Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Rajul Garg of Leo Capital was recorded in February 2018.
Rajul Garg, Head of Investments at Leo Capital, discusses the Indian startup eco-system and his fund’s investment focus.
Sramana Mitra: Let’s introduce you to our audience. Tell us about your investment focus. How big is the fund? What sized investment do you make?
Rajul Garg: Leo Capital is an India-centric fund. I’m looking at early-stage opportunities. It’s an uptake from my angle investment activities in India over the last five years. This is a $30 million fund. We invest typically half a million to a million dollars in an opportunity. I think the common denominator in the investments is more tech-oriented but it’s a sector-agnostic fund. We can do pretty much anything as long as it has potential to be venture scale and enough tech leverage in it.
Sramana Mitra: Rather than the labels of seed, pre-seed, Series A, can you tell me what your validation level is where you feel comfortable? Are you looking for customers, revenue, repeatability?
Rajul Garg: It varies a lot across sectors and across opportunities. Let me give you a few examples. There are companies that we would invest in that are purely at a concept level. One of our investments happened like that was purely at a concept level. It’s in the lending space. In general, there is just a lot of demand in lending in India.
You’re looking for teams that have done it before and a clear articulation of how they will segment it. It’s a relatively simpler business in that sense. If we’re looking at consumer apps or social gaming, we would look for some traction in terms of downloads and retention. If you have 50,000 downloads and good retention and activity, we will look at you seriously.
None of these are necessary or sufficient conditions but I’m just giving you some ballpark in terms of what would catch our attention. Of course if you’re doing much more than that, all that is added bonus. In the enterprise space, for example, typically we would look for one or two beta relationships. You may not be necessarily making money, but we would look for validation that customers are willing to adopt your solution and at least have a willingness to pay a certain amount of money for it. Those are some examples.
Sramana Mitra: You want to be able to make reference calls to enterprise customers or B2B customers and give some level of comfort that they are willing to pay.
Rajul Garg: I think establishment of a price point is a very important thing. If they value it cheaply, then you’re not strategic enough to them. With a long sales cycle, how can you build a large business? What we’re trying to check is are you selling llarge enough to a large company so that you can build a large business on that.