Ajit Nazre: the man behind Kleiner Perkins’ first big hit in India

Ajit Nazre is the point main in India for Kleiner Perkins Caufield & Byers. The former SAP executive has been with the firm since 2003 and invested in Info Edge (India) before its wildly successful public offering last year.

Nazre is based in KP’s office on Sand Hill Road, but he travels to India about half a dozen times a year. He says the firm is focused on services and products for the Indian consumer. It’s a vision he shares with Ram Shriram of Sherpalo Ventures and the two have been syndicating their Indian deals.

We talked to Nazre about what has changed in India and how investors and entrepreneurs are overcoming regulations, fear of IP theft and the lack of high-bandwidth broadband penetration to build and finance great companies.

Q: What’s changed in India in the last 12 months?

A: The activity has absolutely picked up, big time. The capital available for investment has gone up and the number of investment professionals has gone up, too. The number of firms has increased almost fourfold in the last two years.

The late-stage folks—private equity and hedge funds—have gone in as well. But there are not many $500 million opportunities there, so whenever they see an opportunity to write checks, they’ve stepped in.

There it’s manufacturing, services, infrastructure and real estate, which is absolutely out of control. The IPO market is red hot for real estate developers.

Q: According to our records, 2006 was the first year Kleiner Perkins made the plunge into the India market. What changed?

The activity has absolutely picked up, big time. The capital available for investment has gone up and the number of investment professionals has gone up, too.”

Ajit Nazre, Partner, Kleiner Perkins Caufield & Byers

Q: What are the biggest challenges for consumer Internet companies in India?

A: Though Internet penetration has increased, it’s still no China or U.S. There are 20 million to 25 million Internet users. Broadband there is defined as 256k. What can you do at 256k? Imagine that. What you offer as a service to the consumer is heavily constrained by that.

Q: What about the theft of intellectual property?

A: There are a couple of things that really make it a moot point. The fact that you’ve got a legal system is one thing. Sure, it’s slow to respond, but at least you have recourse. And there are examples of recourse. Consider pharmaceuticals. Look at last January when a major generics company was sued by Pfizer and they [Pfizer] won. Imagine that happening anywhere else in the world.

Go visit Bangalore, everybody is doing some sort of engineering work there. There’s no way that General Electric or anyone else would set up an R&D center there if they had any fear of IP theft. If there were IP problems, [GE] would have stopped [its India R&D business] a long time ago.

Q: How do India’s different contract laws and lockup provisions affect what you do?

A: The regulations of the SEBI [Securities and Exchange Board of India] are different. The promoters, who are essentially the entrepreneurs, face a lockup period sometimes as long as 12 months, for example. Compare that to the 180 days that’s typical for Nasdaq. But there is liquidity. There is a vibrant public market. It’s just that the rules are different.

There are some slight differences, but everybody now has found a workaround. It works just fine. It’s like doing business in the U.K. vs. the U.S. Not everything translates perfectly. A lot of the law is from England, though.

Though Internet penetration has increased, it’s still no China or U.S. … Broadband there is defined as 256k. What can you do at 256k?”

Ajit Nazre, Partner, Kleiner Perkins Caufield & Byers

The Bombay Stock Exchange is the oldest exchange in Asia, at 120 years. Look at the number of companies with over $1 billion in valuation in India and compare that to China. It’s a vibrant capital market.

Q: Tell me about Kleiner Perkins’ partnership with Ram Shriram.

A: He was an employee at Netscape and sold a company to Amazon. We’ve known him since 1995. There’s a great deal of comfort with him. One of things we both believe is that the Indian consumer is the growth story of India. It’s not like China, where it’s about foreign direct investment. It’s about more consumers with more disposable income who want to buy more things.

Despite the government, it’s going to succeed. [The government has] really gotten out of the way. They’ve decided that they don’t have to mess with this growth. Kudos to them for that. We’ve done a lot of consumer-related investing and are pretty fortunate to have some successes under our belt. We’re not investing in infrastructure, enterprise or real estate.

Q: Does Kleiner Perkins have any plans to raise an India-only fund?

A: There’s more to do than we can do. For us it’s not the amount of money we invest, it’s the time we invest. Things are going really well so far. It’s always good to show some success before you go and ask for more.

Q: How frequently do you visit India?

A: Six times in 2006. Quite a few of the venture folks in the valley have lifestyle problems when it comes to travel. I’m not one of those of people. I traveled 70% of my time when I was at SAP. I used to be at 100,000 [miles] by April. What are you going to do? Say no? That’s the reality. All of our businesses have business everywhere. You can’t avoid it. There’s no substitute for face time. But the fact that you’ve got a 12.5-hour time difference helps. You’re not cannibalizing any of your working hours here. That helps.

What startups need is not just money. They need help. A lot of fellow venture capitalists forget that the aim isn’t just to invest and forget. The time you have to put into an investment there [in India] is more than the time you have to invest in one here. You don’t have serial entrepreneurs who have done it over and over again there. It’s like Silicon Valley in the 1980s. You don’t build something of value fast.

Despite the huge amount of committed capital, why is it that so few entrepreneurs get seed capital? Because it’s easier [for VCs] to do less work and pay up than to do the hard work.

BIO

AJIT NAZRE

Partner
Kleiner Perkins Caufield & Byers

AGE: 42

EDUCATION: Undergraduate degree in mechanical engineering from the College of Engineering Poona in India. He holds a master’s degree in mechanical engineering from Michigan Tech, a Ph.D. in biomechanics from the Technical University of Hanover, Germany, and an MBA from the Harvard Business School.

WORK HISTORY: Held various positions at SAP for five years before joining KPCB in 2003. At SAP, Nazre played a key role in formulating and executing the company’s Internet strategy (mySAP.com) and co-founded and led SAPMarkets, according to his official bio. Prior to SAP, Nazre worked for six years in the medical device industry.

FOCUS: Enterprise software and services, material science pertinent to energy, environment and life sciences.
Investments: Cleartrip, Info Edge (India), Kovio, Spatial Photonics, SpikeSource, Virsa, Visible Path, Zettacore.

DID YOU KNOW? Nazre made six trips to India in 2006.

Source: VCJ reporting