Home >Specials >Enterprise >We invest to exit, not to stay put: Bharati Jacob

Bharati Jacob, founder and partner at early-stage venture capital firm Seedfund Advisors, has been an investor for more than 13 years. Seedfund has invested in a number of promising start-ups since it started in late 2006, including redBus, which recently was bought by South African mass media firm Naspers Ltd for about $135 million. In an interview, Jacob spoke about risk appetite in the Indian start-up ecosystem, what she looks for in start-ups, and Seedfund’s future bets. Edited excerpts:

What do you think about the risk appetite of investors in the Indian start-up ecosystem? Do you think investors here tend to back only safe ideas?

Many entrepreneurs feel that when it works against their ideas, investors are not taking enough risks—that’s not true. There is a lot of risk appetite here. Now there is funding at multiple levels. You have funding at 1 crore, 2 crore, 5 crore—at all levels. If there is something very risky that we’re investing in, we start off with a smaller amount to see how it pans out. What we lament is that we don’t see too many entrepreneurs dreaming really big. They’re often trying to solve small problems— smaller ideas for smaller markets. As VCs, we like to invest in bigger markets, primarily as it allows us to frame exits better. We invest to exit, not to stay put. We have obligations to our own investors to return their money.

So, what do you really look for when investing in start-ups? What are the one or two important boxes that need to be ticked?

One is obviously the team. If we think the team is not right however good the idea might be, we don’t go for it. Within the idea itself one of the key elements we look for is how large is the addressable market? How new and innovative is it? If it is a ‘me-too’, then we don’t go for it, unless they have something that is unique that differentiates them from competitors or something competitive. So, large market and unique differentiating characteristic—these are two most important things we look for.

The lines between accelerators and VCs seem to be blurring to a great extent—do you think accelerators are the new VCs?

I don’t think so. Accelerators don’t have the large sums of money that we can invest. I don’t think the lines are getting blurred. Accelerators have a role to play too—we (VCs) cannot provide the kind of day-to-day mentoring on areas such as accounting, legal, etc., which they can provide. I think there’s room for both accelerators and VCs to co-exist in the same market.

What do you think of the funnel of ideas in the ecosystem here —do you feel there are a lot of me-too kind of ideas?

We do see quite a few me-too ideas and a couple of years ago, e-commerce was the big buzzword. Everyone was coming up with an e-commerce idea. That happens. In a large country, large population, there are so many ideas that come up at the same time—they’re all reading the same blogs, they’re all reading Techcircle or Mint, etc., which is ok, there’s nothing wrong with that. If you’ve seen some established players emerge in the sector and then a fourth or fifth company comes up, then you need to think, ‘what am I going to do differently that will make people stop buying from Amazon and come to me?’

How big is your fund and what future bets are you making?

We have been investing since 2006. Our investment case philosophy from day one has been that we want to invest in companies that target the Indian market or early markets coming out of India. We have a bias towards consumer-facing companies, for the simple reason that we think they’re riskier bets, but if they play out well, they’ll get good returns. We like tech and tech-enabled or tech-differentiated companies as well.

We have about $70 million under management. We have invested in about 27 companies so far.

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