Profile: IvyCap Ventures' Vikram Gupta

Vikram Gupta left a steady consulting job at IBM in the US to launch an India-based start-up in an unproven field – with three young children in tow. The start-up fizzled, but within five years, he had founded IvyCap Ventures and rewired the VC industry’s conventional wisdom about fundraising.

“It was not easy to take a chance like that at that stage because it was not just a personal risk, it was a family risk, and there was a lot of responsibility attached to it,” Gupta says. “My frame of mind was that I just wanted to start working on it right away, but I didn’t have the team or the funds I needed for the company.”

That leap of faith betrayed an early affinity for entrepreneurialism, an interest in expanding on scientific fortes and a future investor’s instinct for spotting long-term growth potential. The project in question, a medical tourism company called MediGoRound, was an idea too far ahead of its time: the targeted segment was virtually unknown in the mid-2000s, but is now tipped to be worth $32.5 billion by next year.

Science to start-ups

Gupta received his degree in chemical engineering from Indian Institute of Technology (IIT) Delhi in 1993, setting a foundation for a string of life science forays in the years to come with various organizations. He quickly went to work for a number of prominent Indian medical companies including Dr Reddy’s Laboratories and Lupin, where he accumulated business building skills in areas such as manufacturing, facility design and international marketing. 

In the mid-1990s, Gupta parlayed his financial studies at Xavier Institute of Management into a consulting career in the US, where he also earned an MBA. During this time, he maintained a focus on healthcare verticals, working with US hospitals, insurance companies and academic institutions. Meanwhile, his IT work at IBM included contributions to what would eventually become the company’s Watson artificial intelligence system.

Interrupting this momentum to pursue MediGoRound represented a crash course in the hard realities of company building in India’s nascent VC scene. Although Gupta was able to forge partnerships with 15 hospitals and compile the country’s largest doctor database, he was soon compelled to regain traction on firmer ground by joining healthcare and real estate conglomerate Piramal as a M&A specialist.

“At the time, I had consulting and operational experience, but I didn’t know much about fundraising and investing, so that’s where I learned the whole game of private equity,” Gupta says. “It was a very good experience was because it was such a hard period for raising capital – especially in India which has never been easy anyway.”

Gupta began raising late-stage healthcare funds for Piramal during the global financial crisis and led investments in established, defensible assets such as a hospital and a retail pharmacy chain. When Piramal sold its healthcare business in 2010, the firm was obliged to fold the related investment program, and Gupta was presented with another chance to play in the start-up end of the market. This resulted in IvyCap.

“That situation was a little difficult for me personally because I had raised the Piramal funds from scratch with a lot of passion and I would have loved to continue focusing on healthcare,” he says. “But that trigger point really gave me an opportunity to jump off and do my own thing. I thought, if I could raise funds after the Lehman Brothers collapse, I should give it a try at a time when momentum was building for early-stage capital in India.”

Despite encouraging overtures from the government around start-up ecosystem development, this environment was characterized by a lack of Series A funding and a thin, often aloof LP community. As a result, Gupta soon found that selling an early-stage story would require a different fundraising tact. 

“People truly didn’t know what VC funds were and what kind of returns they could get, so they were hesitant to even meet with me and try to understand the asset class,” Gupta says. “A lot of ice had to be broken here in terms of education, but it was a story that had to be told at the time, and that depended a lot on the IIT Alumni Trust.”

Academic endorsement

The IIT Alumni Trust, Gupta’s key innovation in the industry, solved this problem with an emotionally committed support network at every level of the VC value cycle. After two years of rallying deans, professors and distinguished graduates from the IITs, a new kind of anchor LP was formed, capable of deal sourcing and mentoring in the most inscrutable areas of research. IIT connections in corporations also provided exit opportunities.  

IvyCap’s first sector agnostic fund closed in 2013 above target at about INR2.4 billion ($38 million), and a follow-up vehicle raised INR3 billion in 2016. Importantly, incentives for the IIT Trust during these fundraisings included a commitment by the GP to re-invest 25% of its carry into academic foundations and endowments.

“That was the first time ever that a firm decided to give back a significant part of the carry to educational institutions in order to bind the alumni ecosystem together,” Gupta says. “As a result of that structure, a who’s who of the IIT alumni ecosystem said they would love to help in whatever way they could.”

Close integration with academic circles is seen as a critical differentiator for IvyCap in an environment where many VCs practice “spray and pray” investment strategies with little technical expertise. Gupta, who has published white papers and registered various patents, describes the firm’s science-heavy background as a way of prudently navigating the cutting edge.     

“We have something which is unique because we have created a formal legal structure around a mentoring program that is able to validate claims that are usually too hard for other funds,” he says. “Eventually it always comes down to investment in people, but you have to understand those people and the technology they’re working on in order to validate their claims. That mitigates a substantial amount of risk.”  

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