‘Start-ups will find it difficult to raise funds’

Entrepreneur Rehan Yar Khan is perhaps one of the most successful early stage investors. Khan, who started mentoring start-ups as a hobby, had led 19 early stage investments in companies such as Druva, Olacabs, Sapience, Pretty Secrets, Jigsee and Unbxd, among others, of which 15 were successful.

Khan, who was also a board member of the Indian Angel Network, has now raised his first formal fund — Orios Venture Partners — of ₹300 crore. In a tête-à-tête with BusinessLine , Khan, a General Partner and Founder of the fund, says that all start-ups in India are looking for funds and there lies the opportunity. Excerpts:

From being an angel investor, you have now moved over to set up a fund. What motivated you to do this?

On the entrepreneur side, lot of them were struggling for funds, while on the other side there were lot of investors who wanted to give funds but there was no vehicle for it. Just being an angel investor, I was not serving both sides. So, that led me to create this venture.

Tell us a bit about the fund. Who are the investors, which are the sectors and companies you are looking to invest in?

This is a ₹300-crore, domestically raised, fund. We have raised it mainly from institutional investors, family offices and high networth individuals. We intend to invest half of the fund in software product companies and the other half in e-commerce firms. Most of the investments would be between ₹1 crore and ₹20 crore. We are close to investing in a Pune-based software products company.

How long would you stay invested in a company? What are the exit modes?

This is a seven-year fund, and so we would stay invested for about six to seven years.

The exit would mostly be through strategic sale, which will be our bread and butter. We will also look at initial public offerings as an option.

A number of start-ups are scouting for funds. Is there a dearth of funds in the market and how many of them will sustain in the long run?

Our estimate is that about 100 start-ups emerge every month, basically in every space. They emerge across online, software, restaurant chains and schools, among others. There is a dearth of funds in the market, and there is a necessity of investors. All start-ups in India are looking for funds, and most of them will find it difficult to raise funds. The statistical failure rate of start-ups is 90 per cent and only 10 per cent high quality start-ups will sustain.

How has angel investing evolved in India over the last decade?

The economy going through a turmoil may have affected big industries, but I don’t think it affected small businesses so much, especially start-ups. During the rough patch, many companies such as Flipkart had come up. Angel investors are here to stay.

How is the investment scenario in India vis-à-vis other countries?

India is a very large country which goes in our favour. India, America and China are three countries where you can build a big business from scratch as many other countries have the glass ceiling of small population.

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