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June 01, 2011

Microsoft-Skype Deal in the Works Improves Indian Startup Valuation

Since conception, Skype has been synonymous with quality and value. Being that the service is free, many startup companies have been able to use this to lower overhead. During the week of May 9^th, 2011, the Luxembourg-based internet telephone company was purchased by Microsoft for $8.5 billion. New startups around the globe are excited that (what began as) local technology has been picked up by a major player.

Eyeing Indian Startup Businesses

Startup business owners in India have the most hope. Although many do not have ideas as large as Skype or Facebook, they still hold technology that could be picked up by global technology firms. As the valuation for new technology continues to rise, deals such as the Microsoft-Skype acquisition are having a positive impact on technology and ecommerce firms. Furthermore, this deal will act as an excellent benchmark to assist Indian-based companies in negotiations.

A Large Purchase for Microsoft

Although Skype has never made a profit since its release in 2003, there are on average 145 million users of the service each month. Nine million of who are paying customers. Given the numbers, many analysts feel that Microsoft is paying a rich price which equates to almost $950 per paying subscriber. However, Skype is most popular among small businesses due to convenience, cost and integration into Windows and Office programs.

The Maturing of the Indian Ecommerce Industry

Last year MakeMyTrip.com, an Indian startup company, raised only $70 million for the Initial Public Offering held a $1 billion valuation. This is an indication that the Indian ecommerce marketplace was maturing and has the ability to attract investors from across the globe. MakeMyTrip.com was the catalyst that made the Indian ecommerce industry hot and increases the valuation of technology firms.

Flipkart’s Success with U.S. Investors

Another firm, Flipkart, is one India’s most successful ecommerce companies and has been funded by U.S.-based investors. Other contributing factors were the acquisition of diaper.com and soap.com by Amazon for $540 million. Every acquisition is proof that there has been a steep rise in the valuation of ecommerce organization over the past several years.

With investors looking to other countries for the newest technology and investment, Indian startups are becoming the main attraction. As more are purchase by large firms, the sector will learn how to better negotiate deals and contracts to ensure the maximum valuation is enforced.

Tags: windows,  Ecommerce,  free,  business,  Microsoft,  .com,  small business,  profit,  small business owners,  Microsoft Office,  Microsoft Windows,  SOAP,  ecommerce business,  business owners,  Facebook,  Windows 2003,  global marketplace