6 Learnings after 60 days of WFH – for Founders

Yesterday was the 60th day since we shut down our office, but it feels much longer. Partly because of the roller coaster journey I have had with a concept that I could not understand, i.e., working from home. In the last 60 days, I have gone from hating to loving the work from home concept and from working myself to the bone to appreciating the freedom and higher productivity this concept brings to my team and to me.   

There are several posts on how to manage employees that are working from home, but very few focus their attention on the founder that is leading their startup through troubled waters. I had 6 distinct learnings that reshaped the way I thought about working from home: 

 

 

  1. Hyper-productivity has its limitations 

    I was guilty of indulging in this mistake for the first 30 days. Theoretically, I saved 90 minutes of commute time; therefore, I decided that I could take on more tasks and responsibilities. Thus, in addition to my duties as a fund manager, I was reworking budgets with our portfolio companiestook on the chief editor role for Artha’s blogs, and I was conducting multiple team calls a day to keep the team focussed and engaged. 

    It was exciting and new the first couple of weeks, and I enjoyed working myself to the point of exhaustion because it kept all the negativity around the crisis out of my mind. However, hyper-productivity began providing diminishing returns the more I indulged in it. 

    It started with general irritability and slight distractions, but eventually, the focus on work suffered, and the list of tasks pending on me started to pile up. Finally, there was just a general numbness to all the work. The enjoyment of completing one task was quickly replaced by the groan of watching the tasks list continuing to expand

    became aware of the toll my hyper-productive avatar was having on my physical and mental health. Eventually, it started affecting my interpersonal relationships – at work and at home. With some sage advice, I toned down my hyperproductivity ambitions and focussed on quality instead of quantity. I concentrated on completing 5 tasks per day (nothing more or less) and utilizing the extra time to expand my knowledge horizon.

  2. Recognizing and dealing with Zoom fatigue 

    It was fun to be on an endless stream of Zoom calls. The meetings were shorter, I drank fewer calories, and I could do double the number of meetings. Then as Brad Feld put it, I started to experience Zoom Fatigue. I caught myself replying to emails, responding to internal team chats, or editing investor newsletters during these online meetings. I was there, but I was not present

    It did not help that I made my meeting schedule so tightly packed that there was no room for error; therefore, if there was an unscheduled call, it would be a couple of days before I could get back to them. 

    At the start of this month, I reduced the time I allocated for online meetings. Encouraged with the results, I have limited my online meeting schedule to just 3 hours a day from this week. This workaround will give me ample down-time to catch up with my inbox, tasks, and team chat – allowing me to be fully attentive during the online meetings 

  3. Taking a break 

    It is ironic that I would find it challenging to take a break from working while working at home. The opportunity to take a break (my TV) is less than 10 steps away, the bed just another 15 steps. Despite my intense working schedule over my 15year working career, I continued to watch at least 1 new movie a week on averageHowever, in the last 9 weeks, I have watched a grand total of 2 new filmsand I had to split watching each one over 2-3 weeks. 

    The fact that the opportunity to take a break was so close developed a false sense of comfort that I could take a break at any time. That time did not come because there was always something pressing that needed my attention.  

    Although it was late, the benefits of taking breaks finally dawned on me. A couple of weeks back, I took a 3-day weekend (I still ended up working for half a day), caught up with friends, and on my sleep. I had a fresh perspective on projects & a spring in my voice when I resumed work, convincing me that taking a break is an imperative undertaking for any founder.

  4. Setting boundaries 

    When we are done with work, we shut our laptops, stuff them into our bags, we commute back home, switching off all the work-related tabs in our minds and refreshing the tabs for our personal livesWhat happens when that commute is cut down to 90 seconds? 

    In my first month I was taking work calls from 8 am to 10 pm daily, I slept with work and woke up in it. There are several times in a year when VCmust put in those types of hours, especially when we are closing multiple deals. However, this was different.

    I did not have time to work out, I took tons of notes with a mental promise to review them but could not find the time to do it. Many a time, I could not remember what I ate for dinner and in what quantity! These endless hours started to take a toll on the team as well.

    I instituted a pm deadline on myself for all workrelated meetings. Everything that could not get completed by 7 pm would get pushed to the next day. To commit myself to this deadline, I started working out on cure.fit with a partner who would ensure that I did not miss workouts, therefore, ensuring that my work-day had an ending

    Without boundaries, the boon of working from home can quickly turn into a curse. Therefore, it is a good idea to schedule winding up and winding down activities so that there is a psychological boundary between work & home. 

