The elusive early-stage investor

The Indian venture capital and private equity industry has seen phenomenal growth over the last few years.  The industry has attracted the best capital from LPs across the US and Europe  along with some of the best investment managers.

The trend in the industry has been to create funds of at least a US$100m in size while most are much larger.  To successfully manage a US$100m fund, a team of 2-3 GPs can at best invest in 20 companies.  This implies that the average ticket size should be US$5m.  With most sectors in India experiencing double digit growths, there are several companies that can absorb 5m and get 2x-3x returns in 3-5 years.  From a fund manager’s perspective the best approach is go after revenue generating, growth companies that need at least US$5-10m in capital and have market and product risks all ironed out.

Now looking at the other side, a early stage entrepreneur is typically seeking US$100K-1m in capital to validate his product / service and get to revenue.  These entrepreneurs not only need the capital but also need the strong support of the investors to build the business.  Unfortunately most VCs in India will shy away from these opportunities as these companies would be a big drain on their time, have additional product / market risks and increase the risk in the portfolio.

Participation by angels in these transactions is also minimal as a US$100K risk is still large for one person to take in the Indian context.

Most early stage investors in the US have strong operating and entrepreneurial backgrounds.  They typically tend to not only invest with a financial mind set but most importantly their understand of the space and potential disruption a startup can bring in the market place.  They bring skills and experience that may be critical in creating that 10 or 100-bagger, rather than a 2-3x growth.

India needs more funds managed by operating and entrepreneurial partners that are smaller in size that can take advantage of these opportunities.  For example a US$25m fund can comfortably accommodate 1-2 partners and a small team at 2% fees.  The funds can invest between US$500K-3m to create a portfolio of  10-15 companies.  mostly importantly the entrepreneurial background of the managers can bring enormous value to the startups.  A typical early stage success can generate 5x-10x return and in a portfolio of 15 companies, if 3 companies generate 5x returns the fund is home with a 25% IRR.


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Healthcare in India Part 2

A report highlights that 20% of all healthcare spend by patients is on transportation.  This could be due to inadequate access to local staff and facilities.  Dr. Ruchi has some great posts on using mobiles to provide healthcare services to the masses in India.  The same report also points out 15% being spent on miscellaneous.  The inefficiency in the system with 35% of the money being consumed in unrelated costs combined with the shortage of staff and facilities drives up demand and costs.

Technology combined with some traditional India ingenuity can can provide a way to address both. Telemedicine is one example of reducing overheads while expanding the reach of the scare resources.

One other idea could be in the preventive medicine and disease management area, by creating a McDonald’s for healthcare.  These centers can offer fixed menu of services including basic diagnostics and disease management.  The centers can be staffed by semi-trained medical professionals or nurses who follow a fixed process.  In addition to this, a tele-medicine setup can provide enhanced consultations and diagnosis.  Combining this with a micro-insurance product for pregnancy, neo-natal care or diabetes can potentially be a strong business model.

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Swine Flu Best Practices for professionals

Best practices on handling swine flu diagnosis put together by St. John’s Hospital, Bangalore and shared by Dr. Sanjiv Lewin. All copyrights & credits belong to them.

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Swine Flu Update

I had an opportunity to meet with the local State Health Secretary while on a TV show.  I walked him through the issues I faced and some simple solutions they can use.  So here is what the government has done:

1. Patients can be tested in multiple location including private hospitals with better amineties

2. Local testing lab in Bangalore to be used for faster testing

3. Increasing equipment to Rajiv Gandhi hospital – including masks

4. They have talked to St. John’s hospital and other medical professional to kick off a training program for all health workers

In addition I was lucky to meet Dr. Sanjiv Lewin from St. John’s who

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Healthcare opportunities in India Part 1

There are a lot of reports about the healthcare industry in India, the growth potential and opportunities like here by PWC (circa 2007), the US Commercial Service, the India Brand Equity Foundation (IBEF).

All of them highlight:

  • India spend s~6% of it’s GDP on healthcare
  • On a per capita basis this is miniscule to meet the needs of the 1.1 billion people
  • Majority of spend is private $$ by middle class and rich citizens
  • Heath insurance penetration is very low
  • Huge gap in the number of trained staff and facilities required for the large population

Over the last decade or so, there have been some phenomenal improvements in the healthcare diagnostics and delivery with companies like Apollo, Fortis and Manipal opening up great centers across the major urban center.  The biggest catch is these companies are still targeting the less 10% of the population that can afford to spend on healthcare or have insurance coverage

With this situation, if we look at the opportunities in the sector is really in addressing the needs of the non urban and low income groups.  These groups currently rely only on the government for the healthcare services.  Unfortunately the government alone cannot address their needs.

For example in the state of Karnataka there is an acuate shortage of staff and facilities as seen in the table below.  The state needs 254 Radiographers and has only 30.

