Pramati Tech in talks with Khosla for third round funding

The company is seeking to raise $5mn

Pramati Technologies, the city based application server technology developer is in talks with US based venture capital firm Kleiner Perkins Caufield & Byers (KPCB), for its third round of funding. Vinod Khosla, who heads KPCB, met Jay Raghavendra Pullur, the founder and CEO of Pramati during his two day visit to the city last week.

"I met Khosla not just for investment presentation but to discuss with him on how to promote product companies in the country," Pullur told Business Standard.

Pramati is trying to raise a third round funding of about $5 million. It raised $6.5 million VC funding earlier in two rounds. The company's existing investors include Citibank NA, Intel Capital and k1 Ventures which have invested $6.5 million in all in two rounds in December '99 and July '01.

The company is already in talks with a couple of other US based funds and with KPCB evincing interest, it hopes to close the funding within the next three to four months.

KPCB's Khosla is also understood to have shown keen interest to invest in a couple of other start-up companies. Khosla, at a press meet here on Friday, admitted to meeting two start-ups located in the Genome valley, the names of which he declined to divulge.

"Khosla was keen to understand what are the difficulties being faced by the Indian product companies, why things are not happening in their favour and what are we doing to correct the situation," Pullur said. Many US based VCs are keen to invest in India and Khosla advised us to catch hold of these opportunities, he added.

Earlier addressing The Indus Entrepreneurs' local chapter, Khosla said that the outsourcing backlash in US was a short term phenomenon. Outsourcing is a decision to be taken by the CEOs of organisations and not by the politicians. Economists say that outsourcing is beneficial for both the countries, he said.

It is estimated that because of outsourcing, 3.3 million jobs will be moved out of US by 2015. More importantly, one should keep in mind that without outsourcing, US lost 3 million jobs in the last couple of years, he pointed out.

For every job outsourced, US companies can save about $50,000 per annum, which results in a savings of $150 billion for the estimated 3 million jobs, which straight away will get added to the bottomline of these organisations.

Assuming a conservative price-earning (PE) multiple of 10, about $1.5 trillion of wealth will be created for the shareholders in US, Khosla said as he put-forth a case for outsourcing.

Arguing in favour of outsourcing, he said that the US government today spends about $5 billion on research and development while it spends $35 billion on agricultural subsidies.

If the (US) government cuts its subsidies and spends that money on innovation, more jobs can be created than lost in outsourcing. India can counter the US backlash by fighting for 'free trade in outsourcing' at the WTO level, he suggested.