6 Learnings after 60 days of WFH – for Founders

Yesterday was the 60th day since we shut down our office, but it feels much longer. Partly because of the roller coaster journey I have had with a concept that I could not understand, i.e., working from home. In the last 60 days, I have gone from hating to loving the work from home concept and from working myself to the bone to appreciating the freedom and higher productivity this concept brings to my team and to me.   

There are several posts on how to manage employees that are working from home, but very few focus their attention on the founder that is leading their startup through troubled waters. I had 6 distinct learnings that reshaped the way I thought about working from home: 

 

 

  1. Hyper-productivity has its limitations 

    I was guilty of indulging in this mistake for the first 30 days. Theoretically, I saved 90 minutes of commute time; therefore, I decided that I could take on more tasks and responsibilities. Thus, in addition to my duties as a fund manager, I was reworking budgets with our portfolio companiestook on the chief editor role for Artha’s blogs, and I was conducting multiple team calls a day to keep the team focussed and engaged. 

    It was exciting and new the first couple of weeks, and I enjoyed working myself to the point of exhaustion because it kept all the negativity around the crisis out of my mind. However, hyper-productivity began providing diminishing returns the more I indulged in it. 

    It started with general irritability and slight distractions, but eventually, the focus on work suffered, and the list of tasks pending on me started to pile up. Finally, there was just a general numbness to all the work. The enjoyment of completing one task was quickly replaced by the groan of watching the tasks list continuing to expand

    became aware of the toll my hyper-productive avatar was having on my physical and mental health. Eventually, it started affecting my interpersonal relationships – at work and at home. With some sage advice, I toned down my hyperproductivity ambitions and focussed on quality instead of quantity. I concentrated on completing 5 tasks per day (nothing more or less) and utilizing the extra time to expand my knowledge horizon.

  2. Recognizing and dealing with Zoom fatigue 

    It was fun to be on an endless stream of Zoom calls. The meetings were shorter, I drank fewer calories, and I could do double the number of meetings. Then as Brad Feld put it, I started to experience Zoom Fatigue. I caught myself replying to emails, responding to internal team chats, or editing investor newsletters during these online meetings. I was there, but I was not present

    It did not help that I made my meeting schedule so tightly packed that there was no room for error; therefore, if there was an unscheduled call, it would be a couple of days before I could get back to them. 

    At the start of this month, I reduced the time I allocated for online meetings. Encouraged with the results, I have limited my online meeting schedule to just 3 hours a day from this week. This workaround will give me ample down-time to catch up with my inbox, tasks, and team chat – allowing me to be fully attentive during the online meetings 

  3. Taking a break 

    It is ironic that I would find it challenging to take a break from working while working at home. The opportunity to take a break (my TV) is less than 10 steps away, the bed just another 15 steps. Despite my intense working schedule over my 15year working career, I continued to watch at least 1 new movie a week on averageHowever, in the last 9 weeks, I have watched a grand total of 2 new filmsand I had to split watching each one over 2-3 weeks. 

    The fact that the opportunity to take a break was so close developed a false sense of comfort that I could take a break at any time. That time did not come because there was always something pressing that needed my attention.  

    Although it was late, the benefits of taking breaks finally dawned on me. A couple of weeks back, I took a 3-day weekend (I still ended up working for half a day), caught up with friends, and on my sleep. I had a fresh perspective on projects & a spring in my voice when I resumed work, convincing me that taking a break is an imperative undertaking for any founder.

  4. Setting boundaries 

    When we are done with work, we shut our laptops, stuff them into our bags, we commute back home, switching off all the work-related tabs in our minds and refreshing the tabs for our personal livesWhat happens when that commute is cut down to 90 seconds? 

    In my first month I was taking work calls from 8 am to 10 pm daily, I slept with work and woke up in it. There are several times in a year when VCmust put in those types of hours, especially when we are closing multiple deals. However, this was different.

    I did not have time to work out, I took tons of notes with a mental promise to review them but could not find the time to do it. Many a time, I could not remember what I ate for dinner and in what quantity! These endless hours started to take a toll on the team as well.