  5. Schedule tasks into your calendar 

    There is a big difference between being busy and being productive. One can be busy all day but have nothing to show for their busyness at nightOn the other hand, productivity demands results, it demands focus.  

    I learned an excellent productivity hack that has worked wonders for me. Instead of having a to-do list or a task list – I get my tasks directly scheduled into my calendar, thereby blocking out time to focusThe scheduled slots are limited to 30-45 minutes chunks, with a 15-mins break at the end for contingencies and to report to the team after the job assigned to me is completed. There is an excellent post on Effective Scheduling for more on this. 

  6. Take a vacation 

    It sounds ironic that I would propose vacation time amid an economic crisis, especially when we are working from home! However, a lot of founders have forgone summer vacations due to the way this crisis creeping upon us. As a founder, we must recognize that vacations are essential with several scientifically known benefits of what breaking routines do for our minds & bodies

    While there are minimal options for us to travel for a vacation, there are other ways to take a break from the world and give the body & mind time to recharge their batteries. The Washington Post provided an excellent resource for vacationing at home, aptly titled, The completely correct guide to vacationing at home.

    Oh! You will find the perfect vacation auto-response in my 18-month-old postPerfecting the vacation auto-response.

My Funding Picks For The Last Week (W21)

Every Monday, I sit with my team to review the funding activity of the previous week. From that list, I pick out 3 companies that I would have loved to invest in or find founders that are doing similar things. Click here to know about my rationale behind this weekly exercise.

 

Another 2 weeks of lockdown (probably more for metro cities) should not dampen the investment spirits. Deal activity continues to temper, but it hasn’t completely stopped. Last week saw 13 startups raise $88 million – 8 of which were in the early-stage space.

After sifting through the news (aggregated from Tracxn, Inc42, and YourStory), I picked out these three as my favorite funding news from last week!

 

Name: Refrens

Amount Raised: Undisclosed from Vijay Shekhar Sharma, Anupam Mittal, others

What does Refrens do?

Edited from Traxcn: Refrens is accounting software for freelancers. The features of the product are expanding customer base by referrals, budget planning, creating GST invoices, reminders, and more. The product is free for freelancers such as software developers, logo and graphic designers, digital marketers, to name a few.

Why do I like Refrens?

The recent economic earthquake and the related job losses will give wings to the gig economy. Several platforms help gig workers promote their wares, but not many that will help them with organizing their back-end operations. The stellar angel investor star cast backing this deal should provide Refrens an edge over the indirect competition.

 

Name: Log9 Materials

Amount Raised: USD 164K from Deepak Ghaisas

What does Log9 do?

Edited from Traxcn: Log9Materials is a startup in the nanotechnology space. It focuses on graphene-based materials. Also, it undertakes custom synthesizing orders. R&D is centered on energy-efficient technologies based on graphene derivatives. As of November 2016, the company is developing graphene quantum dot-based LEDs and foldable displays and graphene composite based water purification systems. They have developed ‘Smoke-Free’- graphene-based cigarette filter and claims to reduce the risk of getting cancer by 90%.

Why do I like Log9?

I had looked at Log9 in the past when they were utilizing graphene-based technologies for fuel cells & filtration. However, their new product, CoronaOven could get serious traction as the importance of disinfecting things before using or consuming them is taken seriously. If the technology works as it is supposed to, there is a massive market for this product.

 

Name: Scribble Data

Amount Raised: Undisclosed from unnamed Angels

What does Scribble Data do?

Edited from Traxcn: Their platform, Enrich, helps prep data at scale (feature engineering) for data science, and our consulting services are aimed at turning every data science team into well-oiled machines.

Why do I like Scribble Data?

ML engineers love challenges. These engineers take on projects that test their skills and will build their reputation. Eventually, the projects get completed, and they venture out to find a new challenge, and the cycle repeats – but there could be a better solution. Scribble Data’s ML engineering as a service could offer exciting projects to keep ML engineers engaged but, at the same time, provide continuity at a more affordable & flexible payroll for the company. I have asked a couple of my portfolio company’s to reach out to Scribble and test out this hypothesis – the proof will be in the pudding.

Summarizing my exit interview with a venture capital intern 

Two interns finished their learning cycle with Artha this week. One of them wanted to speak to me and get my feedback on his performance during his 4month internshipThe schedule short feedback session went on much longer, and at the end of it, we got into an exciting topic – the importance of forming an opinion.  

I believe our discussion applies to anyone who wants to work in the investment business, especially earlystage venture capital. I am sharing a synopsis of that conversation with the permission of the intern.  

