Breezeblocks

Life in Vasant Kunj continues to be exciting as ever (residential societies come with residential dogs, kabootars and moral guardians) and before I proceed with the general life update, words of wisdom I was privy to this last week:

“If you see a loose thread, you should, by all means, pull at it. Sometimes, it will be a short thread, and that’s great. But sometimes, you’ll see the entire fabric come loose into a ball.”

“Companies that have stood the test of time have taken dozens of years getting built. Early stage investing takes away that perspective from you. You start looking for 5-10x returns in 5-7 years. If you really want to create something, leave before you become one of those.”

“Investment prospecting is like looking for a house. You shortlist a few neighbourhoods (in this case, sectors) and then look at all the houses that meet a basic threshold criteria. It might take you months at a stretch and you might still not be able to find something that checks all the boxes you have, and sometimes you might feel you’re just wasting your time. But all of those failed experiences are basically just refining those inner filters so that when you finally see The One, you know this-is-it.” (Also holds true for dating, I guess)

I have been in and out of IIT and the adjoining SDA market a lot the past few weeks. It’s crazy how much the market has changed, and yet how much it still feels the same, how my eyes keep straining for familiar faces, how it only feels like yesterday I sat on the Rainbows steps and had momos for the first time, celebrated my first placement shortlist by buying food for a little boy who looked longingly at our rolls, how you said sorry for the last time as I stood outside Costa while the rest of my colleagues beckoned me to join them, how you spilled pasta sauce on my sweater outside Pizza Square, the number of times we bought lens solution from the chemist or eyed the expensive Economist issues on sale at the bookstore beside it. It’s hard to take the Uber back home when something inside me keeps holding me back, dragging me to the same old places, finding myself in the second year students from across the road fingering books in Spell & Bound, feeding the cat outside the shwarma place, haggling with the Scissors auntie for the 15% IIT discount. I could draw the restaurant layouts from memory, tell you the times of the day the Qahwa owner sits on the barstool with her MacBook and coffee, recount the sub-of-the-days for all days of the week from 3 years ago, and point out the ATMs that used to be generally out of money. Where I think there used to be a travel agency, we now have a startup incubator. Masala Junction is trying hard to keep pace with the changing times and has rechristened itself as Beeryani. Over coffee and chaay(os), people now pitch, recruit, debate over whether the bubble (if it existed) is now ready to burst and whether going iOS or Android first makes more sense. The momo guys still use their feature phones though, and you still get 5 pieces for 15 bucks with the orange and green chutneys I had grown to love. And no matter how much crap I might have in my head, it’s still easy to get lost in the easy cheerful din that remains my SDA market.

The venture funnel

Sometimes my job feels a little surreal.

I speak with entrepreneurs all day, ninety percent of whom think their idea will ‘fix’ all that is ‘broken’ in said space and be the next ‘unicorn’. I see articles being shared everyday reiterating how you need one person with an unshakeable belief to build a big company battling the hundred naysayers, critics, skeptics to achieve the seemingly impossible. And to dream is great, but we all know how the statistics are completely stacked against even one of them actually realizing those goals. And here’s something I want to say to so many of these founders and always struggle with the right way to phrase it: not all good ideas will make good businesses, and not all good businesses will be good investments from a Venture Capital perspective. To illustrate the thought a little better:

Good idea: Gossip column for the venture scene in India
Good business: Charge startups for manipulating the news you publish
Good investment: Move to North Korea and expand to other categories where you can exploit information asymmetry

On a more serious note, for instance, creating a direct-to-consumer marketplace for primary producers is a brilliant idea but probably not the most profitable one at this point. A socially-oriented VC firm might still back you because its motivations would be different. A personal finance management platform is potentially a good business in India (would make enough money for the operating team to draw out decent salaries) but it’s still early days for it to achieve the kind of scale in India that venture capital needs for the investment to make sense. Think about a scalable way to standardise a hitherto unorganised industry in southeast Asia, though, and now we are talking.

Hence, my $0.02: before approaching an investor, think twice or thrice about what you’re trying to build and whether you need venture capital at all. Would angel funding be enough? Is a strategic acquisition the best exit for your company cause it can never achieve scale otherwise? If you’re speaking to a venture capital firm, be cognisant of the underlying principles governing its investment decisions – is it a firm that places bets on each sector or is it sector-agnostic but looks for specific values driving growth? Is it a firm you can leverage for its sector knowledge or expertise? What are the ticket sizes this company looks at and what are its decision metrics?

Speaking of approaching investors, ‘need lots of capital to redefine xxx industry and make us all multi-millionaires’ is probably not the most compelling subject line to open your conversations with (#CantMakeThisShitUp).