Snapdeal, Ola investors turn down SoftBank buyout offer

As SoftBank was finalizing deals to infuse capital in Snapdeal and Ola last month, it also made an offer to buyout shares of angels and some venture-capital investors in both companies.

 As SoftBank was finalizing deals to infuse capital in online retailer Snapdeal and taxi aggregator Ola last month, the Japanese internet and telecom giant also made an offer to buyout shares of angels and some early venture-capital investors in both companies, according to multiple sources familiar with the matter. Most of them said no. 

It may not have been an easy offer to refuse as some of these early investors are sitting on returns of 100 times their investment on paper. They, however, see the value multiplying further. 

"I haven't sold any shares so far. If someone is offering a valuation which I expect the company to reach in the next one-two years, then I can think about it," said People Group founder Anupam Mittal, one of the early backers of Ola. Investments like Ola come once in a lifetime, he added. 

Mittal's decision underlines what has become a norm, of early capital investors holding on to their winners in risk capital business where returns come from a few portfolio companies. According to data from financial research platform VCCEdge, Indian e-commerce and online businesses have seen 694 investments totaling $5.56 billion since 2011. But there have only been 45 exits worth $295 million in that time. 

Ola, which is competing with global giant Uber and others in India, has seen its valuation increasing more than 10 times in the last 12 months. When the company announced its second round of funding in November 2013, it was valued at $40-50 million, according to sources. In July this year, it was valued at around $180 million when Hong Kong-based hedge fund Steadview Capital led a funding round. The latest investment from SoftBank gave the four-yearold startup post money valuation of nearly $650 million, perhaps underlining why the early investors are holding on to their bets. 

Besides Mittal, Ola's early backers include investor Rehan Yar Khan, Powai Lake Ventures and Snapdeal co-founders Kunal Bahl and Rohit Bansal. These angels had together pumped in Rs 2 crore in a few months after the company was founded in 2011. These investors are said to be sitting on more than 100 times their investment, which was primarily a bet on IIT Bombay alumni Bhavish Aggarwal and Ankit Bhati's ability to execute their vision. 

"There was an offer from SoftBank to the angel investors but none of them sold. They feel that it's a multi-billion-dollar opportunity now and why should I sell even a single share today," said another person involved in Ola's fundraising. 

A SoftBank spokesperson said: "We are not able to comment on investment details beyond what has been announced." Snapdeal and Ola declined to comment. 

Sources indicated that early VC investors in Snapdeal, which had a post money valuation of nearly $2 billion in the latest round, are sitting on at least 8-10 times returns on the capital invested. These investors see potential for the company's valuation reaching $5-10 billion in the coming years. 

While none of the investors in Snapdeal is completely exiting, Bessemer Venture Partners, who invested in the company three years ago, has made a partial exit in this round. The VC firm sold less than a third of its holding. 

Bessemer had invested in the company in 2011 at a valuation of $170-180 million and could make a profit of around five-six times the investment, said sources. Bessemer managing director Vishal Gupta didn't respond to an email seeking comment. 

Sources familiar with SoftBank's deal making said it typically looks to buy 30-35% in a startup, and usually makes a secondary offer after an initial investment to meet the target. 

"Kunal (Bahl, Snapdeal co-founder) made a request to all the existing shareholders to sell some part of their shares to help SoftBank meet their shareholding requirement," said a Snapdeal investor on condition of anonymity. 

Some of the largest shareholders like Kalaari Capital are holding on to their investment."We believe in the long-term potential of Snapdeal. We are not sellers at the current valuation," said Vani Kola, managing director of Kalaari Capital. Her firm had invested in when Jasper Infotech, Snapdeal's holding company, was still in its early avatar of discount coupon startup Moneysaver in 2009. 

