Samir Kumar, Inventus: "We invest in good entrepreneurs, irrespective of which sectors they are in."

It only takes a few seconds to realize that you’re talking to a veteran when you interact with Samir Kumar, Managing Director, Inventus (India) Advisors. Samir became an early-stage institutional venture investor in India in 2001, following a 15-year career with high-growth Indian companies.

Samir was a part of the early team at Wipro and was also a founding member of Wipro’s joint venture with Acer Computers in Taiwan to design, build and sell computers for the Indian market. He became a venture capitalist in India when he joined Acer Technology Ventures in 2001. At Inventus, Samir is a Board Director at Cbazaar, Telibrahma, Insta Health and Sokrati.

In this chat with YourStory.in, Samir speaks about the evolution of the startup ecosystem over the last decade, e-commerce, what Inventus looks for when they’re looking to fund a startup, and business ideas that work at the global level. Given below are the excerpts from the interaction:

You’ve been in the Indian venture capital domain for over 10 years now. In your opinion, how has the startup ecosystem evolved during this period?

I started out in the VC business ten years ago, post the ‘dotcom’ move. At that point of time, there were a fairly large number of people who turned towards entrepreneurship. But if I were to compare them with the entrepreneurs of today, I’d say that a lot more maturity has entered the ecosystem. The other change is the presence of more mature investors, and the whole gamut of accounting firms, recruiting firms, law firms, etc. They have all sprung up during the last decade. Inventus, of course, came into the picture in 2006. Kanwal Rekhi, John Dougery and I got together and started the firm.

In the recent past, most of the investments made by Inventus have been in companies with teams in India as well as the US. Is there a particular reason for this pattern?

Well, we invest in technology and technology-enabled businesses. If you see the landscape that we operate in, the US-India corridor is very seamlessly connected. We don’t see a distinction between a team located here or in the US. For us, entrepreneurs on both sides of this corridor are doing very similar work and by being on both sides of this corridor, we’re able to pick the best teams addressing a particular opportunity.

So, we don’t invest in one particular type of company. It’s not that our fund requires Indian entrepreneurs to necessarily have a US office. But our US entrepreneurs must have an India strategy because we’re essentially an India-focused fund. Increasingly, we find that a lot of Indian companies use the Indian market as a test-bed to establish their products, build revenue traction, fine tune their products and go out to address global market opportunities. And that’s why our presence on both sides helps our entrepreneurs. Similarly, the US companies leverage India for talent, markets or R&D and we’re able to help them build their teams here.

How many investments have you made in 2012? And what does the line-up for this year look like?

We’ve made just one investment so far in 2012 and this particular piece hasn’t been announced yet. We’ll end up making 4 or 5 more investments by the end of the year, which has been our usual pace.

What are your focus areas, in terms of sectors?

We don’t get excited by just the trends or the pick of the day or whatever. Our focus is on software, services, internet and mobile. We invest in good entrepreneurs, irrespective of which sectors they are in.

Also, I’d like to clarify what I meant. I think we saw a lot of irrational executors in the e-commerce space about 6-9 months ago. So, we’re not the type of investors who get carried away by the hype or follow a herd. At the same time, it is not that we don’t invest in e-commerce. RedBus is a portfolio company and we invested in them in 2009. And we’re doing a couple of more e-commerce deals as well. So, while we do look at e-commerce, we don’t get excited simply because others are getting excited.

Since we’re talking about ecommerce, do you think it’s mostly hype or is it here to stay?

It’s certainly here to stay. But that does not mean that there’s no hype. In some cases, it tends to get blown out of proportion and the picture that is provided isn’t very close to reality.

Do you think we’ll see more ‘enabler’ firms coming in to cash in on this e-commerce boom? For instance, we have GharPay enabling cash collection and then there are a few technology enablers as well. Also, what’s your take on consolidation in the e-commerce domain?

You’ll continue to see all of these ‘enabler’ companies coming in; whether it’s the payment gateways or the logistics firms or the technology guys who provide useful platforms and so on. You will also see consolidation happening. It has already started and it will continue. A lot of companies have shut down. We’ve seen them get bought over. For instance, I think that there are far too many groceries/baby product companies for all of them to do well and survive.

How big is team Inventus?

We have 3 people in India and 3 in the US, if you’re talking from an investment professional standpoint. We get to look at over 1000 deals every year. So, I’d say we have quite a bit of work on our hands.

How do you decide to meet a company for investment?

Our hook is almost always on the entrepreneur and therefore, our criteria to move ahead and make the next meeting is based on the team that we see. We try and meet as many entrepreneurs as we can. Even if we don’t notice a match between what we want to see and what comes on the table, we try and have meetings. It helps us understand the space and hopefully leaves the entrepreneur with a thought or two that would benefit him when he leaves the room.

What are the top 3 things that you invariably find yourself looking at, while considering a startup for investment?

