This is Kamla Bhatt. We bring you part-2 of our conversation with Kanwal Rekhi, a well-known investor, entrepreneur and a mentor based in Silicon Valley.In this interview he talks about his success and failures and his humble beginnings in India.
Kamla: How do you know which horse? I am thinking of Exodus. Way back in the 1990s when they started and they were looking for money and when you were going to visit them ...you know the story of how they put up the racks and servers and everything? So what prompted you to go with Exodus? Here were 3 people who were just starting out?
Kanwal: Yes like I said before you have to learn to develop your own filters. You have to become as much a judge of a person as of a business plan. So it takes several steps and I tell that you have to dance several times before you start to get excited about a person. I talked to Exodus people maybe half a dozen times and they had a sense of urgency in respect to their need for money, because they had to meet some payrolls and pay some bills. But even then I took several weekends before I wrote up the check. It took me 2-3 weeks instead of 2-3 months. There was something about the determination of BV (Jagadeesh) and Chandrasekhar and together it really appealed to me. BV was a quiet, deep thinker and Chandrasekhar was a bubbly sales person. The language they were speaking about, (this is at the dawn of the internet) and a large number of people becoming consumers of internet after paying $10 to get internet will draw the businesses to sell to them on the internet and those businesses will need a lot more than simple wire and they will need lots of help. So there is an opportunity here, so it was an intellectually sound concept. And once it starts to appeal to me then I start to add value myself. The 3 of us very quickly went through the process of how to sharpen our focus down to what needs to be done. The original business plan was very large and complex. We simplified it down to just building data centers, which was a lot more easily understood and executed and that is where we made most contribution.
Kamla: What have been some of your failures?
Kanwal: In this business there are both failures and success. It is a very risky business with 98-99% odds of a situation failing. The best returns are about of 20% that means 80-90% of your investments should fail. In my case, my record is very, very good. I have done roughly about 18-19 successes out of 53 and that approaches close about 40%. I still have 2-3 companies left to draw...I think I have 3 companies left to draw. That makes it 22 companies out of 53 and that is over 40% and it is a pretty good record. But I have 31 companies, which have failed.
Kamla: Which are the ones that failed, that surprised you?
Kanwal: I don’t want to use names. Some of the companies which had failed, they should have succeeded for sure. Success rate has been phenomenally good for me. You have to put the whole thing in philosophical terms. Generally speaking where I was not the primary investor, where I was not the board member but somebody else was a primary investor, somebody else was a board member and I supported another investor or another angel investor I did very poorly. Where I was involved more deeply I did much better.
Kamla: What about Ensim?
Kanwal: Ensim, I was not very involved in the first 4-5 years. I stepped in there at the end. That company should have succeeded. That company should have successed because they had a very powerful team and raised huge amount of money, and was in a very hot market. It turns out there was a lack of focus. One of the problems in a start up is that you have got to put some blinders on. Once you have picked your opportunities you have got to put your blinders on because the opportunities are coming to you at a very rapid clip. So you have to work at the opportunity that you have picked otherwise you start to disperse a lot of energy. Ensim could never focus on the opportunity they had which was virtualization that turned to be such a huge market. They were way ahead of VMWare and had far superior technology but they never focussed to execute well.
Kamla: What do you make about the success in the start up world? Do you think it’s a random event?
Kanwal: There is definitely a luck element. It would be foolish if we deny that one. Timing is everything. If you look at startups Apple was not the first personal computer start up, there was Altair and others. There was a timing element. But you also make your own success. Failure could be very quickly attributed to your own if you are not making the right choices and if you have not executed well. You can do everything right but if the market is not there you will fail. So there is an act of luck. I guess random is the right word. Timing has to be right. So there is a saying in our business “When the lady luck smiles at you all the sins are forgiven but when the lady luck decides to spit on your face all the hard work starts to drain.”
Kamla: You have also donated quite a bit of money to IIT Bombay (Kanwal Rekhi Center) where you studied and Michigan Tech. What are you going to be doing in this education space in terms of investing because that is a hot market in India?
Kanwal: Well giving money to IIT and to Michigan Tech was paying my societal debts so that wasn’t an investment but saying that I owe it to the society. Yes we are looking at the investment start ups in the education space as it is hot space in India specially, but we have not seen something that we liked as yet.
Kamla: My final question is a bit on a personal note. You were born in Rawalpindi and then the partition...
Kanwal: I grew up in Kanpur. I left Rawalpindi when I was of 2 years and so I don’t have any memory of Rawalpindi or Pakistan. My earliest memory is of Firozpur. Firozpur is after we cross the border from Pakistan to India and the reason I remember Firozpur is because of a flood, which happened. There was a flood in Firozpur and all I remember is water everywhere and that is my earliest memory. We were an army family so we moved around from Firozpur we went down to Secunderabad in South and then went to Pune and then moved up to UP to Agra. We finally settled in Kanpur in 1954. From 1954 to 1963 I was in Kanpur and that is when I went to IIT Bombay. My family stayed in UP when I came to the US.
