My Funding Picks For Last Week (W27)

Every Monday, I sit with my team to review the funding activity of the previous week. From that list, I pick out three 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.

 

As we enter the final days of unlocking v1.0, VCs are starting to loosen their tightly guarded pockets. As an ecosystem, we are continually maintaining the 2 deals a day average, but this time 14 startups raised $65 million – double the amount of moolah raised last week!

Out of the 14 deals, 11 were in the early-stage rounds (compared to 11 last week), which made the cut for my weekly analysis. After sifting through the news (aggregated from Tracxn, Inc42, and YourStory), I pick these two as my favorite funding news from last week!

 

Name: Bombay Play

Amount Raised: $1.5m from Leo Capital and Ramakant Sharma

What does Bombay Play do?

Edited from Traxcn: Bombay Play is a game development company specializing in casino games. Some of the games developed by the company are Card Party, Pokemon Tower Battle, and Twenty Nine. Bombay Play develops games for Android and iOS platforms and generates revenue through advertisements and in-app purchases.

Why do I like Bombay Play?

The COVID lockdown provided the gaming sector with the right ingredients for massive user growth. Low-cost internet access at a reasonable speed and people stuck at home with little to no avenue for social interactions. Therefore simple games that do can work on inexpensive devices with minimal processing speeds can rule the roost. It isn’t a surprise that Ludo King has seen their MAUs break the 1.5m barrier!

I have learned a lot about the gaming sector through my investment in Rolocule Games and Kabaddi Adda. But I am confident that social distancing norms will cause permanent changes in user behavior, encouraging more virtual social behavior. If I am right, gaming companies like Bombay Play will be laughing their way to the bank!

 

Name: NextBillionAI

Amount Raised: $7m from Lightspeed Venture and Falcon Edge.

 

What does NextBillionAI do?

Edited from Traxcn: Nextbillion.ai offers a wide range of AI-powered hyperlocal solutions, from business mapping to data management.

Why do I like NextBillionAI?

NextBillion.ai is a company that aggregates data from the half a billion Indians who have gone digital over the last 5 years. As of December 2019, India has 450mn smartphone users, so there’s a lot of data getting collected. NextBillion.ai is trying to make sense of all that data providing actionable data for businesses.

Flashback Friday: BrandIdea Consultancy

BrandIdea is a business intelligence tool for marketing and sales information. They offer a SaaS-based business intelligence enterprise tool that helps companies analyze their markets & last-mile sales data. It Integrates and models data from a multitude of sources and client’s internal data to provide analytics to gain insights & maximize the ROI of marketing campaigns.

 

Using advanced Data Science techniques, they generate visually enriched granular analytics streams that are dynamic, deep, and point to precise directions that help companies to make the right decisions. Critically, these analytics are granular – at the micro-market level, thus creating a bottom-up, aggregating impact of customized marketing actions. So not only can the companies re-visit their decisions at short intervals to course-correct or shift priorities periodically, they can do so at every geo-location, creating the bedrock for growth.

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Founder: Suresh Pillai Total funding raised INR 2.25 Crores
2020 status: Operational in Chennai Number of rounds 2
Co-investors: Mumbai Angels

 

Why did you invest in BrandIdea?

In a market as broad and diverse as (pre-digitalized) India, information at the last mile was always challenging to collect, and the data that existed was inaccurate. BrandIdea provided a solution using which large brands could gather granular and in-depth information about that last mile. This information not only helped the brands with their marketing efforts but also their inventory and other aspects of their business.

BrandIdea was the first enterprise tech company that I invested in. The decision was driven by the fact that their enterprise clients had massive marketing budgets and teams that would be willing to pay for that level of granular data.

 

What were the risks involved with an investment in BrandIdea?

As with any B2B SaaS play, there are a few issues we knew we would face.

  • One of them is the long decision-making timelines that large conglomerates like Colgate, Tide, HUL, Unilever, etc. have. However, it is worth being said that once the partnership is complete, these partnerships can be very lucrative.
  • Enterprises have long gestation periods to make a decision; therefore, another risk with Enterprise SaaS is the sales-cycles are going to be extended. You need to maintain firm control on the burn and accommodate for completing those decision cycles.
  • Another risk is that Enterprise SaaS companies can become profitable but not scalable. This could turn it into a lifestyle business, where the founder makes enough money to live comfortably but doesn’t grow, and as a VC investor, you’re stuck. B2B SaaS plays need to move quickly towards $1M per year in revenue before they can be considered a moderate success. The longer it takes to get there, the lesser the chances of it getting further VC interest.

