Seed Capital From Angel Investors: Pravin Gandhi, Seedfund – Mumbai, Bangalore, New Delhi, India (Part 2)

By guest authors Irina Patterson and Vandana Upadhyay

Pravin: So, we went with an idea of a $50 million fund. It turned out to be quite easy to raise and within six months we were all ready to go. We had interest from variety of funds. We could have raised more money but we didn’t because for us this itself was an entrepreneurial challenge to prove that this concept works.

Many people offered us $200 million to be part of their team and run the business for them, which we thought we were not willing to do, we wanted to run something independent on our own.

We had some marquee investors like Google and Motorola and some funds like Mayfield and Sierra, Reliance and Midwest Capital, and some high net worth individual friends.

So, off we went with a $50 million fund.  In 2008, we had invested more than two thirds of the money and, actually, a little bit earlier, we started fundraising for Seedfund II. And we raised [some money] and then unraised because of the 2008 debacle. Some of our investors crapped out on us, so we had to start it all over again, and then finally we closed Seedfund II with $54 million in late September 2010. That is what we are doing right now.

In the meantime, we have added some team members and added a new city for this fund. Instead of being in just Bombay and Bangalore, we also invest in New Delhi. We continue to enjoy what we do and we already had one exit out of our first fund, so it sort of proves our model.

We also learned some stuff with Seedfund I, such as that we should also have some money for participating in the second round because the investor dilution becomes quite an issue [if we don’t participate in the follow-up rounds), which is why we raise $54 million. We will still do the same thing, just save some money for later on participation.

Irina: So, Seedfund II has been in existence since 2010?

Pravin: Yes. It is a $54 million fund. We have three partners and our focus is India, and our primary areas are Mumbai, Bangalore and New Delhi. We are strong believers that we can’t write a check and send it to Calcutta. That doesn’t work. The hands-on approach is very important to us and it depends on proximity.

Irina: Do you focus on a specific industry?

Pravin: We are somewhat sector agnostic. We don’t want to be doing only technology. Obviously, some things disqualify because of the amount of money they require. For example, very high infrastructure businesses that will require a huge capex investment, we don’t do that.

Second, we don’t do biotech because, first of all, we don’t understand it and, beyond that, we are all businessmen in technology, so we will do technology and off-line retail.

The overall team is perhaps more predominantly consumer driven. But we do have technology companies that sell software solutions to banks and insurance companies. There is a health care delivery company which has a bunch of hospitals in small towns [as their clients]. We also have an education company [in our portfolio]. So, it is a mixed bag.

Irina: Which company did you have an exit from?

Pravin: The company is called CarWale. I think it was the first company we invested in and the first company we exited from.

Irina: What is their business?

Pravin: They are basically India’s car portal. You can do research for new cars or used cars. You can research prices of old used cars in all cities in India. You buy used cars. They also provide lead generation for manufacturers, and one of their revenue streams comes from advertising, so it is also a media play around cars.

The company got acquired by a German media company, [by Axel Springer AG and their Indian partners the India Today Group]. They are doing well.

We exited because that was a strategic acquisition and the price that was being offered was reasonably good. We didn’t feel comfortable being coinvestor with a strategic investor because then our objectives were not necessarily on the same wavelength, so we thought it best to exit. It was a good exit: We got about 10x return on our money.

This segment is part 2 in the series : Seed Capital From Angel Investors: Pravin Gandhi, Seedfund - Mumbai, Bangalore, New Delhi, India
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