This was my second meeting with Mahesh Murthy. First was in February 2004, in Mumbai, when I was covering a week-long tour of a group of TiE Silicon Valley venture capitalists for Business Today magazine. Murthy, as a representative of TiE Mumbai, was organising the Mumbai leg of the VC tour. Murthy was running Passion Fund then.
I caught up with him again a few weeks ago in Delhi. This time, he has two fulltime jobs - one as the CEO of his own startup, search engine marketing company Pinstorm, and the other as the partner and the chief driver of a new angel fund called Seed Fund.
Murthy is not a typical CEO or a VC. Dressed in blue jeans and a black T-shirt, he is as casual as he can get. It didn’t matter that he had a client meeting just after the session with me (and also an Associated Press correspondent), but Murthy likes to set his own rules. Some of you may know this already. Murthy’s partners in Seed Fund are Praveen Gandhi and Bharti Jacob, both formerly of Infinity Venture Capital (a firm that had invested in Indiabulls and Indiagames but now in the process of being wound up).
Seed Fund has already finalised two investments. He said that an announcement was expected in a month’s time as the fund formation formalities were yet to be concluded. Seed Fund has a corpus of $10 million and has backers like BV Jagadeesh (co-founder of Exodus Communications), Kanwal Rekhi (one of the founders of TiE) and KB Chandrashekhar (Exodus), besides many others. The fund’s focus is to give very early stage, seed capital or angel funding, hence they raised a very small fund of $10 million (unlike hundreds of millions of dollars being raised by other VCs). We hardly have funds operating at this stage, so that’s a welcome thing for all entrepreneurs sitting with bright ideas but no dough to bankroll it.

A Few Things I Didn’t Know About Murthy
There are a few things I didn’t know about Murthy. He was an engineering dropout (did I hear it right?) from Hyderabad. He started his career as a Eureka Forbes salesman (can you beat it?). He did that for a year and half and used to knock at 25 doors a day. -€œI was a mediocre salesperson,-€ he says. He shifted to advertising; became a copywriter for agencies like Ulka and then Trikaya Grey.
His first big campaign was for computer maker HCL. At 24, he thought he was stagnating in his career. He moved to Hong Kong, did a lot of work in TV. He then worked with MTV Asia. In 1993, he was offered the job of CEO of MTV in India. But Murthy rejected it and went to the States to work with an interactive agency called CKS Partners in Silicon Valley (read an old Wired article on this agency). Thanks to his stint at CKS, Murthy had the opportunity to work with Jerry Yang and David Filo at the time of launching Yahoo portal (yes, Murthy was in the Yahoo launch team!). CKS got 20,000 shares in return which they offloaded when the price reached $7 (if they had held on, they could have made millions).
In 1999, Murthy returned to India as Country Head of Channel V. He was instrumental in repositioning the channel with a youth focus. He also launched a portal, Vindia.com. In 2000, Star bought out Channel V and the portal. Murthy quit the network and started Passion Fund along with Arun Pai (he currently runs BangaloreWalks). They seeded some 14 companies including IndiaProperties.com, Geodesic and CompassBox.

The Pinstorm Phase
Here is the story behind Pinstorm. A friend of his at CRY (Child Relief & You) asked for Murthy’s help to raise funds for the organization. Murthy, an internet junkie, decided to use Google for advertising CRY’s fund raising efforts. The result was phenomenal. In a year’s time, he could raise a -€œsignificant amount-€ for CRY. They came from unexpected quarters and unknown people. Murthy discovered the -€œthe long tail-€ of the search engine marketing business. That was the time Murthy decided that search engine marketing can be a business. Thus was born Pinstorm, which means -€œpin-pointed targeting-€.
When Murthy thought of Pinstorm in early 2004, the first thing he did was to search around for a CEO. He didn’t want to run it himself. He looked around for a CEO for a month, but couldn’t find one. -€œOne day I looked at the mirror and said I might be the chosen one,-€ Murthy recalls.
Pinstorm was started with Murthy’s own money. In two years, it has grown to 65 people, which they plan to swell to 100-150 by next year. The company will close this year (2006-07) with some $5 million in revenues. -€œWe are a multinational agency, the largest in Asia and among the top four globally,-€ claims Murthy. (The other top global players are EFrontier, iProspect, and iCrossing). Murthy owns 80 per cent of the company, while 15 per cent is with employees. Sometime last year, a few unnamed individual investors picked up 5 per cent in the company for an undisclosed investment. Pinstorm may look at its first round of institutional financing (venture capital) later this year. The company currently has offices in Malaysia and Singapore besides in Mumbai and New Delhi, but it wants to go to China, US, UK and Western Europe (Stockholm) and Australia by next year.
Pinstorm, claims Murthy, is a different SEM firm because it follows a unique business model. It doesn’t charge its clients a percentage of their advertising budgets. This brings inefficiencies into the system, says Murthy. For one, an agency may be interested in getting its client to spend more advertising dollars so that they can get a higher fee. But Pinstorm sells “online actions” to the client. For instance, they charge the client for a signup, or a lead, or a form-filling whatever the client is interested in. It’s Pinstorm’s job to buy words, clicks and impressions (they do it on their own behalf) while they will sell the results (like signups or a sales lead) to their clients. Murthy says his clients love this model and he has a roster that boasts of big names like eBay (in four countries), Hewlett Packard (7 countries), Monster India (globally), Dell (3 countries) and Kodak (4 countries).
Pinstorm’s strategy is to buy words which others do not usually buy. Every month, 50 per cent of the words searched are new words, so that would help.  Pinstorm has developed a word picking technology called BroadWords, and on the bidding side they have a tool called BidWise. Both were developed with the help of Prof. V Vinay, the co-inventor of -€œSimputer-€, a low cost computing device. -€œWe currently have a database of 11.5 million key words. We want that to grow,-€ says Murthy.
Where does Pinstorm go from here? The search engine marketing can become huge since there are more than 400 million searches conducted daily. It’s worth some $10 billion a year globally. -€œThere is no reason why we can’t reach $100-200 million in revenues,-€ Murthy says. That’s one target which Murthy does not want to talk with pinpoint precision.