21 Point Action Plan to Corona-Proof Your Startup Dream

Calling the shutdown caused by the Coronavirus pandemic, an economic crisis is a gross understatement. It could be a crisis for the established business ecosystem, but it is the equivalent of a tsar bomba for the early-stage startup ecosystem. If all of us do not act quickly, the entire venture capital ecosystem is staring down at years of effort, getting incinerated in a matter of weeks.

When the Prime Minister, Mr. Narendra Modi, announced the Janta curfew, he talked about blackout drills and wartime curfews to a population where the majority hadn’t witnessed one. It was a reminder of a dark 15-20 period when India went through several wars with Pakistan & China. That ignited a mortal fear in me as well.

I feared that this crisis could destroy the decades of work that it took to provide confidence to young graduates to convert themselves from job seekers to job creators. We had to show years of results to convince Indian & global investors to pour money into startups via venture capital funds, angel networks, superangel syndicates, and venture debt funds. All this effort all this sacrifice, of the tens of thousands of people that make up the entrepreneurial ecosystem viz. over 39,000+ founders, 10,000+ angel investors, 500+ VC funds, several visionary politicians & government officers is on the brink of collapse.

However, real entrepreneurs are problem solvers, optimists, and overachievers. Any challenge, even something that challenges their mortal existence, will help an entrepreneur find another gear within them. As they say, even in adversity, they only see opportunity.

My team and I started to sound out Artha Venture Fund’s founders on the business impact the coronavirus pandemic was about to make a couple of weeks before lockdown. We asked our founders to create new budgets to account for the onset of nuclear winter in the fundraising world, bring their expenses down to the bare minimum, and to show patience along with courage at this time.

It has not been easy to convince the optimist in them to slow down for now and conserve energy to speed up later. Last week we put all our heads together on a zoom call to chart out an action plan for saving their dream – their startup.

I summarized the call in a 21-point action plan to save your startup memo for the founders. My team went a step further to make it into a beautiful & impactful presentation. In the spirit of joining hands during this adversity, I am sharing that presentation with you:

 

It is important to remember the immortal words of General S Patton:

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Together we will win the coronavirus fight in our homes, in our businesses, and our minds. Let’s roll!
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My funding picks from last week (w05)

There were 15 deals in week 5 of 2020 that were available on Traxcn, Inc42, and YourStory,
I sat with our funding team, and after some enlighting discussions, I have shortlisted my picks to:

Name: InterviewBit
Amount Raised: $20 million
Investors: Tiger Global Management & Sequoia India
What does InterviewBit do?
Edited from Traxcn: InterviewBit is an online platform for tech interview preparation. The platform offers gamified lessons with video tutorials, primer problems, and guided solutions for programming, scripting, databases, system design, puzzles, etc. The platform also enables the candidates to get connected with the right companies worldwide based on skills and preferences.
Why do I like InterviewBit?
I like focussed vocational plays. Last year I had picked out GreyAtom as a funding pick as it provided an upskilling platform for data science and web development employees. Therefore picking it isn’t a surprise that InterviewBit got selected even though the $20 million round from Tiger & Sequoia is bigger than a typical Series A round in India.
InterviewBit solves an exciting problem of finding, interviewing, and evaluating tech talent, which is the Achilles heel of the best of Indian start-ups. The CAC for such plays is quite high, but considering the 18-35 lakh rupee salary bracket they target, the rewards may outweigh the costs.
Only request – can someone create a platform for finance and accounting employees! 😊

Name: AdonMo
Amount Raised: Rs. 21.4 crores
Investors: Bace Capital, Astarc & Mumbai Angels
What does AdonMo do?
Edited from Traxcn: Adonmo provides an in-transit cab advertising platform for advertisers to reach their target audience. It enables advertisers to place their ads on top of the cab and select the target location and relevant time slots to display advertisements and track their ads in real-time. It uses a proprietary computer vision and hyper-local technology to identify its viewers and advertise.
Why do I like AdonMo?
It was unbelievable that I had created a business plan to provide contextual ads based on geo-location on top of taxis during a 6-7 months stint in Kolkata in 2012 or 2013. I had reached out to taxi-top display manufacturers in China who could provide the hardware required for this service. These plays were very popular for advertisers in Africa as most homes did not have electricity – therefore, taxi-top displays were the primary distributors of advertising. But AdonMo is precisely doing what I could not i.e., EXECUTE on the idea.
I am excited about AdonMo as it disrupts the hold billboard owners have enjoyed for several decades. A moving billboard provides better and deeper reach to advertisers with exhaustive reporting and must work out to be of much better value than a billboard.

