It gives me great pleasure to start the interviews on this blog with Kiran Nadkarni. Kiran is Founder & Director at Kaati Zone, a chain of quick service restaurants specializing in Indian foods.
Kiran was among the early VCs in the country. Prior to starting Kaati Zone, he has held positions such as President, ICICI Ventures, and Managing Director, Jumpstartup Ventures. He has been an entrepreneur for over three years now and has raised funds for this venture.
Read on to know more about why he turned to entrepreneurship and his experiences in running his venture started in Namma Bengaluru with global aspirations…
Question: You have been one of the early VCs in India, what triggered you to move from someone who invests in entrepreneurs to an entrepreneur who is invested in by someone? We have heard of many entrepreneurs who become investors, you are following the reverse route!
Answer: I had spent 18 years in early-stage venture investing, and wanted to rediscover myself in a way. I was living in the US during 2002-2005, when I first thought of doing the Kaati Zone venture. I felt there was an opportunity to take a brand in Indian foods to the mainstream US markets. Initially, I had planned my involvement in the venture to be much like that of a venture investor, providing strategic inputs to an operating team. However, when I returned to India, I realized my full-time involvement with the venture was very important for it to succeed. You can say, I got sucked into full-time entrepreneurship gradually.
Question: Why this industry, how did you zoom in on this?
Answer: I was living in the US from 2002 to 2005. I noticed that, while Indians were a significant minority in the US and Indian food is popular among locals, most Indians who entered this industry were targeting the ethnic Indian community and did not address themselves to the larger local population. I felt there may be an interesting opportunity to take an Indian food brand to mainstream American market. We chose the quick service format, as it is a scalable business and one can build a significant company with this format. We studied the characteristics of and the current trends in the quick service foods industry in the west and planned our venture accordingly. We had planned to build out the concept on a pilot scale in Bangalore before moving to markets overseas, but things changed as we moved forward.
Question: Did being an investor in companies help you when you started your own venture?
Answer: My involvement as an early-stage venture investor in young companies did help in conceptualization, planning and defining strategies. However, I must admit day-to-day execution was something new to me.
Question: In your mind, what is it in your business that has helped you raise venture capital funding for your company? Any lessons you learnt that you would like to share with entrepreneurs re the fund raising process?
Answer: An early-stage investor assesses three important parameters in a business. He invests in the management team, a business idea that is scalable and can be built into a large enterprise, and a product offering that stands differentiated in the marketplace. My prior experience in venture industry clearly helped me define the initial goals to be achieved before tapping external capital. We invested in a central kitchen that serviced all outlets and demonstrated the hub-and-spokes model that can be scaled. We established a unique identity for Kaati Zone through our products and packaging that signified quality, health and elegance. We built a strong customer base not only for dine-in but for take-away and deliveries (including bulk deliveries to over 80 corporates in Bangalore, many of whom are multinational corporations). We have also ensured that we have retained most of our talent (from restaurant manager level upwards) during the difficult phase of our company. We have achieved it through regular interactions and communication about our vision, growth plans and innovativeness. Our team members have seen opportunities in Kaati Zone and have benefited from our growth.
Question: What is the best thing about being an entrepreneur?
Answer: The idea of introducing innovation in marketplace and making it a success drives the entrepreneurs most. I have also enjoyed charging up my colleagues with entrepreneurial zeal and passion. Young companies are usually unable to hire the best and most experienced talent. The entrepreneurial passion among team members can, to some extent, make up for this handicap.
Question: Is there anything you dislike about being an entrepreneur?
Answer: There is nothing about entrepreneurship that I dislike. I have always respected entrepreneurs and the spirit of entrepreneurship. However, I am extremely disappointed with the system within which we expect our entrepreneurs to deliver success.
- There is not much early-stage venture capital in India. Most investors focus on late-stage private equity deals of multi-million dollar size. I can count only a handful of silicon-valley style venture firms who are willing to back start-ups. Even the silicon-valley based venture firms which have entered India are shying away from start-up deals. I would have liked the Indian national financial institutions, banks and insurance companies to create a pool of capital that could support private initiatives in venture capital to support start-ups and young companies. The Small Business Administration (SBA) in the US contributed significantly to the growth of venture capital industry there. We require similar initiative to create an ecosystem of risk capital.
- The large-scale corruption in different agencies of Central and State Governments takes a heavy toll on young companies.
- Entrepreneurship is a high-risk game, and failure is part and parcel of it. Unfortunately, failure carries a stigma in our society and among investors.
Question: Are there any other insights / learnings / experiences you would like to share with an early stage entrepreneur in Bangalore or someone who is thinking of becoming an entrepreneur?
Answer: Here are a few suggestions for potential entrepreneurs:
- Entrepreneurship is a tough business. It requires staying power and perseverance on the part of entrepreneurs. Do not get into it because it appears glamorous. Attempt it only if you are passionate and are willing to hang in there for a long-term.
- Plan a business that can be built into a large enterprise. Very rarely do venture capital firms invest in small niche businesses.
- Innovate and stand differentiated in the marketplace. Build entry barriers for competition.
- Work actively to hire and retain quality talent. With most industrial sectors booming, employment opportunities are aplenty and retention of staff a very difficult task. This is a test of leadership skills of the entrepreneur.
- Leverage your contacts and networks to grow the business quickly. Also, focus on growth of topline even if it means sacrificing profits in short-term. Profits will grow with scaling up of the business. Venture capital investors like a growing business. They may not necessarily like a business that is profitable but growing moderately.
Dear Mr. Srikrishna,
I agree with you the entrepreneur has to make a choice whether he would like to manage a small but profitable business or whether he would rather invest in growing the business at the cost of profitability. Having been a venture capital investor for many years, I must confess I always think of scaling a business through regular injection of capital. I must add, while a small business may be profitable and will meet the entrepreneur’s objectives, it is very hard to hire and retain talent in businesses that do not offer challenge and growth. Also, businesses are dynamic and require to adapt to changing market forces. Small businesses are more vulnerable to changes in the environment.
Dear Sri Srikrishna, thanks for the comment. Yes, it is good to see both an investor turning entrepreneur as well as start ups in areas than tech space, in Bengaluru, the city of tech start ups!
As you have rightly said, one needs to keep an eye on the money when funds are limited. When the hit rate for getting VC funding is low, it is important to keep a watch on the cash burn. This is a tough call if one is looking for VC funding, as VCs do like to see top line growth and valuations are also impacted by growth in top line. This is not something that has an easy answer, one needs to look at this on a case to case basis and then decide on the strategy and action plan based on the financial strength and risk appetite. Some persons have a high risk appetite, some less. Some are willing to put in all their money in the business; others want a safety cushion to fall back on if they fail. There is therefore no ‘Wrong’ or ‘Right’ strategy. It depends on the business, the general environment and the entrepreneur. So Kiran may be right in his context and you may be right in yours! 🙂
Its refreshing to see Mr. Nadkarni’s candid comments from the entrepreneur’s side of the table. Its encouraging for new or first time entrepreneurs to see experienced folks such as him enter the start-up fold and in creating Kaati Zone, he has also demonstrated that innovation is possible outside of the tech startup phase. See more here.
As he has commented the early stage startup milieu in India is less than ideal – so I am not sure I agree with his assertion that we should go for topline growth as VCs will like it; the entrepreneur has to make the choice if they a moderately growing but profitable business.