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Rajan Anandan, 46, wears multiple hats — as managing director Google India, funding start-ups in India and as chairman of Blue Ocean Venture, a start-ups fund in Sri Lanka.
If you search for the biggest angel investor in India, it's likely to throw up Sri Lankan born Anandan. He has invested in 40 companies, beginning 2006, when he made his first angel investment in India.
Now Anandan puts his money in 8-10 start-ups a year. His own portfolio has gone up 10x, even as Anandan says the country's start-up ecosystem is set to multiple many fold by 2020. Throwing up at least one $1 billion valuation company each year.
"By 2020, India will have at least 15 start-ups that have grown to $1 billion each," says he. In India Anandan runs Google, invests in start-ups out of his pocket and in Sri Lanka BoV seeds tech and non-tech start-ups. In an interview with ET, Anandan talks about start-up ecosystem in India, Sri Lanka, how he manages to do it while running Google. Edited excerpts:
Back in 2006 you invested in one start-up in the whole year and now you are funding 8-10 start-ups a year. Besides investing in Sri Lanka.
In India I invest as an angel only in technology companies. In Sri Lanka Prajeeth Balasubramaniam and I co-founded Blue Ocean Venture, a multi-sector seed fund. It's our joint investment. In India it is my personal investment. I have funded more than 40 start-ups in India.
What change do you see in start-up ecosystem and entrepreneurship in India now? How is the start-ups eco-system evolving?
It's definitely hit the inflection point. Two years back there were 100 funded tech start-ups a year. Last year it was 200. The rate doubled because of initiatives like Nasscom 10,000 start-ups and massive awareness building. The potential is another 10x. By 2020 India will have several thousand venture funded start-ups a year. And the reasons are three fold:
First, we now have internet penetration. We will have 250 million internet users by end of this year. By 2017-18 it will be 500 million. We will have very large user base.
Second, there's an experienced pool of entrepreneurs. In India there are already five billion dollar valuation companies. Makemytrip.com and InfoEdge are public. Flipkart and Snapdeal are among the billion dollar companies. That number will easily be 15 in the next 5 -6 years. We will add one a year in terms of hitting a $1 billion milestone.
Besides we are getting an experienced pool of founders. You have success stories of Sachin Bansal, BinnyBansal (co-founders of Flipkart.com), Kunal Bahl (co-founder Snapdeal.com) and lot of people will see them as role models.
The third thing is that the investor ecosystem is getting larger and maturing. You have angels, seed funds and venture funds. In this eco-system you are already seeing billion dollar companies. One of the constraints so far was no exits, but last year JustDial went public. And now exits are happening.
Is it easier to do an exit now?
An exit is never easy as most start-ups go belly up. If you have 10 start-ups that get funded at a seed stage, 33 per cent will be very successful. They will give 5x, 10x returns. If you are good and lucky one out of 10 will be a home run 50x and 100 x returns and that will pay for all of the others.
Three or four companies might return capital either through acquisition or strategic sale. You put in $1 and you get $1. A third will definitely go bankrupt or shut down. So if you have 1,000 companies 200-300 companies will make it. That's a large number of new successful companies.
How does that start-up eco-system compare with other countries, say Israel?
India had new 200 funded tech start-ups last year. Israel has 800 new funded tech start-ups every year. If you look at the Indian IT services industry there are three million software developers. Israel has a total population of four million. The number of start-ups in India has doubled in the last two years and this will only increase.
Entrepreneurship is inherently risky. There will be start-ups that fail. But as you have thousands of these entrepreneurs that's when you start getting real massive scale. By 2020, we should have several thousand Indian tech start-ups that get funded every year. 2014 to 2020 its 10x increase in everything - number of start-ups, capital deployed, number of exits.
It took about 10 years for makemytrip.com to get to a $1 billion valuation, for Flipkart it took five years. Will the time period to get to a $1 billion valuation shrink?
No, it takes 10-15 years to build a great company. In some cases you can do it much faster. But in general it takes 10-15 years. That's one of the fallacies people have that you can build a company in three or four years. You have to be at the right place at the right time. But most people aren't.
