Kanwal Rekhi, legendary entrepreneur and TiE co-founder, shared his transformative journey and vision for India’s entrepreneurial future in a fireside chat with R. Ramraj at the Madras Management Association and TiE Chennai book launch.
Mr Kanwal Rekhi
Entrepreneur, Investor, Mentor, Thought Leader &
Author of The Groundbreaker
Mr. Rekhi: I want to set the tone for our conversation. When the British reached Delhi in 1800, India was roughly a quarter of the world’s GDP. We were the richest, most creative, most entrepreneurial country in the world. When they left in 1947, they had bled India dry—only 2% of the world’s GDP. The tragedy is that our own government kept us down. From 1947 to 1991, India’s GDP share dropped from 2% to 1%. Narasimha Rao turned the ship around before it went over the edge. The policies pursued by our own government were close to being foolish—they suppressed entrepreneurship, suppressed business, suppressed wealth creation. In the name of helping the poor, they kept everybody poor.
Now, 34 years after liberalization, India’s GDP is about three and a half percent of the world’s GDP. We’re already the number four economy. At the time of liberalization in 1991, we were the 110th economy in the world. Are we going to be number three very soon? Two, three, four years. Are we happy being number three? Should we strive to be number two, or should we go back to our rightful place of 1800 and be number one? Can we dream to be number one? Not tomorrow—maybe by the end of the century, maybe 50 years from now. Can we set that goal?
When I arrived in the US, the brand India was land of snake charmers, land of beggars. Now the brand India is an entrepreneurial technological powerhouse. Indians are among the best of the best in the world, the smartest people. You take an ordinary Indian like me, put him in Silicon Valley, and he ends up on top. There’s nothing wrong with our genes. There was something wrong with our environment and system here in India. Am I the only Indian to do that? There are millions of Kanwals in India. We need to provide them the environment to achieve their potential here in India.
We’ve turned the ship around. We’re starting to focus on entrepreneurship. But a lot more needs to be done. We’re still hesitant in our approach. We still believe bureaucrats and politicians can do it. No—India will be built by entrepreneurs. The challenge I’m saying is 1% of the population should become entrepreneurial by the 100th anniversary of India in 2047. All our economic problems will disappear. Can we set a goal to have a million entrepreneurs by 2030 and ten million entrepreneurs by 2047? What do we need to be doing to make that happen?
Mr R. Ramraj
Past President, TiE Chennai
Senior Advisor, Elevar Equity
Co-Founder and Former CEO, Sify
Mr. Ramraj: You went into an environment of scarcity—what it was when you left India. When you went with that mindset of coming from scarcity at home, not recognized as much as you should be because you’re not a soldier but a nerd, how did you overcome fear of failure to start something on your own? Most people of that generation became professors or took up jobs.
Mr. Rekhi: The biggest break in my life was getting into IIT. The odds were low—no coaching classes, no money for that. I didn’t speak English. I quietly applied without telling my parents. When I got selected, my father had never heard of IIT. When he told his commanding officer, who stood up and congratulated him, that was the first time my father felt proud of me. I grew up in an environment of very low expectations. When expectations are low, you’re liberated. Failure is not a fear—they already assume you’re going to fail. The pressure is off.
But later in life, I learned failure is part of success. You learn to ride a bicycle—you’re going to fall a few times before you learn. Same is true in almost everything you do. Fear of failure keeps you back. It’s not a shame that you failed, but it’s a shame that you didn’t even try. You have to go for it. The worst that can happen is you fail, you don’t get a job—you’re no worse off than you are now.
Mr. Ramraj: When you started a company, it was your idea, you drew it on a napkin, but you had two co-founders. You decided to make one of them CEO because you said you were introverted and he was extroverted. How do you choose a co-founder? What are the lessons for all of us?
Mr. Rekhi: A startup needs two people typically—an engineer and a marketing person. The marketing person says, “I wish we could have this widget, I could sell billions.” The engineer says, “I can design that. Are you sure you can sell a million?” That’s the partnership—Mr. Inside, Mr. Outside. One says I can do it, the other says I can sell it. You need a partner with complementary skills. It’s a team sport. You need a keeper, a bowler, a batsman. You can’t do it all. You don’t want people with the same skills as you. Two engineers doing a startup isn’t as sharp as one engineer, one marketing person. You have to have 100% mutual respect and equality of thinking, equality of status—even though one is the CEO externally. Internally, behind closed doors, you’re partners.
Mr. Ramraj: You raised VC money fairly early. Many times we’re told bootstrap, don’t raise capital too soon. How do you decide when to raise money, who to raise from, and what do we do with it?
Mr. Rekhi: We faced 100 rejections from VCs. There were no examples of successful Indian entrepreneurs. Indians were techies—single dimensional. But can they sell? Can they lead? All those issues were unproven. When John Marquart finally said maybe it’s time to try one of you guys, he offered $2 million for half the company. “You have 15 minutes to decide.” We didn’t need 15 seconds. “Yes sir, we’ll take it.” That’s the beauty of America—someone’s always trying to be a pioneer. John made over 100 times his money.