    I instituted a pm deadline on myself for all workrelated meetings. Everything that could not get completed by 7 pm would get pushed to the next day. To commit myself to this deadline, I started working out on cure.fit with a partner who would ensure that I did not miss workouts, therefore, ensuring that my work-day had an ending

    Without boundaries, the boon of working from home can quickly turn into a curse. Therefore, it is a good idea to schedule winding up and winding down activities so that there is a psychological boundary between work & home. 

  5. Schedule tasks into your calendar 

    There is a big difference between being busy and being productive. One can be busy all day but have nothing to show for their busyness at nightOn the other hand, productivity demands results, it demands focus.  

    I learned an excellent productivity hack that has worked wonders for me. Instead of having a to-do list or a task list – I get my tasks directly scheduled into my calendar, thereby blocking out time to focusThe scheduled slots are limited to 30-45 minutes chunks, with a 15-mins break at the end for contingencies and to report to the team after the job assigned to me is completed. There is an excellent post on Effective Scheduling for more on this. 

  6. Take a vacation 

    It sounds ironic that I would propose vacation time amid an economic crisis, especially when we are working from home! However, a lot of founders have forgone summer vacations due to the way this crisis creeping upon us. As a founder, we must recognize that vacations are essential with several scientifically known benefits of what breaking routines do for our minds & bodies

    While there are minimal options for us to travel for a vacation, there are other ways to take a break from the world and give the body & mind time to recharge their batteries. The Washington Post provided an excellent resource for vacationing at home, aptly titled, The completely correct guide to vacationing at home.

    Oh! You will find the perfect vacation auto-response in my 18-month-old postPerfecting the vacation auto-response.

My Funding Picks For The 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.

Summarizing my exit interview with a venture capital intern 

Two interns finished their learning cycle with Artha this week. One of them wanted to speak to me and get my feedback on his performance during his 4month internshipThe schedule short feedback session went on much longer, and at the end of it, we got into an exciting topic – the importance of forming an opinion.  

I believe our discussion applies to anyone who wants to work in the investment business, especially earlystage venture capital. I am sharing a synopsis of that conversation with the permission of the intern.  

 

Intern: What is one piece of advice for me? 

Me: Form an opinion and be vocal about it. It is acceptable to be wrong, completely wrong, and heinously wrong. However, it is cardinal mistake to have the ability to accumulate and analyze data but lack the courage to form a decisive opinion. The best investors have often sought out views from their peers and from people who could provide them with a fresh perspective. In fact, the investors I emulate often seek out contrarian views to their own to test their hypothesis.  

 

Intern: Why is the trait of forming and communicating our opinions so important? 

believe that investing is the ability to predict future outcomes of current decisions, and an investor’s brilliant foresight finds appreciation only in hindsight. That is why I consider investing more of an art than scienceA room full of experienced appreciators of art would almost inevitably have deep-felt disagreements on the value of Van Gogh. They could all be right or be wrong – we would only find out once the money gets transferred into the sellers account 

 

What should an intern do?  

fondly remember eyeopening realizations I have had during discussions (sometimes heated) with interns, associates, principalspartners, coinvestors, and even entrepreneurs over the last 10 years in venture capital. Initially, it was intimidating for me to showcase my opinions in front of the experienced hands of this game. But I realized that I wasnt learning anything by keeping them to myself. I learned more by expressing my incorrect opinions and recognizing the gaps in my understanding, over keeping my opinion to myself for fear of getting called out.  

A newcomer to the investment industry should seek out experiences where they can form these opinions. Join investment clubs, seek out investors who have strong opinions, even if they are contrarians to their own, but learn how to build and present your investment viewpoint. 

 

Don’t be afraid of being wrong; we learn best through the mistakes we make. Expressing your opinion is a win-win situation. You either get called out and learn where you went wrong, or your opinion contributes valuably to the discussion. Most importantly, you grow with each interaction and learn to receive constructive criticism. 

