Sateesh Andra is a venture partner at Draper Fisher Jurvetson (DFJ) focusing on Investment activities in India. DFJ has allocated $75 million for investing in India over the next three years from its Fund IX of $600 million. DFJ essentially focuses on Information Technology, Nanotechnology and Life Sciences, and Clean Energy Technologies.
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| Sateesh Andra, DFJ Ventures |
How big is the DFJ team in India; what are the areas of focus?
DFJ in India is a team of three people. It has Mohanjit Jolly (Executive Director) and Anurag Jain (Analyst) based out of Bangalore, besides me in Hyderabad. As for focus areas, DFJ is interested in companies that are in the areas of consumer services, technology, cleantech, life sciences, and healthcare.
For the allocated $75 million for investment in India, what kind of companies are you looking at?
The current set of investments we have made in Asia is largely in sync with DFJ’s global strategy. Among Internet-based companies, we have invested in ClearTrip (travel) and Seventymm (movie DVD rental). In the mobile space we have mCheck in the payment space, and mGinger that is an SMS-based mobile platform for targeted advertising. We have also invested in Live Media which is in the out-of-the-home (OOH) media space. Reva, the electric car company, is also in our investment portfolio.
We have not invested in the life sciences or nano-technology space here in India yet. However, for all our focus areas, we are looking for excellent teams to invest in. Even first-time entrepreneurs are welcome. We are very open to taking a lot of risk and get ourselves involved in some very early-stage ventures that are not big but have great teams running them, and in very interesting markets at that.
What do you look for in an entrepreneur coming from the nano-tech or cleantech sector?
In this field, we have not seen much fundamental research happening in the country. In India, it is mostly applications of these technologies that happen. So, we are looking for entrepreneurs who have some intellectual property (IP) in these areas. We are also open to entrepreneurs who may not have the IP, but have access to the right set of properties; IP from elsewhere but that which can be applied in an Indian context. This would enable quick growth and scaling up of the business. Having said that, we are looking at teams that understand technology, benefits of the applications, and applications in the Indian context that would create critical mass quickly.
Does your set of requirements differ from, say, IT companies as compared to those from nano-tech and cleantech companies?
Technology investments or enterprise applications are more IP focused, and of course, a great team is needed in a market that is growing. In cleantech we are okay even if the entrepreneur hasn’t invented anything new here, as long as he knows how to apply what is already available. However, he needs to have entry barriers and advantages that others will not be able to replicate very easily.
Looking at the current market flux, has there been a change in your investment objectives or methodologies?
Not really. I know people are talking about recession in the United States, and investors in India are being wary and cautious.
A majority of our investments are at an early stage, typically having a 3-5 years’ window, and a lot of them are going after local markets.
Of course, we also do some late-stage investments in companies with revenues that run into tens of millions of dollars and are set to go public in a horizon of the next 12 to 18 months.
We believe in the growth story of the Indian markets. We have already seen the telecom sector doing business of a billion dollars plus in several large local markets. Similarly there are other sectors, like financial services, retail, manufacturing, consumer services, and.
My belief is that events such as the current US market recession do not affect venture capitals as much as they affect the private equity (PE) and private investment in public equity (PIPE) investors.
This is not to say that VCs would not be affected at all; of course VC investments will be made more cautiously and sparingly.
Do aspiring entrepreneurs, especially in IT, have a reason to be worried by the current market flux?
No. We have been through such situations even in the Silicon Valley. There was this huge market crash resulting in a nuclear winter for a couple of years, post the year 2000. Anyway, I think, this is a good time for startups to build a business. Because, it would take at least nine to twelve months to get the product or solution ready, roll it out in the market, and then commence getting customers and partners. So this is the time when your business expectations and even the expectations of your employees are reasonable. It is in such times that you will try and make all the right moves, such as building your product or solutions in the right way, managing the burn rates on a monthly basis, not overspending money assuming windfall profits as soon as you roll out, and so on. Often, these are the best times to build businesses as long as you have the discipline.
In addition, venture capitalists look at opportunities and investment windows of three to five years, not just the next six to nine months. My belief is that the aspiring entrepreneurs need not be worried about fund raising. Yes, one will not see that many investments happening at the moment, but just because the market is going down, investment opportunities are not going to be turned down by venture capitalists. From a startup’s perspective, this may be the best time to build it because of all the realistic expectations from the employees, board, team, investors, etc.
In late 2005, Tim Draper said that DFJ will look at launching a $200 million fund for India. What is the news on that?
We are re-evaluating our India strategy. As you know, DFJ has offices in more than 33 cities. It has a combination of its own team plus a network of partner funds. DFJ has its core team members in the Silicon Valley, China and India, and partner funds in the rest of the places. Once we have re-evaluated, the fund size is definitely going to be a big step up from the earlier $75 million allocation. We are also looking to increase the team size. We are also increasing our ticket sizes. In ClearTrip, for instance, we invested $10 million. Whether the India fund size will be $200, $150, or $225 billion, I do not have a number as of now. It is, however, definitely going to be bigger than the current $75 million fund size.
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