Limited partners, or investors in VC funds, say the venture market is just finishing its first cycle."Indian venture capital is still at the earlier stages of its evolution, with the first 10 venture-backed $1-billion-plus companies just created in India. Therefore, there are a few more years to go for us from now, before we see very good cash returns," said Anand Prasanna, managing director at Morgan Creek Capital. "This is not dissimilar to what we saw in other markets like China.
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Behind Google's Europe woes, American accents

When EU politicians call for the break-up of Google, it can sound like sour grapes, the anti-American backlash of an aging Europe envious, and fearful, of the wealth and growing power of young US tech giants.

But should any American take time on Thanksgiving to scoff at Thursday's non-binding vote in the European Parliament, when lawmakers may urge EU regulators to get tough with the search engine Goliath, they should know that behind the EU antitrust probe of Google stand not only Europeans but US competitors.

Indeed, to many in Brussels it is Google's fellow Americans — such as Microsoft, Expedia and TripAdvisor — whose complaints and big-money lobbying have driven a four-year-old investigation by the powerful European Commission into whether Google abuses its dominance of internet searches to push favored web sites.

"The American companies are using the European Commission as a battleground among themselves," a senior EU official told Reuters. "They are the ones coming to us with complaints.

"They are the ones who are not happy when rivals present concessions and say these are not enough."

US companies like Microsoft, hit by a $700-million fine last year for foisting its flagging Explorer browser on PC buyers, are well aware of the Commission's power in the world's biggest economic bloc. It also may seem more aggressive than its counterpart in Washington, which last year dropped its own case inquiry into Google, concluding the firm had not broken rules.

Three attempts it made to reach a settlement were turned down by EU competition commissioner Joaquin Almunia, who agreed with Google's rivals that concessions it offered to avoid a fine of up to $5 billion were not enough. The case is now in the hands of Margrethe Vestager, who succeeded Almunia this month.

US tech firms "are all playing on a little playing field", said Bert Foer, head of Washington thinktank the American Antitrust Institute. "Naturally they're going to move fastest and farthest in jurisdictions that have more favorable laws.

"While there's not a whole lot of difference between American antitrust law and European antitrust law, there is a difference in enforcement style and aggressiveness right now. So it's not surprising that a lot of the fight is over there. And it's not surprising that a lot of the companies are American."

"It's simply not about one side of the ocean against the other," said Thomas Vinje, a partner in the Brussels office of London law firm Clifford Chance. He is advising FairSearch, a group of firms including Microsoft, Oracle and Twenga in their complaint against Google with the European Commission.


"Never has a competition case brought together such a geographical or industrial breadth of concerned parties. There's just never been anything like it," said Vinje. "Probably never has any company exerted so much power on so many key markets."

Transatlantic suspicion
That is not to say that there is no anti-US animus in Europe, among the public and some politicians. It is a fact Google, which declined comment for this article, highlights in portraying itself at times as caught in Transatlantic crossfire.

Last year's revelations of US spying on the digital doings of Europeans, including even German Chancellor Angela Merkel, heightened mistrust of US power in the digital world — though Europeans still use Google overwhelmingly to search the web.

Google suffered a setback this year when the EU supreme court upheld a "right to be forgotten", ordering it to block links to information if people request it. It also faces legal challenges over copyright fees, led notably by German publishers, and over a variety of privacy concerns.

READ ALSO: US voices concern over EU's proposed plan to breakup Google

Underscoring a sense of siege following the drafting of the resolution in the European Parliament, the US mission to the EU in Brussels issued a statement appealing for objectivity so that the antitrust case was not "politicized".

Vinje, however, said talk of anti-Americanism was overdone and accused Google executives of "pushing the line that its troubles are driven by anti-US sentiments in Europe" to gloss over what he said were real concerns about its business.

Antitrust lawyer Alfonso Lamadrid at the Brussels office of Spanish firm Garrigues said the legal troubles of Google, and other US firms, simply reflected their global success: "It is mainly because in most cases US firms are the allegedly dominant players worldwide. I wish more European firms were in a position to be subject to similar investigations in the US."

