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[Published on Yourstory.com]

India’s enterprise software industry has been slowly bubbling since the 1980s but has generally failed to deliver a large number of high impact, high value companies.  We do have some companies that everybody talks about – iFlex, Tally, Zoho – but these are far and few between. I believe that we are seeing a new scalable wave of enterprise software companies coming out of India and there is a potential to deliver several high impact companies over the next decade.  Here at Lightspeed Venture Partners, leveraging our global strength in enterprise technologies, we see opportunities to partner with companies that are cloud-native and have cracked a global market – examples of current active categories in India are CRM, analytics/big data, marketing automation and infrastructure.

India’s enterprise software industry has to be looked at separately from the outsourcing/BPO firms like Genpact, Cognizant, Tata Consulting Services and Infosys.  Starting in the 1980s and early 1990s, this services industry is now mature and at scale.

Separate from the outsourcing/BPO industry, India’s enterprise software industry (or “products” as it is called by many here in India) has evolved from the 1980s to now in what I think can be divided into four waves, coinciding somewhat with three trends: 1) enterprise software moving from desktop to client-server to cloud; 2) evolution of Indian industry post 1991 liberalization; and 3) increased experience of Indians at successful US product companies.

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WAVE 1

Tally-

 

 

 

The first wave of software products came along in the late 1980s/early 1990s – the focus was desktop products for business accounting.  Companies in this wave include Tally Solutions (still the undisputed leader in SME accounting software in India), Instaplan, Muneemji and Easy Accounting.

WAVE 2

Infosys-finacleramco

5I-flex_Solutions_logo.svg

G  _institute_Newgen Logo

 

 

 

 

This generation of software products emerged in the 1990s as projects within outsourcing firms or from internal services arms of larger corporates. Infosys launched Finacle. Ramco Systems launched its ERP. And Citibank launched CITIL which became i-Flex.  Other notable companies included 3i Infotech, Cranes Software, Kale Consultants, Newgen Software, Polaris Financial Technologies, Srishti Software and Subex.

I remember attending CEBIT in Hanover in 1989 when many of these Indian software and consulting companies were first introduced to Europe.

The late 1990s saw a wavelet of ASP (application service provider) startups in India, most of which got crushed after the dotcom bust.

WAVE 3

eka-nexus-funding-147 zycus-logo

Manthan-Systems-Logo

talisma logo

 

 

 

 

 

The 2000s saw on-premise India-first companies such as Drishti-Soft, Eka Software, EmploywiseiCreate Software, iVizManthan Systems, Quick Heal TechnologiesTalisma (for which I did some initial product management work while at Aditi Technologies) and Zycus get started.  This was the era of 8-10% GDP growth in India which lasted till about 2010.  Many of these companies had a direct sales model. After India, they generally expanded into the global South (Africa, Middle East, SE Asia, Latin America) where they found similar customer requirements and little competition from Western software companies.  Bootstrapped in their earlier years, some of these companies grew over several years and have broken through to $25 million+ in annual revenue.  Key verticals have traditionally been BFSI (banking, financial services and insurance), telecom, retail/FMCG (fast-moving consumer goods aka CPG in the US) and outsourcing/BPO.

Having been around for over a decade, some of these companies generally face the challenge of migrating to the cloud, upgrading user experience to modern Web 2.0 levels, and expanding addressable markets beyond the global South to the US and Europe.  We have seen some of these companies get venture funded, typically at much later stages in their go-to-market relative to US-based software companies.  Several of these companies have received funding in the past couple of years, ostensibly to “go international” and “go cloud,” not an easy task, especially when done together.

WAVE 4

Starting in around 2010, a new wave of cloud-native companies were launched, perhaps following the slowdown in India’s economy and the growth/acceptance of SaaS as a delivery model and as a sales model in the US.  These companies have grown and now could power beyond the $10M/year revenue glass ceiling.  The reason for the scale potential being higher for this cloud-native wave is the cracking of efficient online sales channels to reach markets globally.

Why this decade? Because there is an increased willingness of companies around the world to search for and buy software products online.  There is now a large pool of founders who have worked at global enterprise product companies (e.g. Indian offshore development centers or in Silicon Valley itself with companies like SAP, Oracle, Google, Microsoft, Adobe) and have experience in product management, marketing and sales.  And finally, there has been a dramatic reduction in the capital required to bootstrap enterprise software companies.  Everybody uses AWS and software from other startups to get started. It’s quite meta.

