Jai Saxena, from ERNST & YOUNG gives an analysts perspective on how to Build Businesses in a Meltdown. Jai presents as part of the "Surviving and Winning in a Downturn" a one day conference by TiE Internet SiG, Delhi. To catch all the action from the event, visit www.omshare.com (India's first Online Platform for taking Events and Conferences Global) - an Initiative by OMLogic

1. The Indus Entrepreneurs Internet SIG Surviving & Winning In A Downturn Magnolia, India Habitat Centre, New Delhi January 30 th , 2009

2. Internet: Content Usage Trends Likeliness of Using Internet For Different Purposes Top 15 Web Properties in India by Number of Unique Visitors *Increase / Decrease is in Percentage Points Source: Internet & Mobile Association of India (IAMAI) and Indian Market Research Bureau (IMRB) International Communication Likely to Use* Usage Applications 3 5% Invest in Shares & Stocks 1 3% Buy Products 4 4% Access Bank Accounts 6 1% Bill Payments 3 2% Booking Airline Tickets 7 13% Booking Railway Tickets E-Commerce 2 18% Watch Video Clips 2 22% Online Games Entertainment 2 2% Access Government Services (like filing income tax) 3 6% Post Resume on Matrimonial site 1 15% Post Resume on Job site 31% General Information (news, etc.) Informational Services 1 6% Telephone Calls 8 35% Chat 5 75% E-mail 27% 28,886 22,805 Total Internet Audience in India 16% 3,301 2,854 Monster Worldwide 15 46% 3,420 2,336 BharatMatrimony.com Private Limited 14 9% 3,444 3,155 Ask Networks 13 20% 3,841 3,194 CNET Networks 12 - 4,454 - Indian Railways 11 19% 5,020 4,204 eBay 10 55% 5,105 3,295 Naukri 9 21% 5,264 4,353 Wikipedia sites 8 19% 5,948 5,002 Times Internet Limited 7 5% 5,953 5,675 NIC.in 6 - 6,325 - AOL 5 19% 9,246 7,740 Rediff.com India Ltd 4 11% 11,980 10,800 Microsoft sites 3 28% 18,704 14,664 Yahoo sites 2 35% 19,746 14,597 Google sites 1 % Change May 2008 May 2007 Sites S. No.

3. Internet: Usage By Demography Internet is Permeating Into Non Metros 5 Mn 9 Mn 12 Mn 16 Mn 32 Mn 46 Mn 50 Mn Youth leads the internet usage base in India Other metros: Towns with population between 0.5-1 million Source: Internet & Mobile Association of India (IAMAI) and Indian Market Research Bureau (IMRB) International School going Kids: School students above 8 years of age Young Men: Below 35 years and not school or college students Older Men: 35 to 58 years of age Source: Internet & Mobile Association of India (IAMAI) and Indian Market Research Bureau (IMRB) International Place of Work - 60% Home - 55% Cyber Café - 47% 12% 16% 12% Office Only, 20% 6% Cafe Only, 13% Home Only, 21% Source: JuxtConsult Lot of people access internet at office

6. Investment Climate Has Now Turned Uncertain Source: ReadWriteWeb.Com Angel investors have run for the hills They have had their personal wealth impacted They are not diversified like a VC, it is their own money They have no compulsion to "put money to work“ Earning a “carry” is not a motivation Over the next 12 month period - fewer start-ups likely to get funded

7. End Customers Face Severe Credit Crunch Rightsizing across most industry sectors Increase in salaries / disposable income negligible Credit rating downgrades across all personal asset class pools Banks / FIs focused on collections & managing delinquencies Absence of credit facilities leading to lack in consumer demand Falling prices coupled with reduction in consumer spends

8. Global Economic Meltdown: Unpredictable Times Nobody knows what will happen next None of the historical parallels work Corporate earnings across the globe are beginning to slide V shaped economic recovery highly unlikely Advertising markets are shrinking across the globe Retail / e-commerce witnessing sharp downward trend Source: Sequoia “RIP: Good Times” Presentation

10. Strategy Toolkit For Entrepreneurs (contd.) Perform situation analysis. Adapt quickly Use a zero-based budgeting approach Keep cost structures as low as possible Manage cash flows expeditiously. Focus on recoveries & credit cycles Employ a heavily commissioned sales structure Become cash flow positive as soon as possible. Spend every dollar as if it were your last Source: Sequoia “RIP: Good Times” Presentation

11. Successful Strategies From The Last Meltdown Focus on transaction revenue (shadi.com) Reduce dependence on singular revenue streams (online advertising). Generate multiple revenue streams (naukri.com) Create a need based pull model. Build online community across geographies (sulekha.com) Rationalising cost structures (indiatimes.com, rediff.com) Reliance on direct marketing / door-to-door sales campaigns, as compared to costly advertising campaigns (indiamart.com)

12. Strategy For Raising Growth Capital No different prism exists for evaluating online / start-up businesses Not a good time for raising new financing or exits This is a buyers market The reality today is that nobody will raise money or sell out, who does not really need to So, from the investor’s perspective, most deals are likely to be fire-sales Time taken for decision making, likely to be prolonged Source: ReadWriteWeb.Com

13. Strategy For Raising Growth Capital (contd.) Financing for extended periods of cash burn highly unlikely P2P (Path 2 Profitability) will be the key determinant Valuation is not the most critical parameter in these times If you necessarily have to raise growth capital, then get it done & move on If you don't really have to raise money or sell, do not spend another nanosecond thinking about it Source: ReadWriteWeb.Com

14. What Kind of Ventures Are Most Likely To Raise Growth Capital Businesses who set up shop well before the boom (2001 - 2003 era, perhaps 2004) Something starting up right now as everything was imploding Everything in the middle is likely to be riddled with overoptimistic assumptions, expectations of higher valuations from earlier investors Start-ups (established between 2005 - 2007) which either have enough capital to sustain their burn for a couple of years, or are profitable, or very nearly so Ventures who have a strategic fit with existing established businesses most likely to succeed Source: ReadWriteWeb.Com

15. Key Credentials: Transaction Advisory Services People Interactive (I) Private Limited (“PIPL”) Private Equity Placement of USD 8 Million with Westbridge Capital Partners Acted as exclusive financial advisors to PIPL Successfully advised Flight Raja in raising USD 5 Mn in PE financing from NEA IndoUS Venture Capital Flight Raja Travels Pvt. Ltd. Ernst & Young successfully advised People Interactive (I) Private Limited (“PIPL”) in raising USD 8 million from Westbridge Capital Partners. Ernst & Young was the sole financial advisor and assisted PIPL in formulating its pricing and sale strategy, negotiating on commercial terms & advising on transaction documentation Ernst & Young successfully advised Flight Raja in raising USD 5 million in PE financing from NEA IndoUs Venture Capital

16. Key Credentials: Assurance Services Mobile2Win People Group Webdunia.com Indya.com Kreeda Games Explocity

18. Thank You