'We are not funding enough young people. Where are our Facebooks and Instagrams?'

Rajesh Sawhney is the founder of Global Super Angels, an angel investor group. After resigning as President of Anil Ambani's Reliance Big Entertainment in June, he began focusing on the early-stage funding for start-ups, particularly mobile and internet companies. In a candid interview with Taslima Khan, he spoke about why he is betting big on mobile and internet startups in India.
 
What is your sense of the early-stage funding ecosystem in India?

There are three things happening, which are quite good. One is that a start-up is able to raise Rs 5 lakh to 20 lakh from friends, family and angels. My sense is that 200-300 such people get funded every year. But when you come to a funding level of Rs 1 to 2 crore, which is a seed funding round, it drops to 50.

In the last year, we funded only 50 companies, despite all the hype and the talk. The potential is to fund at least 500 to 2,000 in the next two to three years. We looked at funding about 18 to 20 this year. But there is still such a dearth of not just capital, but mentorship capital.

Will seed money come mostly from angels or early-stage funds?

Funds are a new thing here. Altogether, we have not even raised $100 million. Even if they raise $100 million, they will deploy it over four years. In the US, angel money is much bigger than VC money. Last year, $23 billion got invested by angels there. Over 70 per cent of the seed money is from angels.

I think the best form of angel money is founders' money. Look at how the Silicon Valley ecosystem shaped up. When founders created wealth by selling their companies or listing IPOs, they funded other companies. That's the best money because that comes with advice, mentoring and networks.

Why are you focusing on start-ups?

If you see my history, I have set up internet businesses for Indiatimes. Then I set up Anil's (Reliance Group Chairman Anil Ambani) entertainment business from 2005 to 2007. In 2009, I became a part of Mumbai Angels and started doing some mentoring-investing.

What makes you bet on mobile and internet?

I have two theses. One is that India will add a billion new people on the internet in the next 10 years. I say this for this reason. From 1995 to 2005, when I joined Reliance, 36 million was the total universe of mobile users in the country. Mobiles were expensive, it was costly to call people. But then things changed. From 2005 to 2007, India added a billion new mobile users.

It's the same thing with the internet. I launched Indiatimes in 1998/99. There were just 100,000 people on the net at that time. In the next 12 years, India has added around 100 million people, using internet either through mobile or through PC. I think in the next 10 years, we will add a billion people. There is no reason to not become the world's largest internet population.

My second thesis is, if such a big tech force is coming, then it is quite conceivable that wealth will be created by companies that are not even born yet. Big companies will miss it. They don't understand this powerful force. That is what excites me about the early-stage ecosystem and investing in this space.

What kind of groundwork have you done?

Last year I started something called Founders Forum India, which I have done twice, once in Delhi and another time in Mumbai, where we called 150 to 200 digital technologists from across the world. Very intimate, exclusive event - no media. This year we started to understand deeper trends in technology.

The second thing I started last year was the Global Super Angels Forum. I met 400 start-ups between August to October, two before breakfast and two after dinner. I met everyone because I wanted to immerse myself and understand what is happening. In the process, I curated 40 start-ups. I invited 250 of my friends in the investee circle to a closed-door event called the Global Super Angels Forum. The outcome was tremendous.

My idea was to showcase the best Indian talent to the best investors in the world. Out of 40 there, 30 got funded. That is a huge number. I personally invested in three companies. But since I did not have enough money, I invited 15 other friends, most of them are founders themselves, like (Makemytrip founder and CEO) Deep Kalra and (InMobi founder) Naveen Tiwari. I invited them to invest with me. In the process we created a new angel group called Global Super Angels.

Why are you focusing on product start-ups?

Our focus is young guys doing product companies - mobile, social, local, cloud.

I am very data driven. I looked at each and every company that got seed funding in the last two years, whether it is Mumbai Angels, Indian Angel Network or early-stage funds. I got to know two things. First, we are not funding product companies. We are funding only clones with super-smart people who are not necessarily innovative but are good executors. The VC thesis in India is fund clones with super-smart execution-oriented people.

My thesis is, okay if India is going to add a billion people on internet and mobile, then where are our Facebooks and Instagrams? Why are we not encouraging enough people to do that kind of innovative stuff? The answer is, we are not funding product companies and we are not funding enough young people. We are not funding 22-somethings like Mark Zuckerberg (Facebook founder). We are funding 30 or 40 somethings, who are experienced execution-oriented people.

My sense is that innovation will come from people who have no fear and they are likely to be young people. My learning is that we have enough of them. The start-ups I line up will reveal that.