Michael Marelus, at the Brussels office of Anglo-American law firm DLA Piper which is not directly involved in the Google case, also played down the political elements of the EU inquiry:

"Politics is clearly and heavily involved in any statement made by the European Parliament and very much so in the parliament's call to consider unbundling Google," he said.

"It would however be unfair to say that US companies are being targeted as such ... It seems that parliament is taking an aggressive stand in considering unbundling Google in the hope of ultimately obtaining a more realistic commitment from it."

The resolution, being debated in parliament, was proposed by a German conservative and Spanish liberal. While the legislature has no power in the matter, and it does not single out Google by name, the call for the Commission to consider separating searches from other services is intended to increase pressure on antitrust chief Vestager to act quickly.

A Danish liberal, she has sole power to decide and has kept her own counsel. Fellow commissioners with roles in the digital market have given mixed signals, voicing concern about monopoly but also rejecting a break-up.

Backed by members of the main center-right and center-left parties, the resolution was expected to pass on Thursday in a vote scheduled after noon (6 am EST)
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Motorola's price-fixing appeal rejected by US court

Judge Richard Posner said Motorola could not invoke US antitrust law because the "immediate victims" had been non-US subsidiaries that had bought most of the LCD screens that carried inflated prices.

A federal appeals court rejected Motorola Mobility LLC's bid to sue several Asian suppliers under US antitrust law for fixing prices of mobile phone displays sold to its foreign units. 

Wednesday's decision by the 7th US Circuit Court of Appeals in Chicago may lessen protections against inflated prices for US consumers who buy cellphones, computers and other products whose components are made outside the country. 

Circuit Judge Richard Posner said Motorola could not invoke US antitrust law because the "immediate victims" had been non-US subsidiaries that had bought most of the liquid crystal display screens that carried inflated prices. 

While Motorola, a unit of China's Lenovo Group, claimed it paid the defendants more than $5 billion during a conspiracy that ran from 1996 to 2006, only 1% of the components were shipped to the United States. 

"Motorola's foreign subsidiaries were injured in foreign commerce — in dealings with other foreign companies," Posner wrote for a three-judge panel. 

"To give Motorola rights to take the place of its foreign companies and sue on their behalf under US antitrust law would be an unjustified interference with the right of foreign nations to regulate their own economies," he added. 

The defendants include AU Optronics, Chunghwa Picture Tubes, HannStar Display, LG Display, Samsung Electronics, Samsung SDI, Panasonic's Sanyo unit, Sharp and Toshiba. 

Some LCD makers have pleaded guilty to US criminal price-fixing charges. Wednesday's decision limits the scope of Motorola's separate, civil lawsuit, which also alleged violations of state antitrust and consumer protection laws. 

The civil case had also drawn concern from the court that Motorola was trying to obtain US antitrust protections even as it shifted tax burdens to other countries. 

Motorola, which is based in Chicago, denied that accusation, saying it repatriated foreign profits and paid US taxes. 

Unfriended
"The court's opinion basically says that Motorola can't have it both ways," said Robert Wick, a partner at Covington & Burling who represents Samsung Electronics and argued the defendants' case before the 7th Circuit on November 13. "Motorola can't be a foreign company for purposes of manufacturing phones, but a US company when it comes to asserting antitrust claims." 

Motorola spokesman Will Moss said: "We disagree with the decision, and are considering our options." 

Posner said Motorola and its customers were only "indirect" purchasers of the LCD screens, and that Motorola's claims were barred under a 1982 law limiting antitrust claims against non-US companies to conduct directly linked to domestic commerce. 

Of the screens shipped to non-US factories, 42% were used in products sold in the United States and 57% in products sold elsewhere. 

The US Department of Justice and Federal Trade Commission had submitted a brief urging that US antitrust law did cover the price-fixing conspiracy. 

But Posner said the government stopped short of saying Motorola deserved antitrust damages, and merely sought assurance that US efforts to obtain criminal and civil sanctions against foreign companies for antitrust violations would not be impeded. 