Name: YoloBus
Amount Raised: Rs. 4.28 crore
Investors: Undisclosed
What does YoloBus do?
Edited from Traxcn: Yolobus provides an online-based platform for booking intercity tickets. Users can book tickets by giving details like location, date, time, etc. It offers features like real-time tracking, in-cabin Wi-Fi, Toilet, Pantry, CCTV cameras, etc.
Why do I like YoloBus?
There are several intercity bus services. So what is interesting about just another intercity bus service?
There are several intercity bus ticket booking platforms – So what is interesting about just another intercity bus ticket booking platform?
India is home to the world’s largest and fastest-growing middle-class population. India’s growth pulled 271 million people out of poverty between 2006 and 2016. It is only a matter of time before India’s per capita income will cross $4000 with and a majority of the Indians will belong to the middle to upper-middle class i.e., aspirational class.
This vast majority of people will have a very different consumption basket and preferences compared to the sustenance living Indian, and services like YoloBus cater to a growing section of the Indian audience.
While Yolo may get considered a bit ahead of its time, if it can keep its costs of operation and customer acquisition in control and sustain – there is a big market for it to capture!
One question, though – why are the investors undisclosed? The first time for me to see a release in which the amount gets disclosed but not the investors!  

Weekly Review Meetings to Create A High Performance Culture

Yesterday, I did my 8th continuous weekly review meeting with Artha’s interns, analysts, associates, and heads of departments. I did a similar exercise during my last year at the family office and carried it forward to the first team of analysts at the fund. Due to specific personal and professional commitments, I broke this habit until my EA reminded me of the benefits of that practice. I re-read Ken Blanchard’s One Minute Manager in October last year, and immediately, I restarted the weekly review practice in November, adding elements of Tony Robbin’s RPM methodology, something that I wrote about in my first post of 2020.
The format of the weekly review meeting is simple.

  • The meeting is conducted 1 on 1 with each team member for 30-45 minutes
  • Their direct reporting manager’s presence is a must
  • We first discuss the outcomes promised by the team member for the current meeting
    • If the team member misses their committed outcomes, they provide
      • Reasons why did they did not fulfill their promises?
      • How will they avoid this situation in the future?
      • What help or resources they need from us to get to their goals?
    • If a team member meets or exceeds their promised outcomes, they explain
      • Why were they successful?
      • How it felt to achieve their promised outcomes
      • How can they repeat this performance in the future?
      • How could they help others in performing like them?
      • What was their learning from this exercise?
    • Then the team member provides their commitments to delivering outcomes before the next review meeting.
      • The outcomes promised for the following week are recorded on a shared excel
      • It is updated during the meeting and shared in an internal Team’s channel created for weekly review

It is clear at the outset that this meeting is not the time to get specific things reviewed. I conduct weekly reviews to clearly define what each individual is doing for the firm and how their efforts get them to their outcomes and (as a result) help the firm reach its outcomes. Therefore the most crucial part of this meeting is the quality of information on the committed outcomes, therefore:

  • Be specific and quantifiable
  • Challenge the individual to continue to grow in different aspects of their job role. For example, an analyst working with me must commit to complete the following outcomes before the next meeting:
    • The number of deals that they will source directly from their efforts and input into Salesforce. During the review, they must
      • List out the deals sourced
      • Highlight the deals they like and why
    • The number of transactions that will be completed and move out of the active pipeline
    • The number of ecosystem events they will attend and during the review, they must
      • Give details on what they learned and how it benefits their job role
    • Give the number of events that they will attend over the next 30 days
    • Read a book, write a book review and distribute it internally for feedback
    • Prepare an essay, presentation, or report on a topic of their interest or on a subject that is essential for their job and have it:
      • Distributed internally
      • Amended and finalized based on peer feedback
      • Present the final version for sharing on the AVF blog
    • List out activities that they are doing for the investee companies assigned to them and provide the latest news on them and their competitors

