Band of Brothers
Though venture funds are highly secretive about their business there are three ways to assess their performance. The first is whether the businesses they fund improve their market position. Three of IVFA’s current portfolio companies are among the market leaders in their segment. Meru is the largest radio taxi service in the country. Radio City is among the top three radio businesses by size. RDC Concrete is the fifth largest ready-mix concrete company in the country.
The second is whether investors like the fund managers’ work and give them more money. IVFA has raised four funds till now, each bigger than the one before. The last fund of $725 million this July was raised at the recession’s peak. “Of course, the investors love them. Western investors like the control and the buyout model,” says a private equity fund manager.
The third metric is a balanced and stable top team. The five founding partners of the firm have stuck together for 10 years now. Two years ago, two new partners, Mahesh Krishnamurthy and Pramod Kabra joined them. Theckath, Nirula and Krishnamurthy look at investments while George Thomas, Sanjay Arte and Pramod Kabra troubleshoot businesses. Nevatia looks at fund raising and strategy.
So what’s the IVFA secret sauce? Ask any of the IVFA partners and they will say “because we love building businesses.”
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Image: Malay Karmakar
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Unfortunately, this is exactly what most venture funds say. So how and why is IVFA different?
For an answer, consider IVFA investment in CARE Hospitals way back in 2002. Sanjay Arte didn’t know anything about hospitals but “plunged right in.” He figured the team of doctors at CARE were great but hadn’t thought hard enough about hospitals as a business. “So we worked together to develop something as simple as a budgeting process because there was none. I would go from doctor-to-doctor to ask them how much business they did and the costs they had incurred. And using that built a projection for expected business and expenses for the coming year,” he says.
It was a big one-time effort but in forthcoming iterations, the budget became a great source of management information system as well. The other thing IVFA did was to improve the patient discharge process. “This got delayed because nurses had to wait for doctor approval to give unutilised medicines back to the patients. We let the nurses do that without needing too many approvals. The benefit of a quick discharge outweighed the costs of nurses giving back a wrong amount,” says Arte.
A few years earlier, in 1999, IVFA had invested in Shringar Films (now Fame India), a family-run film distribution business. Shravan Shroff, MD of Fame, says he accepted their investment because “they were going to be a partner in the business.” IVFA helped recruit many key middle management professionals in the company.
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