"Motorola has lost its best friend," Posner said, referring to the government. 

A Justice Department spokesman said the government is pleased the court recognized the "propriety" of its efforts to protect US consumers from non-US price-fixing cartels. 

Lenovo bought Motorola Mobility for $2.91 billion in October from Google, which had purchased the company two years earlier. 

The case is Motorola Mobility LLC v AU Optronics Corp, et al, 7th US Circuit Court of Appeals, No. 14-8003
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Google must apply 'right to be forgotten' globally: EU

European privacy regulators want internet search engines such as Google and Microsoft's Bing to scrub results globally, not just in Europe, when people invoke their "right to be forgotten" as ruled by an EU court. 

The European Union's privacy watchdogs agreed on a set of guidelines on Wednesday to help them implement a ruling from Europe's supreme court that gives people the right to ask search engines to remove personal information that is "inadequate, irrelevant or no longer relevant." 

Google, which dominates internet searches in Europe, has been scrubbing results only from the European versions of its website such as Google.de in Germany or Google.fr in France, meaning they still appear on Google.com. 

"From the legal and technical analysis we are doing, they should include the '.com'," said Isabelle Falque-Pierrotin, the head of France's privacy watchdog and the Article 29 Working Party of EU national data protection authorities, at a news conference. 

A spokesman for Google said the company had not yet seen the guidelines but would "study them carefully" when they are published. 

Pierrotin said the guidelines should be published on Thursday or Friday. 

Google previously said that it believed search results should be removed only from its European versions since Google automatically redirects people to the local versions of its search engine. 

The issue of how far to push the "right to be forgotten" has divided experts and privacy regulators, with some arguing that Google's current approach waters down the effectiveness of the ruling, given how easy it is to switch between different national versions. 

Wednesday's decision was another setback for Google, which is facing multiple investigations into its privacy policy and is mired in a four-year EU antitrust inquiry. 

The ruling has pitted privacy advocates against free speech campaigners, who say allowing people to ask search engines to remove information would lead to a whitewashing of the past. 

Pierrotin also said that notifying publishers and media outlets when their stories are delisted from search results would not be mandatory, as Google has previously argued. 

"There is no legal basis for routine transmission from Google or any other search engine to the editors. It may in some cases be necessary, but not as a routine and not as an obligation," she said.

Google's decision to notify press outlets and webmasters via email was criticized by regulators earlier this year for sometimes bringing people's names back into the open
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Amazon Fire phone gets a price cut again

The price cut, which would last until December 1, is the second for the Fire phone.

Amazon has slashed the price of its Fire smartphone that stalled after launch early this year, becoming a drag on the US online retail titan's bottom line. 

The price cut, which Amazon said would last until December 1, is the second for Fire phone and is included in a set of holiday-shopping season deals announced for items including Kindle e-readers. 

Fire smartphones free of accompanying contracts with telecom carriers are available for $199 and come with a year-long membership to Amazon Prime subscription service which gives customers free shipping and access to music, videos and other online content. 

Fire phone hit the market mid-year at a price of $649 each without contracts, or $200 with multi-year telecom service deals. 

Unlocked Fire phone are compatible with GSM networks provided by US carriers such as AT&T, T-Mobile, Metro PCS and Cricket. 

Seattle-based Amazon in September tried to ignite Fire sales by dropping the unlocked price to $449, and offering handsets for just 99 cents if bought along with a two-year service contract with telecom carrier AT&T. 

While some Amazon products and services have been popular, its smartphone market share has been "effectively zero," according to the Consumer Intelligence Research Partners consultancy. 

Amazon posted widening losses in the recently ended fiscal quarter, raising doubts on whether investors will support chief executive Jeff Bezos's strategy of putting investment ahead of profit. 

Amazon took a charge of $170 million for inventory, mainly for unsold phones. 

Some analysts believe that the US holiday season will test Amazon because traditional brick-and-mortar retailers are responding to the competition with offerings such as free shipping.