Wave 4 companies have the opportunity to break through the barriers that previously relegated Indian enterprise software companies to selling to the global South. We have seen Atlassian (Australia), Zendesk (Denmark) and Outbrain (Israel) do this move to Western or global markets.  Zoho is an Indian company that is rumored to be at $100 million per year revenue scale – they have been part of many of the waves I have described.

This cloud-native wave, I believe, can be divided into two dimensions. One dimension is the platform/tools companies versus workflow automation (applications) companies. The other dimension is India-first companies versus the global-first companies.  We see opportunities in all four quadrants, each having its own challenges.  We are interested in looking at companies in all these segments, with a bias toward companies which have reached some scale ($1M ARR) and are going after large addressable markets with aggressive sales & marketing execution.

Applications Markets: Enterprise (retail, banking, telecom, BPO, ecommerce)
Examples: CapillaryPeel Works, Wooqer, Sapience
Categories: Employee productivity, verticalized
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Markets: SMB/mid-market
Examples: Framebench, Freshdesk, Kayako, MindTickle, Unmetric, Zoho
Categories: Mature SaaS segments eg CRM, SMM, horizontal
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Platforms/ Tools Markets: IT dept, developers, SMB, media
Examples: Exotel, Knowlarity, Germinait
Categories: Telecom infra, app dev tools
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Markets: IT dept, developers
Examples: Browserstack, FusionCharts, Little Eye, Mobstac, Webengage, Wingify
Categories: app dev tools, marketing automation, security
—————————————————
Model: License+AMC, direct sales, resellers Subscription, telesales, online sales (SEO/SEM,content mktg)
India-first Global-first

 [Please note this is not a comprehensive list of companies nor a view on which companies we admire or not]

Global-first companies coming out of India have started to crack or have cracked the online sales model, using SEO, SEM, content marketing and telesales.  They are typically going after mature segments where buyers are typing keywords into Google at a high rate. This online selling model results in an SMB and mid-market customer base.  In many cases, founders may have to move to the US to pursue direct enterprise sales.  It’s worth noting that scale markets are not necessarily all in the US – companies could get built with a general global diffusion of customers, perhaps with help from resellers.

I see India-first companies typically going after newer high-growth companies in India (e.g. ecommerce, retail) and startups.  Some go after Indian arms of multinationals (MNCs).  This is a reasonable early adopter market to cut a product’s teeth on, but has limited ability to scale.  Of the newer crop of India-first companies, very few go after large enterprises in India – there are exceptions like Peelworks and Wooqer.  The model here generally is SaaS as a delivery model but not SaaS as a sales model (ie direct sales, not self-service).  Many software companies are essentially verticalized.

We continue to see a few high-ticket, high touch direct sales enterprise software companies which are global-first, including companies like Cloudbyte, Druva, Indix, Sirion Labs and Vaultize. Many of these start out with teams in both Silicon Valley and India or transplant themselves to the Valley over time.  I think this will continue to happen but we will not see the explosion here that we are seeing in the number of companies utilizing low touch online sales models.  I see several high-impact companies coming out of these direct sales enterprise software startups as well.

I think this dichotomy between India-first and global-first companies is interesting and makes India a distinctly different type of investment geography, different from Israel (which has very small domestic market where tech companies move to the US very quickly), different from China (which mostly has domestic market focused startups and very little enterprise software) and different from the US (which is primarily domestic-focused in $500B enterprise tech industry in the early years of most startups). In terms of investor and founder interest, the pendulum may also swing back and forth between these two models as the Indian economy grows, sometimes at high speed, sometimes at a snails pace.

[With input from the team at iSPIRT and several of the companies mentioned above].

newyear

With all the speculation about Bitcoin and an exciting 2013 behind us, I thought that a list of predictions for 2014 would be a good way to start this year. These predictions are based on growth patterns of similar networks, the traction in various ecosystem activities last year, and my conversations with various Bitcoin enthusiasts. So here are my Top 10 predictions for Bitcoin 2014.

1. More than $100M of venture capital will flow into Bitcoin start-ups.

This pool of capital will be distributed across local/global exchange start-ups (e.g. BTC China*), merchant-related services (e.g. Bitpay), wallet services (e.g. Coinbase) and a host of other innovative start-ups. A large chunk of the capital is likely to flow into startups which have emerged winners in their respective segment with majority market share. Building exchange liquidity and merchant network is tough. Hence, these businesses are likely to command high valuations as well. That being said, there would be plenty of money available for start-ups trying to solve a plethora of other challenges (e.g. private insurance, security), that exist with Bitcoin growth and adoption today.

