Dressed in a t-shirt and sandals, Mukund Mohan is easy to miss. But looks are deceptive. Currently, he heads the Microsoft Ventures programme (a start up-mentoring and funding initiative) in India as its director.
By 2008, when he moved from the US to Bangalore, he had sold two Silicon Valley start-ups.
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What is the start-up scenario in India?
In 2006-07, between 300 and 400 product technology start-ups were being formed. Now that number has gone up to 1,200–1,300 every year. The number will have to go up.
In terms of funding, how do Indian start-ups fare?
In 2006, around 66 companies got funded. And by 2013, a little over 150.
India is still ranked seven or eight, in terms of companies funded. To give you a context, in the US, there are 30,000 companies that get started and 6,000 get funded every year.
The industry’s goal is to increase this from 153 to nearly a 1,000 in the coming days.
But do we have such a funding ecosystem here?
The ecosystem has gaps. There aren’t sufficient angel investors who will give a good valuation for the company. As a result, an entrepreneur gives up a lot of percentage (stake).
It also takes too long, almost six months, to fund a start-up here. Improving the exit criteria for investors and extending support for early adopters, customers and consumers who can use the technology created by these start-ups are required.
A number of start-ups fail. Will mentoring programmes help change the scenario?
Failures will be there. Worldwide nearly, 80 per cent of start-ups fail. The percentage of failures or closures has not dramatically altered over the years. If it is any lower, it means people are not taking enough risks.
So how many start-ups has Microsoft Ventures invested in?
It has investments in 130 companies worldwide with 20 of these being in India.
Funding is of two types. One is the early angel fund.
The second is venture capital. Around 50 companies got VC funds; the remaining are angel investments.
Right now what is the amount Microsoft invests?
We invest $50,000-250,000 (in the early stages) through convertible loans.
And what is the stake that’s picked up?
Nothing initially. The conversion from loan to equity happens later (when start-ups reach a certain level). Valuations are decided when the company is stronger and has stability.
How many exits has Microsoft made so far?
We have four exits – one each in India, US, China and Israel. One acquisition was by Microsoft. One of our best investments was in an Israel-based company called Waze. We invested around $10 million and Google acquired it at over $1 billion.
Out of over 1,000 applications, less than 10 per cent get funding from Microsoft. Why?
We want to keep the quality intact. This programme (where Microsoft funds start-ups) is tougher than getting into the Indian Institute Technology.