Tag Archive : investment

The Journey from 500k to 5 Billion Demolishes 5 long-held Startup Myths

It has been over a week now since the news of OYO’s $1 billion round and ascent to unicorn status became official. This is a huge accomplishment for Ritesh and the entire Indian start-up ecosystem as the new round’s purpose is primarily to expand OYO’s reach outside India, something very few Indian start-ups can boast of. I expressed the enormity of this moment in a quote to Ananya Bhattacharya of

OYO’s journey smashed many myths that founders, investors and journalists hold strongly about start-ups. I took the last week to decide the 5 most common myths that can be done away with, for good.

1. The first-round valuation is important to set the floor for later rounds

OYO’s starting valuation of less than 3 crores was not an obstacle in its journey to become the 2nd most valuable Indian startup. The important thing is that Ritesh was able to EXECUTE the plans and ideas that he pitched in his fundraising presentations.

P.S. OYO did well even though we invested in their seed round in tranches… it did not affect any of their growth rounds of equity, obviously!

2. Founders should save equity for later rounds

It is important to note that: 75% of zero, is zero. Unless there are multiple term-sheets being shoved into a founder’s inbox giving him/her stronger negotiation leverage, founders should just focus on raising enough capital to execute the objectives set for the round and investors should provide value-adds besides the capital. Founders that under-raise or hold long drawn-out negotiations for better valuations are doing themselves and their startups a disservice.

3. IITs/IIMs degrees is a pre-requisite for startup success

It is well known that Ritesh did not go to college and got a $100k Thiel Fellowship for choosing entrepreneurship over a college degree.  His journey is a testament that even the best education is useless if it cannot be applied in the real world that we live in. I enjoy working with humble founders like Ritesh who; work hard, study hard and are teachable over conceited founders that expect royal treatment for the degree(s) that they hold.

4. Only deep-tech and hi-tech startups get the big bucks or those with a truly unique idea

The real beauty of OYO’s success is the simplicity of its business. Since none of the incumbents were paying attention to the gap in the budget accommodation space, it allowed OYO to swoop in and leave them in the dust. OYO’s initial premise was to provide a clean room, free breakfast and free wifi at an affordable price – that’s all. The execution required hard-core sales and marketing prowess and strong leadership aided by technology, not the other way around.

5. Founders should not pivot or that will destroy their startup

It is important for founders to have a flexible business plan so that they can address the changing needs of their target market. Ritesh pivoted Oravel to OYO rooms, Harsh Shopsense to Fynd and there are many such success stories that started out very differently from where they ended up and they all teach the same lesson – be prepared to change the action if the outcome is not what was expected.



3 Things to Learn About Investing from a Founder that Sold his Company for $465 Million in 2013

On Friday, AIMWI  invited me to be a panellist for their 6th annual Family Office Summit India 2018. One of the perks of being a panellist is the opportunity to listen to the speakers scheduled before my session. I can point out many instances where the nuggets of wisdom imparted by speakers have led to impactful changes in my entrepreneurial, investing and even personal strategy and/or views. Today was one of those occasions.

I had the privilege of listening to Hexaware Technologies’ founder, Mr Atul Nishar, who shared the wisdom of putting to work, the wealth he gained after selling his stake to Barings PE in 2013. There were 3 key points that will remain etched in my memory:

  1. Putting money into fixed deposits is the riskiest investment one can make
  2. A part of one’s investment portfolio should be earmarked for investing in start-ups
  3. People that believe that 99% of start-ups fail are misinformed


8 Steps to Increase ‘Deal Momentum’ in your Fundraise

It is a common founder complaint that Indian VCs & angel investors take a long time to close an investment. I believe so too.

However, the reality is that founders expend all their energy preparing their pitch decks and put in very little thought and time in the next steps that an investor will take if they are interested in the venture. It is in these crucial steps that the shine & sheen of the presentations start to wean, communications become sporadic and the “deal momentum” is lost.

Founders should understand that VCs do not have any incentive in extending the deal closure process. We know and realize that raising capital is an expensive affair and each day that is wasted because of some routine issue, is costing us too; in associate salaries, legal fees etc.

Thus, based on some recent experiences, I have prepared a list of 8 actions that founders should take BEFORE hitting the fundraising market.