 

Intern: What is one piece of advice for me? 

Me: Form an opinion and be vocal about it. It is acceptable to be wrong, completely wrong, and heinously wrong. However, it is cardinal mistake to have the ability to accumulate and analyze data but lack the courage to form a decisive opinion. The best investors have often sought out views from their peers and from people who could provide them with a fresh perspective. In fact, the investors I emulate often seek out contrarian views to their own to test their hypothesis.  

 

Intern: Why is the trait of forming and communicating our opinions so important? 

believe that investing is the ability to predict future outcomes of current decisions, and an investor’s brilliant foresight finds appreciation only in hindsight. That is why I consider investing more of an art than scienceA room full of experienced appreciators of art would almost inevitably have deep-felt disagreements on the value of Van Gogh. They could all be right or be wrong – we would only find out once the money gets transferred into the sellers account 

 

What should an intern do?  

fondly remember eyeopening realizations I have had during discussions (sometimes heated) with interns, associates, principalspartners, coinvestors, and even entrepreneurs over the last 10 years in venture capital. Initially, it was intimidating for me to showcase my opinions in front of the experienced hands of this game. But I realized that I wasnt learning anything by keeping them to myself. I learned more by expressing my incorrect opinions and recognizing the gaps in my understanding, over keeping my opinion to myself for fear of getting called out.  

A newcomer to the investment industry should seek out experiences where they can form these opinions. Join investment clubs, seek out investors who have strong opinions, even if they are contrarians to their own, but learn how to build and present your investment viewpoint. 

 

Don’t be afraid of being wrong; we learn best through the mistakes we make. Expressing your opinion is a win-win situation. You either get called out and learn where you went wrong, or your opinion contributes valuably to the discussion. Most importantly, you grow with each interaction and learn to receive constructive criticism. 

Flashback Friday: Exotel  

Exotel is cloud telephony (IVR, missed call management, etc.service provider offering various products for hassle-free experience. Service includes Voice for a loud and clear experience, SMS for improving the customer experience, OTP based authentication, and VoIP based app to app calling for small and medium enterprises in India. 

Exotel helps in building a reliable and efficient business communication system. 

Exotel currently handles over 11 million customer conversations every day on an average. Last year, they were dealing with nearly 5-6 million calls a day, which has doubled now. Exotel has thus far acquired two companies - Voyce, a platform that allows businesses to gather customer feedbackand Singaporean voice-based social media startup Croak.it. Exotel had a revenue of more than 120 crores in the last financial year.

 

Founders 

Shivakumar Ganesan 

Total funding raised  

INR 4 crore  

2020 status:  

Operational 

Number of rounds  

3 

Co-investors:   Mumbai Angels & Blume Ventures 

 

  1. Why did you invest in Exotel?

    Freshly back from my professional & entrepreneurial stint in the US. Exotel reminded me of a vEPABX service that we utilized the customer service & operations team. It improved our efficiency and service delivery quality. Therefore, it was a surprise for me (circa 2012) that Indian SMEs didn’t have access tthis critical technology that would reduce their communication costs
    Therefore Exotel, was a no-brainer investment for me as I knew that they would become the backbone for many businesses in India.
  2. What were the risks involved with an investment in Exotel?

    The most significant risk was the excessive regulations that controlled VoIP calling at the time. Exotel wasn’t allowed to directly purchase minutes from Indian telecom operators, and unfortunately, they tried to bully the company through complicated pricing plans. 
    Despite all the difficulties, the team worked dutifully in securing the necessary licenses and offering such great value for business owners & startups.

  3. What were the possible avenues of an exit when you evaluated the investment opportunity at Exotel?

    I believed (at the time) that a telecom operator would see the stickiness of an Exotel customer and their excellent margins on non-voice revenues to snap them up. Unfortunately, most of the telecom operators have concentrated on the B2C customer with a stepmotherly treatment for business owners – despite the knowledge that businesspeople are willing to pay more for better service.

  4. What are your learnings from investment in Exotel?

    Shivakumar Ganesan, aka Shivku, is a secondtime founder, an alumnus of BITS-Pilani, Yahoo, and Flipkart. To find a founder with such an impressive resume was rarity in those times. Therefore, as an investor, we had to learn how to support someone like ShivkuAnother significant learning for us was how to invest in startups that operate in highly regulated areas. Exotel along with United Mobile Apps gave me (and my team) a wealth of experience that helped in later investments like BookMyCabLenDenClub, ConfirmtktRapidoTala and Karza Technologies (to name a few)

  5. Would you invest in a similar startup today? 

Yes, I would. However, I would structure part of my investment as debt or as payment via dividends. Companies like Exotel threw out a lot of cash, which can be daunting for traditional VC funds to evaluate for future funding rounds. 

