Hard Learned Investment Lessons from Rehan Yar Khan



 


Introduction

The session began with me, Sanjay Mehta, from 100X.VC, introducing the Celeb investor Rehan Yar Khan. I presented Rehan’s portfolio and said that he is one of the best investors to look out for in the B2B or B2C segment. There will be a great deal of learning from him. And, he learned a lot from him.

Covid Situation

I asked Rehan about Rehan’s comments on the present situation, to which Rehan replied that, of course, COVID is one of such rare difficult times which the world has never seen. But, from a long term perspective, there will be huge investments in terms of healthcare and science. In the long run, the investment pattern is not going to change. Also, the businesses of digital, home-based, handicrafts, SAAS, essential, or medical, will flourish.

Rehan Yar Khan’s Journey

I asked Rehan an exciting question about his journey to VC. Where and how did he start? To this, Rehan replied that he owns a small flower delivery company that was earning around 10-12 million per year. He was having a conversation with someone who wanted a helping hand in his investment. Rehan helped him, and during this process, he came to know that raising funds for a software giant is extremely difficult. But, together, they were able to raise reasonable funds. Soon after, he got an invitation from the Delhi team, who were also looking to raise some funds, and, that’s how his journey into this sector began. Rehan had been quite picky about the projects in which he invests. Till 2012, he had invested only in 12 projects. And, to date also, his model of investment has been more of a mentoring and then investing. He said that he had lost some of the big projects because he couldn’t give time to them.

I asked Rehan which one he enjoyed – being a VC, angel investor, or an entrepreneur. He enjoyed the company building the most. He's one of the significant investments in Ola, which changed the entire travel domain. So, he and his partners love company building, and they like to handle only a few profiles at a time so that they can give equal attention to everyone.

I then asked Rehan what changed when he became VC after he sailed through the journey of an angel investor. Rehan very positively replied that how he chooses the company has changed a lot. But, what remains consistent throughout the year is that he and his team have always taken a deep interest after putting funds into the company.

If someone wants to become a VC, is there any pattern to follow, I asked Rehan. To this, Rehan replied that VC is more of an added investor. It is a raised responsibility. VC is like managing other people’s money. One of the most important parts is that people should invest in the sector in which they are proficient. No points in experimenting in a new industry.

I also asked Rehan what his investment thesis is. Rehan replied that first and foremost, the opportunity must be enormous. The field must be uncluttered, and the team size must be large and efficient. Also, economies of scale are quite important.

Viewer Questions

I got my first viewer question for Rehan,, which was- what he would suggest to a newbie angle investor. To this, Rehan replied that one should invest only in the sector you know about. Rehan has never invested in biotech.

The second viewer question I got was if entrepreneurs are better served with venture debt or equity. Rehan replied that the best bet is to have a balance of both. It is essential to have a healthy balance ratio like 1:1 or 1.5:1.

Another viewer question which I asked Rehan was what the opportunities arising out of COVID 19 challenges are. Rehan said that companies based on a digital mediums like Amazon, Flipkart, Edutech, or maybe gaming companies, have grown during the lockdown period. Other than these, companies, based on essentials and healthcare have benefited a lot. And lastly, business houses that are like SAAS have expanded.

How big is the farm sector, the next viewer question was. To this, Rehan sounded optimistic about the agriculture sector and said that this sector accounts for 30% of the economy, thus, there is huge potential.

The next viewer question was, is it ideal for a newbie investor to make a portfolio of 5-7 startups to become an angel investor? Rehan appreciated the question by saying that having a portfolio is one of the most important parts of becoming a successful angel investor. Anything below 15 will not be considered. So, at least have a portfolio of 15 companies every 2-3 years.

To this, I also added that investing in merely five companies is like buying five lottery tickets.

The last viewer question for Rehan was, a recession or depression foreseen for the world right now? And, how will the consumers react to it? Rehan said that the world was faring quite well before COVID. And, the same will continue post-COVID too. Investment in healthcare, medical, science, and education, travel will remain the topmost priority. 

Success Stories

When I asked Rehan to share his success stories in the world of investing, Rehan started with Dhruva, a software giant. He recalled the founders and said that they were a great team and had great knowledge. They were ready to change as per the circumstances, and thus, the first major transformation was when they shifted to the laptop model from the server model. Later, they also changed a lot while setting foot in the US. 

Rehan also shared the success story of Country Delight, and how two young boys shaped the entire company. They have now transformed into milk, and its value-added products. They began with premium milk but later on expanded on to many other products as well.

Rehan Yar Khan Expertise

I asked Rehan asked about the future of VC in India, to which Rehan said that India received higher funds as compared to IPO’s in the last year. And, thus, the future of VC is quite positive in India.

As I asked Rehan about the deal-making process in India, he said that reducing risks should be the topmost priority. Also, taking valuation risks at an early stage is not at all appreciated. He further added that frequency is quite important in building up a real company. For example, investing in Colgate, Country delight, and Dhruva is a wise choice because they are seen every day in the consumer market.

Why and how they have missed some companies, I asked Rehan. To this, Rehan replied that mostly they had missed companies because they didn’t have enough time to get into the company. That is the primary reason why they missed Swiggy, Capital Float, FreshWorks, OYO.

Rehan was aslo asked how he compares Indian VCs with that of the outside, to which he said that Indian VCs are quite conservative. No one invested in OLA, it got its investment from a foreign investor, and today it is flourishing like anything. Rehan also added that once India starts seeing more and more funds, the situation will improve. There will be competition, and thus, the situation and fund flow will change.

I further asked Rehan about his book, “Make your luck”, to which Rehan said that he came across many people who believed that majority of people never felt that they were lucky in life. And, lately, he realized that more than luck, what works is his hard work and dedication. And, he addressed the same in his book too.

Finally, I asked Rehan which his favorite three sectors are, or where he would like to bet his money. Rehan promptly replied that anything digital has his heart. Digital platforms are evolving like anything, and thus, they are going to have a bright future.

Secondly, he named the agriculture sector as the next big sector. Since the connectivity feature is improving, the Agri sector and rural India have one of the most immense scopes.

And, lastly, the organized sector in India is slowly growing. Thus, any investment into this sector will yield good returns in the future.

Finally, I thanked Rehan for his time and his deep insights about the investment subject.


- 100X.VC Team

Published on: June 11, 2020