2. Mining ‘will not’ be dead

A lot of press notes and individual viewpoints state that mining is dead, as we are already in the petahash domain and are restricted by Moore’s law from a technological stand point. I believed this until I heard Butterfly Labs and HighBitcoin talk about how enterprises can potential adopt mining. With transactions and transaction fees rising, it would be highly profitable for large enterprises to have data centers with mining equipment to process daily transactions. Medium enterprises, who cannot invest in capital expenditure, would resort to cloud-based mining. Finally, small enterprises would have to pay transaction fees, to the network. These fees would still be lower than those paid to Visa and Mastercard. In conclusion, we can potentially witness investment from large and medium enterprises in mining farms as early as the end of 2014.

3. There will be less than 5 alt-coins (out of the 50+ in existence) that will survive 2014

The open source nature of the Bitcoin protocol led to the advent of over 50+ alt-coins, most of which are blatant rip-offs with a tweak or two here and there. These can be divided into three categories

  1. Coins which are Ponzi schemes, where the sole purpose of the inventor is to drive the price of the alt-coin up and them dump
  2. Coins which can be mined easily and can have potentially more liquidity than Bitcoin
  3. Coins, which are based on a fundamental innovation and can result in specific adoption or security led use cases.

In my opinion, only the category 3 ones would survive. PPC coin, which has introduced a proof-of-stake system in addition to proof-of-work, is one such coin. It is on my list of survivors. It is also important to note that presently, other than Bitcoin, no other alt-coin has shown the potential for a growth in its acceptance network among merchants or companies. This is likely to remain true for 2014 as well.

4. Bitcoin community will solve problems including that of ‘anonymity’

One of the key roadblocks for governments and financial institutions to start participating in Bitcoins is the anonymous nature of transactions. This has led regulators to believe that Bitcoin can potentially be used for money laundering, terrorist support etc. The good news that we have a very active Bitcoin community globally, which is constantly evolving the protocol. Hence, my prediction that in an effort to make Bitcoin more accepted, this community will come out with a solution to ‘anonymity’ that regulators can live with. One of the ways is it being done today is by forcing exchanges, wallet services and other Bitcoin companies to have KYC practices similar to those of financial institutions. As a side thought – Internet was and is still used for porn. That does not make it ‘not useful’!

5. US, China and other global forces will not be at the forefront of Bitcoin adoption

Fincen, PBOC and RBI’s reaction to Bitcoin in US, China and India points to one single conclusion – we are not going to let a ‘controlled’ and ‘vast’ financial system adopt a decentralized crypto-currency, which can be anonymous and used for illegal activities…as yet. Countries which have had a history of currency issues and have not had effective monetary policies are the ones who will be at the forefront of Bitcoin adoption. With China out of the mix currently, one can look at Argentina, Cyprus and others to lead. These may be smaller as a proportion of the global base. However they are likely to have much more local penetration and most importantly more government support or less government intervention – whichever way you want to look at it. That being said, successful internet and mobile companies in the US/Europe are the ones, who are most likely to offer digital goods in Bitcoins. Zynga just announced their experiment. I would not be surprised if Spotify, Netflix etc are next.

6. Indian ecosystem will be slow to evolve; limited to speculators and mining pools

The Indian Bitcoin start-up ecosystem today is limited to less than ten startups, including exchanges such as Unocoin, wallet services such as Zuckup, mining pools such as Coinmonk and some other ideas – compared to hundreds of them in each US and China. There is little evidence today to ascertain whether any of these startups are going to create a home market or serve an international market. In fact on the contrary, the Indian market is likely to be served by global Bitcoin companies. For instance, Itbit, a Singapore based exchange has already started targeting Indian consumers. Global services have demonstrated the capability to be credible especially when it comes to convenience and security by solving complex algorithmic problems. This also makes them more defensible in the long run (e.g. Coinbase’s splitting of private keys to prevent theft) and poses a big challenge for Indian Bitcoin start-ups. There is an active Bitcoin community in India (about 15-20 people), which is trying hard to create awareness among consumers and regulators. I sincerely hope to see at least one world-class Bitcoin startup come out of India.

