India Innovation Fund Bets On Startups In Which Innovation Is The Competitive Advantage

In a chat with Rajesh Rai, CEO of India Innovation FundYourStory.in brings you a conversation with Rajesh Rai, CEO of India Innovation Fund. Innovation is often a misused word in a startup context. But Rajesh is a pro with close to a decade experience dealing with innovation-led startups in the US. He explains the key focus areas of the fund and also succinctly brings out the difference between the US and India in terms of the ecosystem. He clearly points out what India Innovation Fund is looking to invest and the sectors of interest. Having invested in three companies already, the fund aims to expand in 2012. Rajesh also shares his description of an entrepreneur being one himself sometime back and thinks building a strong team is imperative to performance, be it a VC or a startup.

Name of the fund: India Innovation Fund

Founded: 2010

Promoters: The fund is promoted by NASSCOM and IKP Knowledge Park. The investors of the fund are DST, TCS, SIDBI, Airtel and IKP Trust

Philosophy of the Fund: To support early stage startups. There are not too many funds supporting innovation led businesses in India. In addition to that the idea was to provide a network of quality mentors to be able to help the companies move forward. The idea is to fund innovation-led companies and to help them grow.

Sectors of interest: IT and life sciences. To some extent, it represents the competencies of the promoters, NASSCOM being an IT body and IKP Knowledge Part being one of the largest life sciences R&D centers in India.

Rajesh Rai joined the fund as CEO in April 2010. The fund is based out of Bangalore. Rajesh and Ashwin along with the advisor Anjana manage the fund who together take care of operations, the deal making and the deal flow. In addition, a board and an investment committee, which has well-known entrepreneurs like Dr. Bala Manian, guide the fund. At least four investments are planned in 2012.

Rajesh started a fund in the US called New Markets Venture Partners in 2002, and invested in around 20 innovation-driven companies. He says, “I am kind of doing the same thing in a different country now. I have been in the business for a while now.” Talking about the size of the investments, he explains: “We are putting anywhere in between $100,000 dollars and $1 million.”

The deals are sourced initially through talks but Rajesh feels through the network, the fund has gained good traction and has been able to invest in very good companies.

Investments so far: 3 companies

1. Mitra Biotech. Sector: Life Sciences. Very strong team backing the company prompts investment.

2. SEDEMAC. Sector: IT. Service: Embedded software for engines. It is a combination of software and mechanical engineering.

3. Surewaves. Sector: IT. Service: Technology focussed on media businesses. The platform utilizes cloud technology and significant number of patents filed around it.

Talking about these investments, Rajesh points out, “What we are looking for is core innovation which would drive the company, and innovation should be their main competitive advantage, and innovation that can enable something that didn’t exist before.”

To our query if the fund is looking to invest in companies that are solving very India-specific problems, he disagrees saying, “I would not put ourselves in a box, but that would be a focus for sure. What we are saying is that can the company address a real problem, and can we help the company through our networks. We would love it to be a India-specific problem, and are looking for companies that can compete globally.”

Rajesh’s take on being a VC in the US vs. being a VC in India “I think the energy levels are higher in India at this point in time. The white spaces and opportunities do exist. There is lesser depth in terms of being able to build teams. When you have many years of experience in the startup ecosystem, it becomes easier to put teams together. It is happening, but it is still tougher in India. I think large customers need to learn to work better with startups in India.

In the US, acquiring a large customer is easier. In India large customers don’t treat startups too well. So in India it is a little tricky to acquire customers who can provide good margins for you. There is a growth in the consumer market here, which is real and strong. To be able to build good teams, you got to have very good founding teams. In India it is tougher to get employees who will hold equity as team members. It is also because we haven’t had that many mega exits as well. I guess that is where we are different from the US. But, the general traits of the entrepreneurs themselves are very similar.”

Traits of successful entrepreneurs in Rajesh’s view 

“Somebody who is persistent, somebody who can build a team, and someone who can be flexible. I think these are the main traits of successful entrepreneurs. You can’t be in totally wrong market, things always change, and you got to have the courage to accept that and change.”

Rajesh signs off saying, “One of the key things that people should look at now is to build teams. It is helpful. Build teams that take your company from point 1 to point 2, in a finite period of time.”

Website: http://www.indiainnovationfund.in/

- Varsha Adusumilli