India Awards: AVCJ Special Achievement Award – Ashish Dhawan

Q: Looking back at ChrysCapital's development, what do you see as a key turning point?

A: When we got Harvard as an anchor investor in 2001 it was crucial because it signalled to other institutional investors that we were the platform in India. We ended up with Stanford in the same fund.

Q: Why Harvard and why then?

A: I had been to Harvard Business School and my professor Jay Light was chair of the Harvard Endowment investment committee. When we first presented to them they were very clear about not doing first-time funds. They said, ‘Go out and make your mistakes, then show us what you've done and we'll take a look.' We went back a couple of years later and we had some credibility because of the relationship with Jay Light. They took a little bit of a punt at that point - it's not like we had a seasoned track record - but the bet was more on the team.

Q: What else stands out?

A: The moment we decided to build sector expertise and asked ourselves how we were going to do it. We realized we needed a mix of old and young people and of operational and investment professionals, so we brought on board Ravi Bahl and Sanjiv Kaul, two older guys with years of experience in financials and pharmaceuticals, respectively. We had a clear strategy around growth capital investing and a strong focus on a few sectors. As opposed to cold calling companies, we drew up a list of firms we needed to visit once or twice a year. It was a proactive deal-sourcing engine that allowed us to know in advance which companies we should invest in.

Q: So the key is having sector focus but flexibility to go after public and private transactions?

A: In my mind, PIPE deals and private deals are joined at the hip in India. Our core competence is in the mid-market space, we are good at identifying sector trends and we are good at the nitty-gritty due diligence. The public companies we target are of similar size to the private companies, with a high degree of family ownership. A lot of it is betting on the right horse, figuring out a good working relationship as a minority investor. If you can widen your universe and break the pro-cyclicality problem - deploying capital when entrepreneurs don't want it - this gives you a huge edge in the market.

Q: If you were starting ChrysCapital today what would your approach be?

A: We were lucky we started when we did. My approach would be similar to what I did in the first fund. I knew for a while that I wanted to start a fund and I'd cultivated relationships. About 10 Goldman Sachs partners put in their personal capital, including Hank Paulson who was then CEO of the firm. I also knew Jeff Keil, former CEO at Republic National Bank, through Harvard Business School and he and his partner were good for $25 million. George McCown, my mentor at McCown De Leeuw & Co., said whenever you decide to do something we're there with you. They put in capital, housed me in their offices and introduced me to their network. These people's involvement brought credibility and we attracted other high net worth investors. Nowadays, if you're not a seasoned player it's very difficult.

Q: What's your take on the current fundraising and investment environment?

A: Now you see some first-time funds struggling to raise second funds, particularly if they don't have much to show in the way of exits. If you have a track record, LPs are still willing to give you another chance. The joker in the pack is the global funds. I don't see them shutting shop in India but firms that previously did 10 deals in two years may decide they want to take a breather because things aren't working out as expected. That will lead to the opportunity to make slightly better returns

Q: Post ChrysCapital, you've expressed a desire to focus on India's education sector. What will you do?

A: There are a few very important areas: Teacher training and principal training; building high-quality affordable schools; and curriculum and interactive content and technology, which will be a real game changer over the next 10 years. I think like a private equity guy so I want to be active across many areas in the philanthropic world rather than just focus on one.

Q: Can private equity play a role in this development?

A: The challenges for PE in the Indian context are twofold. First, the regulators don't want you to make money from education: The law says that a school or college has to be run by a trust. The way around this is to siphon money out directly or set up an infrastructure or a content management company that charges the trust for services. A lot of capital doesn't come in because PE firms are worried about violating the spirit of the law. Second, private capital will on the top level of the pyramid where people are able to pay. Non-profit can address teacher training, research and charter schools that charge $10 a month. Private investors can make money by running schools with a price point above $50 a month and colleges that go after professional degrees.

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• Topics
• Performance
• ChrysCapital Management
• Ashish Dhawan
• India
• AVCJ Awards