7. The use of Bitcoin will evolve beyond ‘store of value’ or ‘transactions’

The underlying Bitcoin protocol makes itself applicable beyond the use cases of ‘store of value’ and ‘payments’. The Bitcoin foundation took a huge step in allowing meta data to be included in the blockchain. This will unlock a lot of innovation and maybe even prompt regulators to acknowledge the potential of Bitcoin, making it all the more difficult for them to shut it down or suppress it. As one can see from the current Bitcoin ecosystem map that there are almost no startups, which solely use the protocol without using the ‘coin’ or the ‘currency’ as a function. 2014 will be the first year to see some of these.

8. The ‘browser’ of Bitcoin will come this year

The Netscape browser made the Internet happen. ‘Something’ will make Bitcoin happen. It is still very difficult for the average ‘Joe’ to understand, acquire, store and use Bitcoins. Though Coinbase and several others are working on innovative security algorithms and making it easy to store Bitcoins digitally, it is still not enough to make Bitcoin mainstream. Hence, what a ‘browser’ did to the Internet, a product or technology innovation will do it to Bitcoin in 2014. This will make the transition to Bitcoins frictionless. Kryptokit and Eric Voorhees’ Coinapult are promising startups in this direction. Encouragingly, all the building blocks for that to happen – like mobile penetration, cryptography algos etc are already in place.

9. The price of Bitcoin is likely to range between $4000-5000 by the end of 2014

Well, though some people will argue otherwise, price is not the most important thing about Bitcoin. But given the interest and its volatility, it does deserve a place in this blog post. Speculators have predicted Bitcoin to go upto $100, 000; some say the maximum it can reach is $1300. Though, am sure that there is some underlying basis for these predictions; here is the one for mine. Bitcoin’s price is a function of supply and demand. While the supply is predictive, the demand is less so. However, the increase in the demand of Bitcoin can be compared to networks such as Facebook and Twitter, which have followed a ‘S’ curve of adoption. All such networks typically take 6-8 years to plateau out with year 4-5 being the steepest. Though Bitcoin was invested 4 years ago, I would say that 2013 was its 2nd real year. Given the nature of the ‘S’ curve, the price increase in 2014 is likely to be 3-4 times more than the one this year. Hence, the $4000-$5000 range, where the Bitcoin price is likely to settle down in 2014.

10. Last but not the least – Satoshi nakamoto will be Time’s Person of the Year 2014.

Please read about him here.

* Investments of Lightspeed Venture Partners

[Published in Mint on May 30, 2013. Here is the link to an abbreviated version of the article on LiveMint.]

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[Credit: Laurynas Mereckas]

Building a startup into a successful high-impact company is not easy – it is hard no matter where in the world the founding team may be located or which geography is targeted.

It is even harder in India, despite the macro outlook almost always looking rosy – 1+ billion people, strong economic growth, emerging market/BRIC, technical expertise, many underserved needs etc.

Many of India’s successful startups have navigated a maze of challenges, creating leading brands and sustaining for long periods of time.  Correspondingly, it is much harder in India, relative to the US/Europe, for competition to unseat leading brands.  Erstwhile startups that have created a successful brand include Cafe Coffee DayDr Lal’s PathlabsFlipkartIndian Energy Exchange (B2B), Indigo Airlines, Infosys (B2B), InMobi (B2B), Justdial, Makemytrip, Naukri (B2B), one97 and Snapdeal.  

Here are some of these environmental challenges that I see many startups facing here. These are almost never explicitly discussed. Perhaps this is because it’s like the air – it is just self-evident and it is hard to solve for these.

Market friction

Many of the successful companies we talk about today in India took 10+ years to get to escape velocity and impact.  Why? India-focused startups have to change buyer behavior and/or create infrastructure  (eg Flipkart’s several thousand people in logistics, Meru Cabs’ owned & operated taxi fleet, One97’s PayTM mobile payments infrastructure), as opposed to purely focusing on better/faster/cheaper solutions.  As a result, I generally see linear organic growth in companies targeting the Indian market.  There are some companies that have overcome this by creating low-friction offline models e.g. Dr. Lal Pathlabs with low-capex collection centers, and micro-finance businesses with repetitive hassle-free loans to the bottom of the pyramid.

Some other sources of friction include:

  • the need for offline presence (even for mainly digital companies).
  • difficulties in payment collection from consumers and businesses.
  • gatekeepers that have optimized for self-preservation/cashflow.
  • government-driven paperwork for compliance & set-up and regulatory uncertainty.

