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Why Kanwal Rekhi didn’t want to exit redBus despite 10X returns

Online bus ticketing company may have delivered one of India’s most successful venture capital exits last year, but if 68-year old Kanwal Rekhi had had his way, the company may not have been sold.

In a characteristically candid interview with The Economic Timestoday, Rekhi, founder of early stage venture capital firm Inventus Capital Partners, said that personally he did not feel that the company was ready to be sold.

“I was very disappointed. redBus was doing very well, it had a huge market share. It could have been built into a larger company. But I don’t want to say we as a firm opposed the exit. Especially when we are raising money, it was something to show the world. But personally I felt it was not ready to be sold, it had not even started its national campaign, there was no viable competition. (But) the entrepreneur wanted out, the other investor Seedfund had been in for long time, they invested in 2006. They wanted to cash out as well.” The Economic Times, January 10, 2014

That said, Inventus, adds Rekhi, has done well from the exit. The firm earned a 10-10.4 times multiple on its original investment when South African media conglomerate Naspers bought redBus in June last year for a reported $100-120 million. Inventus entered the company in 2009, leading its Series B round of funding (the amount was undisclosed) and later also participated in the company’s $6.5 million Series C round. At the time of the exit, its stake in the company reportedly stood at 23 per cent and its total investment at $2.5 million.

Overall, redBus raised a total of around $9 million from Seedfund (the first investor into the company), Helion Venture Partners and Inventus.

Incidentally, going by a chat I had recently with a senior partner at one of the firms that had invested in redBus, the sale to Naspers was more of a happy coincidence than a deliberate move.

“The exit was not created. The company was raising an additional round of funding with an eventual goal of either an IPO or Nasdaq listing. It just happened that Naspers came along at the time. In India, to get an exit like this, you should not scoff at it… My suspicion is that it would have taken three more years for redBus to go public. If you had asked me in 2004, I would have said we’ll go public. Today, given the environment and the uncertainty on whether it could actually go public, this was a good price to go with.” Senior partner in a venture capital firm that had backed redBus

Pilani Soft Labs, the company that owned redBus, was founded in 2006 by BITS Pilani alumni Phanindra Sama, Sudhakar Pasupunuri and Charan Padmaraju.


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