 

What are your learnings from your investment in BrandIdea?

As I mentioned earlier, there are long gestation periods, and it’s a lot of relationship-building with enterprise SaaS companies. It takes a while to get a lot of clients, and the slower that process is, the worse it is for a VC investor.

This was also the first time we invested in a family-operated business, by Suresh and his daughter, and his daughter eventually left the company.

We learned how to evaluate such companies better. If a company gets into a lifestyle-business model, how do you, as an investor, get your money back; or get good enough dividends. We are still learning that.

 

Would you invest in a ‘BrandIdea’ if it came to you today?

When it comes to enterprise SaaS, we’ve learned that it’s a long process to build a company, and as traditional investors, our IRR expectations are upwards of 75% per year. While BrandIdea didn’t burn too much capital, they didn’t grow fast enough for our liking. Therefore, we don’t think that we are the right investors for them, and they aren’t the right investments for us.

 

What are the exit opportunities that can be foreseen for BrandIdea now?

The possible exit opportunities would either be a founder/company buyback, or the business gets rolled up into a large company offering a suite of products to similar enterprises.

 

Unlocking of Behavioural Changes

Several founders wait with bated breath as the Indian economy reopens after a 76-day hibernation. Many of them wait in anticipation that there will be an outbreak of indulgence consumption or revenge buying that will flood the empty coffers of revenue starved companies. It is (however), not the time for founders to get complacent. There is a long road ahead once the dust settles and we will see the clear signs of permanent behavioral changes after this temporary hysteria fades away.

I believe that we will see permanent behavioral changes starting from the way we lead our lives to the products or services that we consume (and the way we consume them.) Although I agree with Fred Wilson that companies in telehealth, food delivery, and work from home would benefit from these behavioral changes, I would add a few more for those of us living in India.

One of them is online education. In the past, most online education platforms suffered as the instructors were camera-shy when providing instructions to an online audience. Many instructors also found the technology tools daunting and they avoided using them. However, I do not expect parents to enthusiastically send their children back to school. The lockdown provided an extended incubation period pushing instructors to overcome their fears and shortcomings. I believe that the imparting of education through online mediums will continue to expand. Vocational classes are next, then hobbies and even working out, creating great business opportunities. I have current and prospective investments that will benefit from this behavioral change.

Another one is neobanking. It is a travesty that our banks continue to function with 20th-century design and tech infrastructure. I had hope that the lockdowns would have forced them to take a relook at their online banking offerings and improve services for customers. However, our banks are too big to move quickly. This creates a great opportunity for neobanks that add a friendlier design and process layer over the old banking infrastructure. The next 18 months would be crucial for neobanks to scale massively before the traditional banks catchup. I have current and prospective investments that will benefit from this behavioral change.

Another one is multiplayer online gaming. Social distancing is disrupting the hospitality sector especially the nightlife industry with authorities in Japan going as far as demonizing nightlife districts. However, the human need for socializing is driving us online and onto apps like Ludo, Houseparty, and Tambola. Ludo King reported a 4x increase in DAUs with more than 50 million users interacting with their app daily. I believe that the joy of online gaming companies has just begun.

Like Fred mentioned in his post, the next 6-18 months will be an interesting period to study these behavioral changes. It is an important period for founders as they must navigate these uncertain waters, readjust, once again achieve product-market fit and then start scaling up again.

 

 

 

My Funding Picks For Last Week (W22 & 23)

Every Monday, I sit with my team to review the funding activity of the previous weekFrom 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 week for the lockdown to end (probably more for metro cities) should improve investment spirits. Deal activity continues to temper, but it hasn’t completely stopped. Last week saw 13 startups raise $50 million. Out of the 13 deals, 11 were in the early-stage rounds.  

I expect deal activity to pick up over the next few weeks as the economy reopens with founders and funders finally get to their rubber meeting the road moment.  

After sifting through the news (aggregated from TracxnInc42, and YourStory,) I picked out these 2 as my favorite funding news from last week!  

 

NameRemedo Clinitech 

Amount Raised: Undisclosed from AngelList, Mohit Satyanand, Mitesh Dagaand Aditya Vij 

What does Remedo do? 

Edited from TraxcnRemedo Doctor is a cloud-based platform for medical record storage. It allows patients, doctors, and clinics to connect with each other and access relevant data. It enables patients to upload and store their medical records online. Available on Android and iOS platforms. Also, it allows doctors to generate insights through dashboards based on analytics. 

Why do I like Remedo? 

