Into the mind of an Indian Angel Investor: With Rehan Yar Khan

Rehan Yar Khan Bets on Indian Growth Story

Known as the trend spotter and an entrepreneur himself (founder of India-based Flora2000.com that sends gifts and flowers to people in 180 countries from the US), Rehan Yar Khan is an active angel investor with Indian Angel Network and successful one at that. Starting with an investment in Druva in 2008, he has invested in over 15 businesses and focuses on innovation as the prime driver of his investments. He shares his views with YourStory during TiECON Chennai 2012 held recently.

Excerpts:

YS: There is a lot of money poured into India right now from all over world. What’s your take on that?

RYK: India has lot of entrepreneurial activity going on, the country is also growing at a great pace. We have a very large gain even when you say growth has come down to 5% from 7–8%.The size is the key here. We are looking for peak budget billion dollar economy, and we have great young entrepreneurs. I completely advocate the idea of pouring in more capital which is increasingly beginning to happen.

YS: There is a lot of money coming in at early stage capital but again a lot of VCs had a problem raising capital this time. What do you have to say about that?

RYK: I think that the correct picture is that the key industry is not the VC industry. They are a little over capitalized. Venture and a stage before that is finally well capitalized, so they should not have problems. You see from the newspaper reports that Nexus and Kalaari closed upon good investments. So it’s pretty healthy, I think.

YS: As an angel investor, when you look at the companies what are the first three things that you look at before even you start considering that company?

RYK: We look at the

  • size of opportunity
  • quality of people who are going to execute
  • competition involved

YS: What do you think makes a great angel investor?

RYK: I think that a good angel investor is one the who is able to spend time with the companies as these are very young companies  and one who has a very good network so that he can introduce the company to others.

YS: You talked about India’s growth and big markets. So what do you think in India are big market opportunities?

RYK: I think the mobiles; everything seems to grow with the size and is going about the 3.5 to 4 inch touch screen. So we are going about 50 million touchscreen to 500 million touch screens, and that is a huge opportunity. Also the Internet usage is growing about 100 million users and 30 million people are buying on Internet. Finance is growing a lot. Healthcare, education, and rural distribution all are hot sectors.

YS: How many companies do you see or meet on a typical day?

RYK: Well, I actually counted that, 150 a week. That’s the scale of entrepreneurship in India.

YS: So how is your day divided in meeting new companies and companies you already are a part of?

RYK: So what I have got now is a team that is helping me. The companies continue to require a lot of support. We cannot ignore the ignition companies. I would like to say I am spending about 70% of my time on the existing portfolio and 30% on others.

YS: While you talk and work with so many entrepreneurs, what do you think are the striking challenges Indian entrepreneurs in technology are facing today?

RYK: I would say that the base of certain segments is still small. E-commerce had the challenges because of that. It’s not a question of if but a question of when. Some projects because get capitalized and there is lot of pressure on them to execute. The market is incoming and cost of acquisition is going up. I would say that these are very challenges, where sometimes you are ahead of the files. The challenges are the general language challenges. India has come to the second industrial revolution without finishing the first industrial revolution. So we are finding a lot of infrastructure of the first industrial revolution that came in like the logistics system, payment system, and security system. We are trying to build this new ease business, a lot of which originated in first revolution and technologies from the rest and ideas from the rest but an infrastructure for those doesn’t exist.

YS: Do you think we are a little ahead in terms of E-commerce?

RYK: The base for E-commerce, if you ask me, is a little small; it is a little smaller than the ambitions of the products of them. It may be so that it may slightly slow down. To add above that we have 100 million internet users, of which 30 million buy online. So when it crosses 150 million, we don’t really have English-speaking population. The English web might not scale, so how do you see industries whether it be digital or commerce those spanning out?

They will have to go buffer, so they will have connect with the languages. Most of it is like a media where in we can read, write, buy, eat, drink, sleep everything.

YS: Among the companies that you have invested in, what are some of your favourites?

RYK: I like all the companies I have invested in, and if you can imagine I look at 150 a week and invest only in about dozen a year, then all the ones I invested in are great. All are doing market appeal quite well, where Jigzee is doing extremely well in 2G and 3.5G networks, Olacabs is revolutionizing the cab industry, buytheprice.com has got a great model for commerce online, Juba revolutionizing software backup, Pretty Secrets revolutionizing lingerie industry. That’s a great company empowering women and great businesses. What I like most about these companies is that they generate lot of employment and that has been a big driver. In fact we all at angels and mentors have always been believers that if you are going from a population 1.2 billion to 1.5 billion whoever employs us, just copy them. If you are going to generate employment for these 300 million people you will have to be into entrepreneurship. It’s not the big companies that are going to do it. The income pyramid is pretty good as a result of this activity in the industry and that is what is making them pricier.

YS: Let’s say, tomorrow an early stage entrepreneur wants to come and pitch to you, how should he or she be prepared?

RYK: It is very important that when you are going to a pitch event or for raising money, you should ideally study, like in college, or when you go for a job you should ideally study the employer you going to join. So ideally when you go for raising funding, you should study the person you are raising funding from. You should study what works while raising funding, speak to a lot to other entrepreneurs, do a lot of research on Google, attend events like this and learn and go prepared. So lot of people come unprepared and take a longer time. So it’s like getting into good school and going prepared.

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