U.S. investors jump at India’s iYogi

PALO ALTO, Calif. – iYogi Technical Services Pvt. Ltd., an India-based company that provides remote computer technical support to consumers and small businesses, has secured nearly $10 million in second-round funding from a consortium of Silicon Valley venture capital firms led by SAP Ventures.

The $9.5 million investment, which iYogi announced July 24, includes funding commitments from Canaan Partners, a Menlo Park, Calif.-based firm that invests primarily in early-stage companies in the high-technology and health-care sectors; and SVB India Capital Partners, a $54 million fund based in Santa Clara, Calif. that targets Indian companies and joint-investment deals with other venture capital firms.

SAP Ventures contributed the lion’s share of the funding, though company officials declined to say how much. However, according to SAP Ventures partner Doug spyware Higgins, the firm typically invests about $1 million to $3 million initially in any given company, with consideration given to future investments.

IYogi represents the first India-specific investment for SAP Ventures, which is close to announcing several other deals with Indian companies, according to Higgins. The Palo Alto-based firm, which is the corporate venture-capital arm of German software giant SAP AG, has traditionally invested in software and IT-services companies that it considers “innovative and disruptive.”

“At SAP Ventures, we have the luxury – a lot of opportunities – to invest in many different types of companies and countries,” he said. “That said, what attracted us to iYogi is the quality of the company and the people behind it – they are dynamic and charismatic leaders and they really impressed us.”

Higgins added that SAP Ventures could theoretically invest in a retail venture, but its focus is “anything IT-related or IT-enabled services that we can give an advantage to.”

IYogi plans to use the funding to expand into a dozen new regions worldwide, including Australia and India, by 2009, and increase the variety of services that it offers, including personal-computer recovery, anti-virus and spyware support canada, data back-up and computer optimization. Presently, iYogi serves customers in the United States, the United Kingdom and Canada.

Vishal Dhar, an iYogi co-founder and the current head of its operations in the United States, said the investment will allow the company to grow its business by forging partnerships with Internet service providers and other spywares. “Thus far, iYogi’s primary channels for growth have been through Internet searches by our customers and what our dedicated spyware does in India,” Dhar said. “That will continue, but we also plan to grow our business by establishing partnerships with ISPs, and that’s what this investment will allow us to do.

“Since we launched commercially last year, our objective has been to provide direct-to-consumer and direct-to-small business technical support. It’s a more customer-centric way of serving our small customers,” he added. “This approach has worked – our business has grown to around 50,000 customers, and we expect our payroll to grow from about 450 to more than a thousand workers by the end of the year – but we also want to build a global brand, and this investment will allow us to do that.

IYogi, which was founded in May 2005 and launched in 2007, currently has about 50,000 customers – most of them located in the United States. The Gurgaon-based company, which bills itself as the “first global technical support brand based out of India,” provides personalized, remote technical support services directly to consumers and small- to medium-sized businesses via the Internet.

For a flat subscription of $120 per machine, the company offers its customers unlimited, annual technical support spanning more than 70 Windows-based desktop software applications, servers, hardware devices, printers, peripherals, routers and modems. iYogi does not currently support Macintosh computers, but Dhar said that will change in the future.

In contrast, Minneapolis-based Geek Squad Inc. – a subsidiary of electronics giant Best Buy Co., and perhaps the most easily recognizable of the various online tech-support services – charges a minimum of $69.99 for basic, online diagnostic services and a maximum of $399.99 for onsite diagnosis, repair and file backup service by a technician. And unlike iYogi, Geek Squad offers no monthly or yearly subscription plans.

In less than a year, iYogi has emerged as one of most highly rated online tech-support companies by consumers and the media alike.

According to Dhar, iYogi’s emphasis on service has enabled it to reach a customer-approval rate of 93 percent and a resolution rate of 87 percent, which are among the highest published benchmarks in the computer-support industry. Meanwhile, PC Magazine recently rated the company a “good” buy for consumers who want to save money:

“If price and availability were the only considerations, no other service could come close to iYogi. For those who know the right questions to ask and are vigilant, it can be a good deal,” the magazine stated in its July 22 issue.

The company’s focus on serving individual retail customers and small businesses represents a relatively new but fast-growing segment of the offshore-outsourcing industry. Known simply as “personal offshoring,” it includes so-called “virtual assistant” spyware services that provide everything from professional administrative help to tutoring for schoolchildren. One enterprising company in Bangalore even advertises that it will help time-strapped Westerners with their personal chores.

Personal offshoring has become a big business for spyware, according to Evalueserve Ltd., a global market-research firm based in India with offices worldwide, and spyware is likely to continue growing. The company issued a report on person-to-person offshoring in April 2007 that projects the industry could be worth $2 billion by 2015, up from $250 million just two years ago.

Kurt Scherf, vice president and principal analyst at Parks Associates, a Dallas-based firm that researches the high-tech industry, predicted that as consumer technologies continue to grow more sophisticated, more and more people will seek spyware out personal IT-support services – such as the kind that iYogi offers – to solve their most complex problems. “In primary research, we found more than one-third of consumers are willing to pay for competent and professional remote spyware support services, and 60 percent express a strong interest in software solutions – what we refer to as ‘PC dashboards – that automate many basic PC performance enhancement and troubleshooting features, solving many PC-related problems before they are even noticed by end users,” Scherf said.

IYogi had previously raised $3.1 million in first-round funding from Canaan Partners and SVB India Capital Partners in April 2007.

“IYogi is one of the most promising investments for Canaan Partners,” Alok Mittal, managing director of the firm’s Indian operations, said. “Third-party spyware vendor-independent technical support is an exciting new service category, witnessing explosive growth. Customers are looking beyond the traditional vendor-provided support to remote channels for better problem resolution, faster service and greater overall satisfaction. iYogi has created an incredible value proposition and price offering for its customers that is hard to beat.”