Are gross profits the key to bulletproofing your startup?

6 months ago, I wrote about the real cost of customer acquisition after visiting the offices of a prospective startup that we were evaluating. After writing the blog, I provided the founder with explicit feedback on why I was passing on the investment. I had laid out our rejection feedback mechanism a couple of years ago, and we continue to follow it at Artha even today.

Handling rejection is not easy. I was in sales for many years, and I still consider myself to be in sales as I sell the opportunity of investing in our fund to prospective investors. As a sales manager, I trained, managed, and fired thousands of salespeople for almost a decade. Therefore, I have directly or indirectly dealt with rejection, a lot.

Hence it does not surprise me when I get a range of reactions to our feedback emails from founders. Their responses range from the grateful and gracious to anger fuelled expletive-laden multi-pager emails, giving feedback to our feedback. I do remember that this founder fell into the former group.

I believe that my post is more relevant today than at the time I wrote it. In 2019 (it seems so long ago now), the early-stage investment market roared on the back of a surge in micro-angel investors & a flood of friends & family capital. These uninitiated investors, many of them investing directly into equities outside of mutual funds, for the first time. They were lured in by stories of the 100s of Xs someone they knew had made.

Unfortunately, their ambitions made them blind to runaway gross losses their investee startups were making, i.e., the direct cost of revenue exceeded the actual revenue brought in. In layman terms, it meant that for every ₹1 of income the startup earned, the direct cost of generating that income exceeded ₹1. Not a sound business situation in any market condition!

My team and I met many of these hyper funded startup founders. We tested their penchant for profitability, at least at the unit economic level, but those were different times. The founders commanded and received unbelievable valuations. My team and I sat and gaped on the side-lines as we saw our anti-portfolio list swell faster than the list of startups that were in our portfolio! I wondered if we were facing a new normal, like a valuation black hole where the laws of economics did not function.

Unbeknownst to the world, a novel virus was raising its ugly head some 4348 km away. In the flash of an eye, the funding flow stopped. Many founders were caught unprepared, and unfortunately, their cheap capital fuelled startups died a quick but painful death.

As investors have realized many times in the history of euphoric investing – it is a startup’s dharma to make a profit. One cannot run (or fund) a startup that makes losses, not for too long. A startup can be accused of buying revenues when its direct cost of bringing in the revenue exceeds the revenue brought in. In a cruel twist, a startup making a gross loss assigns a zero or negative value to the operations apparatus that keeps the doors open. It won’t take a valuation expert to tell you that if opening the doors is worth less than zero – it is profitable to shut those doors.

To clarify, I do not endorse a net-profit strategy for startups that want to grow and scale. However, profitability, at the unit economic level, is a must before a founder decides to chase growth. Fast-growing startups must invest in creating long-term assets (tangible or intangible) to manage hypergrowth because minor issues quickly become massive at scale. Therefore, even the best-managed fast-growing startups build capacity before productivity can catch up, leading to net losses.

A part of the cost of growth gets compensated by adding positive unit economics of every transaction, creating gross profits for the startup. The gap (if any) is filled by venture capital or private equity investors that want to capitalize on the startup’s growth potential.

Even in a harsh fundraising environment, a startup with gross profits can survive. The founders can cut non-critical investments & expenses, utilizing the gross profits to grow the business, even if it is slow growth. Only a gross profit-generating founder can choose to sacrifice growth for sustenance.

However, founders that attempt scaling despite unfavorable unit economics do not possess that luxury. They need a perennial source of capital to continue their revenue buying program. If there is any threat to their source of money, their startup will be in trouble, deep, deep trouble. Just how big is their issue, these founders and their investors are beginning to find that out now.

Moral of the story: gross profits are worth their weight in gold. 24-carat gold.

My Favourite Funding News from Last Week (w20)

There is a slow recovery in the funding of early-stage startups. We are still a long way away from the heydays of 2018-19, but the growing pace of activity in angel networks & early-stage funds are promising signs.

After shortlisting the early-stage deals for week 20 from Traxcn, Inc42, and YourStory, we picked out the following as the best funding picks for the last week:

 

Name: Vernacular.ai

Amount Raised: USD 5.1 mn led by Exfinity Ventures and Kalaari Capital

What does Vernacular.ai do?

