VC funding fuels 24/7 Customer growth

By Kalpana Shah

Economic Times, MONDAY, JAN 19:In seven months since 24/7 Customer received funds of $22 million from Sequoia Capital - one of the top venture capital firms in Silicon Valley - the company has grown to a 2,500-strong force.

At the end of this quarter, another 500 people will be added to its ranks and by the end of 2004; the number should cross the 5,000-mark.

According to Michael Moritz, the Sequoia partner who led the investment - the VC's first ever in the outsourcing space - and who is on the board of 24/7, this growth rate is manageable.

"We have to balance the growth rate in a business that is as people-intensive as this. We don't want to be a laggard but we don't want to grow too fast either," he says.

Mr. Moritz admits to having great ambitions for 24/7: "We want to be at least among the top two in our business. The company has so far exceeded our expectations, and as an investor we want to help wherever possible. But the credit for getting new and prestigious business belongs solely to the management."

With over four million calls being handled each month at its centres in India, the company is readying to get more.

Where Sequoia helps the BPO is in shrinking sales cycle. "You can save time if you approach the right people at the beginning. We help cut the bureaucracy at the customers' end. We also try and build a prospective customer list - but meeting the right person can be a massive competitive advantage," says Mr. Moritz.

According to Mr. Moritz, the BPO outsourcing trend is an unstoppable force; the only question is its growth rate. He cites the case of electronic manufacturing service (EMS), which was looked down upon a decade, or so ago but now it's a huge business. The dynamics of BPO are similar to EMS, he says.

"When we invested in Flextronics, we ran into scepticism. It wasn't fashionable to invest in EMS. Flextronics was pretty small then - with a turnover of $15-16 million a quarter. But now they clock $3.5-4 billion a quarter. It's taken 12 years, but the entire industry has flourished." Mr. Moritz expects similar good news in the BPO sector in India.

But there's a hint of realism: "This company has a long runway in front of it and it needs to roll down it in a methodical fashion. You can never get the large things done if you don't get the mundane things done first."

With about 20 California companies in its portfolio, Sequoia Capital is betting big on India.