You are in the process of raising a second fund?
We are raising $100 million to invest in India. This will be our second fund. The fund was raised from Europe and United States. We will close fund raising very soon. The first fund was $52 million which we raised in 2008. We have expanded our team. We now have three (partners) in the US and Three in India. When we started in 2006, we were three people including Kanwal Rekhi.
With all the negative sentiments around the Indian government and the state of Indian rupee, are investors shy of betting on India?
There is a renewed interest to invest in the country. Around 2006, private equity was the big thing. Later, there was a slow period because of policy issues. Nobody was interested in regulatory uncertainty. As a Venture Capitalist, you are already risking the money. Most of those risks are controlled risks. And then if you have retrospective laws coming in, it becomes very hard. The most recent changes, after P Chidambaram took over are good. All the big ticket reforms and the Shom committee on GAAR have brought back some comfort to investors.
You have been in venture capital since your days in Acer Tech ventures in 2001. How has the ecosystem evolved?
Very significantly. Both in terms of quantity and quality, there have been great improvements. Its much better than five years ago. People are willing to take more risks. Business was not even a good word 25 years ago. Failure wasn’t accepted. There was a stigma around not having a steady job. It was impossible to say that you don’t have a job. Thats no longer there. No one looks at entrepreneurs as funny, devient people these days.
There are plenty of people with 15-20 years experience in the IT industry these days. They understand their markets and are building products for bigger companies. But slowly, they start making it for themselves and create a business around it.
The Indian market has also emerged. When I started in venture capital, our mandate was to look for companies that have a good overseas market. But now that has changed. The domestic market has evolved. There is availability of capital as well. Angels, Venture Capitalists are all here. The support ecosystem like Pluggd.in and others are also active.
Will the new fund have a similar focus to that of the old one?
Mostly yes. We will look for companies that have a strong technology leverage. The technology could be anything like software, services, mobile, Internet. But we are open to any end user. There are lot of inefficiencies in India to solve. If you are solving a problem in retail, advertising, healthcare or any other sector using technology, we are interested.
How many investments do you make in a year?
Typically 4-6 investments a year which ranges from about half a million dollars to about $3 million. So far we have made 18 investments ($600,000 was the lowest) out of the $52 million fund we raised in 2008.
The exits you have made?
We made two great exits. One was Sierra Atlantic which got sold to Hitachi. The second was ViVu which was acquired by Polycom. ViVu was more like Webex on steroids.
What were the exits like? Can you talk in multiples?
I can’t talk about the exact numbers, but we have had three digit
million dollar exits IRRs. So that’s fairly good.
When it comes to startups, what is your approach, are you more hands on or hands off?
Both aren’t good. Hands on and Hands off have slight negative connotations to it. But if you ask me to choose, then we are hands on. We let entrepreneurs run the business. But we work closely with them. We usually take a grounds up approach and back good entrepreneurs in the areas we understand. There is no rigid allocation of funds. We don’t have the smarts to say that. The entrepreneur usually knows best.