Seed Capital From Angel Investors: Pravin Gandhi, Seedfund – Mumbai, Bangalore, New Delhi, India (Part 3)

By guest authors Irina Patterson and Vandana Upadhyay

Irina: How do you find your current deals?

Pravin: We have been in the game since 1990. Individually, we are quite well known in the early-stage business. Because we have been around, we have a very good network with investment bankers, and we are very active in TiE. The CarWale deal came to us through an angel who had invested in this company that was also known to me.

Irina: Can entrepreneurs reach you via your website?

Pravin: Yes, we have a website [Seedfund.in] where people can submit their plans. That is just one channel. As I said, TiE, investment bankers or even other later stage funds send us deals because they know we are the idiots who like to work hard to mature the company, so that they can come later and invest in it. We don’t mind that, we enjoy doing what we do. It is okay, as long as we get good valuation when they come in.

Irina: How many applications do you receive a month?

Pravin: When we were investing in our first fund, overall we must have received about 3,000 deals over two years. Then there was, I think because of the economy slow down, there was a slowdown in our deal flow. It has picked up  again, so we get about about 10 deals a week now.

Irina: Out of those 10 deals, how many deserve a closer look?

Pravin: On average, out of the 40 deals, we will probably end up having a meeting with close to 10% to 15%

Irina: What do you look for?

Pravin: We don’t have any dramatic insight other than the fact that the team has to be the best possible. Our first and major criterion is the team. Second is that the idea has a proof of concept of some kind and there is commitment and passion, and the entrepreneurs understand what business they are in.

It not so much so that they should have all the answers, but at least they should have made an effort to have a go-to-market strategy. Wrong or right, it doesn’t matter; life will tell us. They have to make an effort to do all that rather than just do a business plan based on a template.

It is very important for us to see that the people who submit a plan have thought through, not going from top-down saying there are 300 million mobile users so if 1% buys from me, that is 3 million and then my price is $1, so I will make $3 million. It doesn’t work like that.

We would like them to figure out how they will go and get the 3 million customers. Then they will realize that it is not all that easy as it looks on a spreadsheet.

When we find the team is good but a little immature or lacking in something, we work with them. Once we find a deal, it is probably three months before we even take it to the investment committee.

Irina: How do you work with them?

Pravin: We work the plan and maybe go with it to some of their potential customers, so that we too can get a feel of what business they are going to be in. But more important, we mentor them on the notions of running a business. It is not just about passion, it is real-life running of a company.

If we are moving forward, we also help them identify some other resources that may be lacking in the team.  Once we do make the investment, we find some people who can then join them, once we make the investment, otherwise, it is impossible to find somebody without the investment.

Irina: In the past 12 months how many investments have you made?

Pravin: After the second fund, we have made three investments. In Seedfund II we have two different lines of business. [In addition to seed investing], we also run a small incubator. There, we put $100,000 to $200,000 to help do the proof or concept. And then we hope that after the proof of concept, the fund will invest additional money.

In the first deal we have invested a million dollars, with the first tranche being only $200,000. The second deal is $2 million, which is a more mature deal with a more mature entrepreneur, and the third one is also a million dollar with the first tranche again being $200,000.

This segment is part 3 in the series : Seed Capital From Angel Investors: Pravin Gandhi, Seedfund - Mumbai, Bangalore, New Delhi, India
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