Business Today

How to make it as a VC

For all the wannabe partners vying the VC and PE Fund space, here’s the mantra for success.

Pallavi Srivastava | Print Edition: April 6, 2008

Harish Gandhi, 37, nurtured a dream for 16 years—the dream of being a part of the venture capital (VC) industry. An MBA from the Wharton Business School, Gandhi has worked in the US for over 12 years with LCC International and Bain & Company. In 2004, he decided to relocate to India to pursue his VC ambitions.

That, however, didn’t materialise for another four years. During this time, Gandhi first worked as Director, Marketing and Technology, at Nokia, and later headed the Value added Services Business and the New Product Development team at Bharti Airtel. Finally, in January this year, Gandhi joined Canaan Partners as Executive Director. “All my life, I have been involved with entrepreneurs, be it a start-up stage, midlevel or in big set-ups. I shifted to India with the idea of entering this space as I could see a lot of innovation happening here,” he says.

Not just Gandhi, many others, too, want to be in the VC and private equity (PE) space in India. Here’s why: VC and PE investments into India touched $14.2 billion in 2007, almost double the $7.5 billion clocked in 2006. The number of deals in 2007 stood at 390, compared to 299 deals in 2006. According to advisory firm Grant Thornton, in January this year, there were 56 M&A deals worth $3.01 billion and 60 PE deals worth $2.05 billion. In volume terms, this was the biggest month for PE funds in India. A recent KPMG survey on the sector says: “This is an exciting time to be involved in private equity in India.” It’s ‘exciting’ not just for the firms or the cash-strapped but innovative start-ups in India, but also for people with an entrepreneurial streak, who want to enter the space as partners or directors.

“I think there are enough qualified people. There is a large pool to choose from. In this model, we hire very few quality people but all of them are senior. Even the largest firms will not comprise more than 8-10 people,” says Avnish Bajaj, Cofounder and Managing Director of Matrix India. His thoughts are echoed by Helion Venture Partners Managing Director Sanjeev Aggarwal, who feels that India has a huge talent pool to select from, even though the industry itself is quite small.

Avnish Bajaj, Co-founder and Managing Director, Matrix India
Avnish Bajaj, 37
Co-founder and Managing Director, Matrix India

This Baker Scholar from Harvard Business School started his career with Apple Computer in the Bay Area. Avnish Bajaj worked as an investment banker with the Hi-Tech Group at Goldman Sachs in New York and San Francisco before he founded, India’s largest online marketplace, which was later acquired by eBay.

Bajaj has been an angel investor and mentor and is on the board of Cleartrip, Pangea3, Pinstorm and Indus Biotech. No wonder then in 2006, Bajaj decided to partner with ex-Sequoia Capital India honcho Rishi Navani to set up Matrix India. “I had followed the path of an angel investor and that’s what sparked the idea. I asked myself if I wanted a career out of this and I realised I had the necessary skill-sets and acumen to add value to more companies and, thus, Matrix was born.”

The demand for VC jobs is way in excess of the supply and, probably, will always be. However, not everyone is the perfect fit.

In the KPMG survey, 21 per cent of the respondents listed management quality as a barrier to investment. Indeed, the perfect fit in this space depends on the strategy of various firms. There are, however, other factors that carry a lot of weight.

What it takes

So, what does it take to be a successful venturepreneur? First and foremost, a word of caution from Bajaj: “Enter the industry recognising where you want to be. Don’t enter with rose-tinted glasses. If you are a failure as an investor, you lose all your credibility.

You should evaluate your readiness for this job—do you have the ability and the networking skills?” The latter resonates as the requisite trait both according to the existing players as well as recruiters as “a good network in the industry makes a big difference”. Sanjiv Kaul, Managing Director, ChrysCapital India, agrees: “Networking is extremely important here.”

Says E. Balaji, COO, Ma Foi Management Consultants: “We have seen top management leaders from large companies taking up the role of a partner as they have had the experience of leading large operations, closing large international deals, turning around businesses, handling teams, developing market strategies, organising funds, handling investor relations and balancing value creation from both shortand long-term perspectives—all at the same time.”

