Sramana Mitra: What do you see in the deal flow? We are in the end of 2017. In the last three months, what trends have you spotted?
Raj Singh: To be very honest, the deal flow is slowing down towards the end of the year, but we still see a lot of the P2P model. I’ve sees looking at a lot of different use cases in the P2P model in the fourth quarter that I’ve not seen in the first few quarters of 2017. Like I said, the deal flow does seem to be slowing down as we get into the holidays.
Sramana Mitra: What kind of trends are you looking to invest into? The first question is what are you seeing in the inbound deal flow. What broad trends do you invest against at this point going forward?
Raj Singh: The way that we look at deals, it’s split up into four categories within the fund. We have four different teams in four different types of industries. We’ve been in healthcare previously. We are looking for healthcare deals at this time as well as mobile applications that relate to healthcare.
We’ve also been looking at the pet industry. There’re actually a lot of applications that are coming in for the pet industry. The most recent one is a peer-to-peer model for pet sitting. We’ve been actually looking at that as well. The other two most common things are ride-sharing and food delivery. Both of those have been pretty prominent in the first half of the year.
Sramana Mitra: I’m going to ask you some general trend questions. How do you process the current investment climate where capital is moving further and further upstream with the traditional VC’s raising larger and larger funds? How does a pre-seed or a seed investor mitigate the Series A gap?
There have been 50,000 to 70,000 pre-Series A investments, but the Series A remains fairly constant. The VC funding is about 1,200 to 1,500. There’s a huge Series A gap it seems. What is your take on that?
Raj Singh: To combat that issue, we’ve partnered with a lot of the funds in the area that do Series A. A lot of the Board Members that validate those companies that go through those funds also sit on our Board and advise us on investments that we’re making. We don’t really see that being an issue because we already have the same eyes that are looking at it from a Series A perspective. We’re fairly confident that the follow on investment that needs to occur is already set.
Sramana Mitra: How do you parse unicorn mania? As a seed investor, you could get buried under later-stage liquidation preferences. How do you protect yourself?
Raj Singh: At this time, that’s something that we leave to the attorneys. We haven’t gotten that far in the fund where that has become a major issue for us. Also dealing with the types of founders that we like to look at, those conversations are easier compared to traditional funds.
Sramana Mitra: Let me actually probe this one a little bit. Are you open to exiting into later-stage rounds instead of waiting till the exit?
Raj Singh: Absolutely. We’d definitely be open to that.
Sramana Mitra: Last question. One of my observations at the end of 2017 is that lots of stuff have already been built. There aren’t so many wide open opportunities out there, but there are many niche opportunities. Some of these businesses need to be built for very small amounts of capital – $1 million to $10 million and maybe sold for $10 million. In some cases, invest just $250,000 to $500,000 and sell for $5 million to $10 million.
Raj Singh: I completely agree with your observation there. We’re seeing the same things. You have the larger players in any industry taking up a larger market share. The small niche opportunities are being missed. We are looking at those opportunities as well. It’s nice to have those large companies where they’re aiming to take a large market share but we do look at these niche opportunities as well.
Sramana Mitra: Any parting comments for our entrepreneurs who would be looking at you as a potential investor?
Raj Singh: Based on the resources that we have, our Board of Advisors does get very active in advising our portfolio companies. We do take a non-traditional look at our application process. People should not hesitate to reach out or send an application to us.
Sramana Mitra: Thank you very much for participating.
This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Raj Singh of Singh Ventures