Norwest Bets on India Web Site
Red Herring - January 16, 2006

Looking to tap India's $40-billion travel market, a Silicon Valley venture capital firm has invested an undisclosed amount of cash into Yatra Online, a travel web site which will target the subcontinent's burgeoning middle class.

Palo Alto, California-based Norwest Venture Partners made the investment along with Reliance Capital?the venture arm of India's large conglomerate the Reliance Group?and broadcaster TV18.

NVP partner Vab Goel did not reveal the exact amount of funding but said "it is a pretty significant amount."

Yatra is expected to help Indian consumers and businesses book airline, train, and bus tickets as well as make hotel and rental car reservations. Users will have the option to make their bookings online or by using their mobile handsets. They'll also be able to phone Yatra's call centers.

NVP's investment is one of the first by a Silicon Valley venture firm in the electronic travel bookings area in a nation where the travel industry is heavily fragmented. Indian consumers have typically had a hard time finding a one-stop shop for making travel plans.

But Yatra is not without competition. Similar sites include MakeMyTrip.com and IndiaTraveLite.com.

The service is expected to start operating in the first half of 2006. The New Delhi-based company plans to employ 100 people at the time of launch.

"You look at the middle class-their buying power is changing," Mr. Goel said. "In the past, it has been about save, save, save. But now they are getting into the same trend like the U.S. where people want to spend."

Growing Market
The market opportunity appears big. NVP estimates the current spending power of Indian consumers at $420 billion. The firm sees the Indian travel market reaching $50 billion by 2009. Meanwhile, revenue in India's software and services sector is expected to grow to $148 billion by 2012 from $22 billion during 2005, according to a Nascomm/McKinsey report.

There was about a fourfold jump in online transactions and business-to-consumer commerce during the last two years in India, according to the Internet & Online Association of India.
br>NVP's partnership with India's leading corporations has helped the firm gain access to their reach and knowledge of the Indian market, Mr. Goel said.

Venture capitalists at NVP have spent the last three years scouting companies in India for investments, said Mr. Goel. Along with partner Promod Haque, Mr. Goel has made frequent trips to India. The purpose has been to establish ties with bankers, telecommunications companies, system integrators, and startups to build a local network to add value to NVP's Indian portfolio companies.

Most recently, NVP invested $18.8 million in Pune-based product development outsourcer Persistent Systems. The venture firm has previously invested in companies like Extreme Networks, SeeBeyond, and PeopleSoft.

"We are very interested in the consumer and mobile space in India," Mr. Goel said. "Some of the things we are looking for are a strong founding or management team, strong syndication of investors, and high-risk and high-reward ventures."

Yatra was founded by Dhruv Shringi and Manish Amin, executives from one of Europe's popular online travel web sites Ebookers, which was bought by Cendant for $410 million during 2004. New York City-based Cendant is a travel and real estate services corporation that also owns Orbitz.