Ojas is an India-centric, technology-focused early stage VC firm backed by Nadathur S. Raghavan, co-founder and former MD of Infosys. Before Ojas, Rajesh was the Business Head, Mobile Terminals Business Unit (MTBU) at Aricent, Inc. He holds a Bachelor of Technology, Master of Science and a Doctor of Philosophy degree
from the National Institute of Technology Karnataka at Suratkal, University of Texas at Austin and the University of Illinois at Urbana-Champaign respectively.
For the past few months, Rajesh Srivathsa and his team have been busy vetting business plans to identify some new companies to invest in. The companies need not be technology companies per se but rather use technology as an enabler to cater to a large market. Ever since Ojas Ventures was set up in mid 2007, this early stage venture capital firm has invested in six companies. With no mandate to invest in a certain number of startups every year, Rajesh and his partners – Pavan Krishnamurthy, Gautam Balijepalli and Raghu Batta – are clear that they would back those companies which they unanimously agree upon with respect to its business model, founding team, and ability to scale up fast.
"You can say we are slow or you can say we are thoughtful, that’s your choice", says Srivathsa when asked if Ojas Ventures was a patient investor and would rather wait to come across the right companies to invest in instead of being hasty? Ojas Ventures identifies those companies that have a technology product or solution that is in its early stage as the first fund is actually a small one with around Rs 150 crore. "By early stage we define a company that has a prototype already developed and pilot customers already engaged. It may or may not have revenue," says Srivathsa. Thus Ojas Ventures come in at a point when the business needs around a million dollars with the hope that "we can help define business models and validate those business models by engaging those entrepreneurs." Team Ojas is already considering two plans quite seriously and if talks with the entrepreneurs works out fine, some announcements could follow.
The Entrepreneurial Genome
It all started in early 2000 when Nadathur S. Raghavan (NSR), one of the founders of Infosys, felt that the best way to give back to the society was to promote entrepreneurship. What better way than to help entrepreneurs realize their dreams, create wealth and jobs. "When Raghavan retired from Infosys the same year, the question he asked was that is there any way he could support entrepreneurship which is a nascent ecosystem in India?" says Srivathsa. So Ragahavan began funding companies as an angel investor through Nadathur Holdings and Investments. This continued till about 2006 and by that time he had already funded 17 companies.
Around 2006, NSR’s son Anand Nadathur thought of going the venture capital way. Anand, who has had a decade of experience with startups and in the VC industry, thought if ad-hoc investments could nourish entrepreneurship so well, why not formalize it to support the early stage startups? So in late 2006, the brainstorming on setting up a VC firm started with Srivathsa and Pavan, who was working with Nadathur since 2000 and was part of every one of the 17 companies that they had funded in terms of diligence.
Raising funds had always been a big challenge for early stage startups but more than that mentoring was something that was missing because many of the startup teams were first-time entrepreneurs and strategic guidance for them was the need of the hour. "If we could go ahead and try to alleviate that to some extent, we would have done two things: help kickstart the entrepreneurial ecosystem and make money in the process, helping entrepreneurs create wealth and make their dreams come true," says Srivathsa.
By mid-2007, Ojas Ventures was established. "This was conceived as the next step, what I would call seed or Series A type funding," says Srivathsa. The money came from the Nadathur holdings and Ojas Ventures benefited from the learnings that came from the Nadathur ecosystem.
Investment Strategy
It was clear right from the beginning that Ojas Ventures would focus on technology because the founding partners understood the sector quite well and strongly believed that many a business can piggyback on technology to deliver services to the masses. "It was felt that we were comfortable in backing technology companies," says Srivathsa. "We look at technology product or solution which can be delivered though minimal cost through internet or an identified mode through which you can have distributed sale," he adds. Create once and use multiple times is the name of the game. "We are comfortable with technology, which means from a risk mitigation point of view to a fair extent, we are able to understand such businesses," adds Srivathsa.
"About the stages of a products' company, we have ideation followed by idea validation, which means you have a prototype, pilot customers saying yes we will pay for it, the technology risk is partly mitigated," he says. So at what point does Ojas put in money? "Then you have to figure out how do I package this and what sort of business models do I engage in so that I can scale it up rapidly and that is the point where our money comes in." says Srivathsa. Ojas Ventures is looking at those businesses that have a large end market that does not require a lot of money to become cash-flow positive.
Level of Engagement
Around a third of the business plans and potential investee companies come via the Nadathur Holdings route, partly because Ojas is a fairly new entity with little brand recall while the former has been in the thick of entrepreneurship for a decade now. "About a third of our deals come from our own network, and the remaining is through people who call us up, email us or entrepreneurs who we meet at events directly or through intermediaries," says Srivathsa.
Ojas Ventures takes a Board seat in all its portfolio companies but the level of engagement could vary depending upon the experience of the founding team and the assessment of the need for strategic and operational guidance. "It has been a mixed bag. There have been companies where people of the management teams have been entrepreneurs previously and who know how to execute a plan. In those types of companies, we play an advisory role," says Srivathsa. This means the partners do not involve themselves in business operations. Tyfone is one such company where the founders are seasoned entrepreneurs and have done startups in the past.
The other set of companies where entrepreneurs are perhaps first timers, Team Ojas has a larger role to play. Does it mean too much involvement with day-to-day operations? No, says Srivathsa. "We would not confuse ourselves for an operations person. Entrepreneurs are in charge of their companies," he adds. The first advisory role is strategic. This is mainly about risk mitigation. Srivathsa believes that first-time entrepreneurs typically have passion and focus on narrow execution parameters and because of the nature of not enough prior experience in dealing with the ups and downs, they get too bogged down and slowly they lose focus on the bigger picture of the two main things of why a startup exists. "What is the value proposition that they are delivering and how are they delivering," he adds. "We actually dig down deeper and these things keep changing over the life of the company. We act as the sounding board and we actively try to bounce off ideas for them to think through," says Srivathsa.
In four of its portfolio companies, Ojas Ventures plays a very active role. "We get into operations in certain areas where they are comfortable," he says. One is in terms of products roadmap and the other is in terms of business development, contract negotiations, etc. "Most entrepreneurs know far more about the former (technology) than we do but there have been instances where there are some benefits that we bring."
In the second part of the operational role, sometimes Srivathsa and his team choose to sit with the entrepreneur across the table. "The reason is that the first-time entrepreneurs in India are technologists. They do not have too much experience in contract negotiations" he says. It means that more often than not, they undersell the product and in a couple of cases, Srivathsa has also seen that they oversell, which means their expectation of what the customer should pay are higher then either what the customer is willing to pay or the value proposition that we can see. This is because they are very passionate about the technology they work on. "So we are able to take an unbiased view. We help with pricing strategy and all the aspects of contract negotiations," adds Srivathsa.
First-time entrepreneurs would vouch that it can get quite difficult to understand the psyche of the potential customer and the price of the product or service accordingly. But Srivathsa is not content with what his team is currently doing for entrepreneurs. "We probably can and should do far more than what we are doing," he adds.
Subscribe to this comment's feed
written by Arun Jha, March 24, 2011
| < Prev | Next > |
|---|
- David Teten: Your business valuation depends on who gets the Value from your business
- A R Jayakumar, KITVEN Funds
- Dr Sridhar Mitta, NextWealth Entrepreneurs
- Gaurav Saraf, Epiphany Ventures
- Vishal Vasishth, SONG Investment Advisors India
- Sandeep Aneja, Kaizen Management Advisors
