Venture Intelligence recently spoke to Kanwal Rekhi of early stage investing focused Indo-US cross-border VC firm Inventus Capital. The firm, which started investing in late 2008, has been among the most active VC investors in India recently. In early January, Inventus also exited one of its portfolio companies - IT services firm Sierra Atlantic via sale to Hitachi Consulting. The firm’s current portfolio includes online bus ticketing firm RedBus, digital marketing services firms Sokrati and Vizury Interactive, wireless app platform provider Genwi, and online personal financial services firms FundsIndia and Credit Sesame.
Venture Intelligence: Can you tell us what Inventus’ key differentiators are when it comes to identifying investments? Maybe you can highlight them using some recent investments.
Kanwal Rekhi: As a small fund, we are very focused on getting into companies in the early stage and typically put in about $1 million. So, that determines the kind of companies we can do – very capital efficient plays and not sectors that need a lot of capital (like semiconductors, etc). We invest especially in enterprises that can leverage technology to tap into the consumption of middle class Indians, be it India- or US-based companies. The companies must leverage Indian talent or be focused on the Indian market. We are of the view that the Indian technology industry is tightly coupled with the US market, and there is very fluid movement of people and ideas back and forth between both markets.We basically invest in the entrepreneur. If we aren’t comfortable with the entrepreneur, the deal is a no go.
VI: Will you invest in 2 guys with a PowerPoint?
KR: All of our portfolio companies have had some revenue traction prior to our investment. It is not as if we will not invest in just an entrepreneur and his idea; it’s because we have such a heavy dealflow of companies that have bootstrapped with support from friends and family, have some working technology and early customer traction.
We do not expect proven business models and technology, but we would like to see some level of maturity in the entrepreneurs, which we saw in companies like FundsIndia which was pre-revenue when we invested.
VI: Your recent investments in Sokrati and Vizury seem to suggest that digital marketing services are an area of focus.
KR: Given how the world economy and the way business is done is getting restructured by the Internet and the emergence of India and China, such businesses are naturally of interest.
In Sokrati, we grew very comfortable with the entrepreneurial team. Vizury was bringing a business model from US to India.VI: A company like Genwi (which offers a development platform for creating apps on mobile platforms like iPhone, Android, etc.) seems to be doing cutting edge work. How do you evaluate such companies?
KR: Magic happens when we can get an entrepreneur who is at cutting edge of technology. The founder of Genwi, PJ Gurumohan who was 29 when we met him, had previously tried and failed with two startups. He had already been bootstrapping Genwi, along with his 20 year old partner Raju Sagiraju, for a year and had developed over 1,000 apps already. But they were charging just a onetime fee of $10 for developing apps and weren’t capitalizing on the demand.
We had some of our contacts in the Internet space play around with the technology. And we checked with Apple and they were very happy with what the team was doing - because what Genwi offered, sped up the app development process. So, we spent time with the entrepreneurs on the pricing and they have now gone to a different plane with over 1,200 apps under their belt and good revenue traction.
VI: In the online personal finance space, you have Credit Sesame in the US and in India, FundsIndia.
KR: Given the indebtedness of the average US consumer, a service like Credit Sesame - which provides tools for consumers to take control of their credit and save money on loans – is a very timely investment. When we bet on them, there was no revenue, now they have $600 million of debt under management. The company has gone on to raise a new round ($6.15 million Series B round led by Menlo Ventures) at 6 times the first round valuation. FundsIndia, on the other hand, advises customers on how to invest their savings, which is more appropriate in the Indian context.VI: Personally, you are very well known as an entrepreneur who turned into a very successful angel investor. How are you finding your new role as a VC?
KR: When you make changes in your career, you have to re-invent yourself and prove yourself each time. Being a successful entrepreneur does not guarantee that you can become a good angel investor and being a successful angel investor does not translate into becoming a successful VC. As an angel investor, it’s one’s own money that you are betting and there is no fiduciary responsibility. But as a VC, you have to work in a team and convince the LPs.
The full version of the interview appears in the latest issue of the Venture Intelligence India Venture Capital Quarterly Report.