When Ratan Tata planned to invest in e-tail ventures, he reached Kalaari Capital, whose investments portfolio of 35 companies include names such as Snapdeal, Urban Ladder and Bluestone. While Tata made personal investment in these three companies, he also agreed to a mentorship role to all portfolio companies of the venture capital (VC) firm. The Bengaluru-based VC firm manages $350 million in two funds. Vani Kola, managing director of Kalaari Capital, spoke to Abhineet Kumar on what has made start-ups so exciting. Edited excerpts:
What has excited Ratan Tata to take so much interest in e-commerce ventures at this stage?
There is tremendous energy about these start-ups and they are indeed making a change in doing things that we do not even think about. These young companies are full of new ideas and confidence that they can change the world. They have the belief that they can decide their own destiny and they are innovating without constraints.
If you are a larger company, you may have a good idea some time, but to be able to innovate at fast pace is not easy. So there is energy in what these young companies are doing. For Tata, there is a sense of discovery that he enjoys and also helping these young people makes him create an impact, that can be very fulfilling and energising.
What has contributed to so much excitement for e-commerce in India? How the system to support it evolved?
When we started in 2006, e-commerce was at a nascent stage. This has completely changed now as young graduates want to start these ventures and senior managers want to join these young companies’ board. Some significant ideas keep coming and now large companies are being created.
This has all been possible through a combination of quality of entrepreneurs and access to risk capital. More importantly, the changing demographic of the Indian consumers has made it possible to execute these ideas that democratise wallet share. Basically, Indian consumers can now buy anything from anywhere that they like. Besides, an explosion in use of smartphone has played a significant role.
How do you see it evolving in the coming years?
Digital India has sort of arrived in the past three years. We now have 300 million internet users and $20 billion digital spend done by 40-million plus consumers. Look at what it can be in five years down the road. All of these are going for exponential growth. That growth will continue exponentially in the next few years and that is where the big bets are happening.
What do you look at before investing in the ideas of unknown investors?
You have to really be open to listening carefully to these entrepreneurs and whether there is a clarity of purpose, what is motivating them, and what is the quality of their idea. Even great entrepreneurs and great ideas come with lots of ups and downs. You also have to be committed to the company and work with them closely, trust them, and help them. What you cannot do is to walk away at the first sign when it is not doing well. So, it is very important to think long-term of three years and more.
Do you have any plan to raise your third fund soon?
We do not have a current time line to do so.