5ideas to raise $10 million to fund startups

By Avanish Tiwary

It is often typical that instinctive entrepreneurs chase something new after their successful initial creations. Thus it is with Pearl Uppal and Gaurav Kachru, the husband-wife duo, who are well-known names in the mobile and internet world. After their startups FashionAndYou and DealsAndYou, Uppal and Kachru have donned a new hat-as seed fund stage venture capitalists with 5ideas.

Soon after quitting their signature company Smile Group, which owns fashionandyou.com and dealsandyou.com, they decided to work with startups in the digital ecosystem. In the first phase, 5ideas will invest between Rs. 50 lakh to Rs. 2.5 crore in startups and work with them as operating partners.

“It is a combination of a seed fund and an accelerator where we will have some of the best practices of an accelerator. The idea is to get the intensive mentoring model coming from an accelerator and the capital investment ability from the seed fund,” Kachru explains.

Recreating from experience
Kachru and Uppal plan to exploit their past working experiences in the digital and non-digital domains in mentoring these startup companies. “We have bootstrapped and scaled businesses successfully, raised money and cut deals ourselves. We have done the nitty-gritty needed to take business to Rs. 200-Rs. 300 crore. When we stepped out of those businesses, we asked ourselves, what if we could create the same kind of an ecosystem for early-stage companies when they are still six months to one-and-a-half years away from their Series A kind of institutional funding?”

Uppal says, though she is aware of a number of innovative business ideas from entrepreneurs in the digital space, there are very few investors and also a weak angel ecosystem in India. Entrepreneurs are not thinking of the business or how to scale it up from the investor’s point of view.

“In my experience of meeting with entrepreneurs, I have seen that they are either trying to raise too little or too much money. A good debate on it will help them realize the kind of shareholding pattern they should have in mind when they raise Series A and B funding,” Uppal points out.

With the aim of mentoring startups in the digital domain, 5ideas will work with them for a period of 12 months. “The first six months will be intense, where we intend to work on all aspects of operations with them. The next six months will be used to help them get commercial connections, provide them with the ability to scale, and set up the foundation to get to the next stage of capital raising or equity,” says Uppal.

Kachru admits they have made mistakes in the past, which he says will only help them to grow the entrepreneurial ecosystem. “We experimented with a lot of service platforms and various strategies,” he says.

Mentoring entrepreneurs
What role does mentoring or hand-holding play in making an entrepreneur? “I don’t think you can make an entrepreneur, even by coaching. What mentoring and handholding can do is change the odds of success and increase its probability.” It is widely believed that mentorship in India is a relatively new concept and budding entrepreneurs chase those few who are successful and have made a mark. That’s not the right approach, says Kachru. “I will advise an entrepreneur to seek out people in their specific domain of business and not be gung-ho about those who just have
the right designations.”

Uppal says 5ideas has not set up an office as yet as she and Kachru are travelling to meet entrepreneurs, partners and investors. A number of good ideas are coming from Chandigarh, Pune, Hyderabad, Chennai and Bangalore, she informs. “We are also mapping mentors to these cities and ensuring that in every city we have people in products, marketing, various platforms, entrepreneurs and some angels who can create this supportive ecosystem.”

As the company grows, Kachru says, 5ideas will roll out several activities to benefit entrepreneurs. ‘Superfuel Fund’ is the first among them through which startups will get the exposure to scale a business keeping in mind the needs of investors. “It is a hybrid model and we have a list of 30 mentors from various walks of life. We have broadly divided them into three categories—successful entrepreneurs, investors and those from platform companies like Nokia, Microsoft, Facebook, etc.,” Kachru says.

Money matters
Kachru and Uppal plan to raise $10 million (Rs. 54 crore), of which they have already raised a significant amount which will help roll out the first phase of 5ideas. The money will enable them to invest in companies by December 2012. Of the 100 applications received till now, 20 have been shortlisted and further discussions will take place with these shortlisted candidates.

“We hope to identify the businesses we want to associate with so that we can start work by January,” Uppal says. Uppal and Kachru believe with 5ideas they will be able to contribute more to the startup ecosystem.

Kachru says there are a host of things to be done on the Internet and mobile economy. With their past learnings in this space, they can pitch in a big manner unlike earlier.

Keen to raise the bar, Uppal outlines her plans to expand to other domains provided this venture gains momentum. “But for a couple of years at least, we want to solely focus on this domain,” she states quickly. As of now, 5ideas is top priority.

© Entrepreneur India January 2013

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