Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Yash Hemaraj was recorded in February 2019.
Yash Hemaraj, Founding Partner at Arka Venture Labs and Partner at Benhamou Global Ventures (BGV), discusses Arka’s recent partnership with 1Mby1M to accelerate Indian B2B SaaS companies.
Sramana Mitra: Tell our audience about Arka and we’ll take it from there.
Yash Hemaraj: We launched Arka Venture Labs in the summer of 2018. Arka Venture Labs is India’s first B2B focused cross-border accelerator. Our idea is to seed the next wave of enterprise innovation coming from India and to connect them to the global ecosystem. Primarily, we’re forward-looking at B2B-focused companies.
The major markets are North America and Western Europe. In particular, the North American market and the U.S. market. Those are the markets that we’re focused on. Our goal is to provide an open and collaborative platform for entrepreneurs to come to the US and set up a base over here and get them the necessary help in order to be successful in the global markets.
Sramana Mitra: We’ll talk a little bit about the model, especially your philosophy of funding in Arka Venture Labs.
Yash Hemaraj: We give about $200,000 of capital to our founders. There’s a lot of thought that went into this. What we observed was that many accelerators are not giving any cash or are giving only $20,000 to $25,000 of cash to the founders. Our realization was that the companies that we’re dealing with are enterprise companies. The sales cycles are six to nine months. More in some cases.
We wanted to give them enough cash such that they can do two things. One is fast experimentation and fast learning and have at least two or three cycles of this by 9 to 12 months. That’s the goal of giving $200,000 to our founders. Sometimes the founders want to raise slightly more money, up to a million dollars. In those cases, we participate with our $200,000 and also have the founders secure the remaining amount. That’s the capital model that we’re going with.
But the whole focus of Arka Venture Labs isn’t just capital, but also providing a platform where the founders can also get the mentorship that they need, get access to the Silicon Valley ecosystem, and also get access to digital and physical infrastructure. It’s about $200,000 of capital but also comes with these additional things.
Sramana Mitra: 1Mby1M has a partnership with Arka Venture Labs. All Arka Venture Labs companies will have access to 1Mby1M Premium. That’s the arrangement we have made. Let’s dive down a little bit to explain to our audience the criteria for funding. So if you’re going to give $200,000 to a founding team, what do you want to see accomplished before you’re willing to write that $200,000 check?
Yash Hemaraj: We’re extremely fortunate to have this partnership with 1Mby1M because when it comes to B2B in particular, there are certain things that you can do in order to help the companies. Unlike B2C, B2B is very structured in terms of helping the company scale. Having that collective learnings from lots and lots of entrepreneurs is extremely important. Because if the founders do certain things well, they can de-risk the company dramatically.
In that way, I want to underscore the importance of this partnership. Now to your question. We apply a very rigorous criteria to select the best startups coming from India. It starts off with five things. But the most important thing is a strong and passionate founding team with a unique insight into a business. The unique insight comes from either being from a different industry or applying a new technique or a new thought process into that new industry.
It could be a pain point that they have lived with for a while. That’s where the unique insight and the experience of the founding team becomes useful. The use cases have to be global B2B use cases. There are a lot of companies that have use cases only related to the Indian domestic market. Those aren’t the companies that we’re looking to fund. In order to help those companies, we want to see that the company have some sort of an MVP which is ready to scale.
I call it MSP, minimum sellable product, so that we’re not investing in the technology part of the business which happens continuously in early stages. But we would like to see a few set of customers who are ready to buy a product like this and we help scale the go-to market teams. We help build that fast experimentation along with the customers in the loop. That’s the MVP side. The last two are what makes the companies really stand out.
As we all know, India has a unique talent base of probably the world’s largest and also the youngest population of computer-educated and English-educated population. This provides a core technology differentiation for the companies which are based out of India. Along with that, it also provides a clear economic advantage.
The economic advantage in the past used to be just the technology piece, meaning finding developers who can code. But now you can also see that the founders can do inside sales from India. They do that at a very high level of customer success for their clients or their customers. All these contribute to clear economic advantages which means less capital intensity in the business.