Rekhi talks in an interview about some of the challenges facing the Indian start-up ecosystem, and his future plans
Bangalore: Veteran investor Kanwal Rekhi, managing director of Inventus Capital Partners, has been investing in start-ups for the better part of the last three decades. Inventus, which invested about $2 million in the recently acquired redBus.in, raised over $100 million with its latest fund and plans to invest the money in about 20 start-ups. In an interview on Wednesday, Rekhi, who is based in Silicon Valley, talks about some of the challenges facing the Indian start-up ecosystem, quality of ideas coming out of India and future plans. Edited excerpts:
What are some of the things that you look for when investing in start-ups?
Very simple for us—we want to get to know the entrepreneur very well. We put a huge premium on the entrepreneur himself. Also, we don’t like to fund a purely new start-up or an idea—we don’t need to be doing it. We like to see an entrepreneur who has spent some time on the ground and survived for 18-24 months on his own, having demonstrated staying power and commitment on his part. We also like to some level of customer engagement, may be having generated some revenue, before funding an idea. It gives us the validation that customers like the idea and are willing to pay for it. We also like to see capital efficiency—a company shouldn’t need more than $350 million ideally from start to finish.
How does the Indian start-up ecosystem compare with the one in Silicon Valley?
Silicon Valley as an ecosystem for start-ups is very well-developed. You have all the players in place—the angels, VCs (venture capitalists), micro-VCs and late-stage VCs. They also have a very well-structured legal framework and deal structures are also very well-defined. You also have the mentors, networking groups, accelerators, incubators, etc. It’s adding new capabilities all the time. India, on the other hand, is maturing (though) things have come a long way since the 2000s. Deals are happening much faster than they used to. The problem here is that the legal and policy framework is still not very good.
What do you think about the quality of ideas coming out of India? Are most of them simply ‘me-too’ ones?
I think it’s definitely getting better…It’s getting better all the time. In India, it is very hard to do a “me-too” kind of a start-up. There are a lot of problems that need to be solved. To tell you the truth, I have no problem with me-too kind of ideas. We saw what happened with Monster.com and Naukri almost 10 years ago. And Naukri survived and did very well.
What’s the size of your latest fund and what are your future plans?
Our funds typically have a five-year investment cycle. In 2012, we were done investing in Fund I. We invested in 10 Indian companies, and eight start-ups from the Valley. We went off to raise another $100 million—closed with about $70 million in December 2012. And in December 2013, we raised another $36 million, so we have closed at about $106 million with our latest fund. We want to invest in about 20 start-ups.