1. Prepare a detailed financial model for fund utilisation

Founders should be ready to whip out the fund utilisation plan during the pitch and prove that the number they are raising is not pulled out of thin air. The first 2 years of the model should be prepared on a monthly basis and quarterly for the last 3 years. They need to prepare the model themselves and vet the numbers so that they can hold up to independent scrutiny. They can also bring in a financial professional to provide a sanity check on the model, but it is important that founders prepare the model ON THEIR OWN. Ideally, a founder should create at least 3 versions of the fund utilisation model:

                    1 that is based on the amount of capital the venture needs to have

1 that is based on the amount of capital the venture should have

1 that is based on the amount of capital the ventures would love to have

2. Clean up your cap-table

Founders should know the investors they have on their cap table. While pitching to a prospective investor, they should make it a point to clearly announce their cap table. Popping up surprises to the cap-table after a successful pitch will destroy investor confidence and invite additional scrutiny which (by design) will delay deal closure.

A piece of advice – please issue share certificates to all shareholders or demat your shares.

3. Know your numbers

Founders should make sure that their pitch and their financial statements show the same numbers.

A disassociation of 2% is understandable but that is the threshold.

4. Get a legal professional to prepare your company for due diligence

Founders usually spend lakhs of rupees in the process of fundraising for their venture. Therefore, investing 30-50k in hiring a legal professional to prepare an internal due diligence report shouldn’t be a problem. A legal professional can help in providing a long list of legal & compliance issues that need to be addressed. Founders can then start working on resolving those issues so that investor’s due diligence is smooth & hassle free.

5. Organise your files

Organising all the files i.e. employment agreements, manuals, rent agreements, licenses, audited financials, etc into physical and digital folders is essential. Founders need to be well-prepared when asked for records and putting them neatly into dropbox folders that are a click away will impress any investor.

6. Prepare a long list of references

Founders need to think of all the people that can vouch for them professionally, personally and socially. Let these people know that an investor could be calling them for reference. They should be ready with the list of these references for the new investors when they ask for it.

7. Pre-select your team for deal closure

To get an investment in a company, it is required that the company has a team of Company Secretary, a Chartered Accountant, a Merchant Banker and a Lawyer. Founders should pre-select a team of reputed professionals who will work on documentation & file requirements of the fundraise once the investor is on board.

8. Apprise your previous investors, mentors & accelerators of your fundraising plans

If the founders have mentors, if their venture has previous investors, or if it is part of an accelerator, it is imperative that they inform about it to the investor they are pitching to, BEFORE hitting the fundraising circuit. It also helps to get the approval of the board for the fundraise (if they are independent or investor directors) before any official fundraising pitches are made.


Founders: Lawyers aren’t your Moral Compass

One of our investee companies made a significant change to their cap table without any proper intimation or disclosure to the existing investors. Not only did they make the change, but also went ahead to complete the transaction, keeping the remaining investor pool in the dark. What the founder failed to consider is that these things cannot remain in the dark for long. So, when the news came to light, I was upset at the way the entire transaction had taken place. A couple of days later, I had a face to face meeting with the founder to understand why such a crucial mistake had been made.

During the meeting, the founder admitted that he had made a mistake by not informing the investor pool about the changes. However, instead of owning up to his mistake, he retorted, “my lawyer told me it was okay.” After hearing this, I asked him if he genuinely thought his decision was morally or ethically correct and his reaction said it all. He couldn’t even look me in the eye or deny his lack of responsibility.

As human beings, knowing the difference between right and wrong is our basic instinct. Therefore, we should not rely on the shoulders of service providers (read: lawyers) to defend our actions (or as in this case, inaction). The critical trust between a founder and an investor is not based on the paper that is signed. The paper only defines what the individuals have agreed to do in the worst-case scenario of a complete breakdown in communication.

Thus, I believe that it is my responsibility to go above and beyond the minimum standards that I have committed to in the investment documents. Hiding behind the cloak of a legal professional’s advice is a smoking gun and founders that do so simply weaken the trust their investors have in them.

For the record, the advice given by the lawyer was incorrect so legally speaking we can sue the company for violating the investment agreement. Not only that, but the founder has also lost all credibility among the investors & what price can you really put on that?

All of this could have been avoided if only the founder had openly communicated what he/she was doing. If you, as a founder are reading this post, remember that communicating with the investors about both, the good and the bad things going on with your company, help to build trust.

