Profile: Saama Capital's Ash Lilani

"There was much optimism that India would create a lot more entrepreneurial start-ups starting in 2006," Ash Lilani remembers of his early days in India, when he was trying to jumpstart the country's venture capital ecosystem with Silicon Valley Bank (SVB). "I think our optimism was right, it was just early by a few years."

Lilani started his career in the heart of Silicon Valley, and the principles he learned there helped keep him steady in India's slow-starting VC ecosystem. As the head of SVB's India office and then co-founder and managing partner at Saama Capital, he has seen a unique innovation landscape develop, and is looking forward to what comes next.

At first, India was just another entry in Lilani's to-do list; SVB wanted to help VC investors spread their businesses overseas and Lilani, who had joined SVB in 1997 from Philadelphia-based Meridian Bank, was tapped to implement the plan as head of SVB Global. But even as he opened offices in China, Israel and Europe, he found himself drawn back to India, and in 2006 decided to turn his attention there full-time as president of SVB India.

Our thesis was that the Indian consumer was going to become more and more aspirational, more and more global, and was going to start insisting on better quality products and better quality customer service - Ash Lilani

As VC professionals set up shop, however, they began to realize the industry was on a different path to the one expected. "Given the base of tech companies in Bangalore, such as Intel, Motorola and Cisco, we all expected people to leave these companies and join start-ups," Lilani says. "That didn't happen to the extent that we thought it would." Instead, investors found themselves committing growth capital to entrepreneurs in existing industries rather than the innovative businesses they had hoped to see.

Patience pays off

Despite the slow start, Lilani continued to believe in India's disruptive potential, calling on investors that had accompanied him to the country to be patient and wait for the transformation that he felt confident was still ahead. In the end the VCs' original expectations were carried out, though by spin-outs from software giants such as Amazon and Google rather than the hardware giants.

As the transformation was taking off, Lilani was considering his own future. He was eager to support Indian entrepreneurs firsthand, and approached his superiors at SVB to inform them of his desire to form his own fund, which they supported.

"Given the depth of our relationships with the GPs in the market - we either helped bring them to India or were early investors in their funds - we felt that we had unique access to deal flow, and should put some money to work," Lilani says. He agreed to stay at SVB long enough to finish building the other global offices and hand them off to the right teams, while overseeing the formation of what would become Saama Capital.

For help setting up and running the firm, Lilani turned to Suresh Shanmugham, a former US-based VC investor who he had recruited into SVB India in 2004. Shanmugham's experience in fundraising and closing deals would complement Lilani's background as a consultant in the heart of the venture capital world.

From the beginning, they have sought to keep the firm focused, with a small team investing relatively modest pools of capital. Fund I, launched as SVB India Capital Partners in 2006, was restricted to $54 million, and the second vehicle, Saama Capital II, closed at $80 million in 2013. Lilani believes this plays to Saama's strengths; a small fund size means the firm makes fewer investments in carefully chosen portfolio companies that can then benefit from one-on-one time with the firm's experienced managers.

"We wanted to make sure the partners actually would spend time with the founders, because that was what we were selling - we weren't the ones on the deals, we were the ones adding value," says Lilani. Keeping fund sizes small does reduce the number of LPs that can invest, but the GP considers the benefits worth this limitation.

Although Saama has tried to keep its portfolio relatively small, the investments it does make cover a wide range of consumer industries. This approach arises from the founders' experience and broad perspective; while many VCs in earlier days focused on the potential in technology, Lilani and Shanmugham saw disruption spreading across India's economy.

"Our thesis was that the Indian consumer was going to become more and more aspirational, more and more global, and was going to start insisting on better quality products and better quality customer service; and if somebody could deliver that, they would have an advantage," Lilani explains. This is the reason the firm has supported consumer-focused companies outside the tech sector, particularly food service start-ups such as teahouse chain Chai Point and specialty food ingredients maker Veeba.

Moving parts

As new breeds of start-up gain traction in India, the VC industry has also seen a shift in the entrepreneurs behind them. While older veterans of traditional industries dominated the entrepreneurial space when Lilani and his colleagues arrived from the US, founders today are more likely to resemble their international counterparts, trending younger and seeking to create new industries rather than work within existing systems.

Despite these similarities, Lilani continues to see unique qualities in India's VC space. Entrepreneurs take some cues from their international predecessors, but they have also shown the ability to adapt to local needs and circumstances. This is important in an economy as large as India, where even capturing a relatively small niche can bring in far more customers than a similar share of a smaller market.

Lilani is also heartened by the strength of the country's VC investors over the last 10 years. While some GPs from the early days have struggled and others fizzled out, those that remain have shown a resilience and understanding of the market that will enable them to go on supporting the ongoing transformation.

"All the people who came and looked at this as an exciting market but really didn't have the commitment long-term are gone," says Lilani. "The people who are active today are the same people who were here ten years ago, who committed to India, and they're here to stay."

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• Topics
• South Asia
• Venture
• Early-stage
• Technology
• India
• Saama Capital
• TMT