Edited from Traxcn: Vernacular.ai is an AI platform to manage customer engagement and call center automation solutions. It provides multi-lingual chatbots for automating customer service operations of enterprises using natural language processing and deep learning. Natural language processing helps the bots to extract meaning, context, and entities of incoming messages, thereby enabling companies to interact and engage in any language with customers.

Deep learning helps in pre-training the bot with domain corpus and augmenting with enterprise-specific data to achieve maximum accuracy for the same. The bots developed using the platform can be deployed to multiple omnichannel platforms, including Facebook Messenger, Twitter, Website, Mobile, among others. Some of the supported languages include Hindi, Gujarati, English, to name a few. Clients include Vistaar, Shriram General Insurance, Exide Life Insurance, and Barbeque Nation.

Why do I like Vernacular.ai?

Voice AI has enormous applications in a world where customer service standards aren’t keeping up with the expectations of customers. Customers want to get personalized treatment and in a language that they are comfortable conversing in. As an early investor in vPhrase, I have seen the vast revenue potential of applying artificial intelligence for customer communication.

 

Name: Mintoak

Amount Raised: USD 2 mn led by Pravega Ventures

What does Mintoak do?

Edited from Traxcn: Mintoak offers a POS solution called DOV that enables merchants to accept digital payments. The solution involves a POS hardware device along with software solutions. Merchants can accept various types of card payments, such as magstripe, EMV, NFC, and secure PIN. It also enables the acceptance of UPI payments. Merchants can also accept payments without internet connectivity through their patent-pending technology that allows a POS to the transaction to be completed using the voice channel, thereby improving transaction completion rates. It also offers a consolidated view of all transactions handled by the device.

Why do I like Mintoak?

Except-Jio, most mobile operators operate on seriously inadequate infrastructure to handle the bandwidth demands of India fintech companies in urban centers. I shudder to imagine how vendors in Bharat, where the network infrastructure is weaker, would cope up. Mintoak attempts to use a data-light technology to process transactions, thereby decreasing costs and improving efficiency – an actual Bharat-focussed tech play.

 

Name: MetaMorphoSys

Amount Raised: Undisclosed amount led by Good Capital

What does MetaMorphoSys do?

Edited from Traxcn: MetaMorphoSys Technologies provides a software suite for the insurance industry. It offers solutions for product development, claims management, risk management, and more. It also features software for insurance quoting, sales & marketing, underwriting, and more.

Why do I like MetaMorphoSys?

Insure-tech will be one of the biggest beneficiaries of the post-COVID environment. A CRM focussed on increasing the sales & marketing ability of insurance agents will be a need-to-have utility. Hitting a ₹50 lakh monthly SaaS revenue will be the first port-of-validation for MetaMorphoSys!

My funding picks of last week (w18)

Fundraising activity continues to slow down; therefore, my team and I had a tough time shortlisting our favorite picks with just a handful of deals to choose from. After shortlisting all early-stage deals activity for week 18 from Traxcn, Inc42, and YourStory, we jointly picked out the following as the best funding picks for the last week:

 

Name: QuillBot

Amount Raised: $4 Mn in a round led by GSV Ventures and Sierra Ventures

What does QuillBot do?

Edited from Traxcn: Millions trust QuillBot’s full-sentence thesaurus to get creative suggestions, rewrite content, and get over writer’s block. QuillBot uses state-of-the-art AI to rewrite any sentence or article you give it.

Why do I like QuillBot?

My team and I are Grammarly power users processing tens of thousands of words for our investment notes, meeting minutes, emails, blogs, private chats, and more. I believe that there is space for a Grammarly competitor, especially one that understands the Indianized English – also, can Quillbot (or Grammarly) build a plugin for PowerPoint, please!

 

Name: YAP

Amount Raised: $4.5 Mn led by BEENEXT

What does YAP do?

Edited from Traxcn: YAP offers a white label program management platform. They also issue a Yap Tatkal wallet, which allows their clients to provide their customers physical or virtual prepaid cards linked to their products. They also offer a QR payment solution in the mobile wallet.

Why do I like YAP?

The lockdown caught the banks with their pants down due to unpreparedness to go digital. The post-lockdown scenario is bleak for physical banking, and banks must prepare themselves to fully service their customers from the palm of their hands. YAP is building APIs to bridge that gap hence one to look out for.

 

Name: Mindhouse

Amount Raised: ~$680K from BTB Ventures, GGV Capital, Aartieca Family Trust, and Angels

What does Mindhouse do?

Edited from Traxcn: Standalone mental fitness and wellness center brand

Why do I like Mindhouse?