Mr. Ramraj: Kanwal, you’ve made a lot of investments as an angel. You’ve done almost 70 plus investments in one year. Then you became a VC and set up many other VC funds. There’s so much dry powder today. A lot of funds in India have set up—guys who got fund number five, six, seven out there. Most entrepreneurs get carried away with the size of the check rather than engaging with angels. We in Chennai Angels see this as a challenge. What’s your view?
Mr. Rekhi: I was doing those investments for 10 years—angel investment for 10 years before I became VC. I did close to 54 angel investments in those 10 years. I’ve done over 200 investments, but my heart is in angel investing. I’m back to being angel investor. The VC is a different game. It’s you raise somebody else’s money. You have to be fiduciary for them. You have to do paperwork. You have to do right investment. It’s a different game. Angel is you’re playing the pure wholesome captain. You’re betting your own money, risking your own capital and you want to play your way. You are not responsible to anybody other than your spouse.
Some angels have to win big. The dams will break loose. When KBC went public, the angels who invested with me made thousand times their money. So the people follow. If nobody’s ever made money being angel, why would you be an angel? India is much better off now than 25 years ago. It’ll be much better off 25 years from now. I wish things were going faster. One of the ways to turbocharge the environment is to change the tax laws. Why are we taxing the capital gains on startups? That’s blood money. In the US, we have a qualified small business investment stream where $10 million of your first gains from startup investing are tax free. When I invest for a family partnership with four of us in the family, $40 million of days are tax free. Why do we have taxes on a startup?
Why do we have so much paperwork for investments to come from overseas? Why do we differentiate between foreign investors and Indian investors? Why do we differentiate between NRIs like me and other Americans? We need 10 million entrepreneurs. If each needs $100,000, I need a trillion dollars for their investments. I need to roll out the red carpet and remove red tape. Please invest your savings in our entrepreneurs in India.
Mr. Ramraj: You built TiE into the world’s largest global network of Indian entrepreneurs. What was the key insight that made TiE what it became?
Mr. Rekhi: TiE was not a big idea. We were trying to be a local network to help entrepreneurs in Silicon Valley. But as Victor Hugo said, an idea whose time has come, nobody can stop. TiE was an idea whose time had come. We weren’t a business, not for profit. People kept coming—can we start a chapter in Boston, in Southern California? They came at us faster than we could handle. We said why not, here are the bylaws. TiE was an opt-in phenomena rather than top-down leadership. It stood the test of time because we very quickly decentralized it. TiE chapters is where the action is—the global organization is lightweight. It became a distributed system. Chennai is free to do what they want as long as they stay within the value system. Only activity allowed is fostering entrepreneurship. No cultural, political, religious agenda. Everybody’s welcome. We only do one thing and we want to do it well.
Mr. Ramraj: There’s a lot of money going into AI. Is AI expected to actually transform? What’s the good part of it? Are many jobs going away? What do you see?
Mr. Rekhi: It will kill many jobs initially. Any productivity enhancement tool does. But it creates more wealth from the same resources. India will benefit from AI. Every company worldwide must adopt AI to compete. Who will implement it? That work will come to Indians—high-quality, high-paid work we’ve mastered. We shouldn’t fixate on developing our own technology. Remember the telephone policy debate? When we simplified it—$10 million deposit, service in 18 months, no license, 7% revenue share—adoption on April 1, 2001 meant India had 1 million mobile phones. One year later: 83 million. Government didn’t invest any money. Use available technology to uplift living standards.
Mr. Ramraj: You’re a young entrepreneur at the age of 80. What inspires you to travel around the world and continue to engage? How do you maintain that energy and continue to be so busy? What’s the inspiration for you to continue?
Mr. Rekhi: TiE movement turned out to be a spiritual movement for us. The TiE founders started to feel very much that fostering entrepreneurship is goodness. It was seen as a freedom movement for Indians—a movement for economic freedom. We had the freedom political freedom movement to get our independence. This was a movement for economic freedom. We started to see the impact we are having around us. Having impact on India. It was a very positive feedback. I had taken care of myself and my family. And all of a sudden I’m feeling very productive in a different fashion. I’m 80 years old. India has done a lot of ways since this process started.
The average Indian is four times better off than his father was in 1991. If pace has picked up, the average Indian will be four to five times better off in another 20 years from now than we are. If that happens, you have transformed the whole world. If you drive 4% in economy growth above 1% population growth, 1% of the Indians have lifted out of poverty into middle class. That’s a massive impact. So I want to live to be 102 to be around in 2027. This is India’s century. We have talent, demography, intent, path—by 2047, we’ll be a developed nation with HDI on par with best G20 nations.
