Reaching the Underserved

Arun Gore, president and chief executive officer of emerging markets venture capital firm Gray Ghost Ventures is often asked how his company got its somewhat puzzling name. He admits he’s not 100 percent sure, having acquired the firm from its founder a number of years ago. As one story goes, the firm’s original owner was fishing in the Bahamas for the elusive “gray ghost” bonefish. The other possibility is that the name has more otherworldly connotations but Gore chooses to believe the former, he says with a nervous chuckle.

Whatever the truth is about Gray Ghost’s past, Gore and his team are writing a success story in the present. The firm is targeting a $60M close on its third fund, having raised $15M on its first vehicle followed by $35M on its second effort.

Gray Ghost focuses on what it calls “global impact investing” in emerging markets, including India, where it puts capital to work with the goal of eliminating poverty and strengthening communities through early-stage capital infusion. The firm moved into early-stage venture investments from micro-financing in 2006.

“Our investment thesis has always been beyond dollar amounts when the spreadsheet takes over,” Gore explains, adding that they focus on growing the business.

Gray Ghost could be on to something. While overall Indian GDP grew 4.7 percent in 2013, community- and social services-focused areas were one of only a few to show expansion of more than 6 percent, according to Bain & Co.’s India Private Equity Report 2014.

While technically sector-agnostic, Gray Ghost pays particular attention to healthcare and financial services on mobile platforms, which plays well with Gore’s background. He was one of the first to join telecom giant T-Mobile when the company had only 25 employees. Mobility is a key to investing in India because distribution of services is one of the biggest problems for startups in the country, Gore says. Scale is vital.

Gore jokes about taking European limited partners on trips to India who have to manage their amazement at seeing early-stage portfolio companies that have tens of millions of customers already. A startup with 30M customers is “no problem,” he says. Gore travels to India about four times per year from Gray Ghost’s Atlanta headquarters for board meetings.

“We don’t want to be managers of our portfolio companies,” Gore says. “We guide and support the company; not run it.”

Instead, Gore and his team provide structure and guidance from 30,000 feet. Gray Ghost will typically make three or four investments per year, totaling 10 to 12 throughout the lifecycle of the fund.

Gray Ghost’s portfolio currently consists of eight investments in India. All are early-stage with a heavy focus on mobile platforms, of course. Overall, the firm’s portfolio has 17 companies invested across its two current funds.

To be sure, private equity and venture capital are not immune to India’s macroeconomic issues. On the one hand, Bain predicts fundraising will become more difficult; on the other hand, investors continue to have long-term conviction about India and refuse to be spooked. That’s good news for a firm with the name like Gray Ghost.