I don't see any slowdown in early stage funding in India or the US: Raj Mashruwala

Raj Mashruwala did BTech from IIT Bombay and MS in engineering from the University of California, Berkeley. Soon after graduating from Berkeley, Mashruwala cofounded semiconductor equipment manufacturing firm YieldUp International and manufacturing software provider Consilium. He went on to be COO of US-based infrastructure and business intelligence software provider Tibco Software, from where he retired. Between 2009 and 2011, he helped the Aadhaar project as chief biometric coordinator. Now, he's partner emeritus in Bengaluru-based seed investment firm Prime Venture Partners.
From the time you first turned an entrepreneur in the US to now, how has the startup ecosystem changed?

My first startup was in 1978.That was a time when nobody actually used the word `entrepreneur' and there were probably four venture capitalists in all of Silicon Valley . We didn't even know what VCs were.Compared to that, life has changed dramatically . There's been a very steady maturing that has happened for startups, especially in India. There is a very clear path that Silicon Valley has taken. Bengaluru is doing a catch up at a fast rate. The world has become so small and it's relatively easy to get an idea. It is very easy to pass in formation across, which is why Bengaluru is moving faster than any other region.

We hear funding is very subdued in the Valley now. You see that effect here?

I would classify it differently. The only thing subdued is huge cheques or late-stage and hyper valuations. I don't see any slowing down here or in the US for Series A or B funding rounds. We consciously fund only those innovative ideas that are not going to require $100 million.We think we have found a model that is far more capital efficient. Two of our companies have become cash flow positive even before Series A and that's the best indicator for being capital efficient. An average VC is a generalist. We are not.

What's the outlook for India?

I don't see a problem at all in India, going forward. There are bidding wars going on between VCs. Chinese investors are also getting interested in India. Europe has its own political problem which is hurting the economy. South America is in a shambles, the (South American) Peninsula will declare bankruptcy is the next six months and Brazil's economy will shrink this year. China is also slowing down. The good part is that globally money moves efficiently. I think there is going to be a lot more capital available for India. But you can't build a company on the hopes that you'll hit a $4 billion jackpot.Sometimes, the shallow inves tors fall into this category. We are more interested in building a company with a $500 million valuation ten years from now.

You are now passionate about the healthcare space.

My passion is how to create a science out of being an entrepreneur. Right now, a lot of it is a hit and miss. For the most successful VC firms, about six out of the ten companies would provide zero returns and they would write it off. The hit ratio for the best VCs is 210. It's not their fault. We haven't really understood the game. That is my interest area. There is a nonacademic angle on how to help somebody who has the right DNA. The difficulty in the healthcare space is that it has been dominated by large companies or public sector activities. I believe that by combining technology, we can look at a problem and find an innovative solution that the existing ecosystem could not find.

So you recently launched the Centre for Healthcare Entrepreneurship at IIT Hyderabad to focus on this.

What we are looking at is, how do I train somebody to be a good entrepreneur in healthcare. We break this into two parts ­ finding the people with the right DNA and teaching them to identify needs by pairing them up with healthcare practitioners. They will come back and spend five months analyzing the problem by leveraging IIT faculty . That's the first year. Our target is by the end of the first year, they'll have working prototypes. They will be provided with a two-year funding. Healthcare has a much longer gestation period. Right now, it takes 4-5 years for a healthcare product to be developed. We want to reduce that by half. The ideas we have got now are not very impressive.

Does that mean a lot of filtering is required at the ideation stage?

Nandan Nilekani had once famously said that you can't outsource thinking and that's the problem here. There should be a systematic method to recognizing what problem fits or is appropriate for an innovative solution. A lot of problems don't require innovative solutions and our focus is on coming up with brand new methods to solve the same problem with dramatically less cost. And there is a way to do that.