If you search for the biggest angel investor in India, it's likely to throw up Sri Lankan born Anandan. He has invested in 40 companies, beginning 2006, when he made his first angel investment in India.
Now Anandan puts his money in 8-10 start-ups a year. His own portfolio has gone up 10x, even as Anandan says the country's start-up ecosystem is set to multiple many fold by 2020. Throwing up at least one $1 billion valuation company each year.
"By 2020, India will have at least 15 start-ups that have grown to $1 billion each," says he. In India Anandan runs Google, invests in start-ups out of his pocket and in Sri Lanka BoV seeds tech and non-tech start-ups. In an interview with ET, Anandan talks about start-up ecosystem in India, Sri Lanka, how he manages to do it while running Google. Edited excerpts:
Back in 2006 you invested in one start-up in the whole year and now you are funding 8-10 start-ups a year. Besides investing in Sri Lanka.
In India I invest as an angel only in technology companies. In Sri Lanka Prajeeth Balasubramaniam and I co-founded Blue Ocean Venture, a multi-sector seed fund. It's our joint investment. In India it is my personal investment. I have funded more than 40 start-ups in India.
What change do you see in start-up ecosystem and entrepreneurship in India now? How is the start-ups eco-system evolving?
It's definitely hit the inflection point. Two years back there were 100 funded tech start-ups a year. Last year it was 200. The rate doubled because of initiatives like Nasscom 10,000 start-ups and massive awareness building. The potential is another 10x. By 2020 India will have several thousand venture funded start-ups a year. And the reasons are three fold:
First, we now have internet penetration. We will have 250 million internet users by end of this year. By 2017-18 it will be 500 million. We will have very large user base.
Second, there's an experienced pool of entrepreneurs. In India there are already five billion dollar valuation companies. Makemytrip.com and InfoEdge are public. Flipkart and Snapdeal are among the billion dollar companies. That number will easily be 15 in the next 5 -6 years. We will add one a year in terms of hitting a $1 billion milestone.
Besides we are getting an experienced pool of founders. You have success stories of Sachin Bansal, BinnyBansal (co-founders of Flipkart.com), Kunal Bahl (co-founder Snapdeal.com) and lot of people will see them as role models.
The third thing is that the investor ecosystem is getting larger and maturing. You have angels, seed funds and venture funds. In this eco-system you are already seeing billion dollar companies. One of the constraints so far was no exits, but last year JustDial went public. And now exits are happening.
Is it easier to do an exit now?
An exit is never easy as most start-ups go belly up. If you have 10 start-ups that get funded at a seed stage, 33 per cent will be very successful. They will give 5x, 10x returns. If you are good and lucky one out of 10 will be a home run 50x and 100 x returns and that will pay for all of the others.
Three or four companies might return capital either through acquisition or strategic sale. You put in $1 and you get $1. A third will definitely go bankrupt or shut down. So if you have 1,000 companies 200-300 companies will make it. That's a large number of new successful companies.
How does that start-up eco-system compare with other countries, say Israel?
India had new 200 funded tech start-ups last year. Israel has 800 new funded tech start-ups every year. If you look at the Indian IT services industry there are three million software developers. Israel has a total population of four million. The number of start-ups in India has doubled in the last two years and this will only increase.
Entrepreneurship is inherently risky. There will be start-ups that fail. But as you have thousands of these entrepreneurs that's when you start getting real massive scale. By 2020, we should have several thousand Indian tech start-ups that get funded every year. 2014 to 2020 its 10x increase in everything - number of start-ups, capital deployed, number of exits.
It took about 10 years for makemytrip.com to get to a $1 billion valuation, for Flipkart it took five years. Will the time period to get to a $1 billion valuation shrink?
No, it takes 10-15 years to build a great company. In some cases you can do it much faster. But in general it takes 10-15 years. That's one of the fallacies people have that you can build a company in three or four years. You have to be at the right place at the right time. But most people aren't.