I like this style of review meetings because it separates the wheat from the chaff. It exposes the team members that are excellent at presenting an image of competence but are slowing down the team. The weekly review system compels them to show me how they are helping the team reach their goals and that they are improving themselves to take on more significant challenges.
As their leader, the periodic review allows me to figure out which team members are struggling, plateauing or spiraling down. I pay close attention to their weekly reports and their overall attitude during the meeting. It allows me to identify issues quickly, isolate them down to a lack of skill and/or understanding and/or environmental problems and create a plan on how to check the slide and get the team member back on track.
Unfortunately, this practice identifies a small subset as misfits for the requirements of the jobs or culture of performance. Those people will quickly find ways to avoid attending the weekly review, scheduling professional or personal appointments, or running away from any reporting that exposes them. I try to reach out to them to the best of my ability, but if the situation does not improve, I must let them go, or they quit. I do not take those losses to heart because a misfit’s departure makes space for some who can, will, and wants to run with the baton.
The new weekly review format has me excited, and the improvement in the team members is encouraging me to make it the central theme of my week. The most significant benefit of this exercise is that it connects me with the person at the frontline of my businesses. I can empathize with their struggles and those of the company and course-correct before things spiral out of control. It also provides me valuable information to decide when I should to press the accelerator or hit the brakes.
Once again I have blocked out a day a week to conduct these reviews, and I am teaching the leaders around me to start doing weekly reviews. It frees up the management from micro-managing and gives the team members the freedom to chose their outcomes and how they will get there. The go-getters love it, the pikers hate it, and the firm enjoys massive gains in productivity!

My funding picks of the last week (W49)

Most funds are winding down their operations in December; therefore, there wasn’t enough funding news from which I could shortlist. Yourstory reports that there were 17 deals in total with less than 50% meeting the criteria of the early-stage deals for this section of this blog.
The launch of the first cohort of Sanjay’s 100x.vc should change that this week, and I should have a tougher job to choose my top picks next week!
 

Sarva.com raised ₹20 crores from Fireside Ventures

What does Sarva do?
Sarva is a wellness start-up that offers a wholistic ecosystem for mental, physical, and emotional wellbeing that utilize the ancient practices of Yoga. Sarva’s website claims to provide 25 forms of yoga taught through studios in 14 cities and has membership plans similar to Cure.fits memberships.
Why do I like Sarva?
The success of offline plays like Cure.fit and Bombay Shirts have brought back confidence in the augmented real estate brand plays.
Yoga has a mass appeal, and while Cure.fit does offer Yoga classes, I like the specific niche that Sarva’s is pursuing. Several Yoga schools in various cities provide personal trainers, but very few (maybe none) have tried launching a national brand like Sarva. The rest of the ecosystem is fragmented and regionalized.
I am a frequent user of Cure.fit (when I am in town) I love the flexibility of choosing classes that work with my schedule at a location closest to me on a given day. I suspect that with their war chest full of money, Cure.fit could quickly launch a Yoga studio vertical too. However, I suspect that the difference could be in the execution.
I found a Sarva studio in Nariman Point, and I will take a trial class to compare the two before I say any further.
 

Indyfint.com raised $2.1 million led by Saravanan Adiseshan

What does Indyfint do?
IndyFint offers a plethora of bank-like services for businesses (as per their website) as well as a marketplace to provide loans to merchants, employees, and students (as per the YourStory article.)
Why do I like Indyfint?
I am a big believer that the Indian banking system is ripe for disruption. Banks use IT systems, policies, and operating procedures that are decades behind the business requirements of today. Previously (and in frustration), I had written a wish list for what I would like for a bank to do for me (as a corporate customer).  Therefore I have a soft spot for those attempting to take on the big banks!
I am not 100% sure that IndyFint is attempting to become an alternative-banking platform but I like the services they offer on their website. Just like them, several other start-ups are trying to break the stranglehold created by Indian banks. I support the disruption, and I forward to helping one of these disrupters with our money as well!
 

