500 Startups sees potential in India's e-commerce, education

The incubator's recently appointed venture partner Pankaj Jain shares his perspectives on India's outlook and his journey from running a hedge fund in New York to failing at a startup.
Written by Srinivas Kulkarni, Contributor
500 startups

The Indian startup community was abuzz with the arrival of prominent angel investor Dave McClure, founder of business incubator 500 Startups last month.

His flagship Geeks on a Plane event (#GOAP) last month was certainly quite a hit. While McClure is back in the Valley, the work still continues with entrepreneur Pankaj Jain who was appointed as the venture partner for 500 Startups in India last October.

Pankaj Jain has been around the Indian startup circuit for a while but that appointment certainly thrust him into the spotlight. He shares with me his perspectives on the local startup scene and his personal journey so far.

Pankaj Jain
Pankaj Jain, venture partner at 500 Startups.

1. How did you get linked up with 500 Startups?

In June or July 2011, I reached out to Christen O'Brien, a partner at 500 Startups, about hosting Geeks on a Plane at Startup Weekend India and helping Christen to connect with the right people around India for the first Geeks on a Plane trip to India.

After hosting Dave, Christen and venture partner Paul Singh, and the other Geeks at Startup Weekend, I decided to invest in 500 Startups. This led to more interaction with 500 and as India become more and more important for 500, Dave and Paul made a quite a few trips in 2012.

In September 2012, I received an offer to join 500 Startups and run our investments in India.

2. Tell us a little about your journey prior to 500 Startups.

I've spent all of my life in New York City. The Big Apple is home for me. I went to school, college and worked in the hedge fund industry for 12 years before leaving finance. From 1996-2006 I worked at three startups: two in finance and one in tech.

By some accounts, Long-Term Capital Management (LTCM) was the largest funded startup in history with a billion dollars in 1993, not to mention having two Nobel laureates as partners. The second financial startup, GlobeOp Financial Services, was much more modestly funded. I exited the company in late 2004. In 2012, the company, GlobeOp was acquired for a billion dollars. 

In 2007, I moved to Delhi to do a startup. I soon realized that I needed help. A lot of it to understand how things work in India. I looked for mentors and co-founders, all to no avail. Out of necessity, I got to work on building a community in Delhi through a small group of founders that I had met and a more open gathering at Startup Saturday. 

I failed at my startup for numerous reasons and moved back to NYC in April 2010. In March 2011, I started organizing and facilitating Startup Weekend in Delhi/NCR and Bangalore while living in NYC. In June 2011 I moved to Delhi again. Yes, I've basically been bouncing between New York and New Delhi since 2007. I love NYC. It's my home. It's where my friends and family are. It's where I grew up and it's what is familiar. However, I love being in India. I love the energy. I love being able to make an impact.

To me, NYC is like a big company--structured, makes sense, things just work. India, specifically Delhi, is like a startup--lots of unknowns, lots of jugaad (frugal innovation) just to get by, lots of pains, many trials and tribulations. Take a guess, why I like doing what I'm doing in India!  

3. What kind of startups do you look for when you want to invest?

I look for well balanced teams of developers, designers, and dhandhawallas (businessmen). I generally prefer tech to be in-house and I like teams that are thinking about how to use online platforms to create massive distribution. Teams that are solving real problems in education, travel, jobs, e-commerce, real estate and attacking real problems across India are very interesting areas. I half-jokingly tell techies in Bangalore that half of them should move to Delhi and I tell the typical Delhi business guys that half of them should move to Bangalore. This way, we would have two really amazing tech startup centers. 

4. How will your personal journey in the startup circuit in India benefit 500 Startups?

I have been in India for six years as a founder, community builder and investor. I view myself as a founder first, investor second. Everyday, I learn more and more about doing business in India, about opportunities that are all around us and about investing in India's future. I believe I can add a unique perspective to 500--the 20+ years of experience at multiple startups plus being a failed entrepreneur, bringing the American way of thinking or doing, and the ability to understand the Indian context and fit the 500 way of doing things into India. I know I don't have all the answers and neither does 500. However, we are here because we believe in the future of India and specifically, of the Indian entrepreneur.

5. What's your take on the kind of pace the startup industry in India is moving at?

I am excited by the pace of evolution. A tremendous amount of change has taken place in just a few short years from every angle--local communities around the country--I would even say that a national community is emerging, mentors joining the community, more investors doing more deals and more young people deciding to roll the dice and make an impact.