A series of small markets

Startups need large markets (Rs 2500cr+ or $500 million+) to get large and succeed.  This is hard to find in India, perhaps due to early consumer demand, unorganized markets, regional differences or foreign substitutes.  For example, digital advertising is a roughly $400 million annual business here, with mobile at 10% of that. To access and maintain growth, almost every new startup here needs to increase their focus on creating and evangelizing their category versus just focusing on their own startup’s growth.

Some examples of overcoming this challenge include:

  • spending large amounts of capital to create a category (eg ecommerce, OTA, wireless telecom).
  • expanding into adjacent markets (eg Info Edge, which expanded from jobs into matrimonials, real-estate, education etc.).
  • building or piloting in India and transplanting to the US (eg Zoho)
  • aggregating several emerging markets outside India, perhaps before proceeding to Western Europe and the US (eg InMobi, iFlexSubex).
  • attacking a large spend base (eg Micromax for hardware, Cafe Coffee Day for coffee/tea/snacks, BillDesk for bill payment).

While many startups choose to access existing categories abroad (eg smartphone apps), many Indian startups have successfully created India-specific categories, including inbound marketing (JustdialZipdial), B2B marketplace (IndiamartIndian Energy Exchange), assisted services (OneAssist, Onward MobilitySuvidhaa), MVAS (OnMobileIMIMobile), entertainment services (Dhingana) and transport aggregation (RedbusOla Cabs).

Lack of trust

Lack of trust is endemic in India, whether you are driving through the streets (and perhaps Delhi is an extreme example of lack of trust!) or negotiating with corporate partners. Examples include:

  • (some) people misrepresent themselves materially without any consequences (eg overselling).
  • (some) founders focus on control at the expense of value creation.
  • potential buyers have a hard time parting with payment details or paying for off-the-shelf software.
  • (some) people negotiate all the corner cases in extreme detail, to the point where the law of diminishing returns kicks in pretty strongly.
  • trust gap between regulators, law enforcement and business.
  • trust gap between promoters (aka founders) and investors and potential misalignment on timelines and strategy.
  • (some) government and companies focus on protecting themselves from the 1% of customers who are gaming the system at the expense of the 99% remaining customers.

Relationships, not contracts, govern deals.  Many brands in India are created from execution reliability at scale rather than product differentiation.  Brands  in India are disproportionately more valuable as they represent a trusted provider of products or services – think about the enduring value of the Tata brand in multiple unrelated categories.  As one consequence, I believe more startups should think about brand-building here in India relative to if they were in the US.

Hard to find strategic talent

Almost every entrepreneur and investor I speak with has this issue.  This is not easily solvable – the only potential solution is to focus on A+ people right from the founding team onwards and never compromise on that front, even if it means slower roll-outs.  Zoho and InMobi are often cited for building great teams.

Strategic talent is hard to find, including executives, product managers, product marketeers and design experts.  We find ourselves scouring large established companies in India for executives and many times find these executives short on ability to take career risk and lower startup-level compensation in exchange for equity.  We look abroad sometimes to import talent.   One other friction point tends to be lack of middle management willing (or empowered) to take their own initiative and a cultural bias for say:do ratio > 1 (interesting quote by an anonymous founder) which generally means that execution requires a lot of hand-holding.

The smaller pool of founder/co-founder and risk-taking startup employees results in lots of churn and inordinately long hiring cycles, although this is changing fast at a cultural level in India.  It is also quite stunning how many times people who have signed employment contracts do not show up on their first day of work.

Not enough experienced mentors

India has an early (but fast-growing) eco-system for new venture creation. I see successful founders giving back to the founder community in a big way through investments, mentorship and driving industry hygiene.

However, there aren’t enough successful founders yet to cater to the much larger group of new founders who need help.  Without the perspective provided by aligned mentors, many founders are finding it tough to pivot or accelerate.

I am optimistic on this front, as many experienced and competent mentors have stepped forward over the last two years.  In my opinion, this is one of the reasons driving the creation of many of the incubators and accelerators in India which are centered around these hard-to-find mentors.

Constricted access to capital

This has been an issue in India for a long time and is probably why there is a higher focus here on companies to get to cash-flow breakeven fast or to trade-off growth for cash-flow.  It is not surprising that the early successes in Indian ventures have mostly come from services-oriented business (e.g. outsourcing, BPO) or offline consumer businesses that grew organically for a while.

