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!  

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.