There's still a long way to go. We need more experienced people coming out and giving back, not for equity or cash but to pay-it-forward. We need more successful founders to be investors and invest like they are founders. Too many successful founders invest like VCs, forgetting, how they raised money.

6. What are your personal goals this financial year as part of 500 Startups?

Find the best founders in India and support them by giving them money, providing them access to over 200 functional and operational experts that can help them with data, design and distribution and try to create deal terms that are more friendly to the founder.

7. What spaces do you think will gain momentum in the years to come in India?

Everything. I don't have a crystal ball but everything is growing in India and I think in ten years, things will change and grow dramatically.

E-commerce will eventually come out of its slump and grow tremendously. Payments is a really painful problem across India. We need someone to work with the RBI to come up with secure frictionless electronic payments. Whoever solves the electronic payment problem in India will create a company bigger than PayPal.

As Indians have more disposable income and as both spouses work, travel and tourism should continue to grow.

Education is a no-brainer. The whole education system in India is archaic and broken. Creativity is squashed right at the beginning of a child's education. Major opportunities exist and some great entrepreneurs are starting to attack the problems.

8. What's your partnership with Dave McClure like?

Dave and the whole team is awesome. For the first time since 1996 when I was at LTCM do I feel like I am working with some of the best and most disruptive people in an industry that is ripe for change. We did it at LTCM, then at GlobeOp and now I get to be a part of the best team in venture doing it all again.

For me, being challenged and learning are the two most important reasons to do something. Dave is always talking about us challenging ourselves and each other, pushing the boundaries, taking risks, making mistakes and learning from them. Everyone is empowered at all times to make decisions with the support of the whole team. Being in an environment like this is incredibly entrepreneurial and fulfilling.

9. Some of your favorite Indian startups? Why?

RedBus - Disrupted the whole bus travel industry in India and unit economics that are mind boggling

ZipDial - A business built on 400+ million missed calls

Zoho - WebEngage, Instamojo and Visual Website Optimizer - truly global businesses being built in India but really awesome, determined and smart people.

gazeMetrix - fantastic technology and founders who won't quit

Innoz - A huge opportunity bringing the Web to people who won't get access to a smartphone, tablet or computer. Add to that the horrible connectivity around the country, even I can use Innoz over SMS :-)

Snapdeal and Flipkart - In my very humble opinion, Flipkart and Snapdeal are the reasons we have ecommerce in India. They created the space by innovating everywhere and selling.

10. Some of your favorite Indian entrepreneurs? Why?

Phani (RedBus) - Super smart, down to earth and able to see things most people can't.

Valerie (ZipDial) - She's just an amazing person. She can sell. She can inspire.

Sree Vijayakumar (TradeBriefs) - Quiet, smart, one of the nicest people I've ever met. He's quietly building a great business that 20K C-level execs in India have opted into.

Sampad Swain (Instamojo), Avlesh Singh (WebEngage) and Paras Chopra (Visual Website Optimizer) - Some of the smartest people I've met in India that fought the odds to build global businesses in India.

Deepak Ravindran (Innoz) - He's not just brilliant, he's solving a real problem. He's making money while doing it but most importantly, he's helping a new generation of entrepreneurs through multiple initiatives.

Kunal Bahl (SnapDeal) - He's plain brilliant. When you talk to him, you can just see the wheels turning in his head.

Sachin Bansal (Flipkart) - More profound than building the leading e-commerce business in India, he has gotten some of the best people in supply chain and logistics to push these industries to new levels.

11. How do you manage to mentor the startups with investing in so many of them at a time?

Our mentor network of over 200 functional and operational experts are the real mentors. They have day jobs building their expertise in all kinds of domains but specifically in data, design, and distribution.

It's impossible for any investor to be an expert in everything. I feel that mentors can be investors but investors really shouldn't be mentors with the exception of the one or two things they have real operational experience in. If someone needs mentoring with financial market data, real-time pricing, trade capture or trade order management, security master, I can try to help since I built, managed, ran those businesses for a very long time.

12. What is your view of investments in India? How is 500 Startups different from any other VC fund?

We co-invest with individual angels, angel networks, and other funds. We also happen to run an accelerator in the heart of Silicon Valley. Add to that the 200+ experts in our mentor network. Next, include the 1,000+ founders around the world and I think you have a pretty amazing offering for startups across not just India, but globally, that almost no one else can offer.

You can reach Pankaj Jain at @pjain on Twitter. 

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