The COVID19 virus reserves it’s worst for those with weakened immune systems. Therefore I expect that fitness (physical or mental) will be on the priority list of most in the post-virus era. Mindhouse attempts to enter the space that mind.fit is operating in. Will it succeed?

Flashback Friday: CarveNiche Technologies

As I approach my personal goal of personally investing in 100 startups within 10 years, it was time to reminisce. Each new investment gave me a new experience, sometimes good, sometimes bad and sometimes ugly. Last week I wrote about my first angel investment, United Mobile Apps. This week is its investment #2!

CarveNiche is an innovative EdTech startup. They developed advanced EdTech products such as beGalileo (India’s largest personalized after school math learning program for K-12 education), Wisdom Leap (free online source for K-12 education), and Concept Tutors (personalized 1:1 tutoring focussed on the international market).

CarveNiche created a niche in the EdTech space. It is the first to develop a product using the latest technology, such as Artificial Intelligence (AI), to teach a subject like Maths. The flagship brand, beGalileo, recently became India’s first after school Math learning program to be available as a Windows App.

At present, they have over 750 women entrepreneurs who are running their centers through CarveNiche. The renewal rates exceed 90 percent, which shows the value they provide to the students and parents.

Founder: Avneet Makkar Total funding raised INR 5.5 crore
2020 status: Operational with HQ in Bengaluru Number of rounds 3
Co-investors: Lead Angels, Mumbai Angels, Calcutta Angels

 

  1. Why did we invest in CarveNiche?

CarveNiche’s initial business model was to deliver a superior classroom experience for the school students by utilizing the latest digital hardware with a customized software platform. The platform provided instructors the ability to track the progress of each student and personalize the student’s teaching plan based on how well the student grasped the subject. The platform also offered a messaging service to connect parents & teachers so that they could track the progress of their students at school & home.

I liked the founders. It was a known fact that Indian schools lacked modern equipment to upgrade the delivery of instruction in the classroom. Looking at the massive size of the market, I decided to invest based on the broad target market, solid team, and their clear understanding of the problem and its solution.

 

  1. What were the risks involved with an investment in CarveNiche?

The risks presented themselves in three ways.

    • Long sales cycles: The company had a tiny window to sell its offering to school administrators, their boards, and their trustees. Next, their team must negotiate contracts, find financing to help the school purchase the required equipment. After that, CarveNiche would implement the solution and train the instructors on how to use their platform. If the company could not complete all these steps before the start of the school (academic) year, the sales decision, the invoicing, and the revenues from it would get postponed to the following year. The company must continue to fund its sales team for long periods before they could see the results of their efforts or get feedback to innovate on the product.
    • Providing subprime debt: Most Indian schools do not have a profitable business model. They must regularly fundraise to meet their budgetary needs. Therefore, most schools could not afford the hardware for CarveNiche’s solution – unless provided with equipment financing.

With most of these schools running operating deficits funded by government grants, donations, and trustees, these schools had an inferior debt profile.

To survive, the company had to come up with an equipment leasing/purchasing plan, and they approached us for that financing. We gave subprime debt to a few schools to evaluate their ability to repay, but most of the schools defaulted on their obligations to CarveNiche and us. That experience burned a severe hole in CarveNiche’s bank account, forcing them to abandon this product offering and the selling to schools’ business model.

 

  1. How long did you plan to invest in CarveNiche?

At the time of the investment, it seemed like CarveNiche would scale quickly and get acquired by a larger player like Educomp. However, our investment coincided with the start of the demise of Educomp, and even though the company raised a couple of follow-on funding rounds, they had to (thankfully) pivot to a B2C business model.

 

  1. Would you invest in a similar startup today?

I learned from CarveNiche’s experience that trying to build a massive business that sells to institutions that possess inherently unprofitable business models is like living in a fool’s paradise. The Modi government invests 4.6% of GDP in education, so I know there is money to be made in EdTech.

However, I find that the B2C plays must spend a lot to acquire a customer, and their LTV / CAC ratios stay <1.

In B2B, I have not found a group of founders that understand the pain that CarveNiche went through and have developed a business model that addresses those issues; therefore, we have cautiously stayed out of this space.

CarveNiche’s new business model providing online tutoring has promised, even if it was a bit niche. However, it has scaled beautifully in the COVID19 era. The company has turned around and raised a new round to aid its growth. Avneet has stayed the course despite several setbacks, so she deserves every bit of the luck that comes her way.

In conclusion, I would not invest in the original CarveNiche business model – but I would invest in Avneet.

