In many non-US markets, DFJ has chosen to pursue investments through affiliates. Why made you choose a direct investment strategy in India?
Again, DFJ feels very strongly about certain regions in terms of the long-term opportunity that they present…specifically India and China. There is no better way to show commitment to a region that to dedicate direct resources as we have done in both China and India. We may at a future date add to the core team by partnering with another fund under the partner network model as long as there are obvious synergies with the core fund.
How many people will the India operations have? Why have you chosen to be based out of Bangalore and Hyderabad?
I will be here initially along with Satish Andra, our venture partner. The decision to base the office in Bangalore was a combination of personal as well as professional reasons. On the personal side, education, weather, affordability, housing were key variables. On the professional front, we had to take into account deal flow and proximity to deals, business development opportunities, syndicate partners, and an established ecosystem for transaction. Three of our four key investments to date are based in Bangalore include Reva, Mchek and Seventymm.
How do you assess the opportunities for seed funding in this market?
Given the initial focus on investing in companies targeting the Indian market, we have to get comfortable with the overall size of the market and the opportunity. Additionally, especially at the seed stage, the investment is in people. So, chemistry with the team and a strong belief in their ability to execute is paramount. Finally, it certainly helps if the team has surrounded itself in terms of employees, advisors, board members and early alpha or beta customers and partners who provide some level of credibility to not only the pain that the company is addressing but also that the solution is valuable and something customers are willing to pay for. Additionally there is a methodology I refer as the credibility continuum where on the one end are paying customers, but short of that (especially in a seed situation), one looks for the credibility of the team, the employees, the advisors, board members and other who have put their own brand or credibility on the line by backing a given seed stage startup.
How does DFJ prefer to source deals – through intermediaries or proprietary deal sourcing?
We expect to have an inbound stream of deals from the service providers, corporate network, academia, government organizations and other venture firms looking for syndicate partners. But we also intend to be very outbound through events, panel presentations, speeches and the press. Bottom line is that we have $75M to invest in India over the next three years and we want all entrepreneurs with interesting ideas in search of venture capital to know about us.
Could you elaborate on the deal due-diligence process DFJ undertakes? Typically, how much time does DFJ like to spend with a prospective company before closing the deal?