In conversation with Rehan Yar Khan of Orios Venture Partners, a Rs. 300 crore fund focused on backing technology entrepreneurs. In this interview Khan shares with us his experience as an angel investor, his approach to building his portfolio and a glimpse into a memorable pitch he heard from the founder of Ola Cabs
After Rehan Yar Khan handed over the reins of Flora 2000, a global flower-gifting retailer, to its CEO (he is currently its non-executive director), he ventured out into the world of venture capital much like several of his peers. In 2014, he setup Orios Venture Partners (Orios), a Rs. 300 crore venture capital fund, that is investing in early stage Indian online consumer businesses and software product companies. “Both these are fast growth sectors and more importantly, we understand these sectors well,” says Khan, explaining his choice of sectors.
According to him, today, everything in consumer technology and Indian Internet is witnessing phenomenal growth, which will see over half a billion people online by 2020 and over a 100 million people shopping online; providing a ready opportunity for dynamic entrepreneurs to cater to these growing needs.
As managing partner of Orios, Khan brings over 20 years of experience both as an entrepreneur and as an angel investor. He has led over 15 early stage investments in companies like Druva, Olacabs, Reach Accountant, Unbxd, DocSuggest, IndiaCollegeSearch and Snapion, which have grown substantially over the years. His journey as an early stage investor made him realise the gaps that exist in the funding space. “We found that there was a big gap in two areas. One, not many VCs were doing series A funding. Two, there were a lot of issues in funding consumer Internet. We plugged this gap by setting up Orios,” says Khan. Apart from these two, another factor defining the philosophy of the fund is that it is entrepreneur-led and a belief that this will significantly help in shaping up its portfolio companies.
Some of Orios’ recent investments include Sapience Analytics, an employee productivity solutions company, DocSuggest Healthcare Services Pvt Ltd, the company behind Ziffi.com, an online booking platform for beauty salons, doctors and health tests and MTC Ecom Pvt Ltd, the company that owns online lingerie shop PrettySecrets.
Learning and unlearning
His journey – from being an entrepreneur to an early stage investor to setting up his own VC fund – has taught him many valuable lessons, most important of them being – the need to learn and unlearn the right things. Commenting on his role as a managing partner, Khan says, “The learning here was of course fund management.” As an entrepreneur, he built a company, learnt how to execute, scale up a business and handle people, and all this learning came in very handy while setting up a fund. “Here we are investing in early stage companies and they require a lot of hand holding,” says Khan. Naturally, his experience as an entrepreneur has helped him tremendously. Not just that, Khan’s domain experience in building companies has helped in picking the right companies to back. What he had to learn more about was fund management, investor relations, fund raising and fund economics.
The one important thing that he had to unlearn was the tendency to hold on too tight. “As an entrepreneur, you are running a company, but as an investor you are investing in people who run the company for you. You have to learn to step back,” explains Khan. To make this happen Khan understood that he had to choose people who are independent. While he accepts that as an entrepreneur his team was dependent on him, in his current role, companies cannot be dependent on him. So as a mentor he plays a pivotal role in helping his entrepreneurs build scale and setup operations globally.
Notable amongst his investments so far is a software backup company, Dhruva, his first angel investment, which is currently valued at over Rs. 1,000 crore and taxi services Ola Cabs, which has over a billion dollar valuation.
Orios is an entirely domestically raised fund and has seen participation by leading Indian investors. This fund will invest in early stage companies from Seed to Series A and Series B with investments ranging from Rs. 50 lakh to Rs. 20 crore. “Till date, most of venture capital in India has come from international sources,” comments Khan. He hopes that with the launch of Orios, he can bring technology venture capital investing prospects to Indian investors. The company currently has about 40 to 50 investors.
Having built businesses themselves, Orios comprises of a seasoned investing team who bring deep domain expertise in strategy, execution and fundraising. It also helps build companies that emerge as leaders in their respective domains.
This apart, Orios has an advisory board of industry veterans including Rajan Anandan (managing director, Google India), Anupam Mittal (founder, Shaadi.com) Shujaat Khan (managing director, Blue River Capital) and Raj Chinai (co-founder, Harvard Angels). The fund has a ten-member team, most of who have worked with Khan for close to a decade.
Deal maker or breaker
Commenting about what makes or breaks a deal for Orios, Khan says, “In today’s market, as it is growing very rapidly, demand is not a challenge. It is the quality of the execution team, which is very important. This apart, the space should be early and not very competitive and large.” So, the entrepreneur needs to put together a great team, which is a big challenge for most and seize the opportunity presented to him/her.
For a technology entrepreneur, more specifically, the early stage finance ecosystem is incomplete and hence, fund raising becomes a challenge. “We feel that even after our entry, there is a big gap in series A funding,” opines Khan. Keeping in mind this demand and gap in the market, Khan has big plans for his fund. However, in the immediate term, his single-minded goal is to deliver to his current investors. He also plans to have a second fund operational within the next five years. “We want to expand the size of fund. It could be two or three times the size of the current fund. So we will have more capital under management and invest in more companies,” concludes Khan.
IN CONVERSATION WITH REHAN YAR KHAN
As an early stage investor, since 2008, you have personally invested in 19 companies. Please take me through your learnings that you have gained from this experience.
The biggest learning was that demand is not a challenge. You should be able to execute immediately. The second learning was that your investments should be designed in such a way that there is scope for follow-on investments and this means you should be able to make more investments in your very best investments. The third big learning is that you cannot do this as a one-man show and you need to build a team.
What has your role been in these companies?
An investor and a mentor. I have taught them a lot about execution and strategy and also helped them with additional fund raising.
Tell me about your first exit as an investor?
In the Jigsee (a mobile video streaming startup) deal, we were dealing with multiple entities and countries and involved different tax structures and other issues. We got it done with a lot of legal and other challenges. It involved four months of intense activity and multi country tax learnings.
What makes you say yes to a deal?
We look at something that will eventually become a sought after brand.
Tell me about a time you got lucky as an angel investor or as a VC
A lot of this is luck. As a VC we got lucky with respect to the team members we were able to hire. We were able to hire two to three very good people into our fund.
What is it about your role that excites you?
It is like going back to being an entrepreneur. Fund raising, setting up processes and hiring new team members, I am really enjoying all that.
A pitch from an entrepreneur you’ll remember forever.
A lot of pitches are memorable. What grabs your attention in the first one or two minutes are the most memorable ones. Like Ola Cabs entrepreneur told me that there are one million tourist vehicles in India and all that has to be done was to bring them under a common platform. That was very memorable.
Where do you see the PE/VC ecosystem in India 10 years from now?
It will become much larger. It will have more representation of domestic capital. Now, a major percentage of capital is foreign. I believe, finally the Indian investor has woken up to the PE and VC opportunity.
According to you, what are the “yet-to-be-hot” sectors?
Financial technology, service market place, Internet of things and wearablesAngel Investor Early Stage Investment Olacabs Orios Venture Partners technology startups