He heads one of the oldest venture capital firms on Menlo Park’s iconic Sand Hill Road. But Navin Chaddha’s Indian roots run deep. The 42-year-old serial entrepreneur-turned-investor is an avid Bollywood fan (favourite film: Dilwale Dulhaniya Le Jayenge) and plays cricket every fortnight. He is also the reason Mayfield Fund has a strong India presence — the 44-year-old fund, which manages over $3 billion currently, is investing out of a 14th fund in the US and has a dedicated fund for investing in India: the $111-million Mayfield India Fund. Chaddha has made over 35 investments at Mayfield, of which 12 have had IPOs and another 12 have been acquired, such as Makemytrip and SolarCity (Nasdaq IPOs) and Ankeena Networks (acquired by Juniper Networks) and Pulse (acquired by LinkedIn). Read on to see why he thinks this is an exciting time to be investing in the US, and why he’s a believer in the India story.
Mayfield is a global fund with operations in the US, India and China. How is entrepreneurship in each of these markets different?
The US is a very well established market for entrepreneurs. Entrepreneurship started with venture capital in the 1960s, so people have been doing start-ups here for 50 years. It is a very mature, established ecosystem where people know how to fund companies and get mentors, and big companies are used to buying from start-ups.
In China, the activity started in the early 1990s, so there is a 20-year history of investing in start-ups. China has a big domestic market for internet and mobile. India, on the other hand, is still early because internet penetration isn’t there — you have mobiles, sure, but not mobile internet. I would say India is where China was in 1995-1996.
In India, our fund is primarily focused on non-technology companies — consumer and infrastructure are the two big focus areas in India. If you take a 10-15-year outlook, India is a great place to invest, because the big successes are still to come. For that you need mobile broadband, tablet and smartphone penetration. Once that happens, the technology industry will grow in India for both, consumers and the enterprise market.
China is probably 10 years ahead in its cycle of evolution because the early-stage investing market in India started in 2005-2006. But in the US, it started in 1961, so there’s a huge difference.
What differences do you see between technology and non-tech entrepreneurs?
In the end, markets make people. If the markets are there in India, there will be many more returnees from the US. Indians constitute 50% of the start-ups in Silicon Valley. They are all capitalists. But in India today, the opportunity is not on the tech side but on the non-tech side. Why? Because there is a growing middle class. They have money to spend and they want to spend it on offline services, be it specialised retail, dental services or healthcare services. That is a big area of spending and we are investors in companies in that space. For instance, we are investors in Genesis Colors, which has the Satya Paul brand.
The second big area in India is infrastructure because the government doesn’t spend as much time and effort as the Chinese government does. So projects have to be private or private-public. We are big believers in companies going and solving problems at the infrastructure level. Logistics is a great example. We were investors in Fourcee, which moves liquids from ports to factories on rail. That was a successful exit for us. We are investors in a company called Sohan Lal that does agricultural warehousing and commodities. Another company is Geodesic Technologies, which does steel-based construction; it did all the steel-based construction in the Mumbai and Delhi airports. Recently, we invested in two companies. One is a company called Securens, which does monitoring of remote ATMs. The other company is Amagi Media Labs, which is focused on advertising on TV — local ads can be put in for the same content that is being beamed in Delhi or Mumbai. It’s what Google does online; these guys are trying to do it on TV.
Therefore, consumer non-tech and infrastructure, those are your two big areas to invest in India. Then, selectively, you can invest in mobile and internet. That is what we have done with BharatMatrimony, Makemytrip in the past and Indiaproperty.
Indians are entrepreneurial by nature. Here [Silicon Valley], they are focused on solving technology problems. There [India], they are focused on solving non-technology problems. But being an entrepreneur is 10X harder in India. Getting loans is harder, the regulation is tough, labour laws are different, currency is a problem. Nobody wants to give you money because they want proof and the people aren’t that risk taking. The venture community, too, doesn’t take as much risk because it is still a nascent industry.
What are the challenges of investing in the US? Is there a glut of early-stage companies?
There are certainly many companies in the US. At Mayfield itself, we see 1,000 companies a year and we fund eight or 10. That means 1% of the companies that come to us, we fund. And the industry as a whole is funding 700-800 companies at the Series A stage. That means there must have been 70,000-80,000 companies that have been created.
So there is a lot of innovation but only very few companies end up getting funded. The bar is pretty high.
Tell us about the investments you’re making in the US. What excites you about them?