Dhruvaspace.com raised ₹5 crores from Mumbai Angels

What does Dhruva do?
Dhruva builds nano-satellites that work with ground sensors (also produced by them) for applications in agriculture, weather monitoring, infrastructure, etc.
Why do I like Dhruva?
Space is the unclaimed territory. Nano-satellites flattens the playing field that was previously occupied by big corporations or large governments. With billions of dollars at their disposal to send up massive satellites, their money power acted as a moat to fully exploit real estate a few hundred kilometers above our heads.
Nano-satellites and alternative delivery mechanisms democratize access to space. They provide access to applications that were (until now) were outside the reach of most of the world.
I believe that the market for nano-satellites will be worth tens of billions soon and add to that this is an Indian company that is attempting to compete in this space (pun intended). It is difficult not to love that!
 
Artha India Ventures invested in Kratikal’s Pre-Series A round. The announcement took place last week, but I chose not to review that investment in this section.

Discovering the true cost of acquring a new customer

Earlier this week, I wrote an email in which I explained the reasons why I was passing on a deal that my team and I had tracked for more than three months.

The eventual reason for letting go of this deal finally dawned on me when I re-did the calculations for the cost it took for this venture to acquire a new customer (or a unit of “new” sales). When I completed this exercise, I could finally appreciate the vast disconnect in the way the founder and I saw the same traction numbers and the valuation for the company.

First, this is how I recalculated the cost of new customer acquisition, starting with a net gross sales number which was done by:

The NGSn number must be positive, and only when if the Gross Sales / NGSn > 2x it piques my interest.

Next is how I calculated Net Sales (new) or NSn:

The NSn number is usually and understandably, negative – profoundly negative when a start-up is experimenting with different marketing strategies early in their development. However, NSn must turn positive before raising your pre-Series A round as it is a clear indicator of achieving product-market fit.

Those preparing for Series A rounds should get to NSn / NGSn > 0.5x as a clear indicator that each rupee invested in marketing delivers an ROI of 2x or more.

Unfortunately for the founder in my example, the NSn number was deeply negative, i.e. in the -0.5x range. I concluded that this start-up was raking in less than the amount of money and effort invested in marketing, i.e. product-market is not yet achieved. The fact that the NSn / NGSn ratio was touching almost -1x in their best sales month made it difficult for me to assign any positive value their traction.   

*I say new sales or new customers because usually any returning customers do not (and should not) cost the company marketing rupees. In the case that returning customers cost the company marketing money, then the budget for that should be kept separate. Remove these returning customer costs from each line item from the formula, to ensure that the ratios are accurate with correct data.

Startup Board Meetings 101

Most founders deem that their relationship with their board will be adversarial and combative. I assume that the founders must get sleepless nights before the board meeting. Maybe it provides the founder flashbacks to the nights spent they spent rolling their beds as they tried to present their school report card to their stricter parent, usually their dad.

Why do I think that?

The creative ways I see founders avoiding calling (forget conducting) board meetings as if it were the plague. Founders drum up excuses for delaying the board meetings, much like my classmates and I did to avoid submitting our signed and acknowledged report cards. Founders get sick; then a family member gets sick, then the ICU and next the morgue. Next when the health issues run out, then the team members are blamed; the reporting systems cop the blame – the list is endless. It is comical to witness the founder’s unnecessary creativity. However, the board is not a founder’s dad, waiting to rap them and it does not need to be that way.

That start-up boards must not have an adversarial relationship with the founders. This relationship should not disintegrate into that abyss is the responsibility of the investor board member and the founder.

For starters, the board must not get into the day-to-day working of the company unless there is a crisis, and the board must over-ride the management – it is rare but required. How can a founder avoid this situation is to be honest, in the founder’s hands.

A first step to building trust in the board-founder relationship is for the founder to get into the habit of organizing, conducting and following-up on productive board meetings.

  • A board meeting must be conducted every quarter – at the very least.
  • Some start-ups may require monthly board meetings, but a long-term plan of conducting monthly board meetings is onerous – on the founder and their board.

