How Facebook will gain from India's Little Eye Labs

Little Eye Labs’ technology will help the social network improve its Android code make more efficient, higher-performing apps.

BANGALORE: Bangalore-based Little Eye Labshas become the first Indian firm to be bought by Facebook, going from creation to acquisition in less than 18 months. 

Little Eye, which its co-founder Kumar Rangarajan said is "like a microscope for mobile app developers," is being acquired for around Rs 90 crore, or $15 million, becoming the third Asian company (the two others are Malaysian) to join the fold of the world's largest social networking site. 

"How much better can it get?" remarked Rangarjan, 38, who is the 'chief ion' of the company, which he says is run by "positively charged particles." 

For Facebook, the deal helps in its push towards the mobile environment, and at areally cheap price. An investor in Little Eye said the American company was striking a really good bargain; such a package would have cost much more anywhere else in the world. Little Eye is majority-owned by its team of eight, including the five founders. GSF SuperAngels and VenturEast Tenet had invested a total of about $400,000 (Rs 2.5 crore) in the fledgling company nine months ago. 

Indian company's tech to improve Facebook apps
"This is our quickest exit so far," said Sateesh Andra, managing director of VenturEast. His fund is estimated to have made a tenfold return on its investment. Facebook's engineering manager Subbu Subramanian said Little Eye Labs' technology will help the social network improve its Android code make more efficient, higher-performing apps, referring to the Linux-based operating system that runs on most of the world's smartphones. 

Rangarajan first met Facebook executives at an annual Google conference in the US six months ago. "They liked the product, and over time the conversation moved to talk of acquisition." 

The deal has enthused the startup community in India with many believing that this is only the beginning of many more such transactions. 

"This acquisition is validation that talented, early-stage product teams which focus on building innovative technologies can create decent exit valuations in a relatively short time span," said Ravi Gururaj, an angel investor who heads the software product council at industry lobby Nasscom. "The fact that Facebook found it attractive to acquire a small, high-value technology team in Bangalore will cause others to open up to India as a future hunting ground." 

Little Eye Labs was founded in August 2012 by Rangarajan and his colleagues from Rational Software. The other co-founders are Giridhar Murthy, Satyam Kandula, Lakshman Kakkirala and Aditya Kulkarni. The entire Little Eye Labs team will move to Facebook's headquarters in Menlo Park, California. 

The closest parallel to what Little Eye Labs does is US-based Crittercism, backed by Google Ventures. It provides solutions which monitor every aspect of mobile app performance. 

In the short span of its existence, Little Eye, working out of India, was able to win customers such as Qualcomm, Intel and GE. In 2013, there were 100 M&A deals across India's information technology industry. Of this, 31, whose value was announced, were worth $1,906 million (Rs 11,807 crore), according to research firm Venture Intelligence. 

Aashish Bhinde, executive director at investment bank Avendus, was of the view that Little Eye is only one of a few instances where a global company has acquired an Indian firm for its technology. "We need to be careful before calling it out as a major development for the ecosystem. Having said that, one can definitely expect this phenomenon to gather pace over the next 3-5 years." 

Rajesh Sawhney, founder of GSF Accelerator, said the acquisition is a "transformative deal" for India and the emerging world. "This validates our core tenet that Indian product startups are now ready for a global play." 

Experts hope small-size technology ventures in India will attract the attention of larger companies. Sharad Sharma, co-founder of software product thinktank iSpirt, was also convinced the acquisition is an indication of what to expect this year. "We will see many more sub- $40 million deals," he said. 

"Smaller exits are the lifeblood of healthy startup ecosystems like in Israel and the US," said Sharma, who is running a matchmaking programme for product companies
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