A seasoned angel investor, Vivek Khare has seen the Indian startup ecosystem grow into a successful entity. At the dawn of the internet era in India in 1999, Vivek worked at Naukri.com and went on to back unicorns like Zomato in their early days. He has also invested in startups like Jaypore, Happily Unmarried, Classify Canvera, Meritnation, and Vastra App, among others.
As an angel investor, Vivek says his strength lies in the zero-to-one stage to help founders in their phase of taking an idea to find 'market fit'. While angel investing has turned out to be an extremely rewarding journey for Vivek, he cautions that the private market is also the riskiest asset class.
"This is one asset class where your principal can get wiped off. It should never be more than 5 percent of your overall portfolio because even if you lose this, you know the rest of your portfolio should be able to pull you back. But if you're lucky, then this 5 percent investment may take your wealth to 200 to 400 percent as well,” Vivek advices during the LVInsights Ask Me Anything (AMA) session.
The next big thing
Once he started angel investing, Vivek says there was no looking back. Besides the handsome returns, being part of the ecosystem allows him to stay updated on the latest technology and gets to work with some of the smartest people.
“Why money is obviously a big motivator, that's a side product and the real reason to do this is to ensure that you are not outdated. That is a bigger motivation to me at least because I don't want to be left behind. That's the reason I work with startups,” he adds.
However, he emphasizes that angels need to spot the trend early and sense what is likely to be the next big thing in the next eight to ten years. And that was precisely what happened with his investment in Zomato, a deal that Vivek likes to call his claim to fame in the ecosystem.
Then called Foodiebay, it was started before smartphones and devices were prevalent. Vivek had invested in the business of aggregating menus of restaurants in a city but was prepared for bigger things as internet and smartphone penetration grew.
“The point is you need to invest before something starts blooming because once it becomes big, angel money will not be sufficient for growth stage level of investment,” he says.
Vivek adds, “Chances are it is a very small company in a market which may be non-existent, but you need to take that leap of faith that this can become big and prevalent because of factors like behavior change or technology.”
Karma points in investing
Vivek suggests angel investors to stay abreast of recent developments in addition to one’s investment thesis. However, there’s no guidelines one can follow or clubs to join to get the right deal.
“I love the example Anupam Mittal gives about karma points. You have to give a lot before you start getting back from the ecosystem,” he quips.
However, Vivek firmly believes there is no such thing as passive investment as an angel because one simply cannot pick “winner startups” but has to make them winners by working with the founders. In fact, Vivek takes on the roles of salesperson and investment banker by getting founders pilot clients and convincing fellow investors to back the startups. More than that, he spends 30 percent of his time acting as hiring agents for the startups he backs.
“It is highly likely that these founders will be young and may not have the gravitas to get the senior and more experienced people to come and join their startups,” he adds.
A good way to start then is by joining at least one syndicate group and finding where one is comfortable and confident to put money. “If you believe India is going to be a big consumer market or there’s scope for eco-friendly solutions to fight pollution, that’s how you can start building the thesis.”
Here is an excerpt of the rapid fire round from the live AMA session:
Question: The biggest myth about startup investment according to you is…
Answer: The biggest myth is that you can be a passive investor. That just doesn’t work.
Question: One startup investment that you are most proud of
Answer: While Zomato is my claim to fame, I am proud to be one of the lead investors in Absolute Foods. Through first principles, I went and spoke to the farmers working with them and it was their conviction that helped me take that call.
Question: One startup deal you regret passing on?
Answer: That list is too long but the BigBasket and Khatabook.
Question: Your biggest learning as an angel investor?
Answer: Be humble. You never know who will prove you wrong. Nobody knows what works for sure. You need to work with probability.
Question: Top three sectors that you would invest in today’s economy?
Answer:
1) The Bharat: I believe it is such a big market of 3 million people that if you have the right product for them, it will take off. It is a space I strongly believe in.
2) Cleantech: Technology will help solve India’s pollution problem.
3) Companies/tools tapping the collaborative working trends and aligning teams not working from the same space.
Question: The first question you ask a founder?
Answer: What led you to this problem? Do you have a deep insight/reason to want to solve this problem? That is very important for me. That kuch karna hai doesn’t work for me.
Question: One reason why one should invest in the Indian private market?
Answer: That is the way to create wealth and improve productivity.
I come from a middle-class family. The reason I am able to retire so early and be financially secure is because I had made those few right investments and they created value. So, the only way you can create value is by investing in good businesses. Good businesses are where competent people run squeaky clean companies which are well-governed while creating products the market loves.
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