 

  1. What are your learnings from the pivots that CarveNiche has made over the years?

CarveNiche was my 2nd angel investment, and it taught me many lessons that continue to guide me today. I’ll share a couple of them:

    • Follow-the-money: It is essential to understand how long it will take a business to convert billed revenue into money in its bank account. If the path to getting the money is long and fuzzy – avoid that business model. As a founder or an investor.
    • Avoid investments in long working capital plays: If it takes a long time to close a sale, then a long time for to invoice for sale, and an even longer wait to get the money from that invoice into your bank account – what is getting utilized to keep the lights on today?

If the answer is venture capital, then I would not invest in that business.

Help us help you get that business partnership you want!

During my door to door salesman days, I could go through a wall if that meant I would get a referral to a potential sale. My team and I created, and memorized closes to secure referrals. My managers and I tracked how many transactions took place from referrals, and we pulled up salespeople that had low referral closes. It is clear to any salesperson that a referral is worth its weight in gold – it is a job half done.

Continuing in the same vein, now more than ever, founders are on the lookout for business partnerships to increase business avenues, and you must know that your investor has access to a vast network of people. Your investors’ immediate network has access to an even more extensive network, i.e., your investors know some people that know some people who are very important people.

So why is it that most founders fail at utilizing our reach?

A majority of the investors have every intention of helping you, but here is another critical question.

Have you made it easy for us to help you?

Despite best intentions (and regardless of the size of the fund or team), we have a limited amount of time and resources to address the needs of founders. A little bit of help from you would make it easy for us to help you. Your help would help us get more done in a shorter time and make you and us happy.

Therefore I came up with a list of steps, distilled from my efforts in securing referrals, whether it be for investors into our fund or for business development. Besides, I analyzed the efforts of founders who got the best out of their investors and those that failed at leveraging them, and the result was more straightforward than I would have envisioned when I began writing this list.

  1. Self-research on your target connect.

Venture capitalists have thousands, if not tens of thousands of contacts, and we are very adept at networking and finding people. However, you need to do your research on the people you want us to connect you with.

Usually, your reason to connect with the target is very different from why (or how) we connected with them. Our personal experiences could bias our opinion with your target, i.e., we could have approached them to invest in our fund, and they refused?

Therefore you should do your research on the target, utilize our knowledge about them to sharpen your understanding and find out whether an association with your target would be fruitful.

  1. Be as specific as you can in what you seek

It is a known fact that the most sought after people have the least amount of time. It is likelier that those people have an even shorter attention span. Therefore you must grab their attention, deliver your request before a notification takes your target onto another window.

Therefore avoid long-winded emails and big paragraphs, write in point format, be specific and get to the point quickly. When you show respect for your target’s time (and attention), it speaks volumes about how well you understand their position.

PS: Do not forget to be courteous & spell check!

  1. Know ‘why’ would your target want to work with you

If you or your company is the ultimate beneficiary of your proposal, expect a long period of silences to your requests. You must find a win-win situation and communicate how your association with the target would benefit the benefits them directly or their company.

If you cannot find or demonstrate the benefits of the association for the target – why would they get out of their chair to help you?

PS: If your strategy is to appeal to your target’s charitable side – please find a better reason.

  1. Create a short presentation (or note) on your proposal

After analyzing 40 million emails, Hubspot reported that emails with less than 200 words had the highest response rates. It is sage advice.

It is an excellent chance that your target receives hundreds if not thousands of emails in a week. Your warm introduction through us would encourage the target to etch out time to respond. However, long emails get flagged for reading when we have more time. Which (in most cases) I don’t.

There is a hack, though:

  • Create a short presentation (5-8 slides max) that outlines your research on your target, defines what you do, what you can do for your target, and how your proposal creates a win for the target.
  • Your presentation should excite them to get in touch with you (or get the relevant person from their team to get in touch with you)
  • Write an interesting note that generates enough excitement for the target to open your presentation.

  1. Get your investors’ buy-in.

Once you have found a win-win, written an action invoking short note to go with a presentation that will get you a callback, next, get your investor’s buy-in.

Some founders treat their investors as gofers who should do the founder’s bidding regardless of the investor buying into the proposed plan. You must understand that it takes much effort to create and cultivate relationships. Just one poorly-thought-out request could ruin that relationship for the foreseeable future.

If we get bought into your well thought out plan, and you can convey how we could enrich our relationship (with the target) through your proposal. You would’ve created a win-win-win that will get us to go those extra miles for you.

  1. Write a short, courteous but direct introduction email to your investor asking for your specific help from the target

With your investor bought in, write a quick introductory email asking for a specific connection to your target utilizing the steps outlined above. Your email must convey that you were specifically looking for an introduction to the target (and why).

