It is seven in the morning of an already-warm march day in New Delhi and at a five-star hotel in the city's diplomatic enclave, the world's best venture capitalist (VC) is ready for a scheduled 210-minute pitch by a Bangalore-based technology hotshop. The man is 55-year-old Promod Haque, and the appellation is not the product of some effective spin doctoring by his handlers. Rather, it is based on Forbes magazine's annual Midas list, its ranking of the 100 best VCs in the world. Haque, Managing Partner, Norwest Venture Partners (NVP) has worked his way up the roll. In Midas 2002, he was ranked 15; in Midas 2003, he was just behind Vinod Khosla at #2. Neither Haque's visit to India-his first after being named the #1 VC in the world-nor his meeting with the Bangalore company should surprise anyone who knows him well. The man believes offshoring (a neologism that means outsourcing to an offshore destination) is the perfect business model for US technology companies.

The logic behind this belief is impeccable: the correction in the US stockmarkets has impacted the exit valuation of private companies, with companies in which investments of $100 million have been made being acquired for around $150 million in the early stage; that translates into a return of 150 per cent, which isn't all that much in the venture capital space; if the return to VCs needs to increase, given that valuations will not change overnight, companies have to learn to do with investment of a magnitude considerably lesser than $100 million; for software companies, this could be $20 million to $25 million over a four-year period and for hardware companies, $40 million, before the cash break-even point is reached; the only way to get by on numbers of this magnitude is to transfer all development offshore. "I believe that the business model of innovation today dictates offshore product development," Haque is to say to me during an interview later the same day. "At the end of the day, investors must make returns; if there is no return, investments will disappear."

Right now, however, Haque is off to the pitch by the Bangalore company. Our companion for the past hour-that's right, my day started with a 6.00 am meeting-Vab Goel, Venture Partner, NVP, spends a few more minutes with me, detailing Haque's role at NVP and his track record as an investor (the two have worked together for three years) before rushing off to sit in on the meeting.

THE MAKING OF A VC

Haque spent his formative years not very far from this magazine's headquarters, in New Delhi's Gole Market borough. Father Alexander-he named his son Promod in the wake of the communal clashes engendered by the partition of the country providing him, in the process, with a name that suggests both Hindu and Muslim ancestry; he's actually a Christian-was a bureaucrat; and mother Phulwanti (Gangaram) Haque, a school teacher at St Thomas School, a mission-run institution in the neighbourhood that is still extant. "My beginnings were very humble," says Haque.

He went to St. Columba's, a popular boys school not very far from home that caters to the well-heeled-"Mom did a lot of private tuitions to send me to that school; that leaves a mark," says Haque whose life revolved around academics, academics, and academics -and then to Delhi College of Engineering, choosing it over IIT Kanpur to stay close to the family. After graduation, he worked with Siemens in Delhi, selling the company's medical equipment. Three years on, in 1972, he enrolled in a masters programme in engineering at Northwestern University in Illinois, putting up the $4,000 he needed by dipping into his savings and taking a loan from his father.

READ THIS, IF YOU ARE AN INDIAN TECH START-UP Why Promod Haque is in India.

His belief in the offshore business model-the mathematical logic of his argument, presented at the beginning of this article is impeccable-is one reason why Promod Haque is in India. That doesn't mean he thinks Indian companies cannot develop technology products, hardware and software. It's just that he'd like the front-end of these companies to be in the US or Europe, preferably the former. "For a product to be relevant in the marketplace, the founders have to have close contact with early adopters of the technology, (who will be in) the US market," he says. The world's #1 VC met with a few such companies on his visit to India. And if they meet his other criteria (see The Haque Formula), NVP will almost certainly invest, and invest big, in these companies. He has already funded 12 such companies in Bangalore. Another reason for his visit is to meet with software firms such as Infosys and HCL Technologies and convince them to adopt technologies from tech hotshops that are part of NVP's portfolio. "The advantage IBM and hp have is that they are big system integrators," he explains. "We can take our small (portfolio) companies and align them with Satyam, HCL, or Infosys and they can compete with IBM or hp." There's a similar story in broadband where he would like to see NVP's portfolio companies ally with Reliance, Tata, and BSNL. "India's telecom market is pretty robust and we want our companies to participate," he says. In May, he hopes to be back with reps from some NVP portfolio companies to strike a few deals. And he's hoping to figure out how Indian telcos survive on low average revenue per user (ARPU), around $10 a month in India as compared to $40 in the US.

The choice of Northwestern wasn't accidental (and as the meeting progresses, I realise that nothing Haque does ever is). Haque's decision to opt for a Masters was motivated by interest in the equipment he sold; Northwestern was the first university in the US to offer a programme in biomedical engineering; and better still, Don Jacobs, a professor at the university, had cut his teeth designing medical equipment for GE Medical Systems. He completed the two-year programme in a year and Jacobs, impressed by Haque's work ethic, offered to take him on as a research assistant. He paid his assistant's (PhD) tuition fee and living expenses. In turn, Haque attended classes between 8.00 am and 12.00 noon and helped with Jacob's research between 12.00 noon and 12.00 midnight. He did that for four years and still keeps a similar schedule.

The project he helped Jacobs with was the development of a gamma-ray camera, something that is of immense utility in the field of nuclear medicine (for instance, it can provide details of how nuclear medicines are absorbed by the human body). So, when after completing his PhD, Haque came to know that Thornton EMI was looking for PhDs to design a cat (computerised axial tomography) scanner, he had no hesitation in signing on.

