Sramana Mitra: You mentioned traction. For Mumbai Angels to be interested in a company, what kind of traction do you want to see? It sounds like you don’t do concept financing, do you?
Nandini Mansinghka: We would do concept financing. We will fund anything which is a people company. It’s not an idea stage that we’re looking at for sure. We would require revenue traction in all cases except two. One exception would be highly suspect products. If it’s an IP buildout, we’re okay to say, “We’re funding because we want to walk with you to the IP buildout.”
We do similar investments in our health care products. We’ve just invested in a liquid biopsy company which is finding a newer way to track cancer through blood samples. We invested in that company when it was at the pre-clinical trial stage. These are the two situations where we wouldn’t look for revenue traction. For all other instances, we will look for revenue traction. When I’m saying revenue traction, traction needs to be higher if it’s a B2C context or if it’s a marketplace context. If it’s a B2B, then you just need to get one or two customers.
Sramana Mitra: As part of your Indian consumer story, what is your position on entertainment? There’s a lot going on in digital entertainment in India. We have companies in our portfolio that are very excited about the digital entertainment opportunity. They have millions of users. What is your position on that?
Nandini Mansinghka: I actually had founded and started a company in the entertainment space. I’m founder and investor of a company, which is a B2B content market for videos. Clearly, there’s a lot of investor interest in this space now. It’s pretty tough on us because what happens is that most of the time, as Mumbai Angels, we find that when we bring companies in who are talking of advertising these revenues, it’s talking of building IC’s. We’re talking about influencers. Those are the business models.
If you are not a media entertainment investor, you will struggle with it a lot. We find those gaps between the valuation. They ask from the founders and what they invested in, they need to pay for.
Sramana Mitra: Being big in Mumbai, I would think that you would have media and entertainment angels. Is that not the case?
Nandini Mansinghka: Investors who are putting money in entertainment and media are different from angel investors in a regular round. For example, we don’t really have a media and entertainment angel in Mumbai. But people are making the investment. These people are from the industry. It’s a very difficult segment to understand.
Sramana Mitra: It is, especially if you’re experimenting with business models that’s not straightforward advertising like the straightforward eyeball monetization. I’m actually not a huge believer in straightforward eyeball advertising as a great monetization technique.
With our companies, I’m pushing on other more creative business models. Yes, you’re right. It’s harder to understand how to get your arms around it. Switching gears a bit, what is your perspective about this whole unicorn phenomenon – everybody chasing unicorns and billion-dollar market opportunities and billion dollar valuations? Is Mumbai Angels chasing unicorns?
Nandini Mansinghka: No, we’re not. We’ve had unicorns in our portfolio. InMobi was one of the first successes. We’ve had others too. We’ve had several others who have built to a certain level. We’ve got those who have been bought out by much larger players like Twitter.
Our view is that unicorn chasing is counter intuitive. You can actually get caught up in this so much that you actually stop looking at investments that can actually build you and people for you. As an investor, you could do this continuously. Unicorn chasing can be done only if you’re a seasoned full-time investor and you’re out there. You’re willing to support the company through its process irrespective of the money it takes. I don’t think all businesses are built like that. That’s number one.
If you actually push them beyond what their business model actually can absorb, it will actually result into a company that’s trying to grow much faster and burn much more without really knowing why they’re doing it. We see that happening over and over again with our portfolio companies.
Sramana Mitra: That’s a sure way for angel investors to lose a lot of money because angel investors can’t really continue to invest over and over again. They can’t invest tens of millions of dollars to stay in the game and maintain their share. If they’re getting diluted in this unicorn-chasing game, I think it’s a very dangerous way to play this market for angel investors.