My funding picks of last week (w18)

Fundraising activity continues to slow down; therefore, my team and I had a tough time shortlisting our favorite picks with just a handful of deals to choose from. After shortlisting all early-stage deals activity for week 18 from Traxcn, Inc42, and YourStory, we jointly picked out the following as the best funding picks for the last week:

 

Name: QuillBot

Amount Raised: $4 Mn in a round led by GSV Ventures and Sierra Ventures

What does QuillBot do?

Edited from Traxcn: Millions trust QuillBot’s full-sentence thesaurus to get creative suggestions, rewrite content, and get over writer’s block. QuillBot uses state-of-the-art AI to rewrite any sentence or article you give it.

Why do I like QuillBot?

My team and I are Grammarly power users processing tens of thousands of words for our investment notes, meeting minutes, emails, blogs, private chats, and more. I believe that there is space for a Grammarly competitor, especially one that understands the Indianized English – also, can Quillbot (or Grammarly) build a plugin for PowerPoint, please!

 

Name: YAP

Amount Raised: $4.5 Mn led by BEENEXT

What does YAP do?

Edited from Traxcn: YAP offers a white label program management platform. They also issue a Yap Tatkal wallet, which allows their clients to provide their customers physical or virtual prepaid cards linked to their products. They also offer a QR payment solution in the mobile wallet.

Why do I like YAP?

The lockdown caught the banks with their pants down due to unpreparedness to go digital. The post-lockdown scenario is bleak for physical banking, and banks must prepare themselves to fully service their customers from the palm of their hands. YAP is building APIs to bridge that gap hence one to look out for.

 

Name: Mindhouse

Amount Raised: ~$680K from BTB Ventures, GGV Capital, Aartieca Family Trust, and Angels

What does Mindhouse do?

Edited from Traxcn: Standalone mental fitness and wellness center brand

Why do I like Mindhouse?

The COVID19 virus reserves it’s worst for those with weakened immune systems. Therefore I expect that fitness (physical or mental) will be on the priority list of most in the post-virus era. Mindhouse attempts to enter the space that mind.fit is operating in. Will it succeed?

Flashback Friday: CarveNiche Technologies

As I approach my personal goal of personally investing in 100 startups within 10 years, it was time to reminisce. Each new investment gave me a new experience, sometimes good, sometimes bad and sometimes ugly. Last week I wrote about my first angel investment, United Mobile Apps. This week is its investment #2!

CarveNiche is an innovative EdTech startup. They developed advanced EdTech products such as beGalileo (India’s largest personalized after school math learning program for K-12 education), Wisdom Leap (free online source for K-12 education), and Concept Tutors (personalized 1:1 tutoring focussed on the international market).

CarveNiche created a niche in the EdTech space. It is the first to develop a product using the latest technology, such as Artificial Intelligence (AI), to teach a subject like Maths. The flagship brand, beGalileo, recently became India’s first after school Math learning program to be available as a Windows App.

At present, they have over 750 women entrepreneurs who are running their centers through CarveNiche. The renewal rates exceed 90 percent, which shows the value they provide to the students and parents.

Founder: Avneet Makkar Total funding raised INR 5.5 crore
2020 status: Operational with HQ in Bengaluru Number of rounds 3
Co-investors: Lead Angels, Mumbai Angels, Calcutta Angels

 

  1. Why did we invest in CarveNiche?

CarveNiche’s initial business model was to deliver a superior classroom experience for the school students by utilizing the latest digital hardware with a customized software platform. The platform provided instructors the ability to track the progress of each student and personalize the student’s teaching plan based on how well the student grasped the subject. The platform also offered a messaging service to connect parents & teachers so that they could track the progress of their students at school & home.

I liked the founders. It was a known fact that Indian schools lacked modern equipment to upgrade the delivery of instruction in the classroom. Looking at the massive size of the market, I decided to invest based on the broad target market, solid team, and their clear understanding of the problem and its solution.

 

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

The risks presented themselves in three ways.

