A man of many an enterprise turns a mentor

He has donned many hats – an entrepreneur, an employee of a multinational IT company, a mentor, an angel investor and an entrepreneur again.

A mechanical engineer Ravindra Krishnappa worked for a few years with Tata Unisys before starting his own venture – an ERP consulting firm that was bought out by Oracle.

The 47-year-old Ravi worked in a leading management position in Oracle in India for a while before moving out to do something on his own. He is an angel investor, a mentor and has also started a business consulting company that invests in start-ups and incubates new companies.

He is clear that he is only a coach. “I don’t want to be running the race for them. I see myself as a coach. A coach may have played the game before. I will walk a few steps (with the entrepreneurs). I will tell them how to do it,” says Ravi, who is a Founder-Partner, VertExperts Consulting LLP.

His response is to a question on what stake he normally picks up in the companies he invests in. “I try and take between six per cent and 26 per cent. Six per cent because it gives me a board seat. I tend not to take more than 26 per cent because post dilution, I want the entrepreneurs to hold more than 50 per cent. I don’t want the entrepreneurs to go very low (their stake), because then their sense of ownership comes down,” says Ravi, in his office in the heart of Bangalore.

After quitting Oracle, Ravi took on an interim CEO’s role in a small company. But that role last nearly six years. After that, he decided to wear the hat of an angel investor and mentor. Thus was born VertExperts Consulting, a limited liability partnership firm.

VertExperts provides seed capital and also does angel investing in start-ups.

ScienceAdda pavilion

Ravi is one of the people behind ScienceAdda, which describes itself as an experiential science zone with mobile thematic pavilions. This is targeted at the 8-15 age group and aims to explain how technology works, in simple and interesting ways.

ScienceAdda’s pavilion in Bangalore will travel around the city explaining simple concepts making it fun to learn and absorb. It plans to expand to other cities through franchisees. He says the first six to 12 months of investing in a start-up are crucial. That is when the right framework has to be created for the entrepreneur to grow the business and expand.

Ravi was clear that he did not want to have a venture capital type of structure because of the fund raising and investment pressures that would have entailed. Instead, he prefers to work with a small circle where he often takes the role of a lead investor and co-opts others depending on a firm’s requirement of funds. All investments are cyclical – there are two years of hectic activity and then three years of maturing that investment, by which there may be a few exits.

Prefers smaller circle

He prefers to work at his own pace. That is one more reason why he did not want a large number of partners in VertExperts. The moment more investors join in, the investment structure will change and the exit perception will be different for different people, he says.

Given his IT background, Ravi generally invests in technology companies, but he recently invested in Chennai-based Stayzilla, an online booking and reservation portal for hotels in India.

“I invest in people I believe in,” he says. The industry itself doesn’t matter too much. His investment sweet spot tends to be Rs 10-25 lakh, although occasionally he may go up to Rs 50 lakh. He has had partial exits, the returns being three times in two-three years. This may be lower than the returns that investors get in the US, but then the risks are also lower. In India, says Ravi, the average return will be better than elsewhere in the world. But then individual returns will be muted. However, investors will not see the kind of wash-outs that are regular in the US.

Ravi says a lot more people are turning entrepreneurs now. But, what is happening is that there is a growing gap between various funding cycles. The initial cheque almost always comes from friends and family.

Then come the angel investors, after which the venture capitalists enter. While the base of entrepreneurs has become broad, the funnel has not widened when it comes to money being available. The net result is that not too many ventures go past the choke point. Unless this is corrected, more ventures may fall by the wayside.

It is in this context, says Ravi, that structural issues in making money available to start-ups and small and medium enterprises have to be tackled. The cost of capital is high in India, especially working capital. This has to be addressed.

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