An important distinction that many founders fail to make is that a board meeting is not an investment pitch, but neither is it the investor update. A board meeting’s purpose is to get into the meat of things that the founders are working on versus the sizzle that sold to current and prospective investors.

If you, as a founder, are confused about what to discuss at your board meeting, I believe that Mark Suster’s How to Prepare for a Board Meeting to Make Sure you Crush It is a must-read for you.

Essential points that Mark delves into are the importance of a well-thought-out agenda, a solid deck and providing enough time to your board members to prepare for the meeting.

Now, if you’re scratching your head on what goes into a board deck, then Bryan Schreier’s post on Sequoia Capital’s website, aptly titled, Preparing a Board Deck should be in your reading list. 

A start-up founder that has an adversarial or a laissez-faire relationship with its board members is losing the plot. The best situation that a founder could wish for is a well-functioning board is their sounding board and guide for the road ahead. The board gives the founder a third party and a bird’s eye perspective on their venture’s progress because founders lose their objectivity in the day to day function of their ventures.

But it is important to note that the responsibility of creating the right board relationship must begin from the founder and supported by their board members – not the other way around.

The art of how much to raise

In the past several weeks, I have been astonished at the size of seed rounds that founders expect to raise in their first round. My jaw hits the table when a founder blindsides me with requests to raise seed rounds of $1 million to as high as $3-4 million!*

These are the start-ups that have

  • Opened their doors for business within the previous 12-18 months.
  • Have an ARR of less than two crore rupees ($300k).

Surprised at the massive requirement of capital, we go through their financial model. Within a few minutes of looking through the model, the spreadsheet would give out a chilling fact:

The founders first decided the amount they were raising; then, they decided how to utilise the amount that is raised!

It may seem like smart scheme when pitched to novice investors, but it is a foolhardy attempt to do that to an investor with experience.

For instance, to show full utilization of the amount the founders pad certain numbers. So, a close inspection of the fund utilization plan exposes the founder’s true intentions, i.e. that they wanted a reverse calculated an ego-boosting valuation for themselves. To achieve that goal they were willing to misrepresent facts. How does a founder come back from that image?

The good news is that – there is a better way.

My advice for founders that are creating their fundraising plans is to start with a well thought out answer to a famous Peter Thiel question

What is the one thing you know to be correct but very few agree with you?

In simple words, what do you need to prove to your team, your advisors, investors, etc. to elevate their belief in your idea? Whatever you need to do to gain their confidence that is the goal of your fundraising efforts.

For example, if everyone in your inner circle does not think that your company cannot sell x number of your whacky widgets in a specified period – then that is precisely the thing you must prove! Your goal must be specific, measurable, attainable, and realistic, and time-bound so that you aren’t on a wild goose chase.

Second, estimate the time and the resources (servers, people, space, travel, etc) required to achieve your goal. Pay close attention that your estimations do not have un-utilized or under-utilized resources. In fact, I advocate allocating 20% fewer resources than your start-up needs. It forces your team to innovate, after all – scarcity is the mother of innovation!

Third, figure out the exact cost of your resources over the period of their requirements. This exercise is a crucial step. Because if you had correctly estimated the resources and the time they’re required, you will (now) have the EXACT amount you must raise to achieve your goal.  

Fourth, add 25% top of the number you had in the previous step. The extra amount is your buffer, i.e. it is the extra cushion you’ve kept to account for any mistakes you may have made in your calculations. The extra cushion gives you the breathing room to commit errors – an essential fail-safe for an early-stage startup.

Now you have the exact amount your start-up needs, not a paisa more and not a paisa less. Next, go out there and raise this amount!

This proper prior preparation will give you the confidence to answer questions about the “why” behind your fundraising efforts. Your confidence will impress your prospective investors as you come off as a professional founder instead of a novice founder who thought they could pull the wool over the eyes of a seasoned investor.

As an investor that has sat on the other side of the table for almost eight years, this level of preparation and maturity from a founder is rare. But, when I meet a prepared founder it invokes confidence that the founders will utilize my precious and expensive capital judiciously. In fact, I may be swayed to give a premium valuation to such well-prepared founders – exactly what the founder wanted but now he/she earns it with respect!

