When Sumant Kasliwal joined ICICI Ventures in 2008, his dream was to help make small and mid-sized companies touch new heights. But after a three-year stint, Kasliwal decided to quit the profession to fulfil another dream — set up a company to give wings to his entrepreneurial zeal.
He’s not alone. As the private equity (PE) industry goes through a rough patch — fund-raising has become difficult, valuations are high and getting profitable exits are tougher — some PE fund managers are quitting their profession and jumping onto the entrepreneurial bandwagon.
Kasliwal, a banker and board member in a handful of e-commerce companies, had quit his PE job last year with ICICI Ventures, and founded OUTLETWISE.com, a high-end fashion and lifestyle e-commerce platform.
“As part of my PE job, I had the opportunity to understand innovative business models,’’ said Kasliwal, who was a board member of Miditech, Contest2win, Hungama and Traveljini. “But beyond a point, at PE, you would realise that you always remain on the other side of the table. There is a huge gap between investors and entrepreneurs when it comes to business strategy and implementation. The action, clearly, was on the other side.”
Manoj Gupta" title="Manoj Gupta" class="" />Manoj Gupta, who wanted to bring all unique Indian products onto a single internet platform, started Craftsvilla in May 2011. Gupta was a former principal at Nexus Venture Partners, where he had the experience of investing in e-commerce ventures, such as Yebhi.com and snapdeal.com. “While at Nexus, I was looking at various business models for e-commerce and found that most were flawed in terms of unit economics (they cannot be profitable, ever), based on deals, and most of them did not have clear value proposition for customers,” said Gupta. He has tried to address these issues in his venture.
Kasliwal and Gupta are not pioneers. Many in the PE business have turned entrepreneurs. Kiran Nadkarni, who is the founder and director of Kaati Zone, a chain of quick service restaurants, is one of the veterans who jumped into the entrepreneurial ring long ago by launching Jumpstartup. Nadkarni, who worked with ICICI Venture during 1990-94 and Draper International (1995-99), started East West Ethnic Foods in 2005, which runs Kaati Zone.
Some have come back to the industry after testing the waters. Cyrus Driver, a PE veteran, started Calorie Care, a provider of calorie-counted healthy meals in 2004. Later, he spent four years at Helix Investments Advisors, a PE firm, before joining Arka Capital, a firm founded by former Warburg Pincus India managing director Rajesh Khanna.
After Arka Capital shelved fundraising plans, Driver has moved to European PE firm Partners Group. Driver refused to comment for this story.
Some like Vivek Subramanian have moved out of the PE industry to join a company. Subramanian, who was founding partner at SME-focused PE fund Avigo Capital, has joined as an executive director at Fourth Partner Energy, a Hyderabad-based renewable energy products and services firm.
Experts believe the tough situation in Indian PE sector is another reason for such exits. According to Sunit Mehra, managing director at executive search firm Hunt Partners, PE is a unique business and not for everyone. “As the industry matured, people began to realise that this is not an ‘easy-money game’ and therefore have decided to move on and find something different to do,” he said.
In 2008, 24 India-focused PE firms raised $16.6 billion against $10 billion raised by 18 firms in 2009. In 2010, the size went down to $6.2 billion by 18 funds. Against $6.4 billion raised by 15 funds in 2011, 2012 saw only two India-focused funds so far, which raised a mere $29 million, according to data from VCCedge.
“In the last decade numerous people joined the industry for the wrong reasons. Several didn’t bargain for the stress or challenges of the job. Finding the right deal is very challenging, given how competitive the market is. It is even tougher to get a profitable exit,” Mehra added.