My thesis on telemedicine and recordkeeping has undergone a significant shift during this economic lockdown and its aftereffects. Platforms such as Remedo will become the mainstay of Indian healthcare as we practice social distancing but with better record keeping and tabs on our health.  

 

NameSwifLearn 

Amount RaisedUndisclosed from Stellaris Venture Partners and Venture Highway  

What does SwifLearn do? 

Edited from TraxcnSwiflearn is an online platform that provides live tuitions for K-12 students. It offers classes in small batches of 5 students. It offers crash courses for math & science for the upcoming year-end exam. 

Why do I like SwifLearn? 

Another product accelerated to the market due to the COVID lockdown. I like their premise, i.e., replace the in-person tutor experience by creating the same experience online. It increases the productivity of the tutor (and they don’t have to leave home!) but also provides them a more significant reach.  

There is better control over the learning experience online, and the broader reach makes it affordable for students. Their pricing policy is exciting too. Definitely, one to watch out. 

My Funding Picks For 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.

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 for Last Week (W47)

I am starting a new section for my blog.
Every Monday, I will share my favorite early-stage startups that have raised money (i.e., <Series C) in the last week. This exercise is a win-win on several levels:

  • It helps me develop the right habit of reviewing deals that took place last week.
  • I am going to write this blog every Monday so that the news is fresh and relevant.
  • It offers perspective to the founders (that read my blog) on the themes that I find interesting; therefore, I expect (fingers crossed) to create a new deal sourcing mechanism!
  • I’ll attempt to connect the start-ups I discover here, with the start-ups in my portfolio; it opens up the possibility that both startups could work together for mutual benefit

Several platforms provide weekly reports on funding news, but I am going to concentrate on YourStory, Inc42*, and Tracxn. These three sources offer the best-researched information on Indian start-ups; therefore, if I utilize all three, there are remote chances of missing out on exciting funding news.

  1. Svami – $1 million

I learned about Svami from my friend and co-investor, Nikunj Shah. A month back, he was raving out about Svami when we met at our offices. At that time I regretted it was too late for AVF to get into the company as the deal was beyond the fund’s investment mandate. Even then, I continue to track the venture, that just raised a $1m round led by Rukam Capital Trust.
Svami team’s branding strategy and their passion for their product is something that other D2C brands could emulate. They have opened up a blue ocean in the premium beverages space with their tonic waters. I recognize that I may have a bias on Svami as I see synergies in distributing their drinks through Daalchini’s smart temperature-controlled vending machines, or through VistaRooms’ to the luxury home rental’s customers.

  1. myHQ – $1.50 million

I am personally extremely bearish on the coworking/co-living space. My pessimism stems from the numerous co-working pitches that I have heard from the founder, real estate groups, and family offices. Each of them claims that they will achieve a pole position in the coworking space within the next 3-4 years with 1 million seats. Unfortunately, when I hear this promise so many times and from so many people that it is easy to see the space over-capacity and low realizations in the future for this space.
What concerns me the most is that none of these promising founding teams has kept tabs on the number of seats their competition is building. I suspect that in the next 12-18 months, there will be a slew of shutdowns consolidation and belt-tightening.

If I am this negative on the space, then it is a pertinent question as to why have I put this round led by India Quotient on this list?

What aroused my interest is the Work Cafes model on the myHQ site. While not precisely similar, it reminds me of the Anticafé model that I saw in several places in Paris. Their concept is simple. They charge their users by the hour that includes food and drinks effectively, making it a coworking café. I found the idea intriguing enough to attempt incubating the idea in-house but could not find the right people to get it going.
Therefore I chose myHQ because of the Work Café model because, in my opinion, it is an idea worth exploring!

  1. Perfios – $50 million

It is difficult to call a 12-year-old company a “start-up,” but I like Perfios’ tech stack that makes credit assessment, monitoring, aggregation, and fraud detection easier for banks and NBFCs.
As an early investor in Karza Technologies, I understand and appreciate the pain point addressed by Perfios, and it is the leader in its space. The new round led by BVP and Warburg, the company, shall be utilized to expand Perfios’ geographic reach and to make acquisitions. I believe that Perfios and Karza could provide a killer product for banks and NBFCs if they worked together as the former utilizes company data to make assessments and Karza uses proprietary databases for the same.

  1. WMall – 64 crores

I am intrigued by the influencer marketing and social commerce space, and WMall offers the best of both worlds. As an early investor in Coutloot, I have followed this space for the past few years, and it will be interesting to see who will dominate this space.
*I am an investor in Inc42 through Artha India Ventures

The Indo-African perspective on the role of mentors in your startup

Over the weekend, I was a guest of Baljinder Sharma, a serial entrepreneur and a highly respected individual in the India & Africa startup scene. He put together the first India Africa Entrepreneurship & Investment Summit in Mauritius.

