Patni Family Office is Betting Big on Tech Start-ups
Apart from the family office RAAY Global Investments, Amit Patni has set up three venture capitalist funds to invest in tech start-ups
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When the concept of family offices was still nascent in India, Amit Patni, the promoter shareholder of Patni Computers, established RAAY Global Investments in 2002 to manage the family's wealth and investments. Though the primary focus has been on traditional investment assets, Patni forayed into the start-up ecosystem in 2011 after his family sold Patni Computers to iGate for $1.2 billion.
"After selling Patni Computers in 2011, we were looking for opportunities to widen the scope of our investments. During the Internet boom around the same time, the growing start-up space caught our attention and we started seed-stage investments in tech businesses," said Amit Patni, founder and director, RAAY Global Investments and director of Campden Family Connect, in an interview with Entrepreneur India.
Restricting RAAY Global's exposure to start-up investments to 10 per cent due to the risky nature of the asset, Patni has established three venture capital (VC) funds—Nirvana Ventures, the Hive India and Ideaspring Capital— earmarked for Internet start-ups.
Scouting for Tech Start-ups
Patni's interest in Internet start-ups springs from his lineage that led the technology revolution in India. "Patni Computers, set up by my father along with his brothers in 1976, was one of the leaders in India's software industry. With the knowledge and experience in IT space, we thought it appropriate to back technology businesses" said Patni.
Fast forward to 2019, he has an impressive portfolio of about 40 start-ups through venture funds and direct private investments from the family office. "We are constantly on a lookout for businesses building on artificial intelligence, big data, Internet of Things and blockchain to invest in," Patni pointed out.
Some of the major tech start-up investments done through venture funds include insurance aggregator Unicorn PolicyBazaar, real estate search portal Housing.com, artificial intelligence solutions company Flutura and Remedinet, which leverages technology to simplify payments between hospitals and insurers.
At the same time, the family office investments are not restricted to tech start-ups and include a variety of private investments in retail, health, entertainment and consumer segments. Online custom shirt brand Bombay Shirt Company, lifestyle retail pharmacy chain Wellness Forever and craft beer brand White Owl Brewery, among others, are part of its investment portfolio.
Typically, the investments range from Rs 5 lakh to Rs 50 lakh, with an average angel investment of Rs 20-25 lakh in smaller start-ups.
Patni family office is focused on wealth creation and capital protection. "By and large, we are risk averse and prefer long-term investments, which will give steady returns," he explained. In line, investment horizon ranges from seven to eight years. The same investment strategy is followed by the three venture funds as well.
"We stick to an investment for a minimum of five years because it takes that much time to build a company." However, Patni does not uphold this strategy as sacrosanct. "If a good exit opportunity comes up in the initial years, we take the exit route or if a company is growing well then we don't make an exit and continue staying invested," he added.
Most of their investments that were started in 2011 are in exit mode now.
On being asked whether he would suggest an entrepreneur to sell his start-up to make money or advice to build an everlasting business, Patni clearly says that every investor expects an investment horizon. "Most of the new-age businesses are focused on generating topline numbers and not bottomline. So they pump in a lot of money to keep their business growing. In such a model, any investor would require some exit horizon," he explained. "Hence, the entrepreneur will have to plan an exit eventually either through a strategic sale, a buyback or an IPO."
Beyond Monetary Support
After investing in a start-up, Patni chips in with strategy, human resources (HR) and governance to help it grow. Most importantly, he helps them to raise funds through associate company Campden Family Connect.
Campden has a co-investment workshop model wherein start-ups get a chance to pitch their ideas to other funds and family offices present in the workshop. "In the workshops, we present deals to other families who are raising money as well as refer the start-ups that we invest in to larger family offices and other venture funds," said Patni.
What Entrepreneurs Can Expect
For Patni, the founding team is as important as the business idea while picking a start-up for investment. "We look into the entrepreneur's background very closely; his work experience, expertise, whether he has the DNA to lead a team and if he has a clear roadmap of how to make the start-up idea work."
Perhaps, this criterion took precedence after he burnt his fingers in Housing.com. "The founder did not follow the board's directive which led to a mismatch in what the board wanted and what he was doing. In revamping the management, a lot of money and the market positioning of the company was lost," Patni recalled.
For Patni, the major takeaway from the Hoisuing.com fiasco was to assess the start-up founder(s) beforehand to make sure that he is on the same page as the investors. "A mismatch in the investors and founder's thoughts will eventually lead to wrong decisions and hurt the business as well as the money involved," he added.
Answering the question how much should an investor interfere in a business, Patni says the investor can map out a broad business strategy but the business operations should be the founders' domain. "The investor can establish a monitoring process, where he can set certain milestones that the founders have to achieve and if they are not being achieved, help them assess what is lacking. But, the day-to-day functioning and operations has to be handled by the founder."