* – Oddly enough, the high expectations were from founders who spoke in millions of dollars instead of crores of rupees. It ignites the patriotic fervor residing in Vinod – a sight to watch!

How to deliver bad news to investors

Hey founders, today I’m going to address a crucial topic: When to update your investors with bad news. If you’re an entrepreneur and running a business, you will have to give bad news at some point.

There are many ways to give bad news. One of them is not to give any news at all, let everything go down, and then explain why you have only ruins and not a building on fire. This method isn’t recommended, but some people choose it – I don’t.

There are minor issues or bad news that can be managed in your monthly and quarterly updates. Like missing your quarterly numbers by 3-4%, or if you’re having a tough time recruiting people, or if a particular distributor who was contributing a large part of the business dropped you for reasons unknown or customer complaints. These are the kinds of things you can manage in your monthly and quarterly updates.

However, certain kinds of news shouldn’t be neglected. These should be communicated to the investors immediately. If a co-founder has left, or one of the co-founders has been diagnosed with severe disease and will not be available for the next 6-8 months, or your fundraising efforts are falling through, or a significant client that contributes a substantial chunk of the profit has left. These are the kinds of situations that need to be communicated to the investors immediately, preferably not on e-mail.

What I recommend is organizing a conference call or an in-person meeting. Explain what is going on to the investors face to face, in a way that is direct with no sugar coating. Be humble about the fact that things have gone wrong. Don’t try to play up things to avoid the investors being angry at you. If the situation is terrible, investors have a right to be irritated and will point out things that could have gone better. You should take criticism in your stride as you’re expected to execute successfully. Take responsibility, be direct, and you’ll find that investors will probably come back with solutions for you to manage the mess.

In adverse situations, you should have a turnaround plan. I would recommend having one if you’re going to have a face to face meeting. If you don’t have one, let the investors know and get back to them in a few days or a few weeks. There may be some questions the investors have, for which you may not have the answers. I would recommend not making up turnaround plans on the spot. If you don’t have the answers, tell them. Mention that you’re going to get back to them in 5, 7 or 10 days (or whatever number of days you believe you need) but ensure that you keep those promises.

Delivering bad news should not be difficult. It’s only tricky when you don’t want to give bad news, and you feel hiding is the best way forward. But it doesn’t solve anything. In fact, it only leads to the problem of getting bigger. If hypothetically, the company shuts down, and investors find out that you knew in advance, you could find yourself in a hot legal soup.

I’ll leave you with that, and I would love to know how some of you guys have shared bad news in the past. Also, if you have tips for other entrepreneurs, do share them in the comments.

The failure vortex and how to get out of it

It is easy to figure out when founders have been pitching for investments without any success and for a while. The pitches become nonstop monologues that will end at the allotted time or when abrupted by questions from us.

Naturally, the founders overcompensate to avoid failing on another pitch. They try different tactics to avoid disappointment, but a series of rejections can take its toll on a founder’s psyche, and slowly the tactics become bad habits. Many founders are not aware that these bad habits are creating a vortex that is attracting further rejections. What seems intuitively correct is practically fatal.

So here are a few tips for founders that will help them in their next pitch.

  • Eliminate the problem areas in your pitch deck

If you’re getting stuck at the same point in your presentation, then it may be an excellent time to eliminate that slide. If that is a slide that you cannot eliminate then use an example to get your point across.

Doing the same thing again and again but expecting a different result is the definition of insanity- for a good reason!

  • Speak at a measured space and

The two significant signs of low confidence are speaking in a high pitch and speaking at a fast pace. The good news is that there is an easy fix for this.

  1. Record yourself pitching so that you hear the difference between your regular and confident voice and that you use during pitching.
  2. Do test pitches where you speak in a tone much lower than your standard baritone and speak at slower than your average space.  
  3. Write down, “breathe” at a spot where you can see it during your pitch and breathe.

These exercises may seem stupid to you, but you have to ensure that your message is getting into our heads. When you talk fast at a high pitch and without taking a breath,  the only thing I’m thinking is – something is wrong with this business!

