles and the other half of them were 1-2 circles
lower than where they are today.

kvaa3@yahoo.com

Its not about just Making in India, its about the Innovation in India
Despite the bullishness around the consumer (and the small nimble
entrepreneur/SME) suddenly doing everything through a mobile Internet device, we
still believe that true world-class innovation is being overlooked. Most of the large
cheque writers whove entered the market so far are not looking at this segment
necessarily they are here since they believe in the Indian market potential. The
Indian innovator-entrepreneur offers a significant opportunity to conquer regional and
global markets and Blume is a big believer in this theme.

Half of our Fund I portfolio reflects this belief and we think our Fund II portfolio will
continue to reflect this trend.

Blume Fund II
Clearly, we are bullish about both the India consumer and small business theme
(where usage will be dominant on mobile devices) and we like Indian innovation that
can be exported overseas. Taxiforsure, Zopper and Purplle all built or are building scale
on the former while Zidpial, Grey Orange Robotics, Carbon Clean Solutions etc. are
leading the charge on the latter.
With these examples of early success in the current portfolio and with a strong thesis
around these investing themes, Blume Venture Advisors have launched their fundraise
in the overseas institutional markets for a $50-60 million fund. We would be keen and
pleased to see all our existing investors participate deeper into Fund II (we are in the
process of setting up a domestic structure as well). We continue to be fiercely focused on
seed/early-stage investing which is not a distinct focus area for most funds in the
market. And we think our brand strength will continue to drive some of the best tech
company founders to work with us not just for the next few years, but for the next few
decades.

kvaa3@yahoo.com

SECTION B: FUND UPDATE

Section B highlights the companies where a material positive event has occurred (all
financial implications will be covered in the financial section of the Report). This list
does NOT include Bridge Rounds led by Blume and or peer seed round investors.
Com pany N am e

Event

Investor(s)

Series As & more

Hotelogix

Series A / Series B

Accel* / Accel + Saama

Mettl

Series A

Kalaari*

Mobstac

Series A / Series B

Accel* / Accel + Cisco *

Zopper

Series A / Series B

Nirvana* /
Tiger Global + Nirvana

Taxiforsure

Series A / Series B / Series C

Accel + Helion * /
Bessemer + Accel + Helion * /
Accel(US) + above 3

Covacsis

Series A

Reliance GenNext + Cisco *

Grey Orange Robotics

Series A

Tiger Global*

WeAreHolidays

Series A

Matrix*

Instamojo

Series A

Kalaari

Hashcube

Series A

Nazara Tech *

Purplle

Series A

IvyCap Ventures *

Nowfloats

Series A

Omidyar Network *

Tookitaki

Series A

Jungle Ventures + Rebright *

Qubecell

Acquisition (company)

Boku

Adepto

Acquisition (asset) #

Kuliza

Gharpay / Clink

Acquisition (asset) #

Delhivery / Ezetap

Skoolshop

Acquisition (asset) #

Hopscotch

M&A / Exits

kvaa3@yahoo.com

Karmic

Acquisition (asset) #

Cliantha

Moneysights

Acquisition (asset) #

Times Internet

Zipdial

Acquisition (company)

Twitter

Note:
* indicates that Blume participated in the round;
Text in BLUE indicates that the latest event occurred in the 6 month period preceding
this Reports Quarter ending date OR has been publicly announced prior to publishing;
# indicates that the there was a positive event but the value exchange (at least at the
time of the event) was less than the value of the original Investment i.e. <1x
2014 Scorecard
At the same point last year, we had stated an anticipated performance uptick, basis
uprounds:

We would like to share our 2014 outlook. We anticipate the portfolio to deliver:
8-10 Series As (in addition to the existing 6)
2-3
Series Bs (from the existing 6 that raised Series A pre-2014)
2-3
Small acquisitions/exits (in addition to the 2 that happened in 2013)
1-2
Tiny specks on the horizon, probably Blu Swans (subset of the above A/B list)
We are pleased to announce that we ended CY2014 at the following counts:
(counting signing/announcement spillover to Jan 2015)
* 8 additional Series As Completed
(GreyOrange, Covacsis, WeAreHolidays, Instamojo, Hashcube, Purplle,
Nowfloats, Tookitaki)
* 3 Series Bs (Zopper, Taxiforsure, Hotelogix)
* 1 Series C (Taxiforsure)
* 1 part-secondary exit + 4 full exits (sales of assets, even if not material to returns) + 1
Grand exit (Zipdial)

2015 Goals
We are even more ambitious this year. We are on the verge of completing 4 years of the
Fund and we think most of our residual star potential from the 2011-2013 Vintages of
the Fund will breakout this year.
These are our goals for the CY 2015 (we will count Feb 1 completions and onwards)
10-12
Series As (in addition to the 14 achieved to date)
4-5
> Series As (in addition to the 5 achieved to date)
3-4
Positive Exit Outcomes Company Sales (in addition to 2 to date)

kvaa3@yahoo.com

SECTION C: Portfolio-Company Level Business Updates

Notes to Section
BLUME ALPHA Group
This comprises of
a) Lead Investments
b) Syndicate Investments where total exposure in the seed round or Seed+Followon rounds has exceeded INR 10 million (Rs. 1cr or 1% of the Funds Capital)
BLUME BETA Group
This group list continues to shrink. More Syndicate investments have
- either moved to the ALPHA Group - since the BETA companies begin to perform
and Blume invests more in a Bridge or a Series A round to increase its exposure
- The company doesnt progress to the next stage and the position is written down
The exhibits present the State of the Portfolio
EXHIBIT 1A / 1B : A CITY-WISE representation of the portfolio and the division is
along the lines of the Alpha/Beta groups as described above
Since Additions to the portfolio have stopped, we are showing the Portfolio Companies
that have raised Series A (and above) and significant Second Seed Rounds on the Maps
using Green and Blue colors respectively.

kvaa3@yahoo.com

EXHIBIT 1: GEOGRAPHIC SPREAD of PORTFOLIO, by City

1A: BLUME ALPHA Group

kvaa3@yahoo.com

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1B: BLUME BETA Group

Section C Addendum [attached separately]

A comprehensive Addendum has been designed to be a ready reckoner to the portfolio,
a Directory of sorts, which is ONLY shared with Fund Investors and select VCs. All of
the Actively managed BLUME ALPHA and BETA Group Companies are covered in
this Addendum
(*Alpha and Beta are classifications from a Risk Management perspective for Blume Fund I and
represent investments where total aggregate investment is greater than and less than 1% of the Total
Fund, respectively).

kvaa3@yahoo.com

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D) Portfolio Investment Details

[Attached as a separate file]

Sincerely,

Karthik Reddy and Sanjay Nath

Co-Founders and Managing Partners
Blume Venture Advisors Pvt Ltd.

[Blume Venture Advisors Pvt Ltd. is the Fund Manager for Blume Ventures Fund I, a SEBIapproved Domestic Venture Capital Fund]

kvaa3@yahoo.com

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