Rehan Yar Khan is an active angel investor in India, who has invested in almost 19 companies in his personal capacity that include Druva, OlaCabs, Jigsee (now VuClip), Unbxd, Pretty Secrets, Reach Accountant, Sapience and DocSuggest, among others. Khan has now announced his maiden VC fund Orios Venture Partners for which he has raised around $50 million (Rs 300 crore). Orios will seek to back home-grown ventures operating in the internet and B2B software products spaces. According to Khan, Orios will be an entrepreneur-friendly fund, which will seek to bridge the gap between traditional VCs fund and entrepreneurs.
Techcircle.in spoke to Khan to know more about Orios, market trends in India and more. Here are edited excerpts:
There are many funds in India. Why does the market need another fund? What is your USP?
Yes, there are many funds in India. However, most of them are foreign funds, while some have started in India but raised money from foreign investors.
Indeed, there are three reasons why we are here. One is that, if you are looking at India, not much action is happening in the VC investment space. I think Indian investors themselves desperately need a fund like Orios to get into these kinds of investments, because these are not available in the public space. Secondly, India needs an entrepreneur-led fund. We are one of the rare entrepreneur-pro funds in India and we understand the entrepreneurship ecosystem well. Third, I think startups definitely need this kind of fund. If you are going to a startup and asking if there are many funds in India available for startups, they would say no.
Our USP is that we will have the easiest term sheets and easiest share purchasing agreement for entrepreneurs. We will not waste people's time. We will add value to our portfolio firms, but will not interfere in their business. Being an entrepreneur, the number one issue is interference. Additionally, we will create a very friendly atmosphere so that the companies can perform properly.
It will not take more than 30 days to write the cheque from the day we meet an entrepreneur.
What is the size of the fund? Who are the investors?
It is a Rs 300 crore fund. I cannot share the details of people who invested in the fund, as I am not allowed to do so. There are some funds which share the names of investors, but I don't know how and why they do it.
Is it an India-focused fund? Which are the key areas that you are looking at with the fund?
Yes, it is absolutely an India-focused fund. We will mainly look at two areas—product software and internet. Product software is an area where I have invested in the past and many of my companies have now moved to the US and raised further funding. So we will continue to look at India-US themes with the fund. In the internet space, we will mainly look at e-commerce, especially companies which make apparels and cosmetics that leverage online platform for distribution.
In effect, 50 per cent of our funds will go to product companies while the rest will to internet firms.
But some VC investors say e-commerce is already fully tapped into in India...
If you look at the trends in emerging markets like Brazil and China, almost 50 per cent of their population are online, of which almost 40-50 per cent are shopping online. Now, when it comes to India, only 20 per cent are online, in which only 9 per cent are into e-shopping.
So, India offers a lot of headroom to grow compared with other emerging countries. Hence the country holds a huge potential.
There is also some perception among Indian entrepreneurs that Indian investors are more biased towards product software space. What do you think?
I don't think it is completely true. It is a fact that most VC investors in India are looking at technology space, but there are investors who are focusing on the non-tech segment as well. Most PE investors are looking at other segments like hotel chains to invest money. But these deals don't get much media attention.
I would say that of the total investment happening in India, only less than 5 per cent goes to technology companies.
What is the investment philosophy for Orios? What is the average ticket size? How many companies will you invest in a year?
Like any other traditional fund, we are a VC fund which will make equity investment. We will back 8-12 companies with our fund. The average ticket size would be between Rs 1 crore and Rs 20 crore. We will invest in seed, casino online Series A and Series B stages.
Have you zeroed in on any companies for investment yet?
Yes, we have identified a company in the product software space based out of Mumbai, but is targeting the global markets. We cannot disclose the name yet. We will announce the names in a couple of weeks.
What are the key things that you will look at before investing in a company?
Some traction and commitment from entrepreneurs are the key things that we are expecting from them.
Will you also look to co-invest with other VCs?
Yes, we will also look at this option. In the past, I had worked with all leading investors such as Nexus, Accel Partners and Tiger Global, and will continue to work with them as and when opportunity comes.
Will you also look to invest in social ventures?
What is a social venture? I think that the whole perception of distinguishing social ventures and regular ventures does not make any sense. I think all ventures are creating jobs. By investing in a company like OlaCabs, you are creating thousands of jobs. From top to bottom of the pyramid, every company is creating jobs.
Any kind of investment in India will have a massive impact. So, I don't think in a country like India, this distinction is valid. More than millions of jobs have been created by e-commerce companies in India. We have to create successful companies which in turn will create jobs. We are in the business of creating successful companies, wealth and jobs.
You have invested in many companies in the past. Will they be brought under Orios?
No. Those investments were made from our proprietary fund and most companies have gone far ahead.
How do you read the current trends in the Indian startup ecosystem?
An increased confidence of entrepreneurs to go beyond India is one of the clear trends that I am seeing, especially in the software product space. Indian entrepreneurs have started thinking global. Secondly, all the e-tail distribution companies like Jabong, Myntra, Snapdeal and ShopClues are providing opportunities for small entrepreneurs to leverage their platforms. Third, the ecosystem has evolved a lot. Lots of incubators and accelerators have come to India, and people have now started recognising the ecosystem. I think entrepreneurship will be doubling or tripling every year in India.
How do you compare the Indian startup ecosystem with that of Silicon Valley?
Indian startup ecosystem is very young. Indeed, there are only two countries that have mature ecosystems "the US and Israel.
Although it is young, the quality of the products coming out of India is at par with those in Silicon Valley. There may be only one company emerging from India for the 100 companies in the US or Israel, but the quality is same as theirs. May be, five or 10 years down the line, at least 50 per cent of the products will come from India.
(Edited by Joby Puthuparampil Johnson)