Target fund size: $30-50 million
When Rajesh Sehgal decided to dabble in angel investing about 10 years ago, it was just another way to broaden his personal investment portfolio. This February, after 24 investments and seven profitable exits, Sehgal bid adieu to a 17-year stint at Franklin Templeton Investments’ India arm to strike out on his own in the venture capital business. Equanimity Investments, his Mumbai-based firm, is now on the road to raise a $30-50 million debut fund.
Like most fund managers starting up for the first time, Sehgal expects the initial tranche of the fund to come from HNIs (high networth individuals) in his own network. That would include batchmates from XLRI, Jamshedpur, where Sehgal did his post-graduation in business management, and a bunch of former colleagues from Templeton, including Mark Mobius, executive chairman of Templeton Emerging Markets Group. Sehgal reported to Mobius while he was at Templeton and, over the years, the emerging markets investment guru has also co-invested in some of Sehgal’s angel deals.
“Each of my angel deals needed his (Mobius) sign-off before they went to the compliance folks for approvals. Sometimes he would find a deal interesting and express his desire to participate," says Sehgal, who managed public market and private equity investments at Templeton within the emerging markets group before he quit. Having Mobius on board as a limited partner (industry parlance for investors in venture capital funds) will certainly help Sehgal win goodwill in the market, especially with institutional limited partners. But it is his 10-year track record as an angel investor that will determine how well he can play in India’s complex and competitive venture capital market.
Fortunately, he’s done rather well on that score.
Soon after he ventured into angel investing as a member of angel network Mumbai Angels, back in 2007, Sehgal discovered that he had more than a passing interest in start-ups. He started with small cheques, investing anywhere between Rs10 lakh (about $15,000) and Rs50 lakh (about $75,000) in a start-up. His first investment was in Pune-based Cnergyis, which was developing a software-as-a-service-based based human resource (HR) model. Sehgal participated in the $1 million deal with a group of angels and Erasmic Venture Fund (now known as Accel India). In all, he’s pumped in more than Rs4 crore (a little over $600,000) into the 24 start-ups that constitute his angel investments portfolio.
Sehgal likes to think that what will resonate most with limited partners is his ability to deliver exits. He’s racked up eight exits so far out of which only one has been a write-off. The remaining seven profitable exits have multiplied his initial corpus four times. The most recent exit was in May last year from Neev Knowledge Management, which offers certification courses under the brand EduPristine. Existing investors Sehgal, Mark Mobius and Accel India sold their stakes to US-based education company DeVry Inc. and private equity firm Kaizen Management Advisors. Other exits include engineering start-up Entropy Innovations (Mobius was a co-investor), Zipdial Mobile Solutions, which was acquired by Twitter in 2015, and a partial exit from Reverse Logistics, which owns refurbished goods retailer Greendust.
The exit run stands out in a market that has lately started to feel the strain of the absence of exits for angels. “There are two kinds of angels in the ecosystem. About 90% are HNIs who prefer to write out a cheque and hope for the best. Then there are people like me for whom even if it is a small cheque, it’s money and it has to be managed. If you don’t manage the investment, you won’t get exits," he says.
That experience and sensibility will be invaluable when Equanimity gets down to business. The firm will largely be sector-agnostic in its investments but technology will be an important factor. In terms of stage, it will specifically target start-ups at the seed and pre-Series A stages. Investment ticket sizes will range between $500,000 and $3 million. Sehgal will, of course, have to suspend his angel investment activities for good, but he’s sure Equanimity will more than keep him on his feet.