Here's What One of India's Oldest VCs Looks For Before Investing

Given market diversity and a whimsical regulatory framework, one must build businesses for the long term in India to build significant value, says Ventureast's Sarath Naru

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Ventureast believes in building businesses having significant value and for that they need to be operational in the long term.

Sarath Naru, Founder and Managing Partner, Ventureast

"We believe that in India, to build significant value, one needs to build them for the long term, given the heterogeneity of our market, the infrastructure friction, and regulatory whimsy," said Sarath Naru, founder and managing partner at venture capital firm Ventureast.

Hyderabad-based Ventureast is one of the oldest VC firms in the country, dating back over two decades. Founded in 1997, the firm's investments include the likes of popular quick-service food chain Goli Vada Pav and Little Eye Labs, an analytics firm that was Facebook's first acquisition in India.

Naru says it is important for fund managers to retool the fund structure models currently in play to cater to investors in terms of providing them optionality for "times' of exit. "To get a quick decent return at exit is very rare in India. So if you have such an opportunity, do go for it. But balance it against a much bigger payoff if you have the stamina to go all the way."

Backing Entrepreneurs All the Way

The firm spends time with entrepreneurs they invest in to make sure that they have the ability for intellectual give-and-take and are fearless when it comes to answering questions, according to Naru.

Following pre-closing discussions with them, Ventureast sits down with them to convey that the firm will always back their decisions, he added.

Balanced Approach

When asked if it was fine for investors to take control of companies they invest in or if they should maintain a higher moral ground and let the entrepreneurs do their job, Naru says the argument is equally applicable for their investors, who have entrusted them with money.

"The investors who backed us expect us to do our best, in thought and effort," he said.

However, if the firm only cares about investors, it wouldn't be attracting the best entrepreneurs to its fold.

"We look at the trade-off of these two guiding principles constantly, so that the overall stakeholders will best benefit," Naru added.