This week Iron Pillar proudly announced the final close of its maiden fund, Iron Pillar Fund I, with over $90M in commitments across its India (AIF) and Mauritius vehicles. It’s the culmination of a journey that began in early 2015. The team got together recently at a farm house in Karjat, about two hours from Mumbai, away from the craziness of a megacity, and in the serenity of the greenery of the Western Ghats, partly to celebrate the occasion, partly to reminisce about the ups and downs of the last few years, and especially to plan for the future. This is a note to capture the journey with its curves, speed bumps and forks (not unlike the Indian infrastructure), the team’s perseverance, the visits to all parts of the world meeting investors, building resilience despite hearing a lot of “no’s”, the patience and support of our spouses and families, all the while getting to know each other personally and professionally.
Since 2012, my partner, Anand Prasanna had been thinking about the coming of the golden age of venture growth investing in India. Having observed investment trends in China, he knew that it was simply a matter of time before similar opportunities would take shape in India. He had been an LP, based in China for many years and had a first hand view of the remarkable maturation of the startup ecosystem there. I remember meeting Anand and spending a day together in February, 2015 when he visited me at my home in Bangalore and talked to me about the concept of Iron Pillar — filling the emerging mid stage technology investment gap in India. His hypothesis was that with the emerging entrepreneurial ecosystem and continuously increasing number of early stage funds and investments, there was a real need for a purpose built venture growth firm in the country — one that had a different investment strategy, and a bespoke team for turning that vision into reality. Anand had also given the name Iron Pillar, significant thought. The millennia old monument in Delhi has withstood the test of time, untarnished. That is the team’s lasting vision for Iron Pillar!
As a primarily early stage investor in India in the late 2000’s, I had experienced first hand the chasm that existed between early stage or Series A funding environment and the late stage, private equity realm where investors were more than happy to invest in profitable and cash flow positive companies. But getting from that early stage “A” to a late stage “D” was non-trivial. In my case, to bridge that mid stage gap, I was often compelled to do inside rounds, pull in strategic investors prematurely or find other boutique firms. I was sold on Anand’s overall vision. I did tell Anand at that time that while I was intrigued with the plan, I was far from committing. I told him that throughout my career, the best AND worst of times I have had are because of people. And as such, while I was interested in Iron Pillar, I had to be convinced by the kind of team Iron Pillar was going to assemble, and we decided to date.
I was still at DFJ at the time. But, with my early sponsors, Tim Draper and Raj Atluru having moved on, DFJ had morphed from a truly global firm to one that was very US, and Silicon Valley centric (for all the right reasons). I had a choice to make at that time — whether to reinvent myself as a Silicon Valley VC or leverage the almost decade that I had spent investing in and managing startups in India. I chose the latter.
Soon after that day in Bangalore with Anand, I had the pleasure of meeting Sameer whom Anand had known for some time and the two had actually co-invested in a technology startup. Anand had already had conversations with Sameer about coming on board as an Iron Pillar co-founder. The two of them had a series of in-depth discussions over the next few months and further validated the investment strategy after which Sameer decided to take the plunge. Sameer brought incredible experience across dozens of sizable technology transactions across the M&A and IPO spectrum during his fifteen years at Citi in New York, Mumbai and Singapore. Co-incidentally, Sameer’s older brother, Sanjay (co-founder at Blume Ventures), was one year my junior during our MBA stint at UCLA’s Anderson School. Anand had experience investing both at Sequoia early in his career and then as an LP running Morgan Creek’s Asia office and I had spent almost fifteen years investing in seed and early stage startups at Garage and DFJ. So, while Anand and I brought the investing experience, Sameer brought the complementary and crucial “exit” skillset. Sameer then convinced Harish, his colleague at Citi for almost fourteen years who was running Citi’s M&A business in India, to take the entrepreneurial plunge and join the team.
Next to officially join was Ashok, an old friend of Anand’s, a serial entrepreneur, in the role of an “in the trenches” Operating Partner. Interestingly enough, Anand was an early employee at Ashok’s first company, Vertebrand, a brand consulting company. Anand was also Ashok’s first investor in Ashok’s second company, Taxiguide. It also turns out that Ashok was the first person with whom Anand had spoken officially about Iron Pillar, in 2014. Last person to join the founding team was Ashish, our CFO. Ashish is the only person I know who has actually lived in Mauritius, Singapore and India. Having been CFO of 3i Asia, a billion dollar private equity fund, it was clear to us that he had the business acumen and attention to detail that was required in this role with Iron Pillar. He had twenty years of private equity and fund experience. Ashish’s younger brother had worked at Citi with Sameer and Harish for a decade, and they had known Ashish socially for a number of years. The dating ritual that started for me in February, ended with the team coming together by the end of 2015. We all knew inherently that the entrepreneurial opportunity in India over the coming years was absolutely massive, and that we wanted to be part of that journey, not just as spectators but as deeply immersed participants, helping make that vision a reality. With that thought as the catalyst, we formally launched Iron Pillar in January, 2016.
