Feb 13, 2017

Top investor Tim Draper makes an India play with new partnership; plans fund of funds

BYJayadevan PK

Tim Draper was disappointed with his bets in India. So the iconic investor shut his fund Draper Fisher Jurvetson’s local operations and sold the assets to another firm last year. But it seems, India is too hot to ignore.
The investor is making a comeback to India, although not with a full blown fund, by partnering with India’s Blume Ventures*. As part of the partnership the Indian early stage investor will now be a part of the Draper Venture Network, a collective of funds worldwide, run by Tim Draper.
Gabriel Turner, the Executive Director at Draper Venture Network told FactorDaily that the earlier model of independently running a local fund didn’t work because “the decisions were being made in Sand Hill road” and India needed funds that had full autonomy. “At the time it was very early in the startup ecosystem. The market wasn’t as sophisticated,” he added.
The Draper Venture Network, which helps member funds and their portfolio companies with strategic introductions and other resources, currently has funds in different regions including Americas, Middle East and Asia. DVN does not make investments into its member funds.
However, Tim Draper has plans to raise a meta fund that will separately invest into other funds.
“The vision is to have a meta fund through which we will be able to invest in all of our funds,” Turner said. The meta fund, or fund of funds, is in the works and will take anywhere between two to three years, depending on the market conditions, according to Turner. “We don’t want to mix those two,” Turner said referring to the activities of DVN and the meta fund.
Here’s an edited excerpt of our Q&A with Turner.
What opportunity do you see in India as compared to the US?
The US is a market that’s pretty much been penetrated completely. You know, it’s like, you’re trying to sell more crap to the same people. Like on demand services. Can people be more lazy. You’re not fulfilling higher give needs or fulfilling their most basic needs. In India the population is huge and underserved. Technology is mostly going to provide the basics of those higher give needs whether it is banking and financial services, logistics services, healthcare and education. Startups in India, have maybe tapped into the top 100 million users who are active smartphone users and have disposable income. That means 1.1 billion people are still left. It will take a while for them to come online but it won’t take long.
What are the timelines that you have in mind for the fund of funds?
The fund of funds we are planning to deploy will give funding to give funding to each of our funds. We’ve been following a sort of strategy in the last 3 years to get there. The first was sort of cleaning up house, getting better funds on board. Now we’ve launched a program called DVN Select, which is a stepping stone for the meta fund. The best companies around the network will be showcased to the limited partners and big investors and grow upon their reputations. Once we do those successful companies and people become aware of the funds that are part of the network, then we’ll have the reputation to be able to go out and raise those funds. That’s anywhere between 2-3 years away. The market will determine whether it is a good time to raise or a bad time to raise.
Any focus areas?
When it comes to co-investing in companies it won’t matter which sector. That being said, financial tech, healthcare, education and government itself is going through a lot of disruption.
* See disclosure.

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Jayadevan PK is a writer of FactorDaily.