    • Long sales cycles: The company had a tiny window to sell its offering to school administrators, their boards, and their trustees. Next, their team must negotiate contracts, find financing to help the school purchase the required equipment. After that, CarveNiche would implement the solution and train the instructors on how to use their platform. If the company could not complete all these steps before the start of the school (academic) year, the sales decision, the invoicing, and the revenues from it would get postponed to the following year. The company must continue to fund its sales team for long periods before they could see the results of their efforts or get feedback to innovate on the product.
    • Providing subprime debt: Most Indian schools do not have a profitable business model. They must regularly fundraise to meet their budgetary needs. Therefore, most schools could not afford the hardware for CarveNiche’s solution – unless provided with equipment financing.

With most of these schools running operating deficits funded by government grants, donations, and trustees, these schools had an inferior debt profile.

To survive, the company had to come up with an equipment leasing/purchasing plan, and they approached us for that financing. We gave subprime debt to a few schools to evaluate their ability to repay, but most of the schools defaulted on their obligations to CarveNiche and us. That experience burned a severe hole in CarveNiche’s bank account, forcing them to abandon this product offering and the selling to schools’ business model.

 

  1. How long did you plan to invest in CarveNiche?

At the time of the investment, it seemed like CarveNiche would scale quickly and get acquired by a larger player like Educomp. However, our investment coincided with the start of the demise of Educomp, and even though the company raised a couple of follow-on funding rounds, they had to (thankfully) pivot to a B2C business model.

 

  1. Would you invest in a similar startup today?

I learned from CarveNiche’s experience that trying to build a massive business that sells to institutions that possess inherently unprofitable business models is like living in a fool’s paradise. The Modi government invests 4.6% of GDP in education, so I know there is money to be made in EdTech.

However, I find that the B2C plays must spend a lot to acquire a customer, and their LTV / CAC ratios stay <1.

In B2B, I have not found a group of founders that understand the pain that CarveNiche went through and have developed a business model that addresses those issues; therefore, we have cautiously stayed out of this space.

CarveNiche’s new business model providing online tutoring has promised, even if it was a bit niche. However, it has scaled beautifully in the COVID19 era. The company has turned around and raised a new round to aid its growth. Avneet has stayed the course despite several setbacks, so she deserves every bit of the luck that comes her way.

In conclusion, I would not invest in the original CarveNiche business model – but I would invest in Avneet.

 

  1. What are your learnings from the pivots that CarveNiche has made over the years?

CarveNiche was my 2nd angel investment, and it taught me many lessons that continue to guide me today. I’ll share a couple of them:

    • Follow-the-money: It is essential to understand how long it will take a business to convert billed revenue into money in its bank account. If the path to getting the money is long and fuzzy – avoid that business model. As a founder or an investor.
    • Avoid investments in long working capital plays: If it takes a long time to close a sale, then a long time for to invoice for sale, and an even longer wait to get the money from that invoice into your bank account – what is getting utilized to keep the lights on today?

If the answer is venture capital, then I would not invest in that business.

Help us help you get that business partnership you want!

During my door to door salesman days, I could go through a wall if that meant I would get a referral to a potential sale. My team and I created, and memorized closes to secure referrals. My managers and I tracked how many transactions took place from referrals, and we pulled up salespeople that had low referral closes. It is clear to any salesperson that a referral is worth its weight in gold – it is a job half done.

Continuing in the same vein, now more than ever, founders are on the lookout for business partnerships to increase business avenues, and you must know that your investor has access to a vast network of people. Your investors’ immediate network has access to an even more extensive network, i.e., your investors know some people that know some people who are very important people.

So why is it that most founders fail at utilizing our reach?

A majority of the investors have every intention of helping you, but here is another critical question.

Have you made it easy for us to help you?

Despite best intentions (and regardless of the size of the fund or team), we have a limited amount of time and resources to address the needs of founders. A little bit of help from you would make it easy for us to help you. Your help would help us get more done in a shorter time and make you and us happy.

