MPW 2014: DEBUTANT
Early-stage investment has more to do with gauging the ability of an entrepreneur than with the potential of a business idea. Bharati Jacob, Managing Partner of Seedfund Advisors, an early-stage venture capital firm, knows that very well. This was a reason why her firm wrote a cheque of $1 million towards Heckyl Technologies, a start-up firm that provides real-time data analytics to financial institutions, in 2012.
Jacob had discovered Heckyl Co-founder and CEO Mukund Mudras while he was demoing at a start-up event in Bangalore two years ago. By December 2013, when Seedfund invested another $3.5 million, Heckyl had on board 15 customers. "Seedfund is more about mentoring and being approachable to entrepreneurs than money," says Mudras.According to IT entrepreneur Pravin Gandhi, who joined hands with Jacob and Mahesh Murthy to set up Seedfund Advisors, Jacob is good in spotting opportunities. "She executes well, efficiently but silently," says Gandhi, General Partner at Seedfund. In a nascent market like India, the toughest part of being an early-stage investor is taking bets on a company's prospects. "There is no history to fall back on like for a mid-cap company or an Infosys. Most of them have never been entrepreneurs before," says Jacob.
A graduate of Wharton School, Jacob, 52, sees her gut instinct to understand an entrepreneur as her biggest strength. A way to assess an entrepreneur's ability to cope with pressure, Jacob says, is to check the way they react when one challenges his/her assumptions of the market or customers. A long and convoluted answer to a basic question such as 'what and whose problem you are solving' is one prime reason she would say no to a start-up.
For Jacob and her team the experience gained at Infinity Ventures, one of India's earliest venture funds set up by Gandhi and Saurabh Srivastava (who also co-founded Indian Angel Network), has come handy.
"In 2000, at Infinity, we had tried to replicate the Silicon Valley model in India. We soon realised it won't work here as entrepreneurs were not that mature," says Gandhi. So throwing in too much money too early could be disastrous for an early-stage venture fund mainly because entrepreneurs, while trying to perform under pressure, could go wrong with the money in their account.Gandhi says the team also found the need to discover unique investment opportunities instead of going with the trend. "In India, me-too companies that are not on the top of the heap face exit challenges. In the US, even the fourth or the fifth biggest company in a sector can exit," he says.
Jacob was the first to join the founders of Infinity, a $35-million fund. She honed her skills with over 16 investments and decent exits like Indiagames and Indiabulls. After returning the money to the investors of the fund, Jacob and other co-founders of Seedfund managed to first raise $15 million in 2006 followed by $54 million in October 2010.
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Seedfund has so far invested in 35 companies. The biggest return for the venture fund till date came from its maiden investment in CarWale.com. Seedfund earned nine to ten times return on an investment of about $800,000 when it along with Sierra Ventures, a venture capital firm, sold their stakes to German media company Axel Springer and India Today Group in 2010. Last year, redBus.in, a platform owned by Pilani Soft Labs and funded by Seedfund, was sold to Ibibo Group, a joint venture between Naspers, a South African media house and Chinese Internet company Tencent, for Rs 800 crore.
In a busy week, Jacob meets at least 15 start-ups. She sees her understanding of the Indian market and her ability to help entrepreneurs achieve the product-market fit as her strengths. Her abilities gel well with Seedfund's objective to cherry-pick companies that solve India-specific problems. For instance, redBus.in has proved that with a thorough understanding of ground realities and a ground-up business model, it can scale up in an India-only market.
"While overseas investors couldn't understand how money could be made by selling bus tickets, we were excited about the idea early on," says Jacob, who prefers consumer-facing companies much more than others. It may be more risky and tough to build but the returns may be higher, she says. One of the Seedfund companies, Vaatsalya Healthcare, provides low-cost health care in semi-urban and rural areas. It has grown from three hospitals at Gadag, Hubli and Karwar, all in Karnataka, to 12 now.
Jacob does not believe in gender differences. "I have led my life not believing in gender differences. It's only a matter of social conditioning," she says. But empathy comes naturally to her. "It comes from managing multiple stakeholders at home - from in-laws to children to servants," she says.
Also, the notion of work-life balance does not bother her because she likes working with entrepreneurs and finding new investment opportunities. "To me work is not different from doing anything else," says Jacob, who has many friends and finds support in her husband, Jacob Kurian, an investor himself. He is Partner at New Silk Route Advisors, a private equity firm. Her leisure time is spent reading, going for long walks or treks. Jacob sees many success stories to chase but she is taking easy on one thing. "My daughter, Urvi, is 18 and we need not worry about her exams anymore," she says.