Disclaimer: YourStory.in is a media partner and hosted this session
Vani Kola, MD of Kalaari Capital, brings in much needed clarity from an investor’s point of view. Delineating the functions of an entrepreneur and an investor, Vani is quite emphatic that execution and operations is the entrepreneur’s exclusive domain and the investor brings in networks and capital along with mentoring support. She is firm that an investor cannot tell an entrepreneur how to run a business. In the Kalaari Capital meet and greet on 24th January, Vani answered a range of questions from entrepreneurs.
We present the entrepreneurs’ questions and Vani’s responses for you.
Entrepreneur: Are there any seed funds in India that put in money just at an idea stage without much traction?
Vani Kola: There are a lot of firms such as Kae Capital, Blume etc which write INR 50 lakh to INR 2 crore cheques to entrepreneurs at a very early stage. Also, increasingly there are now many individuals who are writing cheques at a very early stage to entrepreneurs. However, you need to be careful in some cases when it comes to early stage funding. For instance, there was a company that we liked a lot, we really liked the entrepreneur, but he has raised money from a real estate businessman whom we were not comfortable being the shareholder as he was not adding much value to an internet business. And because of that, we didn’t want to be part of that deal. So when you go to an angel, please be sure that you are raising money from someone who is well respected in the industry, and that it raises your own bar.
Entrepreneur: What is your involvement in your portfolio companies?
Vani Kola: We do add value by bringing capital, experience and also by bringing in our networks to help you solve your problems and get you to scale. But, I want to emphasize that investors add only 5-10% value. It is always the entrepreneur and his team that add maximum value. If I know how to run your company better than you, then there is a problem! 90% of the value comes from the smart entrepreneur himself. We expect our entrepreneurs to be smart and capable.
Entrepreneur: How do you see the mobile ecosystem evolving in India?
Vani Kola: In mobile the question in India is how to make money and get to profitability. If you partner with operators for distribution, they eat up 70% of your revenues in India. Distribution is a big challenge, and this is a very unique problem to India. You are also probably going to operators because there is no other way to get payments done easily, and marketing is a huge problem. How do you make something viral via mobile is extremely important.
Smartphone usage is growing exponentially. But the growth is not homogenous. The way app stores are used in India is not similar to how things work in the West. So cracking that distribution, discovery and payments problem is extremely important. We are very confident that some smart entrepreneur will solve that problem soon.
Entrepreneur: Will you fund the subsidiary of a company?
Vani Kola: I like to fund entrepreneurs whose singular focus is to succeed. All entrepreneurs are crazy and that is good edge to have. Being on a mission impossible is a good thing. So, I do not want to put my money in a hired CEO. I want to put money in an entrepreneur who has a massive drive to succeed. For me, I would like to put money in someone for whom his venture is make or break. There are many hired CEOs who can take a company from A to B. But there are a very few who can take an idea from nothing and make something out of it. I want to put my money in those guys.
Entrepreneur: How can entrepreneurs identify/build defensibility for their business?
Vani Kola: What is valuable to the investors is only what is valuable to the business. When you have a simple value proposition and a very complex process to solve it, first identify what are the most complex parts of your process and jot down how you are solving those problems. To identify defensibility, break down your problems and identify parts that are hard to solve, and those parts should not be very easy for everyone to solve.