Kanwal Rekhi
In Personal History

2002

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2002 was the watershed year for me. I was a spent man emotionally, physically and financially, at the end of 2001. I weighed 275+ lbs, lost most of my wealth to dotcom bust and had serious self doubts. My self image of a confident, smart man who mentors people was shattered because I did not foresee the intensity of dotcom bust.
During a visit to Kuala Lumpur for TiE Malaysia launch, I had trouble keeping up with my schedule. I woke one morning and stared at a man in the mirror I did not like. I saw a man who was morbidly obese who had a family history of strokes. I saw a man who was outright stupid, it could not have been me as I was smart and people came to me for advice. This dissonance got better of me. I cut my trip short and flew back to California. I dropped everything I was doing and decided to retool myself in to my self image. I went on a doctor supervised crash diet, signed on with Barbara Blackburn (http://www.fitedge.net/) to get in shape.
My brother in law Mark Holt signed on with me to help me get fit.
I got in to hiking and biking like there was no tomorrow.
A year of workouts with Barbara (cardio, pumping iron, flexibility training), hiking all the hills around the valley and bicycling every trail in the greater bay area restored my health. I lost almost 75 pounds.
I emerged at the end 2002 as a restored man. It has been 13 years. I have stayed with Barbara all this time, have kept with my hiking and biking. I can do 10 mile hike in the hills and ride my bike 40 mile. I am fitter and stronger person at 70 years of age than I was at 50! I felt good enough as a person to launch a new carrier as a venture capitalist.
I partnered with John Dougery Jr. and Samir Kumar (in Bangalore) to launch Inventus Capital Partners as a US/India fund. We are now thinking of raising our third fund!!

That is me atop Mt. Tamalpais, the highest peak in the Bay Area.

 

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In Venture Capital

VC Business

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In Spite of the glamor associated with it, VC business is a tough business. Most VCs don’t even in provide market returns to their investors, let alone outsized returns! VC investments are risky investments and a majority of them fizzle out where the total invested capital is lost. The remaining companies have to provide big returns to overcome those losses and provide good returns overall. Dirty little secret of the VC business is that almost 80% of the funds don’t even return the invested capital let alone any ROI.

Most of the funds are organized as partnerships where the Limited Partners (LPs) provide the capital and General Partners (GPs) manage the money. A typical partnership provides for 80-20 split of the profits, where the LPs who provide all the capital get 80% of the profits and GPs pocket 20%. Further 2% is allowed every year as the fund expense. Funds have a 10 year life. For a VC fund to provide 5X return, which is less than 18% per year, on a $100 million dollar fund, it will have to produce total value of $600 million, of which $500 million would be returned to the LPs (hence 5X) and $100 million will be retained by GPs as their share of the profits. For this to happen, every investment will have to produce 6X return. If half the investments fail, then the remaining half will have to produce 12X returns. VCs typically invest only 80% of the capital as they spend about 20% on expenses over 10 years. That says winners will have to produce 15X on winners. Math gets worse if more than half the companies fail. Also, 15X winners are not that common.

For VCs to return 5X, they have to have a couple of super-hits, meaning 50X or even 100X returns. For this kind of returns, the initial valuations have to be reasonable. Higher the valuation in the beginning, lower the chances of making big hits. Also capital efficiency plays a big part too. Lower the capital efficiency, meaning high burn rates, results in more capital raised; diluting all stakeholders. This requires much bigger win to get those multibagger returns.

The situations gets dire very quickly. VCs and entrepreneurs who do not focus on profitability sooner rather than later discover that even a win does not give any satisfaction.

Like I said in the beginning, most VCs lose money. In India all the VC capital invested in last 20 years has not been returned to LPs. India has proven to be a bottomless pit. There just have not been any big hits to speak of. Microsoft was profitable after only $1 million of capital raised and Google was profitable at $2 million. They turned out to be big winners for everybody involved.

