Flashback Friday: Rolocule Games

Rolocule Games is a game development studio creating realistic, casual, and social video games for tablets and smartphones. They design games using emerging technologies such as AR, VR, IoT, and AI. From designing award-winning Rolomotion™ technology for Apple to the recent Eagle Eye, which was an SXSW 2019 Innovation Awards finalist, Rolocule is emerging as amongst the leaders in leveraging cutting-edge technology in game design and experiences.

 

Rolocule created the official Australian open Tennis VR game in association with Australian open and Infosys. Their impeccable business ethic about being nimble and flexible has got them rapidly developing multiple games and pivoting, as industry change has become a case study at the world’s top business schools, Harvard and IIM-B.

 

Founder: Rohit Gupta Total funding raised INR 6 Crores
2020 status: Operational in Pune Number of rounds 4
Co-investors: Blume Ventures, Mumbai Angels, CIIE

 

 

  1. Why did you invest in Rolocule Games?

Other than being intrigued by the gaming sector, Rolocule had a fantastic team. What swung my decision was when they were trying to create a game which would utilize your smartphone as a gaming paddle, similar to how the Wii Remote functions. Their game Super Badminton for the iPhone was a huge hit – big enough that they were invited to Cupertino by Apple in 2013.

 

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

Like with any gaming company, it’s a zero-one risk; it’s either a success or a failure. Rolocule was going to be a success and a fantastic winner in our portfolio, or they were going to shut down. Creating, publishing, and promoting a game is an expensive proposition, and funding would only give them a few chances to succeed. It was also possible that the games would not be received well, and if there were 2-3 failures in a row, it considerably reduces the chances of following games being a success.

 

  1. Where do you place your investment in Rolocule Games when you see the success of games like FIFA, PokémonGo, etc.?

In my opinion, the two aren’t comparable. Apart from the difference in budgets, games like the FIFA series are licensed brand names from the organizations and backed by AAA game studios like EA Sports. PokémonGo has Nintendo’s name behind it, and Pokémon is a sensation on its own. Just these reasons are enough to set them apart, overlooking the fact that games like FIFA are updated and released annually. Rolocule exists in a different gaming space where they’ve integrated the technology in smartphones to software, allowing players to use it as a racquet or a paddle, like the Wii Remote.

 

  1. What are your learnings from your investment in Rolocule Games?

It taught me to be more realistic about zero-one plays, where you need to know when it’s not working and stop pumping more money into it. Initial success is not a guarantor for long-term success. It also taught me that not everything could be gets written off as simply; Rolocule went from becoming a game developer and publisher to just a developer of games. I’ve also learned that the defensibility of games is lower than usual. Similar to how most movies have a shelf life of 4-6 months, you have to reap everything you can in that window of opportunity.

 

  1. Would you invest in a similar startup today?

Yes, but with some caveats. As an investor, I would want better control. With the experience of backing a zero-one style business, I have a much better understanding of the space, and I would invest in an entrepreneur like Rohit again. Still, in terms of the venture, I would be more careful about the valuation and evaluate success, keeping in mind that initial success is not a guarantor of long-term viability.

 

 

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. 

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 QZ.com.
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.
91/2018

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

76/2018

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.

67/2018

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.
54/2018

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.
41/2018

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.
39/2018

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.
29/2018

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 myakosha.com 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 prospects@artha.vc with a cc to karishma@artha.vc.
25/2018