Incubating ideas that would grow big

Maverick! This is how six young entrepreneurs (average age 35) who have joined together from diverse fields call themselves. They have also named their company Maveric Systems Ltd to underscore their slightly unconventional approach to business.

Take for instance the ad splurge in national newspapers and magazines calling for ideas they could fund. Not many incubation/seed-funding companies do that here.

Not that they are long on money and short on projects. It is just that they would like to demonstrate their maverick streak. Explains Mr. N. N. Subramanian, 32, director, "We are not just an incubating company. We also target old economy companies to unlock value in their operations through e-strategy. And advertising is necessary for creating a brand equity."

While the team led by Mr. Ranga Reddy, 36, likes to be known as mavericks, others like Indian Railways, the Andhra Pradesh government and big corporates within and oustide India take them very seriously. And very soon, Maveric Systems could be known across the nation. Thanks to the reservation project they could be implementing for the Indian Railways.

The consortium formed by Maveric Systems, along with four other companies, is likely to bag the railways’ passenger reservation project. Some time back the Indian Railways had called for tenders from private companies for net-enabled franchised passenger reservation system, on the lines of a similar system in the airline industry.

"Though a formal letter has not yet been issued to us by the Railways, we have been asked to proceed ahead with the project," discloses Mr. Reddy. The other parties in the consortium are Sun Solaris (hardware company), Polaris Software Lab Ltd (software company), Galileo (the airline-travel reservations software agency) and Deltagram (for satellite connectivity).

Adds Mr. P. Venkatesh, 38, director, "The all India business size conservatively is estimated to be in the region of Rs. 200 crore. The investment outlay will be at the lower level will be Rs 6 crore and at the outer limit will be Rs 12 crore."

As per the current scheme of things, a new company will be floated for the purpose with equity contributions from the consortium members. While Galileo will provide trade expertise, Deltagram will offer the satellite connectivity and its communication centres will also be used for vending railway tickets. The other bidders for the project were EDS, Reliance, CMC, and Wipro.

Apart from the Railways, the Andhra Pradesh government has placed its faith in Maveric Systems to assist it in its e-strategy. Remarks Mr. Subramanian, "our age has never been an handicap for us. On the other hand it is helping us as old economy companies are more interested in getting the value for their money and are not bothered as to who delivers that to them."

Retail is another segment the company looking at for its e-strategy accelerator service. Maverick Systems' US office is offering solutions to medium and small sized retail chains to optimise space and inventories. The company also claims to offer its services to corporates like Citibank, Altech, and Sunrise Systems.

Incubating ideas that would grow big

Notwithstanding the above Maveric Systems is becoming popular due to its incubation activity. Its incubation strategy is structured similar to the technology holding companies in the US but with a slight difference. "In the US, a technology holding company is more of R&D related and commercialisation of the same," remarks Mr. Venkatesh.

More than funding, hand holding and technology, an idea needs networking to realise revenues. In other words if an idea adds value to some other company's activity Maveric System will link the entrepreneur with a corporate, remarks Mr. Venkatesh.

As a policy Mr. Reddy and his team have decided to incubate only those projects that are related to retail, multimedia, banking and financial services.

With an equity base of Rs. 5 crore - 45 per cent owned by Mr. Arun Jain, chairman and managing director, Polaris Software and the remaining contributed by the six directors- Maveric Systems can also access $2 million line of credit from Mr. Jain.

"This sum will be off our balance sheet and will be directly drawn by the incubated company from Mr. Jain," explains Mr. Venkatesh.

As a policy Maverick Systems will restrict its investments in a start up to 33 per cent of its equity or Rs. 50 lakh, whichever is lower. Moreover its funding will be milestone-based in order to achieve its main strategy of accelerating a project from the seed stage to the marketing stage.

While venture capitalists talk about a success ratio of 1 out of 40 projects funded, Mr. Reddy is sure of achieving more than that.

When it comes to exiting a project he says that Maverick Systems will withdraw from giving management inputs to the entrepreneur from month-18 onwards. "While we hope to get at least 22 per cent appreciation on our investment there are others on our team who are more ambitious," he says when asked about any capital appreciation targets.

Some of the projects assisted by Maverick Systems are:

• Studentsconcepts.com, which links retailers with the students/youth community

• Justvox for voice enabling

• Fujini for digital imaging

• Pratyannyaya, which is essentially a teacher training project

Except for the teacher-training project other projects are related to the company's focus. "We did that for reasons other than profits since Pratyannyaya is involved in upgrading teachers’ skills via CD-ROMs, video films. The project is currently on in Andhra Pradesh."

Maveric has recently grabbed media attention with its involvement in a yet-to-be-named multimedia project promoted by couple of IIT-Madras graduates, in which several high profile investors – like the International Finance Corporation, Delhi-based broadband company Spectranet and Bollywood superstar Shahrukh Khan – have reportedly shown interest in investing.

Says Mr.Reddy, "It is the press that is calling the venture as Maveric Multimedia, whereas the name is yet to be frozen."

Adds Mr. Bikash Mathur 35, executive director, "We are in the process of choosing a catchy name for the company. Right now it is a small entity trying to bring in people and yet to start generating revenues." The outfit has poached several leading people from Pentamedia Graphics Ltd., the country’s leading film animation company.

Denying the news reports on equity holding, Mr. Reddy says that concrete business plans are yet to be finalised. The entrepreneurs of the multimedia outfit have to decide on the stakes to be offered to strategic investors like IFC, Spectranet and Mr. Khan.

"IFC is reportedly willing to invest up to $5 million provided the company is engaged in an export activity," adds Mr. Reddy.

According to Mr. Reddy, the incubated company will primarily engage in 2/3D animation business while looking at the possibilities of floating another company partnering IFC, Spectranet and Mr. Khan to be in the video streaming business like Num TV and Sharkstream.com.

While the proposed joint venture company will source content from Mr. Khan's company, Dreamz Unlimited, which owns the rights for several Hindi films, the backbone/bandwidth to stream the video will be that of Spectranet. The promoters of the multimedia company will offer the conversion technology needed to stream the content via net. "The various plans are under discussion," is only what Mr. Reddy is willing to divulge.

Speaking about the video streaming business Mr Mathur says that the company would use the latest component warehousing technology offered by a US based company.

"The modern technology will reduce our time to market. Dot TV is going to be big market as dot com," concludes Mr. Mathur.