The five years Haque would go on to spend at EMI were to prove memorable, and not just because it gave him an opportunity to work with Godfrey N. Hounsfield, a pioneer in the field of tomography who would go on to win the Nobel Prize for Physiology or Medicine in 1979 ("I actually rubbed shoulders with this guy," gushes Haque). His experience selling medical equipment and his natural amiability led to a stint in marketing. Realising that he had spent time in sales, marketing, and engineering, Haque turned his thoughts towards entrepreneurship and enrolled at Northwestern's Kellogg Graduate School of Management for an evening-MBA programme. Midway through the programme he landed the job of chief operating officer at Emergent, a California-based firm in the medical equipment business. Haque hired people, ran the company, and helped build a scanner using microprocessors, all things he found exciting. In 1982, the company was acquired.

By then, Haque had made a name for himself in his field and was offered the post of CEO of a Minneapolis-based start-up Dimensional Medicine. "I had to raise money for the company and we went through some pretty interesting times, running out of cash and looking for capital," says Haque. "I had to hire sales people, the marketing vice president, fire people, effect layoffs, and sell the product." He did this for five years and then took Dimensional public. "I owe a lot to Dimensional for putting me through the very real experiences of an entrepreneur," says Haque. "I learnt in five years what most people learn in 15 or 20."

The experience was to prove addictive. Suddenly, Haque was thinking in terms of working with multiple start-ups, not just one. "I thought this would be more fun," he says. "And your success isn't controlled by the outcome of what happens with one company." After serving as a consultant to smaller firms, Haque joined NVP as a consultant in 1989, and a full-time partner in 1990. And he was on his way to becoming the world's #1 VC.

THE HUMANITY OF PROMOD HAQUE

Today, NVP is based in Palo Alto, California, the ideal place for a venture capital firm. When Haque signed on, it was based in Minneapolis. In his first five years at the firm (NVP moved to California in 1995), he perfected the art of being a road warrior, travelling to Texas and California where most tech companies were based. And he established his credentials as a VC who gets in early on a curve by investing in Tivoli (client/server software and the company was acquired by IBM), Extreme Networks (which bet on internet protocol becoming the standard for local and wide area networks) and Cerent and Siara (optical networking and he invested in these companies along with Vinod Khosla, the man he displaced in Forbes' Midas 2004). Haque prefers to work with other investors. "We believe in syndication," he says. "We advise companies that it is in their interest to have multiple investors, not 10, but maybe two or four." Not surprisingly, most of NVP's investments are co-leads.

Haque is also loath to be a late entrant; if he is not into something early, he stays out of it. "We can't be the fifth company showing up to do the same thing," he smiles. "For instance, if we had missed Cerent and Siara, the play was over." Not surprisingly, NVP stayed away from investing in any of the 160 companies that sought to emulate these two. "That's the kind of discipline the industry misses at times," muses Haque.

This trait helped him avoid the dotcom debacle. It helped that most dotcoms were retail businesses and NVP had decided to stay away from the sector as early as the mid-1990s, after its experience with several offline retailers. Then, there was the fact, as Haque puts it, that "we didn't know how they would make money in the long-term". That and his desire to sit on the boards of the companies in which he invests and "get our hands dirty and leverage relationships" makes Haque a hard-nosed conservative in the venture capital community.

Yet, it doesn't take anything away from his essential humanity. That could be a function of his background. Haque has never forgotten what his parents went through and visits them in Chicago, where they are now based, every summer. And he insists on maintaining what he calls, 'a normal lifestyle'. "We are very careful with the impression we give our kids," says Haque referring to the fact that he chose a Christian school for his three daughters. "In a place like the US, Promod can afford a private jet, but flies coach when with family," laughs Goel. The only luxury he allows himself is an XK8 Jaguar convertible. And while he lives in a comfortable home replete with a pool, tennis court, and sprawling lawns, he doesn't subscribe to cable or satellite television and is particular about what his daughters watch on TV.

Or, it could be a function of his religion. Haque is a practising Protestant; his wife Dorcas is a trained nurse, was born of missionary parents and grew up in South Africa; he teaches Sunday school, on and off at the local church (when he was at Delhi College of Engineering he used to visit his old school once a month and deliver talks on value systems and on the Bible; today, he is chairman of the Elder Board at the church); and funds, in an individual capacity, a microfinance organisation called Opportunity International that operates across the globe. R. Paul Singh, the co-founder of ipVerse-the company developed software switches for IP telephony-funded by NVP recollects how Haque met with the company's employees for between three hours and four hours to address their concerns over being acquired by NexVerse, another company in the NVP stable. "Promod is an individual with a high level of integrity," says Gordon Stitt, President & CEO, Extreme Networks. "He and NVP are not interested in a fast return, but in true value-generation; he invested in Extreme almost eight years ago and is still as excited as he was then." Adds Vinod Khanna, a friend for over 50 years who now heads a London-based outsourcing firm, "Promod always knew he would make it big. He didn't want to be rich, just the leader, and he knew he would be that in whatever field he chose."

Haque's leadership position in the venture capital world may well have something to do with his philosophical approach to investing. "There will always be winners and losers," he says. "For every company that is sold for $300 million, there will be five others in the same area that just couldn't do it." Chances are, Haque, and NVP wouldn't have had anything to do with these five.