My Internet Notebook

Venture lenders are playing a growing role in bankrolling Silicon Valley’s latest boom.

As opposed to venture capitalists, who pay cash for equity, these venture lenders generally charge double-digit interest rates on par with the interest payments on high-risk corporate bonds, known as junk bonds. Lenders typically also get potential future stakes in the companies, via warrants that can be converted into equity. The warrants convert to equity if the start-up eventually gets bought or goes public.

They include SVB Financial Group, Lighthouse Capital Partners, Hercules Technology Growth Capital Inc. and Pinnacle Ventures. Such firms typically provide loans of $500,000 to $10 million and sometimes more to fund start-up operations or equipment purchases.

For startups with stable and/or growing revenue, venture lending may be a viable option without diluting the founders’ equity too much.

Chinese wireless communications company KongZhong (Nasdaq: KONG) won the title of the Best Small Cap for 2007 in a Motley Fool contest.

The reason cited for picking KONG was not entirely convincing though. Okay, it is an emerging market and it is a pure play in wireless communication. The competition in China’s WVAS 9wireless value add service) market is just too fierce. It would be a hard press to believe that KongZhong has the winning formula against Sohu, Sina or Tom Online in the wireless market.

The other four are Atheros (Nasdaq: ATHR), Walter Industries (NYSE: WLT), Portfolio Recovery Associates (Nasdaq: PRAA), Syneron (Nasdaq: ELOS).

Full stories, see: And the Best Small Cap for 2007 Is … [Fool.com: Commentary] December 11, 2006

ComputerWorld story: Outsourcing in China
Most providers target the burgeoning domestic market, but a few offer a hybrid approach that appeals to the West.

IDC analyst Eugene Wee says that the Chinese outsourcing market is growing at about 30% annually but was still worth only $586 million at the end of 2005.

Trombly and Marcus are freelance business and technology writers based in Shanghai. Contact them at maria@trombly.com and BillinChina2004@yahoo.com.

An businessweek article about the ‘Bhagavad Gita’ becoming the hip new ancient Eastern management text:

“… Indian-born strategists also are helping transform corporations. Academics and consultants such as C. K. Prahalad, Ram Charan, and Vijay Govindrajan are among the world’s hottest business gurus. About 10% of the professors at places such as Harvard Business School, Northwestern’s Kellogg School of Business, and the University of Michigan’s Ross School of Business are of Indian descent–a far higher percentage than other ethnic groups. “When senior executives come to Kellogg, Wharton, Harvard, or [Dartmouth’s] Tuck, they are exposed to Indian values that are reflected in the way we think and articulate,” says Dipak C. Jain, dean of the Kellogg School.”

Karma Capitalism

Now outsourced tutoring has been increasingly reported in the news: latest from SF Chronicle (Sunday 10/22/2006). One of the India firm Tutor Vista even snatched a $11 million investment from Sequoia Capital.

So how big is the market potential? According to Tim Wiley, senior analyst at Eduventures, an education and research consulting firm in Boston, it is a $2.2 billion private tutoring market in the U.S., which reached 1.9 million K-12 students last school year. Although TutorVista’s ambition goes beyond U.S.

And how much can this outsourcer make? Growing Stars, which began offering tutoring in 2004, serves 400 students who pay $21 to $25 per hour. TutorVista, which started in November 2005 and charges $20 for a 45-minute session or $100 a month for unlimited hours, has 2,000 students and aims to reach 5,000 by next fall. That’s not a lot of money. But they pay only between $300-450 per month to their employees, compared to about $40-$60 a private tutor makes per hour in the U.S.