  • Act as if

Yes you may have just enough money left to take the Uber ride home

Yes your core team may be on the verge of quitting

Yes your parents are hounding you to take that job you hate so you can make ends meet and;

Yes all this stress is tearing you apart inside

However, those are your problems that we are not aware of right now. During your pitch, we should not be feeling the weight of the issues we’re inheriting. Instead, we want to dream about the promise your opportunity holds, and we want to know you are the guy that will get us to that promised land.

Therefore, clear your head before you start a presentation. I watch specific videos or listen to particular music that gets me in the right frame a mind before I make my pitch for investment. I force myself into a mental state where all the issues in my personal or professional life don’t get reflected in my pitch for investment. For my investors, I am ‘the guy’ wearing the confidence of the success, and a bank account overflowing with money.

Confidence is infectious and FOMO is not a myth!

  • Do not brag or lie

Asking you to act as if may seem like I am encouraging you to lie or brag but let me be clear that that is far from the truth.

A successful person does not need to stamp their success everwhere, and neither do they have to remind people of their success. Most of the successful people I know underplay their success, displaying palpable confidence that is felt but not witnessed.  

Therefore when founders start bragging about meetings with Saif, Sequoia, Lightspeed or well-known super angels in a feeble effort to create FOMO they are pulling the rug from under them. We can safely estimate at what stage of the start-up’s development these top funds will take an interest in investing in them.

Therefore, bragging about meeting x, y or z, when you don’t have a POC, is a sign of your immaturity in understanding how the venture capital ecosystem works. To misunderstand their interest in taking a meeting is a sign that desperation is getting to you – not something you wish to convey to a potential investor!

Act as if is an attitude, a demeanor, and a mental state. There isn’t any space for lies and show off when you are acting as if.

I Invest in Risky Assets but I am not a Gambler!

A few days ago while rushing into a meeting, I heard someone call out my name. I was in a hurry, but I knew the person, so I politely spoke to him for a few minutes. During the conversation, he reminded me of a venture he had recommended that I almost invested in i.e. I committed capital, but backed down due to serious concerns with the founding team. I am aware (and as he went on to remind me) that that company went onto become quite big and it frequentlty comes up in conversation with people and our prospective LP’s as a part of our “anti-portfolio”, but I do not think that I “missed out” on making the investment, because even if it were offered to me today (under the same conditions), I would stand by my decision and refuse to invest in it.

I have been thinking about why I continue to abide by certain principles because eventually monetary returns are every investor’s ultimate goal, right? I know my reasons for abiding by by certain principles, but it is only today as I was getting ready for my day, that it struck me how to explain it.

I am not a gambler, but an investor in extremely risky early stage companies. Each investment has a thesis behind it. That thesis is validated by my team, my close circle of investor friends, my inner circle, venture partners, the external and internal due diligence teams. They ensure that these theses are in fact not a figment of my own imagination. I also have an independent investment committee (IC) who have to agree with my investment decision (Thesis) for the fund to be able to invest in it. Out of the 8 deals that we have taken to the IC 3 have been rejected. Although it may be disheartening at the time, we have later thanked them later for making those decisions. All these steps and hurdles are taken to mitigate the risks of early stage investing – these are done by design and that design is respected for the risks it mitigates.

That is not to say that I don’t test out new theses or edit my theses from time to time. Last year, I invested in Lyft (through my family office) to test whether the precursor to pre-ipo rounds in tech companies makes investable sense. For the record, even though we’re up 2x, I would’nt do it again.  That being said, these are educated guesses and even though it may look like a gamble to an outsider – it isn’t. Whether that thesis is right or wrong is a different matter.  

Therefore, I believe that when I allow a sense of adventure and gambling in our investment style it can quickly spiral out of control for both me and my team i.e. if the gambling starts to make us money. Our risk mitigations, the paranoia that we could be missing out on something, and the fear of the risk that comes with each investment would quickly dissipate because with gambling success comes a sense of invincibility that encourages taking larger risks. This process ultimately ends (and has) disastrously when the market drops which is inevitable at some point.

Only when the tide goes out do you discover who’s been swimming naked.” – Warren Buffet

So yes I am aware of all those investments that I missed out on that could have made me millions, but it would have been a gamble and gambling is not my business.

38/2019