After having worked with successful startups like RedBus and FreeCharge, Alok Goel, in July 2015, took charge as managing director of SAIF Partners, a prominent venture capital (VC) firm that invests in companies in sectors such as consumer goods, IT services, industrials, technology, education and health care.
Although he could pass off as a college-goer in his chequered shirt and denims, he weighs his words carefully enough to not discuss the developments at RedBus that led up to his exit (Esops that were promised to Goel at the time of his joining were not considered when the online bus-ticketing service was bought over by Goibibo) or the change in FreeCharge since being acquired by Snapdeal in April 2015.
As we chat over coffee at a suburban hotel in Bengaluru, Goel talks business:
Q. How has the shift been from product companies to a VC firm?
The shift has been fantastic. It has been a month since I joined SAIF. The biggest thing I am noticing is that when you are into a business or your own startup, you think of a strategy and start executing it, and day-to-day you are completely heads-down into its execution. You keep getting a lot of bottlenecks and roadblocks. Life in FreeCharge seemed like I was defending the company with an AK-47. Whereas a VC job allows you to extract thoughts from a distance and look at various things that are happening. It gives scope for an intellectual discussion in your mind to check what will work best. It helps in getting a bird’s eye view. After doing two startups, going to a third startup was not a novel thing for me.
Q. How have the RedBus and FreeCharge experiences helped you in SAIF?
It was amazingly helpful. In today’s world, VCs offer more than just money. In that context, my experiences with RedBus and FreeCharge come in handy because I am able to connect easily with entrepreneurs. I think and talk like them.
Q. Personally, in what kind of operational areas do you think you could add value to startups?
A VC job requires us to have adaptive leadership approach. Different entrepreneurs are at different levels of thinking and maturity. There are entrepreneurs who have seen and lived life as an entrepreneur (this could be their third or fourth venture). Then there are others who have just got out of college and have started a firm. Then there are the ones who have worked for a few years; they have good insights into an area and have started a company.
We need to understand that an entrepreneur is the star of the company. Our job is to support an entrepreneur and help him succeed. We have to understand what kind of help an entrepreneur needs. But, if you sort of broadly categorise the kind of help we provide, it is, first, in terms of strategic thinking of the business. Second, we actively help in future funding requirements of the business because, at every stage, the company needs a different kind of funding. We also help entrepreneurs with product feedback. Sometimes we help in hiring because we are very well connected with the ecosystem. Not every help is provided at one go.
Q. You are known for your ability to retain best talent in the company. What makes you successful in this?
I think the biggest attribute, which has given me the ability to retain all the talent (which I am really proud of), is to maintain a great level of transparency between my team and me. I share both bad things and good ones. My team would know everything about it.
Overall, in an entrepreneurial ecosystem, and particularly in India, a lot of credit for success is given to the leader. But it is the team that supports the leader. A leader has the job of assembling the right team, which, in turn, executes and creates such a success.
So the leader has a greater responsibility of sharing the success with the team. And I think I learnt this during my RedBus stint and applied it in FreeCharge.
Q. What steps have you taken to ensure your team gets what it deserves?
Let us look at it in two ways: First, it is the day-to-day operational treatment of people; second, what is the outcome? When a guy comes at 9 am and stays back till night, when every employee is spending 10 to 12 hours a day in the office, they need a very good set-up. My request to HR and administration teams is that my team should be happy all the time. But when it comes to the end outcome, which is when a startup succeeds and there is a realisaton of value, it should be shared with everyone. In that sense, the first thing I did when I joined FreeCharge was I actually wrote down an Employee Stock Options Plan [Esop]. And I personally read it five times to cover various angles.
Experts who understood the legal implications helped me refine it. I implemented the same plan for myself and others. So, in a way, what I guaranteed was that my incentives are aligned with everyone else’s in the team. I cannot do something for myself that doesn’t happen to the team.
Q. Why did you quit when Snapdeal took over FreeCharge? Was it decided when signing the deal?
After FreeCharge was taken over, I was looking at how to do integration. The idea was to create a common joint business. And I was getting more and more inclined towards creating a broader impact in the startup ecosystem. It looked like getting into the VC industry was the right thing for me to do. And I consider myself very fortunate that I got into the startup ecosystem in 2012, which was absolutely the right time.
Q. You have invested in Dazo, a food delivery app started by your wife [Monika Rastogi]. How is it doing? Will we see more personal investments?
I have done about four or five investments in different ventures at a personal level, including Dazo. But, as part of SAIF, we don’t want to do personal investments any more. So I will not be doing any of the personal investments; it’s not right, leads to conflict of interest.
Q. SAIF has seen five IPOs. Will there be more in the near future?
SAIF, as a fund, invests in long-term partnerships with entrepreneurs. A business needs a long gestation time of about seven to eight to 10 years for it to become a real business, and to reach an IPO stage. This is the ultimate threshold where the business becomes public and it is operating according to Wall Street expectations. Definitely we will see more IPOs coming up within the SAIF portfolio and that is something we are really proud of.
Q. What are SAIF’s future plans?
We just launched a new fund, a large one, this January. It is about $350 million. We have invested some percentage of that fund into the companies already. And we still have a lot of money left. So we will continue to invest into various companies.
Q. What are the target areas?
We are focussed on technology investments. Within technology, we do all stages of companies. We are quite focussed on the seed stage and then help the company grow all the way from that early stage to either an exit or an IPO. So, we are largely focussed on technology cross-sectors such as ecommerce, health care, logistics, payments, hyper-local, travel, the Internet of Things.
Q. What kind of returns do you look at?
Whenever we invest in a company, it should be able to convince us that it can give us a return of 10 to 20 times. A VC business is an extremely risky business. The few investments that lead to results should give very big returns. Only then will the averages work out. In that sense, it’s the business that works on a black swan event.
Q. In the light of recent events where promoters were voted out of their company, what would you advise entrepreneurs to ensure their interests are protected?
I would like to answer this question from two sides: One, from an investor’s side and the other from an entrepreneur’s side. From the investor community’s side, an early stage business is nothing but the entrepreneur. It is not an established business and is not generating revenue, so profitability is out of the question. In a startup, investors are actually investing in people. We believe that the entrepreneur has a vision and a desire to build a big business. The only reason why he is not able to do that is because he does not have money and some bit of guidance. So there is no reason why investors would have any motivation to vote out the entrepreneurs. Investors are not running the company. Hence no entrepreneur should think that this investor is going to throw me out.
I feel entrepreneurs think raising money is indication of success. This is not always true. At the end of the day, the business is still risky; if it does not work out, then investors need their money back at least. In such an instance, it is actually the entrepreneur who ends up losing. One should raise the money at the right valuation. Inflating the valuation is against the interest of the entrepreneur.