By the way I did go back to Rawalpindi twice over the last 3 years and to Pakistan. I went to see my village and the school where my father went to school. I sort of spotted the house where I was born, but I was not hundred percent sure because all the landmark signs were there except the house was not as described by my mother. So maybe the house was re built. We were very well received at Rawalpindi, they honoured us a lot.
Kamla: So what prompted you to come to the US because in the 1960s people were going to UK, US was not the option for many people?
Kanwal: No that was 1950s and you are talking about the 1960s. IITans right from the start went to the US. In the 1950-1960s people went to UK and early 1960s they were being sent to Russia by the government of India. The IITans started in mid 1960s going to US so there was not even a thought of going to any other places. When I applied everybody was going to the US.
Kamla: And how much money did you have in your pocket when you came?
Kanwal: Those were the days when I had with me $ 8 but it was a very great amount of money. There was the plane fare and living expenses for 2-3 months which was already pre paid. We only carried $8 with us in cash. We had 3-6 months to become self sufficient here, but most of us would get money paying jobs at the university itself. And then work around the Christmas holidays and by the first year summer holidays rolled we had done two jobs. So after I was here in 6 months I knew I am going to survive and after the first summer I knew I will do very, very well.
Kamla: When you look back at your journey what are some of the things you are very proud of and some of the things you think you still have to achieve?
Kanwal: I don’t know. I still have to achieve anything because at my age of 63 you have to have a different perspective. I have my kids now and looking at their success and their future. I did very, very well for the humble start I had. I was the third child; I was an awkward child and a little clumsy and with some speech impediments. Getting into IIT probably was the biggest achievement because back then it was a very tough competition and once you are at IIT you are able to compete and work with the best in India. So we came to US and within weeks we knew we were very competitive in our classes as IIT prepared us well. So, US education turned out to be a lot easier than any of us had imagined in terms of our effort and how as we stood to compete and of course at jobs we did extremely well. Coming from India where you had to compete for survival to US where there is almost no competition. Even though we talk about a competitive society at the same level as we have in India it was a cakewalk.
Kamla: So you think you have achieved everything in your life?
Kanwal: I think I will be foolish to expect more from myself. I have done well and I have shared my good fortune with others and with my family. I sponsored all my brothers and sisters. We have a huge family we have 7 of us: 6 brothers and a sister. The next generation kids are going to colleges one by one and becoming professionals now. We have been married 37 years. Paid back my dues both to the Indian society and the American society. I just want to be productive right till the day I die.
Kamla: Are you surprised by your success?
Kanwal: Yes, yes, absolutely. Like I said I was one of the 500 million people back then and so there was an element of luck getting into IIT. Yes, I did work hard and my wife would tell you that I did work hard, but nothing came easy in terms of...nothing was handed out to us. I worked hard but success was phenomenal. First entrepreneur, first guy to take public in NASDAQ and so these were some things which were not everybody was able to do back then.
Kamla: What are some of the basic things you need to do to succeed?
Kanwal: I tell people that the biggest hurdle you have to overcome is yourself and you have to give yourself the chance to succeed. A lot of people don’t even try and they start telling 10 reasons why they would not succeed, why they should not do it. My advice to people is give yourself a chance give yourself second chance, third chance to start up business, specially as an entrepreneur. You have not failed until you decide that it is not for you and then you go ahead and get yourself a job. So if you don’t succeed in the first start up you give yourself a second chance and if you don’t succeed in the second start up give yourself a third chance so every step of the way your odds are improving. You yourself have to decide whether you are going to do it or not which nobody else can tell you. Other people can hold you back, almost everybody will tell you that why bother why do that but you have to give yourself the push.
Kamla: So persistence?
Kanwal: Persistence and not taking no for an answer, not putting any limitations for yourself, not accepting any limitations on yourself.
Kamla: You make it sound so easy. But if I was an entrepreneur and I failed in my first venture and then I failed in my second venture it takes a toll on me because there is only so much that I have and have been beaten down that to get up again and to do it is not very easy.
Kanwal: Yes that is probably true. If you have failed three times you have to think whether it is for you. But the first failure is in the nature of the beast. You are trying to do something that has very low odds of success and the fact that you tried was a big step. People mostly succeeded on the second attempt. The first attempt becomes a learning experience and sharpens your senses plus shows you the danger that you missed. The more people fail because they fail to see the dangers, they see the upside they don’t see the downside and so what happens is by the time you do the second start up you become very aware of potential downfalls, you start to think hey what am I missing and what is going to bite me and from which side? So you develop this sense, which gives you a bit of an edge that you did not have the first time.
Kamla: So entrepreneurship is not for everybody then?
Kanwal: Entrepreneurship is not for everybody at all. Only 1-2% of the population will succeed, but nobody knows which 1-2%. So you would never know it was not for you if you would not try.
Kamla: Kanwal it was a pleasure talking to you. Thank you for the conversation.
Kanwal: Thank You.
You were listening to Kanwal Rekhi who ia co-founder of Inventus, a US-India venture capital fund located in Silicon Valley. This is Kamla Bhatt and as always thank you for tuning in.