FEATURE > Venture Capital

5 VCs Talk About Their Marriages
By Laura Parkin

Laura is the Executive Director and co-founder of the National Entrepreneurship Network (NEN). NEN is a leading catalyst for entrepreneurship education in India. Prior to this, she was Vice President at Ashoka, an organization that identifies and supports leading social entrepreneurs in over 40 countries. She is a serial entrepreneur, having founded four companies, and former venture capitalist at Highland Capital Partners in Boston, Massachusetts, where she invested in health care companies.

 
  
Name: Alok Mittal
Age: 30's
Location: India
Occupation: Venture Capitalist, Canaan Partners
Energetic, IT-focused, early-stage VC, looking for entrepreneur combining savvy and smarts….
 
With the emphasis that VCs place on their relationships with the entrepreneurs they back, one could almost imagine a personal ad playing a role in deal sourcing. Especially now that a leading venture firm, Canaan Partners, has joined with Bharat Matrimony.

While it's generally known that venture capitalists invest in young or expanding companies, how many know of the role the VCs promise to play in building the companies? Or the importance of their contributions?

It turns out that 'chemistry' between the VC and the entrepreneur is an unlikely key to success in a VC-funded company.

The vows VCs make

Talk to the new breed of Venture Capitalists, and you'll discover that they promise far more involvement than your regular financier would provide.

Says Alok Mittal of Canaan Partners, "We tend to be active investors, we involve ourselves in Board-level issues including strategy, recruitment and fund raising."

"You have these Ministers in the King's Cabinet," Balaji Srinivas of Aureos Capital explained, "My style is more about sitting in the background and enabling people to achieve their dreams."

The experience a Venture Capitalist brings to the table, combined with his understanding of the industry, his network and solid funding can act as rocket fuel for a young organization.

Asked if she would ever give entrepreneurs the money, walk away and tell them to come back with the cash, Bharati Jacob of Seedfund laughed, "There isn't a VC who will say that to you! I will agree in print to that. Everybody claims to be a value added investor - more than capital, more than money."

Promises kept?

From the VC perspective things seem to be working, as Avnish Bajaj outlines Matrix' involvement in one of their portfolio companies:

"In Four Interactive we invested in two guys and the business plan. And we engaged right from product strategy, hiring and building the team, when do you raise more money and all of that stuff."

Moving to the other side of the equation, several recently-funded entrepreneurs confirm that their VCs keep fairly close tabs on their companies, either through informal chats, emails or regular meetings. Some, like Phani, co-founder of RedBus, an integrated bus ticketing website, interact with their VCs on a daily basis. RedBus recently received an investment from Bharati's Seedfund.

All in all, these entrepreneurs agree that VCs live up to their promise of 'more than money.' "They see the market differently, and lot of the business issues we discuss are fundamentally about building a company," claims Sanjay Swamy, CEO, mChek, a company with an innovative mobile payment solution. "We appreciate their perspective."

Experience Matters

This kind of engagement by VCs marks an evolution in the practice of venture investing in India. Over the past 18 months, a number of top tier overseas firms have entered India, including Matrix Partners, Canaan Partners and Sequoia Capital, bringing talent and a lot more money to the table. These new players join a group of home-grown VCs who have built significant experience over the past 7 - 10 years.

Bharati of Seedfund, and formerly at Infinity, has some 10-12 deals under her belt, having evaluated perhaps thousands of companies. Balaji, who was at Carlyle Group before launching Aureos's India presence, has done 25 - 30 deals in the past 10 years.

Adding a different perspective to the pool, recently more entrepreneurs have turned VC. They bring credibility gained through hands-on experience. Both Alok Mittal of Canaan, co-founder of Jobs Ahead, and Avnish Bajaj of Matrix, founder of Baazee.com, fall into this category.

Kanwal emphasized Helion partners' strong entrepreneurial operating backgrounds. He is very clear about preferring to invest in the spaces where he has experience. "We have the contacts and understanding of those industries," he says.

Meeting Your Match

Since every VC has his own particular strengths, finding the right match between VC and entrepreneur is important for the ultimate success of the enterprise.

Perhaps surprisingly, given the number of deals each VC declines, the control does not rest entirely in the hands of the venture capitalist. Entrepreneurs are actively choosing their VCs for their particular skill set or industry experience.

Kavita Iyer of Minglebox.com believes she has an advantage in partnering with Sequoia Capital, globally the leading investors in the internet space. "Sequoia has funded the likes of Google, Yahoo and Youtube at very early stages," states Kavita, "So they have a wealth of understanding in our domain."

Raghav Kher (Seventymm) too was clear from the outset that he wanted to work with VCs that would help build their business. And he seems happy with the choice, stating that, "Matrix has a lot of connections in India where as DFJ has a lot of connections in Silicon Valley."

But is the chemistry right?

With both VC and entrepreneur so passionately involved in the enterprise, getting along is just good business sense.

"The most important thing, after all, is if you really like the founders of the company; that you think these people are compatible….it's just very personal," Balaji explained.

Kawaljit agrees that the final critical element when deciding to invest in a company rests on "our chemistry with (the team), our comfort with them."

Till debt do us part

Personal connection is all very well, but money remains the bottom-line - in fact venture capitalists 'partner' their portfolio companies in order to promote growth and manage the associated risk. As Kanwal Singh of Helion explained, "we are responsible to our investors…so end of the day it is a financial exercise for everyone around the table."

Therefore, however personal the relationships, VCs will play hard ball if required to protect their investments. And though Balaji is willing to give the entrepreneur space to a certain extent, he insists on a balance so the entrepreneur "doesn't go so overboard that he pulls even the existing business down the drain."

With the view that the end justifies the means, most are willing to do what it takes to ensure success. Avnish puts it succinctly, "If the market opportunity is fabulous and you have a B team, you can always hire an A team."

Kanwal agrees, "When the business reaches a certain stage of growth, there might be a potential for the company to bring in a different profile of senior management - could be a CEO or COO."

So when business potential outgrows its founders, it's amply clear which horse the VC will back.

Enjoy the ride

All things told, venture capital - for those that fund, as well as those funded - can be a wildly exciting ride. A ride where the ultimate highs don't just come from the money, but from new ideas. Entrepreneurs live in a world where dreams can come true and if the match is good, VCs can provide just the right help.

As Alok Mittal of Canaan Partners puts it, "We don't call ourselves venture capitalist as much as venture catalysts, and money is just one of the pieces that go into catalyzing growth".

 
> Straight Talk: What are VCs really looking for?
> In depth: negotiating with VCs
> The investment process
 
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