Particulars Required Actual Short Fall Short Fall %
Radiographers 254 30 224 88%
Paediatricians at CHCs 254 116 138 54%
Health Worker (Male) 8,143 3,762 4,381 54%
Health Assistant (Male) 1,679 837 842 50%
Laboratory Technicians 1,933 1,242 691 36%
Total specialists at CHCs 1,016 691 325 32%
Health Assistant (Female) 1,679 1,170 509 30%
Multipurpose worker (Female) 9,822 7,244 2,578 26%
Physicians at CHCs 254 192 62 24%
Pharmacist 1,933 1,472 461 24%
Community Health Centre 302 254 48 16%
OBGYN 254 215 39 15%
Nurse/Midwife 3,457 3,100 357 10%

Source: Ministry of Health, Government of India 2008-09 report

Looking at this one obvious opportunities is:

Micro health insurance:  Current government schemes which utilize a re-embursement mechanism have failed as affordability is still an issue for the group.  We need schemes that provide cash less insurance coverage.  One good case of this a company called ARC – Accident relief Care for short.  ARC provides cash group accident cover for the low income groups for as little Rs 2-3 / day.  Their target market is auto drivers, waiters who live from day to day cash collections and a single day’s lost due to any accident can lead to dire consequences for them and their families.  Extending the ARC concept to other markets and offering new products is a great opportunity.

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Brush with Swine Flu

Ok so I had  swine flu.  The funny thing is I did not get it from traveling but caught the virus right at home.   In India they say it is my karma.

The good parts first:

  • I stayed at the Rajiv Gandhi hospital which had a sanatorium like feel with lots of trees, low rise buildings and no traffic
  • The staff, nurses and doctors were just amazing.  Lots of great care and support
  • Gave me a couple of days to look and experience the real state of  healthcare in India rather than have an academic view of it

Now the real meat:

  • We have a limited supply of the drug and test kits.  When I got tested, the lab in Pune was only testing for swine flu
  • I got tested after repeated requested for 3 days and it toke another 2 days to get my results back. that is 5 days to get a result
  • I was not shown the results but the information was given to someone at the hospital by phone. No verification, no paper trail, nothing.  Human beings make mistakes and not having proper communication mechanisms in this day and age (an email, a fax anything will do) is ridiculous
  • The government forces all people who undergo a test and are awaiting the results to stay at the Rajiv Gandhi institute so they can contain the spread.  Two issues here: one a person who has not tested positive has a high probability of getting infected by being in such close proximity to an infected patient; second: the facilities at the hospital are just disastrous (see pictures below).  Most people feld the hospital without getting tested when they just saw the place. Bangalore has some great medical facilities but we were forced to only stay at this government run hospital.  Here are some key features of the place:
    • 14 beds in a dorm style.  Bed were old, sheet did not look clean and blankets definitely had stains.
    • 2 toilets both Indian style (do a google to figure this out). One for the guys and another for the ladies
    • No soaps or toilet paper
    • There was active construction work going on, so patients were entertained by constant banging on the roofs, strong smell of paint and dust everywhere
  • The hospital did not have a simple thermometer to test patients. I bought them one
  • Finally I had a cheat x-ray taken and the lab was from another world.  It had one seemingly working machine and lots of old crap with tons of dust on them.  There was no changing rooms, no proper magnetic protective shields
  • Another big issue is the staff though competent have not been trained to handle swine flu.  I saw vague uninformative circulars being sent by bureaucrats.
  • Finally: there was no food and everything had to be got from restaurants near by.  I don’t think unhygienic restaurant food is ideal for flu

So here are some quick things that can be done to solve these issues:

  1. Allow other private hospital to test patients and have those suffering from the virus at least get comfortable accommodation, food and facilities
  2. Open up more testing labs- especially the great lab we have in Bangalore
  3. Charge patients for the health services – Most people infected with swine flu are more than willing to pay for the testing, stay and medication.  Please charge them and in return provide them with adequate facilities
  4. Spruce up the facilities at Rajiv Gandhi – Instead of building gazebos outside, please build a couple of additional toilets, get some basic supplies like sheets, thermometers, masks and soaps
  5. We have some very competent healthcare professionals.  Please get a group of them together and develop a well thought through strategy and action plan.  Please train medical staff on these and empower them with processes and techniques to address the key issues.

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Bharathpur Bird Santuary

We were on a business trip driving through a town called Bharthpur in Rajasthan. Bharthpur has an amazing national park which is also a bird sanctuary called the Keoladeo National Park.

So I got a few of my collegues out of bed before dawn and we had this amazing walk through the national park. Pictures are from our walk there and some birds we caught on camera.

About Bharthpur:

Bharthpur is still a sleepy small town. The town has enormous tourist potential and does attract up to visitors a year.

Interesting Bharathpur Park is over 250 years old and has between 250-350 species of birds.  This is the ONLY World Heritage site in Rajasthan.


According to a UNESCO investigation, the park is under serious threat due to lack of water supply and environmental changes.  Since most of the birds at Bharthpur are water birds, they depend on the monsoons and open landscape for their existance.  Over the last 10-15 years, the drop in monsoons, the reduce water supply from natural water sources (from construction of dams) and the growth of new vegetation is seriously affecting the bird population.  A 2008 UNSECO study points out some of these issues.  One serious issue pointed out is of the endangered Siberian Crane species which has always migrated and spotted at the park, is not seen since 2002.

Travel etc:

There are lots of resources online on how to get there.  Our itinerary was quite convoluted and not aimed at traveling to Bharthpur in particular so I cannot add much value here.  One thing I can talk about is the lack of hotel accommodation.  We had a tough time making a booking over the phone and ended up in a guest house / rest house run by an ex-army gentleman.  He was a great host and very accommodating but the facilities were terrible.  The key issues for a place this beautiful is that there are few clean hotels and even fewer clean places to eat.

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