Coverage by Bhat Dittakavi of Variance.AI on
“Khoj: Investor’s role in fueling Startups” on 21st Mar 17 at T-HUB
Sanjay Jesrani, GoNorth Ventures
Venkat Vallabhaneni, Parampara Capital
Viveck Varma, DisRUPPt
Jairaj Mishru, KHOZ
Venkat Vallabhaneni: VC funding slowed down but it won’t remain the same. Indian VC industry is at infancy. Investment size is also smaller compared to the rest of the world.
Globally, 2 good exits of 10 is benchmark but in India size of exits being smaller, they need to have 4-5 exits out of 10
Size of investments is 8-10 crores. We like to see at least 2 crore in revenues. 10% of portfolio is allocated for innovative Startups with out revenues.
Sanjay Jesrani: Globally back to back IPOs (Snap chat, AppRhino) happened and is good.
Activity we see in India is hardly 4 years. It is about getting investors excited for disproportionate returns.kt means fear and greed play and in hand.
Sanjay Jesrani: Breaking down “10% succeed out of 100” Out of 100 launching, less than 30% qualify to be Startups. Out of 30%, 10 become successful. Get into that worthy 30% and 10 out of 30% means 33% success rate.
Viveck Varma: The riff-raff in our ecosystem is causing harm to the ecosystem. Are you fully ready to be funded? Question yourself. Needs are high in education, health care and health care sectors. These three stand out as sectors that stand out and investments happen here.
Jairaj: I wish Startups get into space race.
Jairaj: What is success from an investor perspective? Series funding? Crossing the valley of depth?
Sanjay: don’t look at Unicorns. Think of heading to Everest. Think of base camp. No startup journey happens in few years. When you look at base camp, early stage founder shall look to build a business that has clear business problem, elegant solution and strong demand.
Can you take $2 million of investment in aggregate in 5 years and can you build a business valued at $30 million at the end of 5 years? P/E of 10 means, you should generate 3 M in bottom line. At 15% margin, top line is has to be $20 million in 5th year.
Venkat: Success is moving target that we define ourselves.
Viveck: Assumptions we make in business have to be validated continuously and adjusted. How well our assumptions is one success metric. Unit economics is the other measure.
Advise Startups not to do Robin hood approach of robbing the investors to pay consumers buy for unit economics.
Jairaj: I see an investor having very strong acumen, benchmarking and research skills. What do you offer? Best way to engage with you to leverage your strength?
Venkat: innovation and product are probably 40% of the game and 60% is market acceptance. Financial management can be solved by adding right people. Market acceptance and scaling are the big ones.
How do i take one of our portfolio company to Midwest? Immigration and selling?
Second one is trying to switch from B2B to B2B. Branding and outreach are challenges.
Founders fail to knock on investors more as they are stuck at scrutiny øf the funds invested by investors. Be shameless to reach out. No apologies. Make them work for you.
Viveck: Money is the last thing you need from the investor. Investor is taking risk with you as he sees some connect in your work with his desire. How are you engaging the investor? Err on the wrong side. It is OK if they find you wrong. Help could be with me work, growing segments, geographies and markets. Connects by investor are the best value for you. We could have seen in pitches someone else mastered where you struggled. Investors are happy to do some mentoring.
Sanjay) Early stage investor is nurture capital, not venture capital. Investors understand the need to guide. Investors are selective too as they are not here for invest and forget ad such ones become handicap for Startups. I Ave been the CFO of a company we took public. When you are going with your business pitch and plan, be transparent and realistic. 80% of Startups only acheives 20% of the projections they showed during pitch. If you take investment on number that you can’t acheive, you get stuck. Your first investor stand as your testimonial.
Read the book “To sell is human by Dan Pink”.
Go with a very specific question and investor csn make you a connect. Say I want to reach out to ITC VP of sales and I see you he is in your LinkedIn connect. Please connect.
Q) Global markets first?
Venkat: Win local, win neighbors and then farther countries.
Viveck: Be prepared for the brutality in developed and unknown markets. Have some local understanding of that market.
Sanjay: Grey Orange Robotics that sells in Singapore and also in Japan. Look up on them.
Q) Why investors prefer B2C over B2B?
Viveck: We are happy to mentor those who don’t fall in our criteria right now. Trend is changing. It keeps swinging. Shift is from B2C to B2B as projections are more realistic.
Venkat: e-commerce side B2C is not encouraging me. There is need for solving a real problem with IP.
Sanjay: Dharami, slum in Munbai has a revenue of 2M per year.