2016 Is Likely To Continue The Trend Of PE Investments, Albeit At A Much More Measured Pace: Dhanpal Jhaveri, Everstone Capital

The year 2015 reported $9 Bn of total investment in startups, making India the fourth-largest base for young businesses in the world. With over 3000 technology startups, mostly based in Bangalore, Mumbai, Delhi-NCR and Pune, India is expected to be the largest startup market with over 11,500 startups by 2020.

In its endeavor to connect startups with a global pool of mentors, investors, collaborators and business leaders, The Indus Entrepreneurs (TiE) is organising TiECON Mumbai 2016 themed on Transformation Lead By Disruption.

TiECON is held in over 15 cities globally and it is regarded as one of the world’s largest entrepreneurial forum. TiECON Mumbai 2016 will be a melting pot of entrepreneurs, mentors, investors and businesses from across the globe – bringing together the complete entrepreneurial ecosystem. It seeks to be a point of convergence for entrepreneurs around the world who have set the ball rolling for a change with their disruptive business models and transforming the way business is conducted.

At the same time, it will be a platform for all aspiring entrepreneurs to turn their bright “startup ideas” into reality by connecting them with a global pool of mentors, investors, collaborators, business leaders, etc.

We caught up with Dhanpal Jhaveri, President – TIE Mumbai chapter and Managing Partner – Private Equity at Everstone, an India and Southeast Asia focused private equity and real estate investor with approximately $3 Bn of assets under management to know more about TiECON Mumbai and the current startup investing scenario is India.

Here are the edited excerpts:

Inc42: What is the reason behind choosing the theme of ‘Transformation’ this year?

Dhanpal: ‘TiECON 2016’ focuses on the core theme of ‘Transformation’ because India is at the cusp of a phase of rapid change and a palpable effect of this change has been on businesses – old and new. There is a collective effort on improving our ranking from the current 130^th among 189 countries in the scale of ease of doing business. The push for ‘Make in India’ is translating into creating a conducive environment for startups. Almost everyday we see new disruptions being brought about and new rules being set, and this has been the case across all the sectors – Technology, Media, Entertainment, BFSI, Retail, Healthcare, Investors, Government, Travel and Hospitality, Social entrepreneurship, etc.

Inc42: How will the plenary sessions of the conference pan out?

Dhanpal: There will be various sessions during the conference that have been designed to bring out transformation game plans, new models, balancing acts, technology disruptions for the future. And also those are being developed, besides showcasing new concepts and ideas, looking at some of the social impacts of disruptions and deliberating on possible inclusive disruption models. The concept will be dealt across various verticals such as – Technology, Media, Entertainment, BFSI, Retail, Healthcare, Investors, Government, Travel and Hospitality etc.

Inc42: What kind of turnout do you expect this year?

Dhanpal: TieCon 2016 will be attended by 1500 delegates, ranging from top CXOs, entrepreneurs, investors, thought leaders and policymakers from India and abroad. Our key speakers will be Ratan Tata – Chairman Emeritus Tata Sons, Harsh Mariwala – Chairman Marico Industries, Ronnie Screwvala – Founder  Unilazer Ventures , Ritesh Agarwal – Founder & CEO – OYO Rooms, Kunal Shah – Founder Freecharge and Kunal Bahl – Founder Snapdeal.

Inc42: Tell us about some of the highpoints about TieCon 2016 that you are expecting?

Dhanpal: Firstly, it’s the general gathering that makes the conference stand out. It will be a window to the Silicon Valley entrepreneurial ecosystem for our startups. Out of the 200 curated startups, five most innovative ones will pitch their ideas to a global panel of investors. They will be sponsored to visit TiECON Silicon Valley to meet key ecosystem partners.

We also expect our specially designed workshops on Fair Valuation, How to pitch, Women Entrepreneurs and IOT to be a big hit among participants.

Inc42: Private equity investments in the country witnessed a record high of $20 Bn in 2015. What would be the scenario like in 2016?

Dhanpal: 2016 is likely to continue the trend of PE investments, albeit at a much more measured pace. India is emerging as the fastest growing economy in the world and the 3 Ds – democracy, demography and demand will drive further investments into India.

Inc42: Do you agree with Nikesh Arora’s view that startup valuations have jumped far ahead of what they should be? Do you think angel investors, VC and PE firms are holding their horses before making big bets on startups?

Dhanpal: Startup valuations is even more imperfect science (as against valuing established growth businesses) as in most cases, the business and revenue model is not established. In addition, there was a ‘being left out’ syndrome which afflicted the market and investors were rushing in to deploy capital leading to a rapid inflation in valuations.

With reality not keeping pace with investor expectations, we have seen a rapid deflation in valuations, and to a certain extent a ‘flight to quality’ where fewer and better performing startups are receiving capital. There’s also an emerging trend of industry consolidation with markets leaders consolidating markets share through acquisitions or backing new startups to accelerate their moves into new adjacencies.

Inc42: An increased number of private equity players have started investing in startups. However, there is a general consensus that PE funds and entrepreneurship don’t go hand-in-hand; startups generally prefer VC funds. Do you agree with this? What are the merits of choosing PE funds for startups?

Dhanpal: I do not subscribe to the thought that PE funds and entrepreneurs don’t go hand-in- hand. It’s a question of what each investor brings to the partnership other than capital. VC firms have a better understanding and appreciation of the unstructured (somewhat chaotic) environment in which startups operate. However, once the business model is established and revenue streams are clear, PEs have a better understanding and experience with how to manage the complexities of fast growing businesses including managing organisation change, attracting talent, etc. Each investor has specific capabilities and it’s important for the entrepreneurs and investors to be aligned with  strategy and execution.

TiE, a non-profit global network of entrepreneurs and professionals, was started in 1992 to foster entrepreneurship and nurture entrepreneurs. Presently, it has over 13,000 members across 18 countries.

Prior to joining Everstone, Dhanpal has held the senior leadership positions with Future Capital Holdings and Vedanta Resources, Head of Investment Banking at ICICI Securities, and as a Partner at KPMG. Dhanpal holds a degree in Bachelor of Commerce from the University of Mumbai and an MBA from Babson College, Graduate School of Business, United States.