5 questions with Kanwal Rekhi

Kanwal Rekhi, a longtime angel investor and the founder of computer networking company Excelan, has spent the last two years raising a debut fund for Inventus Capital Partners, a U.S.-based India-focused venture firm. Rekhi says that he expects to close his first fund at the end of the year with about $125 million in commitments. The fund has already raised $50 million, including $4.5 million in commitments from Rekhi and co-founders John Dougery, Samir Kumar and Parag Dhol.

The charismatic Rekhi, who also once headed up the networking group The Indus Entrepreneurs, talked with PE Week Senior Editor Constance Loizos after he returned from a recent fund-raising trip to Bangalore, Hong Kong and Tokyo.

Q: How has the investing environment in India changed since you first set out to raise this fund two years ago?A: Series B and C rounds have soared, but not A rounds, and there are plenty of opportunities to do A rounds. In India, lots of companies are bootstrapped and really don’t need that much financing. Our average deal size is going to be $2 million. Meanwhile, other firms are trying to put $5 million to $10 million to work.

Q: How do India-based VCs compare to their U.S. counterparts?A: My sense is that VCs in India, homegrown ones, aren’t as good at looking at deals from an international perspective. And they aren’t as good at mentoring entrepreneurs, who require a lot of mentorship.

The problem is that homegrown Indian VCs just don’t have entrepreneurial backgrounds; they don’t have operating expertise. Also, the venture capital industry is only about 9 years old.

Q: Did you expect fund-raising to take this long?

When we went out and tried to raise, all the Silicon Valley VC funds began showing up. So it’s a little more competitive. And it’s taken longer because people didn’t take me seriously. LPs felt that I’m going to not be able to do it, in the sense that I’ve done well [financially] and why bother.

They thought I’d just use my name and have other people do the work. But we’ve surprised them. I don’t do anything lightly.

But I’m not making angel investments while raising this fund. Nothing on the side. My focus in on this 100 percent.

Q: Are you mostly targeting institutional investors or individuals?A: About 90% of the fund is being raised from institutions, mostly U.S.-based, though we also have an LP from Gibraltar. They don’t want to be named, but one is the pension fund of a telecom giant. We also have a couple of funds of funds, and several family offices.

Q: What were you reading on the plane ride home?A: India Arriving, by Rafiq Dossani, a Stanford University professor. It’s an amazing book to me because he writes about what’s happened in India over the last 50 years.