The Kris Gopalakrishnan innovation model

Infosys co-founder Senapathy ‘Kris’ Gopalakrishnan is a very private person behind a public face. The 65-year-old billionaire entrepreneur, who has channelled his passion for research, innovation, and entrepreneurship by backing projects at academic institutions and funding startups, says his investments are not just for returns, but to create an innovation-led economy. Edited excerpts.

Second Innings

After leaving Infosys, you have become a big backer of research and innovation, whether it’s at the Indian Institute of Technology (IIT) Madras or at Indian Institute of Science (IISc), Bengaluru, among others. How did it start?

When I stepped out of Infosys, I had to think about a second career. After 36 years, I wanted to try my hand at something different. I always had a passion for innovation and wanted to take that forward. I chose brain sciences and decided to explore two areas: brain-inspired computing and understanding how the brain ages and disorders that arise due to ageing, such as Alzheimer’s, dementia, Parkinson’s, and other neurological disorders. I have been working on various projects with IIT Madras, my alma mater, for the past 25 years, so it was an obvious choice. [I also chose] IISc because it is the No. 1 research institute in the country and it’s in Bengaluru, so it was quite accessible to me. I strongly believe that if India needs to grow fast, it has to be [through] innovation-led economic development. This will hap - pen through startups and by building innovative products. Research, innovation, and entrepreneurship—that is the complete chain I decided to support.

What are your focus areas and how do you decide on funding these?

The areas that I chose were primarily in healthcare because the space can be transformed using technology. If India needs to provide affordable, quality, and accessible healthcare to 1.3 billion people, it has to be built on technology and a new model of the healthcare system. So from areas of the ageing brain, I also looked at the other aspects of healthcare, including preventive, curative, and palliative care.

To that end, I invested in multiple companies. I set up my startup, Bridge Health Medical & Digital Solutions, and recently invested in a palliative care company, Sukino Healthcare Solutions. I have also invested in a health-tech startup called Niramai Health Analytix, besides my investments in Neurosynaptic Communications, and Cure.fit, among others.

Your family’s philanthropic foundation, Pratiksha Trust, has also invested in brain research. In 2014, it donated ₹225 crore to set up the Centre for Brain Research (CBR), at IISc. How is that going?

There are two interesting projects the CBR is pursuing. The first one is a longitudinal study. It is studying 10,000 people over a period of 10 years in Kolar [district, in Karnataka] to see how the brain ages. These people are healthy individuals without dementia, aged 45 years and above.

There have been some hiccups in conducting the study and collecting data due to the pandemic. But it will restart soon. Till now, they have covered more than 2,000 people. It will be the first comprehensive database of Indian subjects on how they age. There’s a similar study done by CBR on urban subjects in Bengaluru which is funded by the Tata Trusts. The studies show interesting insights and the contrasting lifestyle between people in urban and rural areas.

The second programme is the Genome India Project (GIP) which is supported by the Department of Biotechnology [under the ministry of science and technology]. CBR at IISc is one of the over 20 labs involved in the project across the country. [The project aims to collect over 10,000 genetic samples from people across India to build a reference genome.] We don’t have a comprehensive database of DNA sequences of Indian subjects. Besides my grant of ₹225 crore, there are other research programmes that I support. Overall, my support for research work alone is approximately ₹400 crore, currently spanning across brain, brain sciences, stem cell research, and others.

For early-stage and growth investors, how have things changed after the Covid-19 pandemic?

Immediately after the Covid-19 pandemic struck, there was an urgency to evaluate the portfolio. And every investor and venture capitalist has done that. For example, [they evaluated] which companies have cash to withstand a prolonged downturn and which need infusion of cash. Investors will infuse cash only on their best bets. [That’s why] companies with better ideas got more funding during the pandemic. Investors have become more selective about their funding decisions.

Last year the Reserve Bank of India (RBI) appointed you as the chair of its new innovation hub, set up to promote advancement of tech in the financial sector. What is your role and your plans?

I am the chairman of the governing council which is setting up the Reserve Bank Innovation Hub (RBIH).

The idea is to bring innovation into the banking and financial services space and create a sandbox where these ideas can be experimented with, with the RBI’s participation. We have had a lot of innovations in the financial services space with Aadhaar and UPI (Unified Payments Interface), and JAM (Jan Dhan-Aadhaar-Mobile) for financial inclusion. We want to continue that way—that’s why RBI has set up this hub. We will come up with the plans later; I cannot talk about them now.

The need for this is very clear: to bring innovative products into the financial sector and improve financial inclusion. [It’s] about 1.3 billion people getting access to credit and being able to do financial transactions at a lower cost. It is an ecosystem... and we have to collaborate with the private sector and startups.

The Mantra for Startups

You’ve been selective about investing in startups. Besides healthcare, you have also invested in deep tech. Is there a particular funding strategy you follow? Are you satisfied with your investment returns so far?

These sectors interest me. There is an element of exciting opportunities and transformation in these areas, such as healthcare. I see healthcare as an industry growing at 10x in India in the next 10 years. In deep tech, again, there is a lot of depth in research in areas such as medical equipment, robotics, and artificial intelligence. If we can take that research and innovation to the market, there are a lot of opportunities.

I am satisfied that we were able to find and back good companies, and support interesting research projects. In the startup space, I believe that out of 10 investments you make, most of the returns will come from two or three. My expectations as an investor are not very high because I’m not doing this just for returns. I firmly believe that we need to create an innovation-led economy. I’m glad that the number of unicorns and startups are increasing. More and more young people are getting into entrepreneurship.

You’ve been vocal about unit economics and profitability in the startup ecosystem. In the past, you have also stressed on the need for startups to explore the initial public offer (IPO) route for funding. What advice would you give to startups in the current uncertain market?

The perfect business is a predictable business: what you forecast, what you plan, you achieve. But it is never like that [in reality] because there are so many variables which are not under [your] control. The pandemic is an example, unfortunately, of what can go wrong. The idea of a business is to create a self-sustaining model. A startup should think about creating a profitable business. As you scale up, one option is to opt for Series C and D funding rounds and then exit by selling out to another company. That way, only a few people—the investors—make money. But in an IPO, the public makes money. We want our people to enjoy the fruits of economic development.

In a pandemic year, India produced about 11 unicorns. How do you see this valuation play?

I don’t see this as anything negative because this investor money allows you to accelerate innovation, try new things, and scale up rapidly. If you look at the top five companies in the U.S., in terms of market cap, they are all less than 50 years old. Apple, Microsoft, Facebook, Alphabet [the parent company of Google], and Amazon. Their valuations go into trillions. And all of this is on top of the digital and computer revolution.

We also need a robust, innovation-led economy. Investors are doing it because they are getting returns. For example: Flipkart was sold at a $21-billion valuation in a little over 10 years. That is the positive spiral out of this.

(This interview originally appeared in Fortune India's February 2021 issue).