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Seed Capital From Angel Investors: Pravin Gandhi, Seedfund – Mumbai, Bangalore, New Delhi, India (Part 1)

Posted on Thursday, May 19th 2011

By guest authors Irina Patterson and Vandana Upadhyay

I am talking to Pravin Gandhi, a founding partner at Seedfund, which is one of the India’s leading early-stage venture capital funds, with operations in Mumbai, Bangalore and New Delhi.

Seedfund was founded in 2006 by Bharati Jacob, Mahesh Murthy, and Pravin Gandhi.  In 2010, they raised Seedfund II, which is a $54 million fund. The fund also runs its own incubator.

Irina: Hi, Pravin. Let’s start with your personal background. Where are you from and where did you receive your education? How did you arrive at this point in your life?

Pravin: I was born in Mumbai and did my schooling here. I did my undergraduate work at Cornell and then returned to India after I finished my undergraduate degree. Then I worked in a couple of companies because I really wanted to be an entrepreneur.

My choice was that I had to understand what it meant to be an employee and also what the lay of the land was so that I could be a smarter entrepreneur. That is what I did for four years from 1968 to 1972. I found some co-founders and started a company in technology in 1972. It actually started as a distributorship for Digital Equipment India Limited, Digital Equipment Limited’s Indian subsidiary.

Over the next 17 years, we grew that company and added other disciplines within that group instead of just being sales distributors for Digital. We added a site capability and system integration capability, and we started software exports.

Since Digital did not have a great presence in PCs, we also started manufacturing and selling computers. We did that till 1998, and at that point we formed a joint venture with Digital Equipment and went public and raised money.

I served on the board of Digital Equipment India Limited for four years and also ran their sales and marketing for four years till such time as our obligations as part of the joint venture agreement. When we started, the equity of the company was 40% with Digital, 30% with us and 30% with the public. There was an agreement that Digital would acquire more than 50% equity, so when Digital acquired the stake, I figured it was time to move on.

I went back to the parent company, Hinditron, and ran a domestic software services company to find develop customer applications for Indian customers, and we run this till about 1996. It didn’t work the way we all thought it would, so I shut it down and then I decided to become an angel investor.

I did that for three years and I invested in three companies, two in India and one in Singapore. I made money. I discovered that all my contemporaries in the computer hardware and software business were also moving on and they were also doing the angel investing.

It occurred to some of us that instead of doing it individually, why don’t we start a fund and with the help of folks in Silicon Valley, such as Kanwal [Rekhi], Jagdish [Bhagwati], [prominent Indian-born Silicon Valley entrepreneurs], we started a fund called Infinity in 2000, made some investments, saw the ups and downs, the bubble and the bursting of the bubble, but still ended up returning nearly two times on the investment. We returned the money about 2005. There were some companies that were left over that got disposed of, and one finally closed in 2009.

In the meantime, by 2006, all the major returns of Infinity were over and my earlier partners didn’t want to do early-stage investment. But it continued to be my passion, and we had also learned a lot of lessons during Infinity of how not to get carried away, how to be smart about spotting bubbles, and how much money it needs to get entrepreneurship going in India.

I found two partners, one by the name of Mahesh Murthy, he was doing the same thing at the time and also doing business plan contests along with me and we were judges. I felt that he too had enough passion in India in this early-stage business. Then, there was a woman by the name of Bharati Jacob based in Bangalore who worked with me in Infinity, and she also joined as a partner.

We debated for a while and finally agreed that we should raise the $50 million seed stage fund with the theory that for between $750,000 and $1.5 million you can build a decent company and then be able to find additional money from other later-stage investors.

This segment is part 1 in the series : Seed Capital From Angel Investors: Pravin Gandhi, Seedfund - Mumbai, Bangalore, New Delhi, India
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