Navigating the Indian Seed Landscape

No one can doubt that the Indian PE/VC ecosystem is going through a golden run. The amount of money flowing into the ecosystem is breaking records –records set just the previous year! If I narrow the PE/VC down to just “start-ups” then Indian start-ups have raised $11.3 billion this year – up from $10.5 billion raised last year – the good times are truly here.

This massive influx of money and strong tailwinds make it seem as though raising capital is getting easier. But, with the number of start-ups growing as fast (if not faster) than the money supply, the real picture for a start-up raising money today is – disconcertingly different. The discussion of what metrics does it take to raise a round, what the different stage VCs focus on when you raise, etc. is a polarizing topic. One that I regularly have now with founders who are raising, founders who have raised and with funders of all stages – but there isn’t a silver bullet.

Therefore, when Yuki Kawamura shared Pear VC’s report, aptly titled, Navigating the New Seed Landscape, he could not have sent it at a more opportune time. Mar Hershenson, Managing Partner of Pear VC, created this report analyzing the US VC ecosystem but there are several parallels we can draw for our ecosystem here. For example:  

  • It confirms something that seed investors have long known, i.e., the time, amount and metrics required to raise a Series A round has increased, therefore;
    • The money needed to get a venture ready for Series A has also increased
    • Series A investors want to see positive unit economics and traction before putting in growth rounds
  • Traction has a direct correlation to valuation
  • Second time and successful founders get a premium valuation
  • Where you locate your start-up does affect its initial valuation

There are several other learnings in the report, but the one slide that stuck with me is:

Just replace the names of columns (from the left) with Seed, Pre-Series A (or Angel), Series A, and Public to translate this to our ecosystem’s lingo. However, the vertical order in those columns stays the same
  • A seed investor (like me) backs the team
  • The angel investor backs the traction, and
  • The Series A investor backs the market.

The report then gets into further details as to what your start-up must emphasize when you are raising a new round. It provides a founder the VC view on where your venture must be before attempting to raise that the Seed, Angel, or Series A round. I believe that this presentation is manna for founders. I Whatsapp’d it to my founders in the morning. Now I share it with you!

My Jabalpur Visit Confirms that Bharat is Booming!

I was part of the final jury that was judging business models at a weekend hackathon in Jabalpur. It was a massive event with almost two hundred teams competing to build the best solution to different problems. I was impressed by the progress that some of the teams made in the short span of 40 hours.

The Executive Director of Jabalpur Smart City Limited (also the organiser of the event), Mr. Chandramauli Shukla encouraged the audience of over 400 budding entrepreneurs to work with the government. He committed to the top 30 teams that the government would be the first tester or consumer for their solutions, since they were working to solve problems that had been put forth by the government itself.

There was a palpable energy at the venue, and the teams presented with confidence regardless of their preference of language. It was powerful stuff.

Even outside the venue, Jabalpur is a town on the move. The city is getting a rapid upgrade with the implementation of multiple projects under the Smart City program. Roads are being concretized, filthy lakes are being cleaned and beautified, garbage bins are being given RFID tags and the data from them is being analysed. There are multiple but unheard-of restaurant chains like Chai Sutta Bar that are choc-a-blocked with teenagers. The city will also get an autonomous traffic management system soon. I was told that the citizens have responded positively to all these developments and I even met people who have moved back to Jabalpur after emigrating to developed countries like China!

What I saw was a stark contrast to the image I had in my head of a Tier 3 start-up ecosystem like Jabalpur. I was pleasantly surprised.

Just under a year ago, I had written about the transforming effect that Jio and GST would have on the Bharat that exists beyond India and the importance of positioning my VC investment gun on start-ups that cater to these underpenetrated ecosystems. Since then, I have made a conscious effort to visit the start-up ecosystems of Bharat like Udaipur, Kharagpur, Kanpur, Goa, Lucknow, Chandigarh, Mysore, Guwahati, Indore, Surat, Raipur and now Jabalpur. During my visits, I witnessed the wave of change that is taking place with my own eyes and I cannot emphasize any harder (as I already have before) that the next wave of start-ups will come from Bharat. However, after the visit this weekend, I realized I have underestimated the speed and the size of that wave.

A truly Mera Bharat Mahan & Jai Hind moment for me.