Many would point to investors being over-cautious and risk-averse.  I think that the environmental factors mentioned above are the causal factor for investor cautiousness and not vice versa.  I would argue that the $1.1B in 2011 and $762M in 2012 (source:  Venture Intelligence) that went into venture in India was perhaps more than the market could absorb efficiently.  Capital is abundant in the growth stage, once product-market fit and/or profitability has been achieved, and hard to come by in the development stage (ie pre-revenue and/or pre-traction stage).

Indian startups have developed a unique set of growth strategies to overcome the challenges mentioned above.  I will write about these different growth strategies (and perhaps deep-dive into some of the challenges) in subsequent posts.  I am hopeful and excited about companies in India that are overcoming these challenges.

Thanks to the brain trust, who provided feedback and contributed ideas, including Bhawna AgarwalKunal BahlRaj ChinaiAshwin DameraPranay GuptaRavi GururajRavindra KrishnappaSasha MirchandaniKavin MittalSuchi MukherjeePallav NadhaniHitesh OberoiJanhavi ParikhAvinash RaghavaAmit RanjanRajesh SawhneyVijay Shekhar SharmaAmit Somani and my colleagues here at Lightspeed Ventures Maninder Gulati, Apoorva PandhiAnshoo Sharma and Bejul Somaia.

Please note that three companies mentioned in this article – Dhingana, OneAssist and Indian Energy Exchange – are Lightspeed portfolio companies.

oneassist_logo timthumbLightspeed India MD Bejul Somaia was interviewed by Paramita Chatterjee of the Economic Times newspaper about Lightspeed India’s experience with incubating both OneAssist and LimeRoad.  Here’s the link to the article.

We are actively looking to incubate companies in these spaces, as well as back established companies and startups in these areas.

Our experience has been very positive:

“We were involved in incubating two companies in the last 12 months – OneAssist and LimeRoad – and have been very pleased with the results so far. Being able to work closely with teams during the incubation period really helps set the right foundation and strategy for the business. The incubation approach is very time-intensive, with no certainty of a successful outcome. But we will build on our positive experience by catalysing new companies in an organised manner.”

What sectors are Lightspeed looking to invest in?

“Education technology, financial technology, healthcare services, internet, mobile, software and software-as-a-service.”

 

(Source: Dilbert)

[Also published on Yourstory.in]

Earlier this week, I was invited to mentor the GSF Accelerator’s startups on Pitching & Investors Decks.  I thought I’d summarize what I said there.

I certainly don’t claim any special knowledge on what makes for a good first investor presentation.  There have been many books and blogs written about this.  However, I’ve seen hundreds of investors pitches over the past several years of coaching CEOs on IPO roadshows, raising capital as a founder and listening to pitches as an investor.  Heck, I’ve even been involved with investing in the leading presentation sharing company – Slideshare – which has helped accelerate a trend toward storytelling in presentations.

The first meeting is not about getting investors to agree to invest (although perhaps it is when you are looking at angel/micro-VC funding). The key is to start to develop the relationship and get them excited enough and intrigued enough to want to dive in deeper in a subsequent meeting.

You can greatly improve the odds of having a productive first meeting by telling a compelling story in a concise and hard-hitting manner.  Make it personal. Hit the main high points first to generate and assess interest. Then provide backup to your claims to cement the story.

Click here to see the 4 key slides (on Slideshare) that you need to nail.

After these four slides, stop and assess your audience by asking them what they think, their key concerns etc.  You should then be adept enough to address these concerns as you continue with the familiar series of slides on traction, product overview/roadmap/differentation, market sizing, business model, go-to-market, financial projections and funding requirement & milestones.  Finish by showing the Investment Highlights slide again and summarizing the key points.  Leave this slide up while you go through any final Q&A with the investors.

Some other guidelines and pet peeves:

  • The point of the slide should be the title of the slide e.g. don’t say “Team” as the title of the slide. Instead, say “Extensive Team Experience in Adtech” if you are doing an Adtech startup.
  • The meeting is not about reading out the presentation, it’s about your conversation and engagement with the investors, with the presentation as support material.
  • No more than 2 minutes per slide. I’ve seen 30 minutes spent just on the first slide where the whole pitch is given with that one slide.
  • You should be able to run through the presentation by yourself in less than 30 minutes.
  • Place yourself between the investors and the projected or laptop-based deck. Otherwise you’ll have the tennis match effect of spectators swiveling back and forth between the presentation deck and you.
  • Don’t leave the meeting without asking investors: “What do you think?”, “What are your main concerns?”, “What did you like specifically?”
  • Know what your investors have invested in or said about your space before you meet them. The Web is your friend.
  • Please don’t take the slide deck I’ve embedded above as an example of the colors, fonts or layout that you should use.

