As you may know, I’m a strong supporter of bootstrapping. But I understand that some companies simply can’t get off the ground without significant financing from investors like those at Kae Capital. My interview with managing director Sasha Mirchandani will help entrepreneurs who are looking for seed capital to understand what to expect if they should decide to pitch investors at Kae Capital.
Sramana Mitra: Hi, Sasha. Tell us briefly about your group. Sasha Mirchandani: Kae Capital is an early stage VC firm focused on investments in sectors like technology, healthcare, financial services, education, defense, and so on. The fund is based out of Mumbai.
Sramana Mitra: Do you or members of your group have any particular industry expertise?
Sasha Mirchandani: I have significant experience in early stage investments. I’ve made more than 30 investments and been on the boards of several companies. The other team members have investment experience across various sectors.
Sramana Mitra: Do you invest regionally, nationally, or internationally? If regional, what is your primary region(s)?
Sasha Mirchandani: We mainly focus on companies based in India and those which have a global audience.
Sramana Mitra: What are your current sources of deal flow?
Sasha Mirchandani: Most of the deal flow presently is inbound from friends and professional contacts. We also do attend conferences and incubation centers to identify and source deals.
Sramana Mitra: On average, from all sources, how many pitches do you receive a month?
Sasha Mirchandani: We receive over 100 pitches in a month.
Sramana Mitra: Out of all pitches that you receive, how many deserve a closer look?
Sasha Mirchandani: An average of 10% to 15% of the companies deserve a closer look.
Sramana Mitra: What factors receive the most weight when you’re debating whether or not to fund a venture?
Sasha Mirchandani: The management team, scalability and defensibility of the model, target addressable model, value proposition, and unique differentiation are some factors that receive the most weight.
Sramana Mitra: How many investments have you made in the last 12 months?
Sasha Mirchandani: Three.
Sramana Mitra: How much money do you usually invest?
Sasha Mirchandani: The first investment in a company is anywhere between $200,000 and $500,000. If the company does well, we are open to investing an additional $2 million to $2.5 million.
Sramana Mitra: How long does it take for a company to receive funding from you or your group?
Sasha Mirchandani: On average, anywhere from one to two months.
Sramana Mitra: What is the typical valuation of a company that you invest in?
Sasha Mirchandani: Five hundred thousand dollars to $2.5 million.
Sramana Mitra: In terms of percentage, how much of a company’s equity do you usually seek?
Sasha Mirchandani: Anywhere between 20% and 40%.
Sramana Mitra: What is the typical return you seek, and over what period?
Sasha Mirchandani: Given that we check in very early in the company’s life, we look at disproportionate returns compared to our investment.
Sramana Mitra: In what stage of business development do you usually invest?
Sasha Mirchandani: It depends from company to company, but I’m open to looking at all stages of the business. The preference would be for companies that have shown traction.
Sramana Mitra: What should be the TAM (total available market) for the company’s product or service?
Sasha Mirchandani: We prefer to invest in companies with large target addressable markets.
Sramana Mitra: What do you do with the businesses you don’t invest in, if anything?
Sasha Mirchandani: Companies where we do not invest because of less traction are kept on cold to monitor and revisit at a later stage.
Sramana Mitra: Do you have any sector preference?
Sasha Mirchandani: We are a sector-agnostic fund, but bias is towards technology-enabled business.
Sramana Mitra: Do you have to have an exit strategy, or would you invest in deals that can go on generating dividends over a long time?
Sasha Mirchandani: We would invest in companies that would be good acquisition or IPO candidates in a few years’ time.
Sramana Mitra: What is your preferred investment type? Common shares, preferred shares, royalties?
Sasha Mirchandani: Preferred shares.
Sramana Mitra: Do you do debt financing? Convertible? Non-convertible? Terms?
Sasha Mirchandani: No.
Sramana Mitra: Well, thank you, Sasha, for taking the time to answer my questions.
Sasha Mirchandani: My pleasure, Sramana. Thank you.
This segment is a part in the series : Seed Capital