What's the future for Kalaari?

Mar 1st

Another week gets off to a start! A bit of change of scene for me; I've escaped SF to work remotely from the Pacific Northwest for a bit. I'm hoping lots of open space helps with the dog rearing!

We had some interesting fund news this week, with sources reporting that Reliance is likely to be the anchor LP in Kalaari Capital's most recent fund. We'll cover that in our column this week, while rounding off with news and reads as usual.

Reliance to infuse $200M in Kalaari Capital

The Economic Times reported yesterday that Reliance is finalizing a $200M investment in Kalaari capital. $100M has already been deployed, with details for the rest likely to be finalized soon.

Kalaari has been one of the most high-profile early stage fund in India. The firm had some big successes in backing companies like Snapdeal, Urban Ladder, Myntra, Dream11, etc. The firm has also had a unique profile because of Vani Kola, the only female Managing Partner in the Indian ecosystem. Kola has had a long presence in the start-up ecosystem.

Kalaari can trace its roots back to NEA IndoUS Venture Partners. That firm was set up in 2006 when Kola and former Intel Corp Vice President Vinod Dham and former Intel executive Kumar Shiralagi launched a $190-million India fund backed by Silicon Valley venture capital firm New Enterprise Associates (NEA). When NEA went solo in 2012 and Dham left as well, Kola went solo and launched Kalaari.

Despite its successes and long history, the last few years have been tough for Kalaari. The firm announced its intention to raise a new fund in 2019, and it is only now with news of Reliance stepping up that the fundraising is coming to a close. Kola has had some testy relationships with founders. Most famously, she resigned from Snapdeal's board in 2017, when the company was going through a tough time and considering a sale to rival Flipkart. The last year hasn't been kind on Kola and Kalaari's reputation either. In November of last year, Urban Ladder was acquired by Reliance in what was widely seen as a fire sale. It was the fourth Kalaari portfolio company to be acquired by Reliance (in 2019 - 2020).

Kola's argument at the time was, “selling is not a sellout”. In an interview with Business Insider she said, “Consolidation is a real part of that and it didn’t exist a decade ago. I always advise entrepreneurs that as much as I would love to see you take your company to IPO, you have to see whether you are better off building this company individually or after you have reached a certain scale whether you will get better value out of being part of a larger platform.”

I don't think Kola is saying anything wrong there, but if I was an entrepreneur I would want an investor in my firm to be cheering my stand-alone success more than my ability to sell the company. This is precisely what makes the relationship with Reliance really tricky. It's clear that Kalaari has been a pipeline for Reliance for a while. That isn't in itself a bad thing, but what is problematic is the undercutting of companies to make a sale to Reliance. The most recent example of this is the Milkbasket case (a story we’ve covered). Kalaari sold its stake in the company to a close associate of Reliance, despite objections from the board. It's not a story that bodes well for Kalaari's reputation.

If the Reliance funding news is true, it might scare off the best founders from accepting Kalaari money. Anmol notes: “Firms are a fidicuary to their LPs so if Kalaari continues to help Reliance acquire its portfolio companies that could be a little weird if they're destroying value in the process.”

Still, it's an important to note that the Reliance commitment will make the conglomerate one of the largest Indian players in the VC space. Anyone who has worked with Reliance knows that they play tough - this is not an investor that will give you a frothy valuation. But at the same time, Reliance is not a player that can be ignored, so I'm curious to see what kind of dynamic develop with Reliance and the start-up ecosystem.

As for Kalaari, both Anmol and I wonder what the future holds for the firm. Will this be their last fund? The firm doesn't have a strong pipeline of talent or successors beyond Kola, so where does it go from here?

🗞️ News of the week

  • Twitter reportedly offered to buy ShareChat for $1.1B and committed to investing an additional $900M according to TechCrunch's sources. This would not only have given an exit to ShareChat's investors but would also give the company a war chest to compete with the local and global short video competitors and also expand Moj globally.

  • Vedantu acquired the doubt solving platform Instasolv for an undisclosed amount. Vedantu has known about Instasolv for a while, and previously led the company's Series A last year

  • Razorpay, the fintech company, is in talks with its existing investor GIC (Singapore's sovereign investment fund) and others to raise another $150-$200M in a new financing round that would value the company at over $2B. This news comes just months after the company's last round where it was valued at over $1B.

  • Pravin Jadhav (previously of Freecharge and Paytm Money fame) has finally announced what he's been working on - Raise Financial Services. The company aims to build financial services, namely across Financing, Insurance, Investments, Payments and Wealth for the "35 Mn+ tax paying citizens of India"

  • A Reuters report calls Amazon's small business credentials in to question. ~35 (not percent but literally 35 sellers) of Amazon’s more than 400,000 sellers in India account for around two-thirds of its online sales. Two sellers in which Amazon had indirect equity stakes accounted for around 35% of the platform’s sales revenue in early 2019. Another 33 Amazon sellers accounted for about a third of the value of all goods sold on the company’s website.

📰 What we've read and listened to this week

🎙️ Podcast of the week: How to Moderate Talks, Panels, Meetings, More (Virtual and Beyond!) with Sonal Chokshi and Matt Abrahams