Therefore I came up with a list of steps, distilled from my efforts in securing referrals, whether it be for investors into our fund or for business development. Besides, I analyzed the efforts of founders who got the best out of their investors and those that failed at leveraging them, and the result was more straightforward than I would have envisioned when I began writing this list.

  1. Self-research on your target connect.

Venture capitalists have thousands, if not tens of thousands of contacts, and we are very adept at networking and finding people. However, you need to do your research on the people you want us to connect you with.

Usually, your reason to connect with the target is very different from why (or how) we connected with them. Our personal experiences could bias our opinion with your target, i.e., we could have approached them to invest in our fund, and they refused?

Therefore you should do your research on the target, utilize our knowledge about them to sharpen your understanding and find out whether an association with your target would be fruitful.

  1. Be as specific as you can in what you seek

It is a known fact that the most sought after people have the least amount of time. It is likelier that those people have an even shorter attention span. Therefore you must grab their attention, deliver your request before a notification takes your target onto another window.

Therefore avoid long-winded emails and big paragraphs, write in point format, be specific and get to the point quickly. When you show respect for your target’s time (and attention), it speaks volumes about how well you understand their position.

PS: Do not forget to be courteous & spell check!

  1. Know ‘why’ would your target want to work with you

If you or your company is the ultimate beneficiary of your proposal, expect a long period of silences to your requests. You must find a win-win situation and communicate how your association with the target would benefit the benefits them directly or their company.

If you cannot find or demonstrate the benefits of the association for the target – why would they get out of their chair to help you?

PS: If your strategy is to appeal to your target’s charitable side – please find a better reason.

  1. Create a short presentation (or note) on your proposal

After analyzing 40 million emails, Hubspot reported that emails with less than 200 words had the highest response rates. It is sage advice.

It is an excellent chance that your target receives hundreds if not thousands of emails in a week. Your warm introduction through us would encourage the target to etch out time to respond. However, long emails get flagged for reading when we have more time. Which (in most cases) I don’t.

There is a hack, though:

  • Create a short presentation (5-8 slides max) that outlines your research on your target, defines what you do, what you can do for your target, and how your proposal creates a win for the target.
  • Your presentation should excite them to get in touch with you (or get the relevant person from their team to get in touch with you)
  • Write an interesting note that generates enough excitement for the target to open your presentation.

  1. Get your investors’ buy-in.

Once you have found a win-win, written an action invoking short note to go with a presentation that will get you a callback, next, get your investor’s buy-in.

Some founders treat their investors as gofers who should do the founder’s bidding regardless of the investor buying into the proposed plan. You must understand that it takes much effort to create and cultivate relationships. Just one poorly-thought-out request could ruin that relationship for the foreseeable future.

If we get bought into your well thought out plan, and you can convey how we could enrich our relationship (with the target) through your proposal. You would’ve created a win-win-win that will get us to go those extra miles for you.

  1. Write a short, courteous but direct introduction email to your investor asking for your specific help from the target

With your investor bought in, write a quick introductory email asking for a specific connection to your target utilizing the steps outlined above. Your email must convey that you were specifically looking for an introduction to the target (and why).

Emails that convey a spray & pray approach get treated as spam.

  1. Draft the email for your investor

For extra credit (and to ensure that your message isn’t lost), go ahead and write the email that your investor could copy, paste, as their own words, and forward the email you sent in step 6.

It is unlikely that your words will get copy-pasted in the form that you’ve sent it in. However, your words will load our words when we write our email, thereby ensuring a near-total control to you on the messaging.

PS: It won’t take but an extra few minutes, but knowing how busy and dynamic an investor’s day could be, you leaving anything to chance is foolhardy.

  1. Give them a way out

Your target must have a courteous way of saying ‘no’ to your investor. I have explained before that each relationship takes much effort; therefore, the target’s failure to help you through your investor should not lead to a loss of the connection itself.

We want to help you, but if that means it puts our relationships on the line – it isn’t the sort of song that you wish to play in the back of our head.

PS: Give your investor a way out too. You can utilize this forgiven favor soon! 🙂

A Pleasant Surprise on the Upside!

