Emerging Entrepreneurs

Seeding deep technology ideas

Meera Siva | Updated on January 10, 2018

Vishesh Rajaram (right), Managing Partner, Speciale Incept Advisors LLP, and Arjun Rao, Partner   -  Bijoy Ghosh

Speciale Invest hopes to play a part in the new digital revolution

Disruption – a favourite word for venture investors – is typically driven by technology. So, when a venture capitalist and a technology entrepreneur came together, it was only natural that they decided to launch a fund focussed on deep technology ideas.

Vishesh Rajaram, former Principal at Ventureast, and Arjun Rao, serial tech entrepreneur and early Yahoo! employee, have set up Speciale Invest, a seed stage fund. The fund is estimated to be about $20 million and had its first close recently. It expects to have its final close in the next two quarters.

Opportune time

The partners say that there is a new digital revolution unfolding and the fund aims to be hands-on and play an active part. “We have spent time in the industry on operational and investment front,” says Vishesh, who was an active tech investor for the last decade and was an entrepreneur prior to that. Arjun has worked with large tech companies in their early days of evolution – Yahoo! in 2001 and Ibibo/Naspers in 2007 and was later part of two start-ups. The duo says that seeing the unprecedented advancements in technology their entrepreneurial instinct led them to start a fund. “There have been significant advancements around quantitative computational power and machine vision. There are open source standards emerging for neural networks. All these are creating avenues for radical changes on the software side of things,” says Arjun.

He adds that breakthroughs in hardware — higher performance and cost efficiencies in batteries, optical sensors — are opening avenues that did not commercially exist before. “This is an important focus area as some of these advancements will play out over the next 3-5 years,” he notes.

“In our view, India is close to being at par with the pioneers on the software front. We certainly have some catch-up to do in hardware and other emerging sectors like cryptography, sensors (RADAR /LIDAR) for autonomous vehicles,” says Arjun. The catch-up will happen fast, especially if the ecosystem plays a constructive role.

The partners believe that there will be disruption in the ecosystem with higher computational power, rapid advances in deep neural networks, increased (lithium) battery efficiencies, data mining, stronger layers of cryptography and maturity of machine vision.

Investment philosophy

The fund plans to invest between $500K and $1 million per deal and the plan is to build a portfolio of about 18 start-ups over the next four years. “The fund strategy is investing in disruptive tech at an early stage. Other metrics in terms of horizon and amount are not significantly different from other investment themes,” says Vishesh.

It will select start-ups across sectors, including cloud management, enterprise — AI, electric vehicles, autonomous vehicle kits, immersive experience (VR/AR), and enterprise block-chain solutions. Their interactions with tech entrepreneurs show that there is a breadth of opportunities in hardware and software that start-ups are going after now.

The fund prefers to be an early investor and conversations may start even if the team does not have a minimum viable product. Speciale may not be a fit for start-ups if large funding rounds have been raised. That said, Vishesh notes that they have also worked with companies that have raised small rounds – less than $200,000 – from accelerators and friends and families. Start-ups are evaluated relative to the sector they are in and what problem they are solving. Based on that, investments may be before a proof of concept is established or for someone working on building a minimum viable product. “We like to partner with founders who have a deep insight on how innovation will change behaviour – in both for businesses and consumers, and are building products that enable this change,” says Vishesh.

Even with a deep technology focus, the partners have a prudent view on patent. “Our focus is heavily weighted on avenues for the start-up to be solving a large-size problem differently from others. While patentability is useful, our focus is on whether there are deep layers of differentiation on how the solution is being built versus existing incumbents. Of course, in certain industries — specifically med-tech and hardware — patentability has a much larger weightage than software led innovation,” says Arjun.

Good interest

The fund is betting on the fact that there is an increasing appetite within corporates to invest and acquire start-ups, especially ones with deep technology. Vishesh believes that a reasonable proportion of their exits would be through strategic sale.

There is active deal flow coming in from corporate incubators, accelerators and incubators backed by research and technology institutions. “As we have been active tech investors for a decade now, we have a strong pipeline of deals from our proprietary networks,” says Vishesh. The partners are also banking on their experiences on building businesses and investing in start-ups to actively help the portfolio companies. Speciale is in conversations with large institutional investors and seeing positive reception on investment.

Published on September 18, 2017

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