Beyond finance

If Bipaschit Bose, Chief Executive, Prospect, a Delhi-based recruitment firm, is to be believed, PE and VC firms look for strong business experience, particularly experience in turnarounds or M&As, and an excellent track record of hiring, retaining, training and enthusing people.

Sanjiv Kaul, Managing Director, ChrysCapital Investment Advisors
Sanjiv Kaul, 50
Managing Director, ChrysCapital Investment Advisors

A pharmacy graduate with an MBA from IIM Ahmedabad, and an AMP (Advanced Management Program) from the Harvard Business School, Sanjiv Kaul seems to have the right prescription for the PE space.

He has 25 years of management experience in the pharmaceuticals industry of which the last two decades were spent with Ranbaxy. In 1994, he served as the Managing Director of Ranbaxy, China, and after a successful tenure, he was appointed Regional Director, India and West Asia, in 1996.

When his friend Ashish Dhawan, Senior Managing Director and Co-founder, ChrysCapital, told Kaul of his plans to make investments in the pharma space in 2004, he readily agreed to be a part of it.

Kaul says his years in Ranbaxy, spearheading the company’s various initiatives in different geographies, had given him an idea about what it would mean to work for a venture firm like ChrysCapital.

“PE and VC firms rarely look for expertise in finance. They have that in abundance,” says Bose. Agrees Balaji: “PE and VC firms are beyond comprehending financials. It involves working closely with the invested firms. A partner is expected to have senior managerial abilities to make the firm’s investments work.” Agrees Bajaj, who says the formula is not same for everyone. “I will put 50 per cent emphasis on skill sets and another 50 per cent on values and culture.”And skill sets in this space mean mainly two things—the person must either come from an operational background or must have been an investor in a personal capacity.

He should be involved in this ecosystem in some way, says Bajaj, adding: “I don’t care if that person didn’t work for too many years; but the quality of his work should come across. For an operational person, there are three significant skills—significant domain experience, networking in that domain and sourcing and winning deals.”

People skills

An eye for detail helps by all accounts; so do the following set of traits: Extreme patience, to be able to sit through the articulation of business plans, great perception and the ability to see into the future with little data at hand, strong understanding of the fundamentals of the business, and great people ability to bring out subtle behaviour patterns in the investee company, points out Bose.

According to Venkatesh Shastry, Partner, Stanton Chase, all aspiring CEOs and CFOs (in the space) should initially assess if they can work in multiple client contexts, with little or no operating or administrative support. Shastry expects the candidate to possess wisdom and experience to help portfolio companies to succeed in strategy and execution.

“He should have good operating experience across functionalities combined with a flair for advisory business,” Shastry points out.

And before you decide to take the plunge, it will surely help to acquire an iron fist. You will need this to take hard business and people-related decisions when necessary. Also, those who are an astute judge of people have a headstart. “It’s a very people-centric role—it’s more about building relationships and dealing with people than anything else,” says Gandhi.

For Bajaj, one of the two key soft skills in the business is people evaluation and presence (read positive influence). But ultimately, he says, it boils down to your gut instinct.

 A Day in the Life of a VC

Sanjeev Aggarwal, MD, Helion Venture Partners
Sanjeev Aggarwal
Sneak a quick look at a VC’S calendar and not surprisingly, it is mostly about portfolio development. Says Sanjeev Aggarwal, MD, Helion Venture Partners: “My time is mainly divided into four buckets.” While portfolio management takes up a major chunk of his time, deal making and sectoral assessments also need daily attention. Add to it the task of evangelising entrepreneurs, mentoring start-ups and what have you—that in a nutshell is the choc-ablock schedule of a VC partner. Aggarwal, 47, was the founder-CEO of Daksh, which was acquired by IBM in 2004. He ran the company as its CEO till June 2006, after which he decided to switch tracks. Aggarwal had three choices then: work at IBM as a senior executive, start another company and become a serial entrepreneur or start a VC firm. “I decided to become a venturepreneur, as it gave me complete freedom to be involved with lots of start-ups, instead of being confined to a single one,” he says. It’s all in a day’s work for him now.

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