While redoing our website, I accidentally stumbled upon an interesting piece of information.

I wanted to create a portfolio filter that would allow a visitor to create portfolio cohorts using factors such as the year of our investment, whether we were current investors, which startups we had exited from, or which sector the startup operated in and so on.

While tagging the startups, my team discovered that 4 of Artha Venture Fund’s portfolio companies had at least 1 female founder, i.e., 66% of the fund’s portfolio! This statistic piqued my interest as I stress the importance of being gender-neutral when it came to choosing our founders. Yet our female founder representation was far higher than the 20% female founder representation reported in CrunchBase EoY 2019 Diversity Report published in January 2020.

I dug further to look into our upcoming pipeline, which told me that out of the 5 deals which were at an advanced stage of closure, 3 deals had at least 1 female in the founding teams – 2 where the female founders held the CEO position!

I still felt that my sample size was too small to form an opinion. So I widened my search. My team & I started an investigation into my previous portfolio that I had set-up through our family office, i.e., Artha India Ventures.

The team keeps granular information on my past performance to report to institutions and family offices that need the information as a part of their due diligence. It took a few hours to figure it out, but 22 out of the 69 startups I had previously invested in had one female founder, i.e., almost a 33% representation!

MicrosoftTeams-image

The team went deeper to uncover that the female founder cohort delivered a 41% IRR with 4.3x multiple on invested capital in comparison to an overall portfolio IRR of 56% with a 4.6x investment multiple. Though the female cohort performance is lower than the overall performance; it does not tell the entire picture.

Our 330x multiple in OYO skews the numbers in favor of the XY chromosome cohort, but several of our female founder companies are raising new rounds of capital. One of them is months from becoming a unicorn, so it is a matter of when (not if) when the female cohort will be the alpha for the portfolio. While an eye-opener, I am not proud of beating the gender bias – not this way.

What I am proud of is that diversity happened without gender bias in favor of the XX chromosome. I am very vocal in stating that we do not favor a particular gender in our employees or founders. I believe that being entrepreneurial is a gender-neutral trait, and to invest in someone because they have or lack a Y chromosome is foolhardy.

Despite these results, I continue to stand up for what I said in last year’s blog post, Why I refuse to promote Women’s Entrepreneurship. 

The moment that I start treating a founder differently because they are women, it means that I do not see them as equals. I will skew my thoughts to cater to my bias, and it will hurt them as much as it will hurt my bank balance.”

To investigate if my lack of bias was something I felt or did it percolate down to our treatment of our female founders, I asked my XX founders whether they felt any bias from our end. Besides, I asked them why they gave a seat to Artha for their entrepreneurial journey. This is what they had to say:

IMG_8029

WhatsApp Image 2020-03-09 at 7.24.53 PM

The diversity of the artha eco-system is felt in all the events we come together with Artha- where we meet entrepreneurs working on awesome ideas - pushing through- without feeling any differenc

In closing, while global reports state that the penetration of female founders in startups is very low, I have little concerns for the same. People whose investment lens has a filter against a particular group of people due to their color, country, or chromosome will lose out – lose big.

I am glad that our lens is crystal clear and that my team chooses the best people for the founder’s job. We follow an incredibly meticulous approach when it comes to choosing our founders.

Not always do we have the most qualified founders, but we attract the most passionate founders’ with a deep internal drive for the problem they are solving. We trust in our process of channelizing a founder’s energy to win one battle at a time and create category-leading companies.

Now if that means that our winning portfolio has a disproportionately high number of female founder companies – then so be it!

