Select Committee on Foreign Affairs Written Evidence

Written evidence submitted by Alpesh B Patel




  Alpesh Patel is the UKTI Dealmaker responsible for India. He was also in 2000 appointed by the Foreign Secretary to the UK-India Roundtable and is a member of the Indo-British Partnership Network chaired by Lord Bilimoria. The DTI, through UKTI, has appointed business people as Dealmakers. Alpesh Patel is the Dealmaker responsible for India. In this role he visits India every six weeks to major Indian cities. (As a businessman he is founder of Agile Partners Asset Management—a US hedge fund).

  The essence of the role is in part deal maker, in part lawyer, in part financier and in part priest! In bringing the global HQ of early stage intellectual property rich companies to the UK, he is looking to bring for instance "low cost computing to the world and to the poorest in the form of "thin client PC developed from Indian technology" and bring to the world through the UK through nano-innovations cleaner hospitals, more energy efficiency, purer medicines, cleaner environment".

1.  Channels to bring Indian companies to UK

  Open channels from which I can receive pre-vetted business plans eg Nasscom, TiE, IIT, IIM, ISB. This has proved effective. I have examined over 100 business plans. I then undertake evaluation, due diligence on financials, market opportunities, feasibility of growth from the UK, fit with GEP objectives.

2.  Targets

  My target companies are early stage, IP rich technology companies, who can be persuaded of a business case of setting up global HQ in the UK. Ideally they should have a realistic prospect on their business plan of achieving sales of $20 million by year five, giving a market cap of $200 million on a multiple of 10. After a full day of meetings and then working on the various deal aspects, and then catching up on my own businesses, before the next days schedule, what keeps one going is the thought that if these companies hit their targeted earnings projections in five years, then that is an annual market cap across five wins a year of $1 billion brought to the UK. Few people get the chance to create that kind of value for their country! We may only be 60 million on this small island, and the world is globalising, but this proud trading nation will not be going quietly into the night!

3.  My role

  My role, other than executing the India strategy for finding these companies, is to evaluate them, and do deals to make the move a reality, from working with the company on its pitch, strategy, to working with financiers and acting as honest broker. In this capacity promoting the UK as a strategic base for global HQ nestled in the EU and next to the equal size US market is key. Press coverage has helped in finding deals from my roles as IBPN member, TiE UK Board Member, Chatham House trustee, and author of several books relating to India business.

4.  Vision

  Find the most outstanding science and innovation in India, help assist global HQ in the UK to make them global companies. Revolutionary technology which brands the UK as innovative, forward thinking, a home for entrepreneurship is ideal. Immense value created for the UK and shaping the world through these innovations and revolutions.

  Alpesh Patel started writing an investment a weekly investment column in the Financial Times in 1999. He is the author of 10 books on investing, including Outsourcing Success.


Indian Prime Minister Manmohan Singh: "Europeans need to show the spirit of adventure of their forefathers in exploring the opportunities India has to offer"


  a. For the UK to retain its status as one of the largest economies in the world in 2050 it needs to increase its entrepreneurial gene pool, its intellectual property gene pool by making greater use of competitive advantages whilst it still has them.

  b. Where there is market failure in exploiting opportunities from India to improve the UK entrepreneurial and intellectual property government should be involved.

  c. There is an urgency. Think of it as climate change for business.


  a. From my regular visits to India weaknesses in attracting early-stage companies to establish their global head-quarters in the UK include the following:

  b. Cash-shells on AIM rules have changed and tightened, whilst listing on Offex (ProMarkets) is an alternative, it is a shame AIM have tightened their rules for listing on their market. Recommendation: re-consider tightness of rules on AIM for cash-shells.

  c. An angel network with know-how on doing cross-border deals:

    (i)  Whilst angel investors here have interest and capital in funding Indian deals coming to the UK, they often lack the know-how. Market failure therefore needs government intervention to plug.

Recommendation: Angel networks need more information and a catalyst from entrepreneurs who have done such deals. It is not difficult finding the networks, and the know-how. The marriage of the two has not happened in the UK in the way it has in the US. To some extent I am doing this through the Indo-British Partnership Network and TiE ( but a broader push is needed.

  d. Poor media perception:

    (i)  Recommendation: Despite the Public Diplomacy Initiative, an on-going effort is needed to get across the message that the UK is entrepreneurial. Business plan competitions help. Associations with UK business schools eg University of Bedfordshire where I am a Governor or Oxford Business School; playing to our strengths in education and in business.

    (ii)  Recommendation: Fund journalist Fellowship at our Universities to bring business journalists for a term to the UK. A journalist is a multiplier.


  a. Below are examples of some outstanding intellectual property I have brought to the UK with their Global HQs here.

  b. Key problems and bottlenecks include:

    (i)  Cost of set-up in the UK. Recommendation: Promote in India through entrepreneurs who have successfully used them the UK's incubation centres which are geared up as hot-houses for low-cost set-up for start-ups.

    (ii)  Lack of know-how amongst start-ups in India of the services of UKTI and Foreign Office. Recommendation: If the UK is serious about India and driving deal flow from India to the UK, then it needs to add resources now. Our High Commission and Trade Offices do a sterling job, but more funding for more initiatives to get the word out about the support and services in the UK is vital. UK Plc needs to add more resources to its high growth India division.

    (iii)  India's top scientific institutions lack a spin-out environment. Indian institutions such as the IITs (Indian Institutes of Technology) and the biotechnology institutes in Bangalore lack the same commercial spin-out know-how we have created in the UK over years. Yet they produce outstanding technology.