In fact, I would go a step further in suggesting that you communicate the bad news quicker if not as quickly as the good. Not only will this help reduce the damage that it can cause but it is also just the right way to do business. Nothing harms your business’ growth like the loss of an investors’ trust.


The hunt for my mattress points to a shift in Indian E-commerce

In January, I found myself at my orthopaedic’s office for the 3rd time in 12 months complaining about unbearable back & neck pain which were not only limiting my movement but also leading to sleepless nights. Obviously, concerned about my frequent visits, he did an array of tests that revealed that it was nothing serious. So, he inquired further into my daily habits, activities, time spent on the computer and so on. After giving all the information that I had given him some serious thought, he concluded that the issue could be the mattress and pillow that I was using. He surmised that these items had most likely lost their firmness and suggested that I should change them immediately. Little did I know that this exercise would take me from the outskirts of Bangalore to the ports of Kolkata and open my eyes to a rapidly growing industry and proof that Indian consumers were growing up.

The first company that hit my eye was a company that had (at that time) over 1000 reviews on Amazon, with 95+% of those being a 4-star rating or higher. I assumed that 1 out of 10 people will actually go online and rave about a company (1 out of 3 will do it if it is a negative feedback) which meant that this company had sold close to at least 10,000 mattresses on Amazon alone! The average product price was around Rs. 15,000 so this company should have done 15 crores in sales online (the number is much higher than that) but, the best part of my research was finding out that the company had not raised any external funding. This sleeper hit of a company is Wakefit, founded by Ankit Garg and Chaitanya Ramalingegowda. In a recent interview, they predicted that their 2-year-old startup would exceed $5 million in sales for FY2018. This is an impressive number for a nascent startup with no retail presence at all.

I reached out to Vinod and Dhiral on my team, and with my initial findings and our combined brain power, we were able to identify 5-6 other companies that were selling mattresses online. I decided to visit each one and although it took longer than expected, I got into their warehouses, offices, and factories and had the chance to speak with each founder. While most parts of those conversations are confidential, their stories and experiences confirmed the increasing comfort of Indian e-commerce customers to make large ticket purchases online. Not just that, but they have even become comfortable purchasing goods from brands that they haven’t previously heard of and are willing to pre-pay for the same (these companies do not provide COD).

This entire exercise served as an eye opener for the AVF team and I, concerning the Indian consumer. We realized that the Indian e-commerce buyer is becoming more and more confident to make purchases of over 10,000 rupees (except mobile phones) online. Going forward, we are actively reaching out to product startups with larger ticket sizes since we feel that this could be the next wave of e-commerce purchases and that has already hit us or is about to.

I did end up buying a mattress and pillow set from Wakefit, as a mystery shopper and it has been 2 months since they delivered and installed my new mattress. It is safe to say, that I won’t be visiting my orthopaedic for back or neck pain any longer.


Angel Networks in India Are Dead

Angel networks have played an important role in developing a robust investment ecosystem for start-ups in India. While the initial networks were small, they were composed of individuals who had known each other for a while, so there was a web of trust that continued to hold the members together. Then as the initial investments of these networks started to pay off and start-ups started becoming an obsession for mainstream media, the networks grew rapidly from a city or regional networks to India-wide or even global networks. What looked like an amazing business was the slow poison of death being gleefully ingested by the network’s administrators. Today, many of these angel networks are dead if not in the terminal stages of death.

What I meant by ‘dead’ is that these networks have morphed into investment banking businesses under the garb of angel networks. Therefore, most of these networks comprise of passive investors that rarely bring in deal flow or can provide time to investees – both important tenets of a successful angel network. Instead of ensuring that the investors know each other and form robust bonds for the future of the investees, the network is gauged by the number of people that have paid the “annual fee”. The value that each angel adds isn’t a metric that is considered– therein lies the problem.

The net result is that the entrepreneurs that approach these networks for funding are treated as “leads” that need to be closed. There aren’t any minimum investment thresholds (eg. size of the cheque, etc) for the investors putting in money which means that the sheer size of these networks coupled with angel’s abilities to write multiple small cheques, almost guarantees that any leads that come to the network won’t go unfunded. The size of the network also causes a hike in the number of investments in order to keep every angel interested. This leads to either relaxing investment standards, investing in rounds that do not conform with network’s objective or most worryingly, investing at valuations that do not make sense thereby killing an entrepreneur’s future chances of raising funds.