This is one of the most exciting times in the US to be invested in the technology sector. Every decade, there is a fundamental shift in technology. The 1960s were about mainframe computing. The 1970s were about mini-computing with companies such as Dell. The 1980s was the Microsoft era and desktop personal computers (PC) and the 1990s were about internet computing. The past five years in tech have been about mobile and cloud computing. And in every decade when there is a platform shift, many multi-billion dollar companies are created.
Right now, four or five drivers of technology are going mainstream at the same time. The mobile is the new client device; it is no longer the PC. Smartphones and tablets are the new end-user devices. Mobile consumers and employees bring in their own devices and applications, their own cloud. They want choice and convenience versus IT departments wanting control and centralisation. So, it is not only BYOD [bring your own device], it is also BYOA and BYOC. This push-and-pull is creating opportunities in mobile like it did in the PC era.
The second big issue is that on the storage, network and server side of the business, the back end is all moving to cloud architecture, be it public, private or hybrid clouds software. At the same time, software is being delivered as a service, which is the SaaS trend. That is the third trend. The fourth trend is socialisation, which started in the consumer sector with Facebook and Twitter. But now businesses are leveraging social media to connect closer to their customers as well as to collaborate with their employees, and socialisation of the enterprise is happening.
The fifth area is big data and analytics, where all the software innovation and IT innovation in the past has been about cutting costs and making you more efficient — remove humans and automate the process. But now people are using the data to maximise revenue and profits. There is a shift there, from being cost centres to becoming revenue centres. The final trend is software-defined infrastructure, where software is redefining everything from servers to storage to networking and security.
Usually, every decade has only one inflection point; we have five or six things happening at the same time in the US. So there is much more opportunity than ever existed. The $2 trillion IT spend that exists globally is going to be redefined. People are always creative here, coming up with new products that can change the way people work, live as well as play. But you cannot sit and predict what is the next Facebook and Twitter. It will just keep coming.
How do you keep ahead in that case? Where are you investing?
We are making investments across the board because our belief is to back the people. People make products. Products don’t make people. What we fund is the congruence of smart people in a great market. Our job is to pick the brightest people with the best ideas and we need to have a prepared mind on where the industry is heading. If you have those factors in place, you can execute.
Tell us more about socialisation of businesses. Which companies are doing this?
There are two or three kinds of companies. Businesses have to build their presence on Facebook and Twitter, which is where companies such as Buddy Media and Vitrue came in and got acquired by Sales Force and Oracle, respectively. Then, you need to monitor what consumers are talking about you in the fan pages. We have a company there called viralheat, which tracks what consumers are saying about you and your products. The third area is that your website is static. How do you make it social? We have a company called Gigya that helps you connect closer to your customers. That is what I mean by socialisation of enterprise. And with internal facing tools such as Yammer and Jive, the way you communicate with your employees is also getting socialised. “How do I build my presence and make my website social? How do I make my collaboration with employees social?” All of that is happening now.
You have invested in many gadgets and medical devices companies. Is that going to change healthcare as we know it?
There are two things we believe are happening in healthcare. One is consumerisation of health where companies are solving problems for patients, doctors and hospitals. Let me give you two examples of companies in our portfolio there. One company is called Helptap. It has built an online community where 30,000 doctors can answer questions for you in real time from mobile or from the web.
A second example is a company called Brighter, which focuses on the dental market. Half the population in the US doesn’t have dental insurance and dental care is very expensive. Brighter helps you find the best dentists at the cheapest prices and get discounts of up to 30-50%. The dentists pay Brighter for every patient it brings in. So that is what we call the consumerisation of health. There are no insurance companies involved.
A related trend is what we call quantified life where consumers are collecting data about themselves from all kinds of sensors and are trying to find actionable insights. “Quantified life” because I want to know everything about me. There are companies such as FitBit that offer you wearable devices. We are investors in a company called Basis, which has a smart watch that has sensors to measure your perspiration and heart rate. It goes deeper than just tracking how many calories did you burn in a day; it measures your stress when there is traffic, when you have to speak in an interview.
Both those trends, digitisation of health and quantified life with wearables, are going to go mainstream. They typify the notion of everywhere computing. That is a big focus area for us.
Which of your investments worked better than you expected?
In the US, one of my successful investments has been SolarCity, which puts solar panels on roofs and charges on a monthly or lease basis. Nobody believed in it, but we took a risk. That company is now worth over $4 billion. SolarCity went public last December. People didn’t believe that what it did could be a business and that you can provide solar power at a cheaper rate than what you get from your electricity company. But it ended up surprising everybody, including exceeding our own expectations.