Yesterday, we formally announced that Lightspeed and Sequoia invested in OneAssist, a company that creates and markets assistance and protection-oriented membership plans for consumers.  OneAssist was incubated and founded in the Lightspeed offices during 2011 by Gagan Maini and Subrat Pani.  We’ve known Gagan for almost five years and frequently traded views on business ideas and opportunities in the payments, loyalty and concierge space.  Gagan and Subrat have known each other since the late-90s, when they worked together at the SBI-GE cards joint venture.  They have each built new businesses from scratch inside larger companies – Gagan most recently started the Indian operations for CPP and Subrat built the credit cards business at Kotak – and we’re excited to back them in building a new company in this white space.

The thesis behind OneAssist is that consumers increasingly value peace of mind, convenience and assistance with respect to certain events that can disrupt or interrupt our everyday lives (such as the loss of a phone or wallet, health emergencies etc.).  This is driven by: (i) increasing time scarcity – especially in double income households, (ii) a cultural preference for ‘assistance’ (witness services such as Naukri’s ‘assisted’ online job postings, where sales reps hand-hold employers through the job posting process, JustDial’s assisted directory service, IRCTC’s agent channel for booking online tickets etc), and (iii) an emerging orientation towards protecting oneself from unforeseen future events (health insurance didn’t meaningfully exist 10 years ago and is a 13,000 Cr industry now).  And perhaps more anecdotally, a growing sense of taking responsibility for oneself and one’s family.

We believe there is a large opportunity to create a branded, consumer-oriented assistance and protection platform across multiple segments.  The initial use cases OneAssist will support are the loss (or theft) of a wallet (including cards, driving license, PAN card etc) and the loss (or theft) of a mobile phone.  In each case, the company takes on the chore of cancelling credit/debit cards (or remotely wiping and locking a phone), protecting against misuse of cards and/or data, providing emergency assistance (such as providing a replacement handset with data fully backed-up), and replacing essential identity documents such as a driving license or PAN card.  Each product also offers certain group insurance benefits to protect against financial loss.  Plans are priced at Rs 1,000 to 2000 per annum depending on the chosen package plan, which equates to just about Rupees 3-5 a day.

In addition to marketing directly to consumers, the company would also market their products through affinity partners (such as banks, telcos, retail, etc) and corporates who have large customer or employee bases and can offer such products as very relevant value added service or benefits for a fee.

This business model is notoriously difficult to execute against given the importance of delivering against the promise in ‘moments of truth’, the myriad of supply-chain partnerships and capabilities that must be developed and coordinated, the direct and partner-driven sales and marketing capabilities that must be built to achieve scale and the customer engagement strategies that must be deployed to ensure high customer satisfaction and loyalty. We believe that Gagan and Subrat are the best entrepreneurs to take on this challenge and wish them and their team the very best as they embark upon this adventure.

[Published in Pluggd.in]

I was looking at some stats on growth of consumer social and mobile platforms between 2008 and now. Even though it’s an obvious point, the contrast is quite stark and shows how much the world has changed in a short time.  It’s almost hard to imagine a world where Facebook was a startup, LinkedIn and Twitter had very small user bases and iOS and Android each had less than 10M users. But this was the case in early 2008.

The numbers above are based on Crunchbase, SEC filings and news reports – I think they’re directionally correct although there may be some numbers that are not exactly right.

While all these above-mentioned platforms or quasi-platforms (and others I have not mentioned) have impacted startups in the US and Europe, I think Facebook and Android are the real game-changers in India as opposed to LinkedIn, Twitter or iOS.

Why Facebook and Android in India?  Here’s why: When I think of consumer platforms (a much abused term), I think of a few criteria:

  1. a large, engaged and fast-growing audience (100M+ users)
  2. a developer friendly culture and technology base
  3. a monetization vehicle that is providing enough return to developers for their time

In my opinion, three platforms stand out today and meet this criteria – Facebook, iOS and Android – in many parts of the world.  However, they all fall down in India when it comes to #3 (monetization) and (for now) #1 (audience size).  I have no doubt these platforms will get to the right audience sizes in India in the next 12-24 months – Facebook claims ~50M users and Android has <10M in India. In the meantime, Google reigns supreme for reaching users.

