Seed Capital From Angel Investors: Pravin Gandhi, Seedfund – Mumbai, Bangalore, New Delhi, India (Part 5)

By guest authors Irina Patterson and Vandana Upadhyay

Irina: You invest not only in technology companies but in companies in other sectors, right?

Pravin: Yes. India has many opportunities and challenges; technology adoption is not the best here. There are enough opportunities in different business models on how to do things better and more efficiently. We have done a bunch of hospitals in class B and class C cities.

It is not that there are no hospitals in this country. There are many hospitals here, but there are no hospitals that are run efficiently and provide value for money to the people who need and pay for these health services.

Irina: What type of investment you usually do?

Pravin: They are all common shares. There is not a big concept of preferred shares here, but in the shareholder’s agreement, like any typical investor we will have some veto rights, some need for approval on capex, and some liquidation preferences. They are pretty standard rights.

Irina: What are your challenges as an angel investor?

Pravin: One challenge from the supply point of view is the quality of entrepreneurs. I have the money to invest, but the entrepreneurs are not mature enough. That is a challenge and sometimes we spend a lot of time nurturing them.

Second is the country itself. There are challenges of technology adoption and [understanding of] how business is done, so the market can be inefficient. To that extent, growth is not always as spectacular or “hockey stick shaped” as you would like it to be.

The ecosystem for early stage investment here is so poor, there isn’t enough money available in any case, and there are not enough mentors. It is not yet clear to me whether there are not enough entrepreneurs because there is not enough money or if there is not enough money because there are not enough entrepreneurs.

We haven’t seen much success for a country of a billion people. Israel can probably show much larger success ratio than India can. The ecosystem is still weak and that needs strengthening. Government interventions and some incentives are needed, but I think that there are bigger issues to solve.

The problem with incubators is real estate. For example, at any point we can incubate only three companies. One challenge in India is that lot of entrepreneurial work is not about developing an IP sitting at home or two guys in a garage. Many of these are execution plays, which means that at the very start you may have 10 to 12 people, which make it very difficult to execute out of homes.

People in India, for example, don’t buy off the Internet as easily as they might in the U.S. Which means you must have a sales team or at least a salesperson who physically has to go and do stuff, and then [you need] someplace for a team to develop software. Very quickly it become three to four people.

In a typical U,S. entrepreneurial model, the teams are small, basically it is around IP development. This works very easily. Here, it may not be a common occurrence.

Irina: Could Flipkart be is a good role model for Indian entrepreneurs?  They started from home, right?

Pravin: Do you know how many people Flipkart has today? Two hundred. It did start from home to the point that they built a website, but the minute you talk about warehousing, logistics, staff grows quickly.

CarWale also start from home in that sense. Generally,  if you want to be in the market quickly, that is perhaps in two to three months, it is no longer a home-based business.

Irina: Thanks, Pravin. This has been a really interesting discussion. Thanks for your time.

This segment is part 5 in the series : Seed Capital From Angel Investors: Pravin Gandhi, Seedfund - Mumbai, Bangalore, New Delhi, India
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