The team is always the top priority. But once the team filter is passed, we look at the opportunity, how big the market is, how fast the market is growing, how big a company can be built in that market space and how competitive the landscape is and so on. Finally, we look at the sort of resources that are required for the company to become big and what sort of returns we can expect when the company does become big. But the entrepreneurial team is easily the most important factor.

As someone who has met thousands of entrepreneurs, what are the traits that you’ve noticed in the successful ones?

Off the top of my head, I would say that their background and experience in the space that they’re in usually says a lot. Ideally, they should have a fairly good understanding of the market and the customers in the space that they’re going to operate in. Technology is taken for granted. Most entrepreneurial teams we see come from a strong technology background. The other ‘softer’ criteria that we’ve bet on are passion, dedication, how excited they are about the opportunity, ability to take risks, ability to build a team, to sell their vision to customers, employees and other stakeholders, to put together a high quality team of advisors, the board, etc. and their integrity.

What, according to you, are the challenges that tech startups in India face today?

The scenario is much better now than, let’s say, 10 years ago. I’ll answer this by giving you a contrast between then and now. Every startup needs customers. 10 years ago, the Indian market in almost every sector was very small to build a company. But today, that has changed. Entrepreneurs today, see large enough markets in healthcare, education, mobile and many more domains. These are all global scale markets that have emerged. Internet, with a 100 million users and growing rapidly, is also becoming an almost global scale market. So, market opportunities are not as much of a challenge. But if you ask me, compared to the US, they’re still small.

The other thing is that people with deep technology knowledge and domain experience were not widely available here in India. Product management is a skill that is still evolving in this country. That’s because we have a base of services on which the IT industry got built. And product companies, which are almost all the new companies today, require very strong product management skill sets.

Again, this has changed over the last 5-6 years with companies like Google which have produced quite a few of those. They have had product managers working here and many of them have come out and joined startups or have started their own companies. A lot of Indians have returned from abroad with a lot of knowledge in product management, architecture, technology and so on. But I’d still list architecture, product management, etc. as challenges. Also, there’s the issue of access to high-quality investors. There’s just a handful investors who understand the early stage investment space. Few are ready to back startups in the early stage.

What are your thoughts about the mobile app ecosystem in India? Do you see more companies coming up in that space?

Mobile has exploded in India with about 800 million subscribers. The smartphone population is increasing. So is GPRS and 3G penetration. Data plan prices are also coming down. Mobile is going to be the first screen through which most Indians will access the internet in the next few years. The PC population is 50-55 million; the mobile population is 800 million and it follows that the smartphone population will rapidly overtake the PC population. So, there’s a huge opportunity for mobile apps, mobile access to internet and technologies that enable people to do that and also, technologies that enable people to consume content, whether it is music streaming companies or travel companies like RedBus which allow you to book tickets on the mobile.

You’ve also invested in service companies. Does the criterion change for them, when you’re looking to invest?

One of our portfolio companies is eTechies, which is a tech support company. So, we looked at pretty much the same criteria. This was a great team. They understood this space. They’d been working in this space for many years. When we met them, they’d already built a business that was beginning to scale. We saw huge opportunities in the Indian market, which is very fragmented. There are various mom-and-pop stores but no single organized player. It all fell in place because we were convinced that this was a great entrepreneurial team and we thought that this was a problem that was crying out for a solution.

What according to you are big, untapped opportunity areas for entrepreneurs in India to chase currently?

Oh, I think there are plenty. So if I take a macro view, the Indian economy is highly inefficient. The productivity of the market is very low. The opportunities for entrepreneurs to build technology solutions and other such solutions to improve the efficiencies of business or provide more convenience to users are very large. In fact, everywhere you look around, there is an opportunity.

You talked about one of the challenges being finding a good quality investor. What do you think an entrepreneur should consider before approaching a VC or an angel investor to raise money?

I think people tend to underestimate the quality of the first output that reaches the investor. Whether it’s the quality of the business plan or the presentation, we like to see that it has all been thought through. We all know that the business plan is very unlikely to be met 5 years later in the form that it was first presented. We all know that markets change, dynamics change and, therefore, a business has to change to keep in tune with changing markets.

However, what a good business plan tells you is how much thought the entrepreneur has put in when he drafted the plan. So, one of the things I’d like to tell entrepreneurs is to think their business plan through before presenting it to investors. Whether you believe it or not, the first impression is a lasting impression. So, when we see entrepreneurs who are not thorough with their plan or if someone else has made it and they’re coming and reading it for the first time, it doesn’t leave a very good impression.

Entrepreneurs must live, breathe and be consumed by their business and present it with the same passion with which they started it. It also helps if they come with a reference. But it’s not a disqualifying factor if they don’t have one. A little bit of homework on the investors, what areas we’re interested in, etc. would help as well. If someone is starting a restaurant, he’ll be wasting time with us. But we don’t see that as a problem. Targeting helps them save time.

We’d like to thank Samir Kumar for sharing with us insights on the startup ecosystem, investing and entrepreneurship. We’d also love to hear your views on this story. Do feel free to write to feed