A large angel network is harmful to the ecosystem because it lacks the focus and objectivity required of this type of investment group. A smaller, more close-knit angel network that revolves around one investment theme or comprises of individuals from one specific geographic location or investors who only invest in a particular geographic location are all better for the startup ecosystem but not the “angel network business”. Otherwise, this celebrated size of the growing angel network will soon become the tombstone under which the angels’ network will be buried.


Desperation is the Name of the Game

If all things are equal between two candidates that want me to be their mentor, what would be the difference, that would make all the difference? No, it’s not how equity you will give me or how much respect you have for me… The correct answer is – desperation.

I am not referring to the desperation to get time, money or references, but the desperation that burns through the eyes and words of the prospective mentee to succeed. The desperation that cannot be dissuaded by failure, drowned out by rejection or simply because they didn’t get an immediate response from someone they attempted reaching out to for help. I am referring to that desperation that will make a person turn the world upside down to get what they want – yes that desperation.

In a world of unlimited opportunity, this is the kind of desperation I look for, to decide who I should devote my limited time (a precious resource) to. A person must innately want to achieve the skill he is seeking my mentorship for, and not only be attempting to achieve it because he ‘has to’. This distinction leads to a visible difference in the amount of passion and desperation a person exudes.

The lack of this type of desperation and conviction in the importance of achieving that skill doesn’t bode well for my ROTI (Return on Time Invested).

So, if you think I’m being arrogant, standoffish or aloof to your call for help, I am only checking to see if you are as desperate as you are making it out to be.


Venture Idea: Putting the Custom in Customer Service

One of my favorite entrepreneurial movies is Rocket Singh Salesman of the Year. The movie has a dialogue that goes, “customer ke toh naam mein hi mer likha hai” (the word customer has mer (pronounced “marr” is the Hindi word for ‘to die’) embedded in it). This single dialogue aptly defines the treatment meted out to the billion Indian consumer customers every single day.

All one has to do is go through the Facebook page of any Indian brand and it will not be hard to find the abundant record of horrific complaints and the apathy awarded by these brands to their customers. Although I have been on a crusade against JetAirways for the ad hoc changes to its Frequent Flyer experience, I have seen very little progress in brands making an effort to improve how they treat their customers. Despite the government’s attempt to provide adequate protection to the consumer by allocating a separate consumer court to resolve consumer grievances and penalize erring brands… the problems are only continuing to mount.

I believe that the next ten years will be the golden age of Indian consumerism. With this thesis in mind, I strongly believe that there is going to be the need for a service that goes beyond allowing a customer to air their grievances but actively taking control to resolve these complaints. For a small fee, this service provider can engage with brands to resolve customer’s problems. If that route doesn’t work they should also be able to prepare the legal documentation required to take the brand to consumer court. They can even go a step further to provide the contact details for competent lawyers who can file & fight these cases. As India marches to 1,000,000,000 online via mobile – the market potential will be massive!

I have been on the wrong side of several bad consumer experiences in India and there used to be a company called that was solving my problem. They played the role of a service provider who resolved these issues directly with Idea, Jet, AMEX and other companies that I was facing issues with. I simply loved their service and the way they made these brands come running to me to solve their errors was an experience worth living through. However, for reasons best known to the MyAkosha team they pivoted to another business model leaving a gaping hole in the ecosystem. Now, I am personally motivated to be that agent of change for the way Indian brands treat their customers. I have a design team ready to develop the front end, know a law firm who can provide the infrastructure & know-how for this service and am willing to fund this project out of AVF.

I am seeking individuals who have a strong background in social media marketing, customer complaint management, and a strong tech background. I am also looking for a person with a strong background in data analytics to build out this venture.

Do you know someone or a team that fits this bill?

Email with a cc to


KISS for your Investors

Imagine that you have been invited for a stand-up comedy show of a well-known comic. You are excited about the show, arrive well dressed with a date in arm, get your favorite drink and are sitting in the front row with bated breath. Then your comic comes on stage, everyone starts clapping (including you), the atmosphere is full of excitement and anticipation. Just as the comedian begins to speak, you realize that his act is in Russian, Spanish or Klingon i.e. whatever language is completely foreign to you and the audience. For the first 3-5 minutes, you try hard to understand what he is saying then look around to see a similar look of bewilderment on everyone’s faces. Some people leave almost immediately, and the remaining make heckling sounds, the artist looks bemused but act continues, rooms starts emptying out and finally you, who has checked out mentally a while ago, decide that it had been enough and join the beeline to the exit. How inclined are you to attend a show with that comic in the line-up the next time around?  