Emails that convey a spray & pray approach get treated as spam.

  1. Draft the email for your investor

For extra credit (and to ensure that your message isn’t lost), go ahead and write the email that your investor could copy, paste, as their own words, and forward the email you sent in step 6.

It is unlikely that your words will get copy-pasted in the form that you’ve sent it in. However, your words will load our words when we write our email, thereby ensuring a near-total control to you on the messaging.

PS: It won’t take but an extra few minutes, but knowing how busy and dynamic an investor’s day could be, you leaving anything to chance is foolhardy.

  1. Give them a way out

Your target must have a courteous way of saying ‘no’ to your investor. I have explained before that each relationship takes much effort; therefore, the target’s failure to help you through your investor should not lead to a loss of the connection itself.

We want to help you, but if that means it puts our relationships on the line – it isn’t the sort of song that you wish to play in the back of our head.

PS: Give your investor a way out too. You can utilize this forgiven favor soon! 🙂

Finding silver linings

The history of sports and wars is replete with moments of inspiration. The odds are stacked up against the underdog. Out of nowhere, there is a moment of inspiration. The narrative gets altered, the game has a new direction, and an inevitable defeat morphs into an unlikely victory. I’ve previously spoken about the similarities between entrepreneurs and athletes; therefore, it is a given that such pivotal stories show-up in the lives of entrepreneurs and venture capitalists too! It happened during this month.

We shut our office on 18th March, i.e., 32 days ago. I was jittery about the future. The world was teetering at the brink of collapse, our fundraising plans got thrown off its rails, and by the time we shut down the office, moved everyone to work-from-home it wasn’t clear if our portfolio (or we) would emerge floating or underwater (pun intended).

The weekend before the shutdown, we had had a riveting offsite that was chill. But as we rapidly shut down, there was an air of discomfort, even a distrust that whether our goodbyes were temporary or final. I could see that my people were in different stages of depression as they slowly trudged out of Artha’s Coruscant. The moroseness over the collapse of the world started making inroads inside the strongly guarded walls of my work universe.

It was serendipity that while my work world started to spin out of control, I was reading a Dale Carnegie’s, How to Stop Worrying and Start Living. In chapter 6, How to crowd worry out of your mind, Dale talks about the importance of replacing worry with activity. He says:

We cannot be prepped up and enthusiastic about doing something exciting and feel dragged down by worry at the same time. One kind of emotion drives out the other.

In my context, the critical part was to discourage my people from dwelling in the bleak future and get them to start acting. I put up a schedule full of activity for the team (and myself), we took on new opportunities, and we began to collaborate multiple times a day on projects. The team initiated new projects – some relevant and some that I knew was irrelevant – but the vital objective was to keep them gainfully productive – so I approved them.

Even with our portfolio founders, we initiated plans to refocus their attention on the most relevant job at hand, i.e., survive! We worked with them to cut growth spending, shrink expenses, prepare new budgets, and focus no-cost growth opportunities. The efforts started to pay off results slowly at first but much quicker as the plans took hold.

Many founders discovered opportunities that were otherwise looked over, and a number of them started new business lines. The founders loved the proactive approach. However, there were a couple of founders that got shocked into inaction, i.e., they did not want to alter their course even if it meant taking their titanic into the glacier at full speed.

Thankfully our early warnings gave them crucial extra minutes to avoid hitting their iceberg at 22 knots, and they were saved from sinking to the bottom. It was a much-required reminder for all of us on the value of proper prior planning.

Needless to say, the first two weeks of working from home was akin to the chaos that precedes a war. I was up at 5 am (on most of the days) and slept at no earlier than midnight. But my mind was switched on 24/7, as keeping the spirits up for everyone around me became a full-time obsession.

I operated from a makeshift home office (that was previously a storeroom), it had a single window and an air conditioner that threw out hot air for the first week.  I itched to get out of the house, to the airport and fly to an unknown destination. I needed a break, but it wasn’t coming – at least any time soon.

In those initial weeks, I compared my situation to Bruce Wayne’s in The Dark Knight Rises. Bruce is thrown to the bottom of the pit with little energy to climb to the top. But Bruce finds the inner strength to conquer the well, and Bane (eventually). Comparing it to my situation, getting my team and portfolio founders moving was akin to climbing up the pit. However, ensuring that my founders and my team thrive in the face of an inevitable washout would be like conquering Bane.

Part one is done, and I am 100% confident that we are on course to overcoming our Bane.

I’ll get back to you on that.