So, the upshot is that now is the time to start companies leveraging these platforms in India.

[previously published on Nextwala blog]

(Source: Marttj)

[Published in VCCircle]

I have worked with the Slideshare team, as a user, investor and board member at different times, from 2008 till late last year.  After the Slideshare + LinkedIn announcement last week, I have been reflecting on how much has changed and how much (or little, depending on your perspective) I have learnt from this experience since starting out in the venture business several years ago, as well being a founder myself in the late 1990’s.

Here’s what I learnt from Rashmi, Jon and Amit about best practices of founders.  I appreciated their willingness to work with me and be patient.

Passion & Focus

  • Passion about your userbase is contagious. It impacts the employees and their retention, it impacts your core user base and their retention, it impacts customers and their retention.
  • Focus, focus, focus on honing the product – UX, scalability, security, data, analytics and more – but keep trying new product angles quickly to iterate toward high engagement and clear value.
  • Focus on crystallizing value to paying customers – make it easy for customers to understand value (packaging, positioning, messaging), connect value to price, and make it easy to pay as customers receive value. To do this, understand who your super-user segments are and why.

Growth and (or versus) Monetization

  • Be frugal (if possible) but keep innovating, so you are around when lightning strikes in terms of user growth, revenue or outcomes.
  • It’s tough to balance growth versus monetization versus profitability. There is definitely a trade-off. Get lots of input on this from people who have made these trade-off successfully.
  • Understand path from user acquisition to engagement to retention to monetization early on and track associated actionable metrics (a la Dave McClure’s AARRR). Especially for user-generated content, there’s no automatic connection between usage and revenue.

The Outside World

  • Acquisitions and successful partnerships take time to develop.  They generally come from engaging over long periods of time. At the end of the day, it’s about people getting to know people.
  • Keep tabs on competition, don’t obsess about them though – most companies die of self-inflicted wounds, not because of competition.
  • Investors are people. Sometimes your investors and board members know what they are talking about, sometimes they don’t, hopefully more of the former.

Becoming a Better Board Member

Through hit (and miss), I also learnt some lessons on how to become a better board member over time:

  • Be respectful w.r.t. founders – they known their business better than you do.
  • Be patient – there’s no such thing as an overnight success – don’t get too impatient but still hold management’s feet to the fire
  • Be thoughtful and have a high bar when suggesting workstreams for the company – their time is precious, don’t waste it.
  • Focus on strategic impact – as an investor, focusing on daily management decisions (i.e. micro-managing) will not have a positive impact on the company (and may have a negative impact). Focus on strategic changes, such as building the best management team, making the right bets on monetization, making the right introductions to partners/acquirers, holding people accountable for outcomes.
  • Conduct board meetings for the right reasons. Board meetings should not primarily be about reporting only but also about trying to solve problems together and laying the groundwork for scale.  The real action happens outside of board meetings though.
  • Align with founders on outcomes. Understand your goals and risk-profile as an investor early on relative to goals and risk-profile of the founders & management team.  Align.
  • Angels and VCs are not at loggerheads. As long as companies continue to build value in a large enough market, angel investors and venture investors are aligned.  All the media hype about the two communities being at loggerheads with each other is overdone.

(previously published on Nextwala blog)

[Published on Yourstory.in]

So, how long will it take to get a term sheet?

This is a question that most entrepreneurs appropriately want to know.  While there is no one size fits all answer to this question, the focus of this post is to ask what I think is an equally important question for all entrepreneurs – what does a term sheet really mean?

The reason this is important is because all term sheets are not equal.  Some firms issue term sheets early in their investment and diligence process (Firm A), while others issue them at the end of their process (Firm B).  While Firm A will be able to issue a term sheet more quickly than Firm B, there is likely to be a higher risk that the deal does not close as most of the detailed diligence is yet to be done.  Conversely, while Firm B might take longer to issue the term sheet, if/when when they do so, they will likely have a very high likelihood of completing the investment, thus providing the entrepreneur with a higher certainty of close.

Since most term sheets contain exclusivity clauses that restrict the entrepreneur’s ability to speak to other firms and evaluate other financing options, wouldn’t you rather accept a term sheet that has a higher probability of close, even if this takes a little longer? So next time you ask an investor how long it takes to get a term sheet, be sure to also ask what level of commitment their term sheet represents.

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