We knew that building a venture growth firm from scratch would be challenging, especially as a first time team. But we knew the key ingredients that we needed to have in place to be able to get investors/LP’s on board — we had a remarkable team with extremely complementary skillsets, we had a first of its kind venture growth story for India, and we knew the market was sizable and growing, given the uptick in the overall Series A activity in the country. In 2016, we spent significant time honing and refining the story, understanding the landscape and nailing down our detailed investment criteria and process. The plan was for the firm to construct a portfolio where we could mitigate risk, but still provide meaningful IRR to our investors. We were not going to underwrite home runs necessarily, but nor were we going to take binary or mortality risk with our investments. It would be a concentrated portfolio where we would lead or co-lead, take board seats, and take an active hands-on approach to portfolio management. While the fund would clearly be India-centric, with my presence in Palo Alto and Anand’s China experience, the fact that we had strong connections to those geographies was another key strategic advantage. The fund would also be shorter than a typical ten-year fund life cycle. We decided to make it a seven-year fund. The rationale was that we were going to “walk the walk, rather than just talk the talk” when it came to delivering returns in 5–6 years, rather than the typical 8–10 years. That was (and is) the plan.
That’s not the end of the beginning of the story. That is just the beginning of the beginning. Once together, we were self aware enough to realize that as a first time team and first time fund, going out fund raising based purely on a story and dream would be a herculean task. We needed to work together, meet companies and ideally make a couple of investments before actively approaching LP’s. And that’s precisely what we did. We ended up raising “warehouse capital” from IIFL Wealth and one other LP. Essentially, they provided a pool of capital alongside our own to make initial investments without formally raising a fund. The IIFL executive team was convinced of Iron Pillar’s overall thesis and their belief that we would be able to successfully raise Fund I. Once we raised the fund, we would return the warehouse capital. In 2016, the team met over 150 startups and made two investments — NowFloats (www.nowfloats.com) and BlueStone (www.bluestone.com) in March and June, respectively. We led the rounds, with meaningful ownership, took Board seats and got deeply involved with the companies. The idea, again, was to be value-add active investors and true partners for the entrepreneurs, existing investors and management teams.
With initial investments under our belt, we rolled up our sleeves and got involved with business model refinement, hiring, business development and any way we could add value to both companies. We also figured out our collective working style, spent time understanding each other deeply, and over multiple off-sites, honed our overall positioning as well as value system for the firm that we would hold sacrosanct. Given Harish and Sameer’s background at Citi, we became fundamental believers in data and deep pre-investment diligence and analysis — understanding the overall startup ecosystem, not only qualitatively, but also through objective quantitative lens. We mapped the market and sectors in detail, and conducted bottoms up analysis of every tech Series A and B deal in India. We constantly interacted with Series A investors upstream from us. With our first two investments, existing investors in those companies such as Accel, Kalaari, Saama, Omidyar, and Blume saw us in action and got to appreciate the value that we brought to those companies. That was indeed part of our strategy. We knew that it was on the back of a high reputational index, would we be able to build a lasting firm.
In early 2017, with version 15 of the pitch deck, we finally hit the road to fundraise in earnest. We had gotten early interest from Indian investors, and we wanted to take advantage of the Indian government’s India Aspiration Fund, a Fund of Funds established to help accelerate startup activity in the country. At the same time, we got introduced to a US Government entity called Overseas Private Investment Corporation (OPIC), a decades old US Development Finance Institution (DFI) that had historically provided billions of dollars in low cost debt for infrastructure projects in emerging markets. In 2017, they launched a new program to invest in emerging market venture capital funds. Iron Pillar was part of the very first applicant pool. The selection and diligence process was long and grueling. But in February, 2018, after multiple meetings over months, a week-long diligence trip by a team of five people to India, background checks, and dozens of documents, the OPIC Investment Committee gave their formal approval. Iron Pillar, therefore, became the very first venture capital firm globally to have OPIC as an LP. That was a key milestone that started the process of corralling other interested parties — institutions, family offices, tech entrepreneurs and executives within our extensive networks and those introduced to us by our advisors. All along, we continued to meet interesting companies and build a robust pipeline.
After roughly eighteen months, and a lot of collective hard work, we have formally closed Iron Pillar Fund I. We are delighted and humbled by the endorsement of our investors from around the world — India, China, Singapore, Dubai, Abu Dhabi, UK and the US. The fact that OPIC chose Iron Pillar as the first fund out of the Venture Capital program is truly an honor. We recently announced our third deal, Servify (www.servify.in) and have two additional companies moving towards closure in the coming weeks. There are many other bits of positive news that Iron Pillar will be releasing in the coming weeks and months. We are clearly in business, and look forward to turning our early vision into a reality — making a meaningful impact on the companies, entrepreneurs and overall Indian startup ecosystem. From the entire team — Anand, Sameer, Harish, Ashok, Ashish and yours truly, a note of gratitude to all our supporters and we are all genuinely excited about the path ahead. Upward and onward!