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In Excelan

Duane Murray

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Duane Murray was the the fourth founder of Excelan. We had an ambitious hardware development plan and we needed somebody to supplement me. Duane’s name popped up in my head. Duane had worked with me for four years. He had interned under me at Singer-Link in 1976 and came on full time in 1977. Both of us had gone separate ways in 1980, I went on to work for Zilog and he had gone to work for Tandem Computers. When I called him to let him know that I was starting a new company, he immediately asked when could he join. No discussion about title, salary or equity followed. He just assumed that I will take care of him.

Duane was a hardware engineer par excellence. He handwired the initial boards that I had designed and debugged them. He totally relieved me of actual design work. I designed the initial Multibus Ethernet board but Duane designed all the other busses- Uni Bus, Q Bus, PC Bus, VME Bus. Duane was a most dependable individual and was like me, a perfectionist.

Later when I became CEO and realized that our sales and marketing was not very effective. I plucked Duane out of engineering and made him director of Technical marketing with an explicit charter of making our sales process effective. Duane moved into sales area and with his usual zeal set about to find out why a large number of incoming calls were not converting into sales. He quickly discovered that actual sales were very much technical in nature and a usual initial buyer was a ‘nerd’ and needed a “nerd’ on our side to close the deal. We put several engineers on the frontlines and started to close sales rapidly. Duane was later promoted to VP of marketing. He made a great VP of Marketing.

Incidentally, Duane did very well when the company went public. I had assumed that Duane would do a start-up of his own after leaving Novell. That was not to be. Instead, he opened a restaurant and lived happily ever after.

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In My Opinions

Another Poem by my son Ben! I did not fully know this side of him till recently.

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Ben Rekhi
6 hrs · Quezon City, Philippines ·
Nov 8
A year since the world shifted on its axis
Since we watched the house of cards come crumbling down.
Since we entered an alternate universe.
Since the dark cloud blocked the sun.
A slap in the face.
Fake news.
Lies.
Tweets.
What had been in the shadows reared it’s ugly head in the light of day.
Tempers flared. Friends were lost. Families divided.
You.
Me.
Them.
Both sides flooded the streets.
Screaming too loud to hear each other.
Handcuffed on the sidelines while the kings pillaged the castle.
The clowns keep spilling out of the car.
And all we can tell ourselves is
This isn’t normal this isn’t normal this isn’t normal
But what is normal?
So now, a year on, I feel nothing but gratitude.
Grateful because without the darkness, I would have never seen the light.
Grateful because there’s no more confusion.
No more self-negotiation, no more wavering, no taking anything for granted.
Everything is crystal clear now.
What matters in life. What’s most important.
Family.
Friends.
Humanity.
Peace. Love. Compassion.
I never thought I’d say this but
Thank you.
Because it’s back to basics. Here and now. Heart and soul.
Thankful that logic has failed us, and all we can do now is follow our hearts.
No more analyzing. No more strategy. No overthinking.
The lights are out and we’re just feeling our way forward.
So close your eyes and let the universe guide us.
Your intuition is a whisper.
You already know what you need to do.
You’ve always known.
And to those that think differently, I’m grateful to you too.
I know you have your reasons.
I’ve been listening and making every effort to understand.
And if I can’t, I still respect our differences.
We still have more in common than what separates us.
We all still work. We love, eat, and breathe.
Our circumstances are different.
But we are born into this world, walk on two legs, and die.
So let’s put the guns down and agree to disagree.
Thank you.
For waking me up.
For bringing out the best in me.
For reminding me of who I am.
For making me feel more alive than I’ve ever felt.
Your callousness makes me kind.
Your lies make me truthful.
Your hate makes me love.
It’s been a hell of a year.
And without even intending to,
You reminded us of our greatest gift.
Our ability to transcend our primal nature.
To rise above fear, hate and anger.
You reminded me what makes us human.
You reminded me of everything you’re not.
So as I think back to that night of shock and awe,
when the world changed in a matter of minutes,
when nothing made sense any more,
I feel nothing but gratitude.
You reminded me of life’s greatest lesson.
We can’t control what happens to us,
But we can control how we react.
We can choose peace.
We can choose love.
We can choose compassion.
So yes, god yes, its been a hell of a year…
But you know what?
… I wouldn’t change it for the world.
Now I know who I really am.
#thankyouDJT
#staypositive #bethechange #oneyearstronger

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