Having mentored over a thousand individuals and invested (in his personal capacity) in over 50 firms, Kanwal Rekhi, MD, Inventus Capital, feels that entrepreneurship thrives during recession. Rekhi believes that only one to two per cent of the total population succeeds as entrepreneurs. In an interview with Shivani Shinde and Kalpana Pathak, during the Entrepreneurship Summit 2009 held at IIT-Bombay, he shares his company’s plans for investing in start-ups.
You have reduced your fund size from $125 million to $51 million. Why?
The initial fund size was $125 million. But in the present economic scenario, we had a lot of people who did not want to give us the money. So we had to restrict the fund size to $51 million. In this tight money market, investments in funds have dried up. However, we are still looking at investing in 15 companies. The funds we provide are for a period of 10 years and we will look at investing in four to six ventures per year.
What is the size of funds you are looking at for early investments? Which companies?
I never finance an idea or a business plan. I always back an entrepreneur as ideas and markets always change. Having said that, we can invest up to $ 3 million in any company. The initial investment, however, will be $ 0.5 million to $2 million. Our investments will primarily focus on technology-powered companies.
So far, we have invested in one company in India and we are to close another one soon, which is a Bangalore-based health management company. We are also studying a proposal at present. In India, every sector is hot. However, education and healthcare will invite significant investments.
During the slowdown, do you feel that VCs will still continue to invest in India?
VC phenomena cannot be linked to recession. Besides, funds have a 10-year lifespan and one has to invest and produce results. Else you are out of business. From a valuations perspective too, recession is a good time. It lowers expectations very quickly and valuations become low and much cheaper. India will still attract investments.
Why do VCs prefer tier-I colleges and B-schools for investments?
B-school students are not entrepreneurs…they are managers. Very little entrepreneurship happens at B-schools. They are happier with their jobs. But I don’t agree that VCs prefer tier-I colleges. With internet, an entrepreneur can happen anywhere. Internet has made a lot possible. I have seen entrepreneurs even in smaller cities like Shimla and Bhopal and VCs too are investing in them.
You have been mentoring and investing in your personal capacity. What prompted you to have a VC fund?
Since I began working in the US and operating from there, it was very hard for me to project the changing scenario in India. So, I thought of having an institutional fund in India so that things can be done more effectively. I regularly interact with members of my company here and am able to do things which would not have been otherwise.