Unfortunately, several founders are guilty of being that incomprehensible comic. Using acronyms or words that only your peer group understand may give the smart founder several accolades at startup events but leave investors (like myself) flummoxed about what the business really does. In fact, I feel that if a founder cannot explain what they do in layman’s terms to someone who has no knowledge of the technical jargon of that industry, then the business is too complex for me to invest in. A founder may feel short-changed because as an investor, I am supposed to be “in the know” but the truth of the matter is that I am not supposed to be the knowledgeable person in the room about their industry, the founder is!  

This video from the show Silicon Valley aptly explains what I fear as an investor 

A founder that is unable to explain what their business does to me in terms that I understand, is running a business that most customers won’t understand. To educate a customer entails a long sales cycle, and I find it is best to avoid such long-tail plays. However, when a founder is able to explain a complex model in simple terms, it gives me immense confidence in the fact that prospective customers will understand it too and therefore not hesitate to adopt it. Not only that but also the founder will easily be able to train lay people on selling his/her product or service and achieve targeted sales without hiring expensive talent. For the investor to have such confidence has tremendous value.  

Here are some of the tools that founders can use to explain complex business models:  

  1. Paint a picture of what their target customer currently does to solve the problem and how their product/service will change their life  
  2. Dumb things down by using simple everyday terms that anyone can understand 
  3. Use check-backs like does that make sense? to ensure that your audience hasn’t lost you 

There are many other techniques that founders could use to present an impressive but comprehensible pitch. The best way to test a pitch is to present to the most challenging audience i.e. people that wouldn’t understand their business at all. These unfriendly audiences will force you to KISS (Keep It Simple Stupid) for the investor, which is exactly what we are looking for!

So, don’t try to challenge the intelligence of the mere mortal investor and just KISS for us!  


Why We Must Become that Asshole Investor (from time to time)

2018 started off with a bang for Artha India Ventures. 4 of our portfolio companies successfully raised new rounds with pre-money valuations of more than $5 million. As a team, we are very happy with the solid multiples that we received on our investments and it validates our thesis of getting in early, building solid value and increasing wealth for all shareholders. These are the times when we look forward to celebrating with our founders for a job well done and to wish them luck on the new journey that has just begun (with the incoming investor).

However, there are a couple of founders that bring forth disturbing issues at the time of signing documents that hold up the entire round of investment. Usually, I can classify the issues that force this reaction into two buckets. The first and most contentious issue is the diktat issued by the incoming investor to disallow any of the previous investors from participating in the new round.

As an investor who invests in multiple stages, we have specific clauses in our investment documentation that allow us to participate in future fundraising rounds of a company. Whatever the logic the new investor can provide (more on this in a later post) we as the early backers of the venture expect the founders to stand up for us and remain loyal to their word and contract, that were negotiated and signed when we initially decided to back them. While many founders ensure that we get to participate in the new round (thank you to them), we do not have sympathy for those who behave this way even without being coerced by another investor.

At the time when these founders needed the money, they eagerly signed the documents with these terms clearly being stated, but when it comes to actually following through for a follow-on round they want to cry foul. To completely sell yourself to the incoming investors and screw over your earliest backers doesn’t bode well for our ecosystem. Firstly, the new investors will only put in stronger clauses to ensure the same doesn’t happen to them in the following round and secondly, the later investors will be way more cautious and hesitant when considering the opportunity to participate because of your past behavior towards investors.

Unfortunately for them, Artha does not respond well to oppression tactics and while we can understand the occasional tough spot a founder finds himself/herself in, the founder cannot always cry wolf.

To be involved in a bitter conflict at a time when we should be celebrating victory is a situation I want to avoid at all costs, but founders need to understand and respect that just like them we too are running a business and to deny us the rights that we mutually agreed before entering the relationship, tinkers with our business model. Just like they would not like to tinker with a business model that is doing well – neither do we!!