Facebook in talks for its first acquisition in India

Being facilitated by iSpirt, deal likely to be announced in weeks

Social networking giant Facebook is in talks to acquire Bangalore-based product start-up Little Eye Labs. Sources close to the development said the deal was expected to be announced in the next few weeks.

It will be Facebook's first acquisition of a product firm in India. It will also be a first for software product think-tank Indian Software Products Industry Roundtable (iSpirt), which has facilitated the deal through its M&A Connect programme, which helps Indian product companies find global buyers.

Little Eye Labs builds performance analysis and monitoring tools that identify and fix performance problems for Android app developers.

When contacted, Facebook said "no comments", and an email sent to Little Eye Labs remained unanswered.

Little Eye Labs is a start-up founded in May 2012 by four Bangalore-based programme analysis geeks - Giridhar Murthy, who has worked at Apple Inc earlier; Kumar Rangarajan, who has worked at IBM and HP; Satyam Kandula, an IIT Kharagpur alumnus; and Lakshman Kakkirala, who has also worked at IBM, besides Yahoo!. Rangarajan is currently the CEO of Little Eye.

According to CrunchBase, a database of technology companies, Little Eye Labs has around seven employees, including Gaurav Lochan, who has earlier worked with Flipkart.

The product company had earlier this year received investment between $100,000 and $200,000 from early-stage start-up incubator GSF Accelerator. GSF's Brij Bhasin is an advisor to Little Eye Labs.

If the deal goes through, this will be a huge leg-up for the efforts of iSpirt, which has been working towards bringing Indian product companies to the global map. When contacted, Sanat Rao and Jay Pullur, both heading iSpirt's M&A initiative, declined to comment on the deal.

Founded in February this year after breaking out of IT industry body Nasscom, iSpirt in May conducted a closed-door meeting with tech majors in the US' Palo Alto. The meeting saw participation of firms like Facebook, IBM, Cisco and VMware, among others.

"Over the past few years, Indian product companies have been developing products to cater to the global market. Also, in the US, there is a rising trend of 'acqui-hires', under which big companies hire smaller players (which could be an Indian product company) and use their manpower resources to work on other products as well," Rao said, talking about iSpirit's rationale for approaching large US companies to look at buying Indian software product firms.

Pullur also pointed out that Israel, a country much smaller than India, had emerged second in terms of M&A transactions in the product space. The idea behind the meeting was to understand why Indian product companies were not on their M&A list. Last year, IBM spent around $5 billion in acquisitions, a majority of that on product firms. Similarly, Oracle spent around $4 billion.

"Discovery is a big issue. We were told they did not know India also had product companies. Also, some said Indian companies lacked maturity of dealing with M&A transactions and there was no ecosystem within the country to showcase product firms," added Pullur.

As part of its M&A Connect Programme, iSpirt launched a hotline for start-ups two months ago. This can be used by product companies if they want to be acquired, or need to raise funds.

"We are doing some match-making for Indian companies and we do actively showcase Indian companies to US buyers," iSpirt's Rao told Business Standard. At present, iSpirt is working on two-three similar deals.