India's Digitization Drive Is What These Operators-Turned-VCs Are Focused On
Bengaluru-based Prime Venture Partners is focused on start-ups that make tech-led products and has invested in companies such as MyGate and NiYO.
Sanjay Swamy, Shripati Acharya and Amit Somani have all had differing career paths before finding themselves in the middle of India’s bustling start-up ecosystem.
While Swamy has been a serial entrepreneur having dabbled into various start-ups, Acharya was the co-founder of an online photo services company that was acquired by HP. Both founded Prime Venture Partners in 2011, before being joined by Somani four years later. Somani’s last stint before getting into venture capital was as an advisory board member at online travel booking platform MakeMyTrip.
But the one common thread that brings them all together is that they are all operators turned venture capitalists, believes Somani.
“That is a very key ethos we bring to the table, so we call ourselves a low volume high conviction high support investor,” he told Entrepreneur India, explaining that the VC firm is quite actively involved in all the companies it invests in.
How Prime Invests
Bengaluru-based Prime’s area of focus is technology, with fintech and software-as-a-service currently most prominent in their portfolio.
“The broader thesis is around digitization,” said Swamy, adding, “as industries go digital, there becomes more and more of a need for software and technology.”
From a strategic standpoint, the firm prefers to invest in companies that are creating new markets.
“We look at companies which are category creating companies, where the opportunity is new,” said Acharya.
As an early stage investor, Prime tends to be the first institutional investors in any company, and typically enters at the seed stage with an average investment of $1 million to $1.5 million. They reserve a further $2.5 million to $4 million per company for future rounds.
On working closely with start-ups, Swamy said that was one of the core reasons why companies too want them on board. “The core reason why people work with us is not just because we are writing a cheque into the company, but because we're actually going to spend a lot of time in working closely with them.”
Unlike most such firms, all three managing partners work with each of the companies.
“What that means is that we are trying to sort of bring the breadth and depth of our backgrounds to play,” added Swamy.
However, this model also means that it isn’t very scalable, according to him. In a year, Prime typically invests in 4-5 companies.
Apart from the obvious things that any venture capitalist looks at, Prime tries to see if there is a founder-start-up match.
“To me, what we look at really, why is this founder more likely to succeed than anybody else?” said Swamy.
He said, more than the calibre of the team, the size of the opportunity and other such things, the match between the founders and the opportunity is what is really essential for the VC firm.
“Because, you know, things go wrong, (but) if you're really passionate about the space, you figure out a solution.”
According to Swamy, the three managing partners are “sufficiently different” despite being completely aligned as a partnership.
“It's a lot of fun to have people who clearly are committed to the same thing, but have very different points of view on some of the tactical things,” he said.
While Swamy himself tends to go with gut feel, he said both Acharya and Somani were more analytical in their approach.
Once all the partners have met a company’s founders and had a thorough understanding, they have a final meeting which also sees the involvement of Raj Mashruwala, who lives in Palo Alto and is partner emeritus.
For the firm to make an investment, all four have to agree, said Somani. “If one person says no, we won’t do it.”
Their current fund, which is their third and also the largest so far, has a $72 million corpus. Their last two investment vehicles had about $8 million and $60 million respectively.
Some of their star investments include MyGate and NiYO, both of which saw big follow-on rounds by China’s Tencent last year.
But have there been any misses for Prime?
Urban Ladder and Taxi For Sure are some of the most well documented ones, said Swamy. The former sat at their office during the initial few months while the firm saw the latter months before anybody else. Cab hailing unicorn Ola bought Taxi For Sure in 2015 for $200 million while online furniture retailer Urban Ladder proved to be one of the pioneers in the space that now looks packed.
“Our not funding a company isn't a sign that it's good or bad,” he said.
Going forward, while the company will continue to look at differentiated start-ups in the tech space, healthcare and edtech are two areas that they are closely looking at, said Acharya.
“We continue to be excited about those areas and we have some exposure to it, but I feel that in terms of the role that those will play, and the amount of innovation which is possible there, those are both interesting areas for us,” he said.
In the healthtech space, the company has invested in AffordPlan and Mfine while it recently made an investment in pay-after-placement edtech company Sunstone Eduversity.