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Seed Capital: Independent Investor Rehan yar Khan

Posted on Friday, Mar 2nd 2012

The entrepreneur ecosystem in India is growing by leaps and bounds. Still, almost all of those who apply for funding are rejected, and it’s not always because they don’t have viable products or services. Often, entrepreneurs get rejected because they pitched to the wrong investor. An entrepreneur with an e-commerce company should not be pitching to an investor who specializes in green tech or manufacturing. Read carefully, entrepreneurs, if you want to pitch to Rehan yar Khan.
Sramana Mitra: Hi, and welcome to the Seed Capital series. Would you tell us briefly about your background?

Rehan yar Khan: Hi, Sramana. I invest both individually and as part of of a group. Most investments are seed investments, but some are Series A. These investments range between $150,000 and $1 million depending on the stage of the company and its capital needs.

SM: Do you have any particular industry expertise?

RyK: My expertise is mainly in Internet, mobile and SaaS. This has developed from my own work as an entrepreneur for the past 20 years, which has been IT intensive, and from my investing of the past four years.

SM: Do you invest regionally, nationally, or internationally? If regional, what is your primary region(s)?

RyK: I invest in India companies, located in Mumbai, Bangalore, Pune, Delhi, Hyderabad, and Chennai, serving both the domestic and international markets.

SM: What are your current sources of deal flow?

RyK: My deals primarily come to me directly because of my many speaking engagements at entrepreneur events in India; they also come as referrals from existing investee companies, from other angels, VCs, and from groups of which I am a part.

SM: On average, from all sources, how many pitches do you receive a month?

RyK: Close to 30.

SM: Out of all pitches you receive, how many deserve a closer look?

RyK: Six to eight.

SM: What factors receive the most weight when you’re deciding whether to fund a venture?

RyK: A great team, a coder as part of the team, a large market, little competition, some form of IP that has given the company a 12-month head start; and the likelihood of the business receiving future investments from VCs.

SM: How many investments have you made in the past 12 months?

RyK: Eight.

SM: How much money do you usually invest?

RyK: Between $25,000 and $100,000 in each investment.

SM: How long does it take for a company to receive funding from you or your group?

RyK: Around two to three weeks.

SM: What is the typical valuation of a company you invest in?

RyK: It would be $400,000 to $2 million.

SM: In terms of percentage, how much of a company’s equity do you usually seek?

RyK: Thirty-three percent.

SM: What is the typical return you seek, and over what period of time?

RyK: It would be 100 times – looking to invest only in companies that have massive growth potential.

SM: In what stage of business development do you usually invest?

RyK: Product in alpha with some customer feedback if software; product with some sales or users if a consumer product.

SM: What should be the TAM (total available market) for the company’s product or service? At 1M/1M, we believe that there are many more $20 million business ideas than $500 million ones. Do you invest in the $20 million ones? An investor can get 20 fold by investing in a small niche idea that either has a strong exit or generates great dividends every year for 20 years. Do you invest in such deals?

RyK: No, I don’t.

SM: What do you do with your rejects, (businesses you don’t invest in), if anything?

RyK: I currently don’t do anything. I can send them to 1M/1M for mentorship.

SM: Do you have any sector preference?

RyK: I invest only in consumer Internet, SaaS and mobile apps.

SM: Do you have to have an exit strategy, or would you invest in deals that can go on generating dividends over a long time?

RyK: The company must have an exit possibility of an M&A or an IPO.

SM: What is your preferred investment type?

RyK: Preferred shares.

SM: Do you do debt financing? Convertible? Non-convertible? Terms?

RyK: Only with companies I have already invested in.

SM: Great. Thank you, Rehan, for taking the time to participate in my Seed Capital series.

RyK: My pleasure. Thank you.

This segment is a part in the series : Seed Capital

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good number of investments in last 12 months …

manish Friday, July 13, 2012 at 11:38 AM PT