Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with John Dougery was recorded in May 2016.
John Dougery, Co-Founder and Managing Director of Inventus Capital, a fund that is one of the earliest players in the Silicon Valley – India corridor, discusses his firm’s investment focus, as well as reviews the trends of the Indian market.
Sramana Mitra: Tell us a little bit about your firm. You’re a Co-Founder of the firm so you must have founded the firm with a certain thesis. How has it evolved over the years that you’ve been in action in this corridor?
John Dougery: This firm is one of my entrepreneurial efforts along with my co-founders. It all came out of my mutual experience with Kanwal Rekhi who is a very successful entrepreneur here in Silicon Valley. He got venture backing and took the company as a result. He was the first to commercialize TCP/IP over Ethernet. He had a successful IPO. He ultimately merged it with Novell and ran Novell for five years. He took Novell to India in the early 90’s.
He was the one of the first to move significant engineering into India. He and I got to know each other in the industry. I was in the PC business back in the 80’s. I was in the workstation business. Then I got recruited into venture capital in 1997. By that time, Kanwal had left his operating career to become a prolific angel investor. He was investing in five to seven companies every year.
He and I invested in a number of companies together, largely in the Indian community. I sat down in 2004 when the dust settled after the dot-com boom, compared notes, and discussed the fact that we’ve seen a lot of success with the lean startup model, which was just becoming a coined term at that time. We had invested nearly 80 companies at that point.
We looked at our track record and realized that most of the wealth for both the entrepreneurs and investors had come from the companies that hadn’t taken huge amounts of capital. For example, Nextag were among the first to start in Silicon Valley but ultimately built 80% of the staff out in India. Here we were in 2004. You could see what was happening in China. You could see the trajectory that China was on as an emerging entrepreneurial economy.
Kanwal had been extremely engaged with both the Prime Minister at that time in helping them reform the economy to open up to venture capital and open up sectors like telecom to private enterprise. We thought, “If we’re going to start a venture firm, we should start it in a sector where we have an unfair advantage.”
We decided that a smaller venture capital firm of $50 million to $100 million focused on capital-efficient entrepreneurs with the leverage of the emerging Indian opportunity was the way to go. That’s what we went out to do. He and I travelled to India about a dozen times throughout 2005. We met hundreds of entrepreneurs and talked to the various venture capitalists who were on the ground at that time.
We came to the conclusion that there was still a big opportunity to build the number one firm what would focus on the Indian community. We sought out the experienced on the ground in India. Our Co-Founder, Samir Kumar, joined us. Kanwal had known him for six years at that point. He had been a venture capitalist in Bangalore for the past six years. We raised the fund, which wasn’t easy. It was 2007 when we started. It was 2008 when we finished.
It was a very tumultuous time in the capital market and venture in general. Venture hadn’t produced returns for quite some time at that point in time. A lot of investors were losing faith. We found some who believed in us and we were able to get it off the ground. Our first fund was $50 million. We started investing that in 2008.
We expanded our team. We had a fourth partner we brought on – Parag Dhol had been one of the venture capitalists in India. He had been with ICICI back in 1993. He had invested in Indian entrepreneurs for nearly 15 years by the time he joined us. We thought like we had the best team. We all had operating backgrounds. We were very focused on entrepreneurs who were applying technology to modernize the economy.