David Giampaolo has spent the early part of the evening at Fitness First, the sprawling multi-level fitness centre at Connaught Place, New Delhi. Sure, the 50-year-old CEO of high-profile, London-based private equity firm Pi Capital is a fitness fanatic, but his interest in the fourth Indian branch of Fitness First goes beyond pumping iron for a lean look before a meeting.
He wants to see how the newest branch of one of the world’s largest fitness chains, where he is an investor and a non-executive director, is doing. Over a glass of “sweet and salt” fresh lime soda (which this well-travelled entrepreneur has never tasted before) at The Imperial hotel in the Capital, Giampaolo looks happy to report that despite the downturn, the branch is doing well. Since January, this branch has signed on 2,300 members at minimum membership fee of Rs2,500 a month.
Green signal: Giampaolo began his career with a gardening business. Jayachandran / Mint
Whether it is his conservative dressing style (pale blue half-sleeved shirt), his medium height, or the fact that he is soft spoken, it is difficult to imagine that Giampaolo was once called London’s most networked man in an interview in The Times, London. “I don’t like using the term networking. Let’s call it idea sharing, or just learning together. Networking is usually for lower-level people, for whom the first thing to do when they meet you is thrust their card out and say ‘Hi my name is Bob and I am a lawyer’. Nothing comes out of that,” says Giampaolo, who is no great fan of social and professional networking sites such as Linkedin or Spoke. “I am still a very tactile person. I like to read my Financial Times as a newspaper, not as an online supplement.”
Giampaolo’s uber networker moniker comes from his association with Pi Capital. Pi is ostensibly a private equity firm, but one with a twist. The firm works more like a club of high net-worth individuals (HNI) who, for a fee, meet frequently and are presented with investment opportunities. Members are free to pick and choose their investments (as opposed to a regular fund in which investors put in money largely at the behest of fund managers).
Aside from providing investment opportunities, Pi Capital provides a platform for these highly successful people to interact and share experiences. Members also get access to financial reports, newsletters and savings on, among other things, business travel and Moët Hennessy products. Yes, including Dom Pérignon. “Being a member of Pi is the most classy, low key, professional and discreet way to meet other people who are at the same level as you,” explains Giampaolo.
In the last 12 months, Giampaolo has visited India four times, and not just to keep an eye on the Fitness First network. “I am sometimes here to meet Indian venture capital funds, and at other times to sit in on rental negotiations with landlords in retail space for Fitness First. In fact, in the last few months, our phone has been ringing a lot. Landlords we negotiated with in 2006-2007 are now offering space at up to 50% discounts on rent. But rentals in retail space must come down more. It’s just a huge bubble in India right now.”
With economies such as the US and UK unlikely to see growth for a while, Giampaolo is looking at other markets to make money. “Investing money is easy, but making money, that’s much harder. I need to deploy my capital in markets where I see real growth is yet to occur and where growth revolves around local consumption rather than being dependent on export only.” For Giampaolo, that means markets such as Brazil, India and Malaysia. Indeed, India ranks higher on Giampaolo’s list than China.
An educated and youthful population, democracy, a seemingly stable government and a well-defined legal system—all these factors put India ahead of China in his estimation. “My caution about investing in China vis-a-vis India is higher. And while India offers opportunities to make a lot of money through private investments, this will not be fast or easy money… Each investment here will have a five-to-seven-year holding period and we at Pi Capital will only make investments alongside a local co-investor.”
This optimism about the country is reflected in the fact that Giampaolo is working quietly on an Indian chapter of Pi Capital. He resolutely refuses to share details of who will run Pi Capital India, or who will be invited to join the local chapter. But the select few, he promises, will find Giampaolo’s value proposition tempting.
Pi Capital, he explains, is a conservative investor. Even during the boom years—2006, 2007 and 2008, when cheap capital fuelled global investment sprees—Pi invested only in six ventures. He points out that one of funds that Pi invested in is yet to spend even a single penny of its £75 million (around Rs590 crore) corpus: “I firmly believe that some of the best investments are the ones people don’t make.”
Giampaolo dropped out of high school at 16 and started his career a year later with, first, a gardening business and then a gym in Florida, US. His subsequent career graph probably has much to do with his unique approach to managing investments: Giampaolo says he thinks more like an entrepreneur and less like a banker or accountant. “I look at the CEO, the business plan, the sales and marketing of the company, and try to understand the heart and soul of business, not just the back end.”
The economic slump has helped validate this approach and the Pi Capital model: “There are two significant developments as a result of the very painful last 12 months: People want transparency in investments. Investors will now want to get closer to their money and that means their having a say in investment decisions. A complete alignment of interests between the investor and those investing on his behalf is the only sustainable model for the future.”
Giampaolo dismisses reports that the worst of the economic downturn is behind us: “A lot of pain still has to work its way through the system. Real estate prices have to fall a lot further. Western banks still have a lot of toxicity on their books that needs to go and the unintended consequences of the huge fiscal stimulus and bailouts will create new problems.”
He draws a parallel with a book he read recently. Dead Aid by Zambian economist Dambisa Moyo, published earlier this year, contends that billions of dollars in aid has not helped reduce poverty or increase growth in Africa. Similarly, Giampaolo says, it would have been better if Western governments had not taken the bailout route, burdening the next generation: “When you have a huge party, you have to live through the hangover. Just popping pills will not work.”
As dusk falls in Delhi, the hotel decides to fumigate its lawns. We are bundled indoors. “It is because they have to deal with mosquitoes,” I explain to Giampaolo, who looks confused at the sudden and insistent intrusion.