Recommendation: The business schools of our universities look for alliances to tie-up with IITs to access their technologies for spin-outs. Thereby take advantage of the new Indian rules permitting foreign universities to establish in India.

    (iv)  UK companies outside the FTSE 100 make relatively few connections with India. This is not a private markets problem, it is a market failure problem warranting government intervention. British companies due to lack of information or misperception, especially SMEs are not taking advantage of opportunities.

Recommendation: Target CEOs of the FTSE Small Cap and FTSE Fledgling companies on invitations from UKTI on opportunities and counterparts and databases available.

Nanotech: The benefits to UK include lower cost and more efficient production of medicines, reduction in greenhouse gas emissions, improvements in hygene etc

  Indian scientist feted by the Indian President with new innovative patented process to make lower cost, higher quality nano-metals. After successful incorporation of global HQ in UK, I have been developing the business strategy for the UK company, drafting the legal documentation with the financiers for the floatation on Offex. Negotiations are on-going with the Indian side on warrants, options over patents, convertible loans but an Offex listing is planned with a share pricing making the market capitalisation at £20 million.

Low Cost Computing: The benefits to UK include lower cost computing in the education market and also bridging the digital divide

  The company out of Chennai is IP rich and willing to have its global HQ in the UK after detailed discussions with me on the opportunities to tap EU and N.American markets. Thin client, pay per use PC, with reduced cost because all software and processing power is held centrally not on the PC. Asian Red Herring 100 winner. 7 Patents. Looking for $8 million. UK company would then own Indian company with latter as wholly owned subsidiary.

TeNeT—IIT Chennai Spin-out Village BPO: The benefits to UK include centre of next wave of BPO and social change globally

  Spin-out from IIT Chennai. Company with proprietary software IP permitting outsourcing from West of BPO work to villages with high number of educated but poor women. Has VC interest of upto $10 million. Looking for "smart money" and seeding of $300k in three to four months. Willing to set up in UK Global HQ. Turnover in year 3 est to be $5 million at top end. Have UK clients already.


Typical Trip

  1. Meet existing wins—two to three meetings.

  2. Meet follow-up pipeline clients based on previous meetings to move forward.

  3. Meet new leads generated through own networks (eg TiE, Nasscom), emails from PR received, any new ones from High Commission etc.

  4. Visit two to three cities. (Coverage equals Mumbai, Delhi, Hydrebad, Bangalore, Chennai. To add Ahmedabad, Pune, Ahmedabad, Kolkotta, Kanpur).

  5. Typically four to five meetings daily per City per trip.

  6. One trip every six weeks.


  The return to the UK is $200 million market capitalisation companies in year 5 (calculated by year 5 earnings of pre-tax earnings of $20 million and a market multiple of 10.)

  Approximately five to six wins annually. On average each completed deal to win takes approximately 300 man hours of the Dealmaker. Sifting through deals which do not fit totals est 300 man hours totally annually.)

Evaluate deal opportunity

  1. Does it meet criteria:

    (a)  realistic potential of pre-tax earnings of $20 million in year 5, so on a multiple of 10, a market cap of $200 million introduced into the UK.

    (b)  early stage IP of exceptional, international cross-sectoral application.

    (c)  UK global HQ of independent entity make business sense.

  2. Due Diligence: if initially meets criteria, take financial projections and pass to accountant for due diligence and my own staff for evaluating market feasibility.

Business Plan Preperation

  1. Full plan and financials amendments usually needed, P&L, cash-flow, balance sheet.

  2. UK marketing and growth strategy.

  3. Compliance and iteration for requirements of each VC prior to pitch.

Business Operations

  1. Assist in gaps in Non-exec directors, sales, MD, CEO.

  2. Location, costings of offices—operational roll out plan options.

Find Financiers

  1. Based on relationships.

  2. Remit of financier, sector focus, investment criteria.

  3. Iterate business plan where necessary to fit remit, and match and liaise with entrepreneur's own strategic outlook.

  4. Approach informally VCs etc to gauge interest and meet.

  5. Arrange roadshow for entrepreneur.

  6. Presentation rehearsal and VC pitch materials review and revision with entrepreneur.

Negotiations with financiers

  1. Ideally seek to create competitive tension between financiers.

  2. Equity stakes of both parties.

  3. Negotiate quantum of convertible loan for financier, strike price, duration.

  4. Negotiate quantum of warrants for entrepreneur for earn-in based on sales (strike price, duration).

Negotiation with IP lawyers

  1. Ownership rights over patents, transfers.

  2. Jurisdictional holdings.

  3. Vetos.

Negotiation with Tax lawyers

  1. Acquisition by UK HQ of Indian shareholding. Implications for existing Indian shareholders, UK entity.

  2. Transfer implications of Patents from Indian entity, options over patents.

Negotiations with entrepreneur

  1. Equity for investment. Internal rates of return, investment requirements.

  2. Payment for signing.

  3. Warrants/earn-in.

  4. Dividends policies.

  5. Shareholder agreement—eg tag along rights.

  6. Initial cash-injection, convertible loans, loan. Debt/equity ratio.

  7. Shareholder/entrepreneur asset injection for shares—valuations.

  8. Management meeting requirements.

  9. Share structure—classes.

  10. Earnings—dividends, loan repayments.

  11. Deadlock provisions.

Alpesh B Patel

3 December 2006

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