My Funding Picks from Last Week (W01)

The first week of 2020 was understandably slow for deal announcements with Yourstory reporting a 73% drop in funding from last week. It was slim pickings for me to choose my funding picks, and I decided to choose just one.
Aeron Systems raised ₹2 crores from Bharat Forge
What does Aeron Systems do?
Copied from Traxcn: Aeron Systems focuses on the development of technology, applying its expertise in embedded electronics to domains encompassing aerospace, automotive, renewable energy, and agriculture. The company offers products in two technology segments, Inertial Sensors, and M2M devices. The IoT solutions include wireless data loggers, wireless data gateway, vehicle health monitoring systems, and a wireless weather monitoring system.
Why do I like Aeron?
Artha manages 5 renewable energy projects, and for a long time, I had an analyst to log weather data sourced from weather.com with each daily generation report. We would find trends that gave us a good idea of the next day’s generation. However, the weather.com data wasn’t accurate as it did not capture the weather at the project location but from their closest available weather station.
Therefore and in all honesty, it was their Weather Monitoring Station for Solar Power Plants that lured me into learning more about the company. I asked the Artha Energy Resources team to reach out to them and get a demo for our current and future projects and see if it is cost-effective.
Looking at their product portfolio, getting investment from Bharat Forge is a masterstroke!

I liked FarmERP investment as I am interested in Farming as a Service. However, there was nothing shared on the amount of financing, and since the company is over 14 years old it outside the contours of how I would define an “early-stage” start-up.

Family & Friends – Please Save Your Capital!

A couple of months ago, I found my jaw hitting the floor during a start-up pitch. The founder of an early-stage B2C startup revealed that he had previously raised a family and friends’ round of the princely sum of 5+ crores (~$900k). That capital was exhausted in less than 18 months; the monthly burn was over 50L per month with a double-digit staff strength. All this effort was delivered less than 25 lakhs in sales – since inception!
Runaway spending, low traction, running out of cash are situations that I regularly encounter as an early-stage investor. What worried me was the lack of oversight the family and friends had on how the founder invested their capital and their lack of experience steering the founder from avoidable expenses.
For example, precious and expensive capital found itself funneled into:

  • A massive PR & Branding campaign which wasn’t delivery but continued to burn a hole every month
  • Lobbying for international “paid awards” that cost a bomb but did not deliver results.
  • Massive allocation on R&D, but it was a ruse. The money got spent on traveling to different countries to find manufacturers to white label their products to the company
    • I have seen others do it at 1/10th the cost & time

I cannot hold the founding team entirely at fault here too – part of the blame should be on the investor class. They infused excess capital into the business, thereby encouraging the founder to burn the money on things that don’t matter, ultimately setting up things to fail.
My presentation of these entrepreneurial misadventures is not an attempt to rub salt on the wounds of the family and friends’ investors or the founders.
I want to point out something fundamental. Except for unusual situations* family and friends must limit the amount of capital they commit to an entrepreneur. Leave the larger rounds of capital to the professionals. Not only will it save capital for generous family and friends, but it will also save founders from committing hara-kiri with their startup ambitions.
If this were a one-off situation, I would not have written about it, but I am witnessing a marked increase in the number of ventures backed by family and friends and coming to us for a seed round. We like family and friends supported investments because it shows that those closest to the founder also believe in them, but like healthy foods – too much green can be injurious to health.
Most of the time, family and friends judiciously put in a small amount of capital, just enough to get the venture started. However, there were many examples where family & friends have drowned a lean start-up culture with a deluge of capital – killing the enterprise and blowing away the capital.

So, the obvious question that arises is, how much should a family or friend commit to an entrepreneurial family member or friend?
The good news is that a family or friend need not look too far.

The best accelerator programs in the world, i.e., Y-Combinator or TechStars, commit $150,000 (~₹1 crore) for a 7-10% equity stake in pre-seed ventures. Similar programs in India like 100x.vc, Indian Angel Network accelerator, or VentureNursery (in the past) invested between 25-75 lakhs for a similar equity position.
All the branded investors mentioned above have many good and bad investments; therefore, with their experience, they can guide founders on promoting the right and shunning wrong behaviors in their start-ups. So, for inexperienced family and friends’ teams, the correct amount of capital would be between 50% to 75% of what these guys invest, i.e. anything in 40-75 lakh range.
Family and friends can decide where to invest in this range based on the domicile of the venture but ensuring that the founder has 6-9 months to find a professional investor while they continue to grow their start-up. It is the founders’ responsibility to consistently update their investors whether things are going well (or not). Developing this habit is vital but critical in case things are going well, but finding a professional investor is taking time. Family and friends could opt to put in some more capital IF they are comfortable with the start-up’s progress and are objectively taking the additional risk.
However, the family & friends’ capital tap must end at that.
 
