Home advantage

It has been nearly a decade since Vani Kola, managing director of Kalaari Capital, went from being Silicon Valley entrepreneur to an India venture capitalist. The big move appears to have paid off

14d94dc“I DIDN’T COME FROM A BUSINESS FAMILY, so in the beginning I never thought of myself as a business person – I always thought of myself as a hardcore engineer,” says Vani Kola, managing director and co-founder of Kalaari Capital.

However, it wasn’t long after arriving in the US that venture capital came onto the agenda.

Originally from Hyderabad, Kola enrolled at Arizona State University in 1985 on a master’s program in electrical engineering. This was followed by a move to Silicon Valley where she held various engineering and technical management positions at IT group Consilium and later Control Data Corporation. By the mid-1990s Kola found herself working in the global epicenter of internet entrepreneurialism, and the mood was infectious.

“Everyone was trying to be an entrepreneur – your friends were doing it, your neighbors were doing it – so it really didn’t seem so far- fetched for an engineer to quit her job and start a company,” she says. “That is exactly what I did.”

First foray 

The idea for Kola’s first venture came while she was working at Empros, a division of Control Data, where she was in charge of building a real-time software application for power generation management. Kola recalls that the culture of Silicon Valley was such that advice and mentorship for budding entrepreneurs was always close at hand.

Backed by VC investors, she set up Right Works, a platform through which large companies could efficiently manage their global procurement. The thesis worked well and the business was sold in 2000, and Kola began her next venture. This was Certus Software, a software solutions provider specializing in financial compliance that grew to the point of serving over 70 clients globally. Securac Corp. bought it in 2005, after which Kola decided to return to India and move into venture capital.

“I like the world of start-ups but eventually I wanted to play a different role,” she says. “I wanted to be on the sidelines rather than on the front line, and bring my knowledge and experience to help other entrepreneurs.”

In 2006 Indo US Venture Partners – later to become Kalaari Capital – was formed. The first fund was NEA Indo US Ventures, a vehicle co-sponsored New Enterprise Associates, with a target of $150 million. It ended up closing just shy of $190 million.

“By then, I felt there was an inflection point in India – at least from perspective of venture capital and tech companies – so we set about raising a fund to invest in India’s digital start-ups,” says Kola. “When we first started the fund there was a notion that maybe there would be a lot of cross-border investment where my knowledge working in the US could play a role.”

The original idea was for IUVP to back early- stage start-ups that would have the opportunity to expand into the US. While this may have been the case with a handful full of Indian start-ups, most of the growth was closer to home.

“I don’t think it worked because we found that the best opportunities involved domestic companies leveraging India’s consumption story,” says Kola. “So we changed our name to reflect something that showed our roots in India and our commitment to the country.”

Rebranded as Kalaari – after Kalaripayattu, an ancient Indian martial art – the firm launched its second fund as a completely independent entity. Though smaller than its predecessor, the vehicle exceeded the $150 million target and closed at $162 million.

No plain sailing

Kalaari currently has 27 companies in its portfolio across both funds. They include e-commerce marketplace Snapdeal, online jewelry store Bluestone, and mobile app start-ups such as Haptik and Swipe. But the evolutionary path for India’s VC industry has not been smooth.

“The biggest challenges have been around making entrepreneurs understand the expectations of venture capital – the obligations and the value proposition – and the give-and- take of that,” says Kola. “It can also be difficult to find quality entrepreneurs who can think very big. India has many companies that will have good outcomes, but you need to create large companies that can be category leaders.”

Even with the right team, it has often proved hard to raise follow-on funding. However, that is changing and companies like Snapdeal – which most recently received $627 million from SoftBank Corp. – are leading the way. This rapid growth among India’s tech start-ups has also created more exit opportunities. A highlight for Kola was the sale of fashion e-commerce site Myntra, in which Kalaari first invested in 2007, to Snapdeal rival FlipKart for over $300 million.

“The best part of nurturing a young company and team is having belief in the concept and then seeing that concept validated. Mukesh Bansal [founder of Myntra] had a very strong conviction that he could build Myntra at a time when there had never been an online apparel businesses in India,” she says. “I was very proud that were able to take that journey with him.”

As India’s technology space consolidates and those much-sought-after category leaders emerge, Kola expects Kalaari will continue to capitalize on its position as an early-stage investor. She adds that, despite challenges in the short-term, it has the potential to deliver consistent returns in the future.

“For the foreseeable future we will continue to pick strong entrepreneurs, and be the first ones to pick them,” says Kola. “It is not a bubble, it is the beginning. Over the next decade we will see a number of new generation companies come,supported by investors like us.”

Source: AVCJ (ASIAN VENTURE CAPITAL JOURNAL) Published on 21st April, 2015

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