The event started as an idea to create a bridge between two ecosystems that houses over 1/3rd of the world’s population. It culminated in a 2-day event attended by over two hundred illustrious participants of the African & Indian early-stage ecosystem.  

The number of close relationships forged at the event is the barometer of success for such an event. On that scale alone – this event was a resounding success. I made several new friends, some from India and many from Africa. I will strongly encourage Baljinder to make the event a permanent annual feature for both ecosystems.

On the first day of the event, I was on a panel with an impressive list of panelists viz, Stephen Newton, Jonathan Mazumdar, Eric Osiakwan. Atim Kabra deftly and expertly moderated the panel channelizing our experiences and energy into a coherent narrative. Our discussion topic – the role of mentors and incubators in our respective ecosystems. Our discussion on mentorship got extremely engaging so much so that we did not enter into any meaningful conversation on incubation.

My co-panelists came up with a host of discussion points, but we unanimously agreed that the title of “the mentor” was thrown around very casually in our respective ecosystems. Often, service providers are self-anointed mentors, and their misrepresentation can have disastrous effects for the founders, their startups, and their investors.

On Sunday night as I boarded the flight back to Mumbai, I put down those discussion points that resonated with me; here is that list.

A mentor should not cost the company money.

This point is not to say that the mentor should work pro-bono. However, mentors that offer hourly/weekly/monthly/annual payment plans are service providers. If your proposed mentor charges money to meet you for an evaluation – please be smart and avoid them. 

A mentor’s role is to guide, not to become the founder.

I have committed this mistake a few times, so it hits home. Many times, founders start abdicating the decision-making role to the mentor, and there are several times the mentor starts getting too deeply involved. The mentor is not the CEO or a co-founder, but neither are they above the CEO or the Founders.

If you have crossed this line in your mentor-mentee relationship already – it is time to scale it back maybe even take a break. 

A mentor’s job is to do /advise you on what is best for you, not to make you happy.

This point is a personal favorite.

The mentor’s role is like that of a coach – they are present for the overall success of your company, not your success alone. Therefore, they must offer advice which is best for the company.

A self-respecting mentor will promptly quit if they get the message that their presence is to be a rubber stamp to your whims.   

A founder should have multiple mentors.

This learning was new to me. A founder should seek out multiple mentors that can help them with different aspects of their business or challenges. As the startup grows, there should be a churn in the mentors with new mentors taking over from the mentors that have finished their role/utility.

A good mentor stands on the side-lines while you make mistakes.

An extension of point 2. Experienced mentors sit on the side-line while you make mistakes even if they could help you avoid them. The lesson of letting you experience failure and learning how to prevent future mistakes is more important than the experience of getting saved by the mentor.

A good mentor will warn the founder of the challenges but leave the final decision on them.

The mentor’s role is to guide the founder through their decisions, but in the end, the founder is the one that must pull the trigger. When a mentor starts making decisions for the founder stops taking responsibility for the results.  

It would be best if you chose mentors that have substantial previous experience in the areas you need help

If you want to learn how to build a billion-dollar startup, who would you go to for help? The founder that built billion-dollar startups a couple of times or the founder struggling to get their startup out of their garage? 

Even though this sounds like a simple point reiterated – I am surprised how many times founders commit this mistake.

The best mentors only take on mentoring projects that challenge them.

Good mentors get sought, but they aren’t running after the money. They are looking for a challenge. A challenge that will stretch them and help them grow thereby (and in most cases) helping the mentor and the mentee.

Mentors that are running after money will accept any project, regardless of whether it intrigues them are not the right choice for you and your startup.  

The very best mentors get involved before the founders know that they need them and leave before the founders question their existence.

An involved mentor that is “in-sync” with their mentee knows precisely when to increase their involvement and when to decrease or terminate their relationship. A mentor that must be asked to leave has stopped paying attention.

It would be best if you convinced the mentor that you are worth their time investment, not the other way around

When a mentor is chasing you, explaining why you “need” their mentoring or pestering you to “sign-up” with them, they are a service provider. Service providers have other motives driving them but they are most likely not in line with your mentoring requirements.

The best mentors are so busy with their projects. They place a high value on their time. Therefore, you must convince them that you are worth the opportunity cost of their time – without using money as the offset.

My takeaway from the panel: Choosing is a mentor isn’t rocket science, but neither is it a game of roulette. Choose wisely through the generous application of common sense.