VC firms seek experts to give start-ups a leg-up

VC firms seek experts to give start-ups a leg-up
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First Published: Tue, Mar 25 2008. 12 04 AM IST

Jayachandran / Mint
Jayachandran / Mint
Updated: Tue, Mar 25 2008. 12 04 AM IST
Electric car manufacturer Reva Electric Car Co. Pvt. Ltd breathes easier in five states—its users don’t have to pay road taxes on electric vehicles in states such as Andhra Pradesh, Karnataka and Rajasthan. In others, buyers of the electric car still have to shell out money that varies from an annual Rs5,000 to up to 9% of the purchase price. While a few states grant such exemptions towards non-polluting vehicles, “there is no uniform long-term policy in place,” rues Chetan Maini, deputy chairman and chief technology officer, Reva.
Jayachandran / Mint
The Bangalore-based company, funded by Draper Fisher Jurvetson (DFJ) and Global Environment Fund, today exports some seven of 10 Reva-branded cars to other markets where regulations are friendlier towards environmentally “clean” transport, but would like India to be a larger market.
It has been lobbying for government subsidies and exemption on road tax, value-added tax and excise duty, among other levies, by talking to the various ministries and government departments at both the state and national level.
To help portfolio companies such as Reva influence key decision makers on such policies, DFJ plans to set up an advisory council of academicians, industry experts and people familiar with government regulations by the end of the year.
“Sectors such as energy, power, infrastructure and health care are a significant focus for DFJ here, so it is necessary for us to have access to a network of people who can help us understand issues and influence government policies at (the) national level to help start-ups take off,” says Mohanjit Jolly, director, DFJ. The venture capital or VC firm is in talks with former public officials, including some retired members in the defence sector, he adds.
On the academic side, it wants to get on board faculty from the seven chapters of Indian Institute of Technology, or IIT, Indian Institute of Science at Bangalore, and other research institutes to guide tech companies it has funded. The advisers will work in flexible roles: they could either advise DFJ directly on investments or take on roles at individual companies it has funded to mentor the team and help tackle growth issues.
DFJ is one among a group of VC firms here seeking experts besides its own partners, with specific domain knowledge to help portfolio companies in various roles.
Take Erasmic Venture Fund. The Bangalore fund has taken on board Abhishek Goyal, who has spent the last six years in companies such as Yahoo Inc. and Amazon.com, as an associate to engage with its 14 portfolio companies on the operational side. Goyal, an IIT Kanpur graduate, guides these firms on issues ranging from building revenues to client presentations. He is, for instance, working with Chakpak Media Pvt. Ltd, a Bollywood-centric online company that Erasmic has funded, to help it evaluate various revenue options for its website.
“Without external guidance, the only way for us to figure out the best option is to try all of them. As a small start-up, we are stretched for bandwidth, so his expertise and research helps us improve our execution speed,” says Nitin Rajput, co-founder, Chakpak. Erasmic also accesses a network of marketing firms and individual consultants on a project basis.
Helion has hired Dhruv Prakash, a former human resources manager at Hewlett-Packard Development Co. Lp., to address another big issue faced by start-ups: recruitment and training. In addition, the firm shares other resources with its portfolio companies. For example, its chief financial officer Natarajan Ranganathan holds a session with all its companies every two months to discuss issues faced by each and share bestpractices.
These initiatives can be put down to a few key factors. One, as VCs with finance and technology backgrounds get into new, unfamiliar sectors such as clean tech, retail or health care, they need domain expertise. For VCs entering India, it could be the need to familiarize themselves with the market quickly. DFJ, for example, has in-house analysts focused on clean tech at its Menlo Park, California offices, but does not have similar resources here.
Two, as the portfolio grows, VCs will be stretched to be very hands-on with each company. For example, both Helion and Erasmic, which have four partners each who can take board seats, fund at least a dozen companies, meaning each partner will be on the board of at least three firms it funds. The partner-to-company ratio is similar for firms such as Nexus India Capital, NEA IndoUS Ventures and Matrix Partners India, all of which have dedicated funds to invest over the next few years. “You can use your VC contacts to help the company with the first few customers, perhaps, but companies have to go beyond that, and it is very difficult without external support,” says Prashanth Prakash, managing partner, Erasmic Ventures.
Three, VCs say, industry experts are keen to spend time with start-ups. Mentor Partners, for example, has a 14-member mentorship council comprising experts such as telecom technology company Vanu Inc.’s president and CEO Vanu Bose and Rangu Salgame, formerly of Cisco Systems Inc. and Tejas Networks India Ltd. “These are senior people at large corporates who want to help start-ups,” says Vish Narayanan, Mentor’s founding partner, who aims to expand the council to 30.
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First Published: Tue, Mar 25 2008. 12 04 AM IST