* While It is still advisable to leave the more giant cheques to a professional but in certain situations, it makes sense for a more significant allocation from family and friends. These are exceptional situations, not the norm.

  1. If the family and/or friends have in-depth domain knowledge and are objectively backing one of their own
  2. In Meditech or Healthtech like start-ups that require more massive upfront investments and the family and friends’ investors have in-depth domain knowledge

My funding picks of the last week (W49)

Most funds are winding down their operations in December; therefore, there wasn’t enough funding news from which I could shortlist. Yourstory reports that there were 17 deals in total with less than 50% meeting the criteria of the early-stage deals for this section of this blog.
The launch of the first cohort of Sanjay’s 100x.vc should change that this week, and I should have a tougher job to choose my top picks next week!
 

Sarva.com raised ₹20 crores from Fireside Ventures

What does Sarva do?
Sarva is a wellness start-up that offers a wholistic ecosystem for mental, physical, and emotional wellbeing that utilize the ancient practices of Yoga. Sarva’s website claims to provide 25 forms of yoga taught through studios in 14 cities and has membership plans similar to Cure.fits memberships.
Why do I like Sarva?
The success of offline plays like Cure.fit and Bombay Shirts have brought back confidence in the augmented real estate brand plays.
Yoga has a mass appeal, and while Cure.fit does offer Yoga classes, I like the specific niche that Sarva’s is pursuing. Several Yoga schools in various cities provide personal trainers, but very few (maybe none) have tried launching a national brand like Sarva. The rest of the ecosystem is fragmented and regionalized.
I am a frequent user of Cure.fit (when I am in town) I love the flexibility of choosing classes that work with my schedule at a location closest to me on a given day. I suspect that with their war chest full of money, Cure.fit could quickly launch a Yoga studio vertical too. However, I suspect that the difference could be in the execution.
I found a Sarva studio in Nariman Point, and I will take a trial class to compare the two before I say any further.
 

Indyfint.com raised $2.1 million led by Saravanan Adiseshan

What does Indyfint do?
IndyFint offers a plethora of bank-like services for businesses (as per their website) as well as a marketplace to provide loans to merchants, employees, and students (as per the YourStory article.)
Why do I like Indyfint?
I am a big believer that the Indian banking system is ripe for disruption. Banks use IT systems, policies, and operating procedures that are decades behind the business requirements of today. Previously (and in frustration), I had written a wish list for what I would like for a bank to do for me (as a corporate customer).  Therefore I have a soft spot for those attempting to take on the big banks!
I am not 100% sure that IndyFint is attempting to become an alternative-banking platform but I like the services they offer on their website. Just like them, several other start-ups are trying to break the stranglehold created by Indian banks. I support the disruption, and I forward to helping one of these disrupters with our money as well!
 

Dhruvaspace.com raised ₹5 crores from Mumbai Angels

What does Dhruva do?
Dhruva builds nano-satellites that work with ground sensors (also produced by them) for applications in agriculture, weather monitoring, infrastructure, etc.
Why do I like Dhruva?
Space is the unclaimed territory. Nano-satellites flattens the playing field that was previously occupied by big corporations or large governments. With billions of dollars at their disposal to send up massive satellites, their money power acted as a moat to fully exploit real estate a few hundred kilometers above our heads.
Nano-satellites and alternative delivery mechanisms democratize access to space. They provide access to applications that were (until now) were outside the reach of most of the world.
I believe that the market for nano-satellites will be worth tens of billions soon and add to that this is an Indian company that is attempting to compete in this space (pun intended). It is difficult not to love that!
 
Artha India Ventures invested in Kratikal’s Pre-Series A round. The announcement took place last week, but I chose not to review that investment in this section.