Canaan Partners has signed up former Yahoo! India research head, Sharad Sharma, as its first ‘entrepreneur-in-residence’ (EIR) in the technology space. Sharma will work with the Canaan team, both in India and the US, in developing a startup business model in the cloud computing space. The most famous and successful EIR project out of India so far is Mumbai-based business process outsourcing firm WNS Global Services. Co-founder and group CEO Neeraj Bhargava was an EIR at private equity firm Warburg Pincus, at whose offices the BPO’s business plan was modelled. More recently, Artiman Ventures has been working on an EIR program to find more viable Indian product startups and IDG Ventures India incubated Aujas Networks, a security solutions firm, as an EIR project. I put some questions to Alok Mittal, Canaan Partners general partner and India head (in photo), on their EIR program. Excerpts from the email interview:
Does Canaan have an EIR program globally? How many companies have been seeded so far via the EIR route?
Yes we do. However, it is a recent program (less than a year old). We have done some of this in our healthcare team, but it is the first of its kind globally in our IT business.
How did the association between Canaan and Mr Sharma come about? How long have you been looking at the cloud computing space?
Canaan has had an interest in cloud computing for over three years now, since we invested in Soasta. I, as well as Deepak (Deepak Kamra, one of our partners in Menlo Park) have known Sharad (Sharma) for about the same time. This association has helped us develop comfort. Sharad was also on the board of Bharatmatrimony (as a Yahoo! representative) and thus we shared seats on a common board. This level of comfort prompted us to move forward.
Do you see Mr Sharma’s proposed venture as primarily a cross-border (US-India) initiative?
We do see Sharad’s involvement as being cross border, though how it evolves will depend on the specific opportunity that he zeroes in on. That is also perhaps the reason why he found Canaan interesting. We are one of the very few cross-border, integrated venture capital firms.
What are the advantages and disadvantages of an EIR program from a venture capital firm’s point of view?
Among advantages, it gives us temporary access to specialized knowledge and an opportunity to participate with who we believe could be a great entrepreneur. Of course, we could participate later when the person is raising financing but, with the EIR engagement we are derisking that outcome. There aren’t really too many disadvantages, except that it takes time and effort to support this and hence there is a bandwidth limitation.
Do you think the Indian market is more ready now for VC-backed EIR programs? Why?
I think so. In some sense, EIR programs have to do with the maturity of VC operations. It is only once the internal firm operations are stable and on-track, only once there is enough bandwidth to support such a program, that an EIR kind of relationship can flourish. A lot of VC firms (in India) are now 2-3 years old and are acquiring that semblance of stability. I would hope to see more such engagements.
Are there any segments or niches in which EIR programs work better?
In most sectors that we invest in, specialization and experience are the key assets of the founding team. In that sense, I think this can scale reasonably well across areas.
How much has Canaan invested in India till date and in how many companies?
We have invested in eight companies and committed about $60 million.
How many and how much from the $650 million Canaan VIII fund? How much of this fund do you expect to be invested in India overall?
Three of the eight investments are from Canaan VIII, which amounts to an expected commitment of $25 million. We do not follow a system of allocating capital to geographies but we have been thinking in the 20% range.
Photo Courtesy: Canaan Partners
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