Nandini Mansinghka: I think what has happened is that even in our portfolio, once in a while we do come across a company that looks like a potential unicorn. And that’s when you finally see a lot of investors coming in. Over a period of time, we haven’t always seen that case.
So the ones that you actually think are potential unicorns are also the ones that run out of money. You say, “Okay, here is money for 18 months.” Then in twelve months, the money runs out. Because you’ve not built a steady revenue or haven’t built a product by then, the next round of money isn’t coming in. If you ask me to choose between scalability and sustainability, I think I’m more on the sustainability side of things.
Sramana Mitra: We’re on the same page. As you know, I’m not popular with a lot of the VC’s in India for what I say. I’ve been harping on this topic for many years now and have a big voice and huge influence. They don’t like the fact that I keep harping on this. Did you read this article that I recently wrote on Bootstrapping to Exit?
Nandini Mansinghka: No, I haven’t. But I will.
Sramana Mitra: I actually think that more micro VC’s and angels and angel networks should consider the Bootstrapping to Exit strategy. I’m doing a big expose on that right now to look at what’s happening in the industry.
If you look at many of the companies that are playing this space, Freshdesk is that we incubated many years ago and is one of India’s big success stories. They’ve made nine acquisitions and most of them are either bootstrapped startups or very modestly capitalized startups. They have reached the unicorn valuation. Money is pouring in from investors. They have the capital and the equity currency to be able to do these smaller acquisitions, but they can’t go and acquire sub-$100 million companies.
What they can acquire are $5 million to $20 million companies. They have strung together nine acquisitions to expand their product roadmap and bring new capabilities into their platform. This is happening across the board. I see Zomato is doing that. In the international arena, there’s Atlassian and Smartsheet. Kolis is doing this in India in the cyber security area.
A lot of companies are following this strategy on the buy side – acquiring smaller companies that are modestly capitalized or bootstrapped. They can’t afford to buy heavily-venture funded companies because the valuation expectations are too high. They are acquiring companies that are reasonable and that could give investors greater returns.
Nandini Mansinghka: If somebody invested in each and every company that Mumbai Angels has been with, ARR’s are about 31% which is much better than what most other funds have. We’re not picking and choosing. We’re in any platform. I completely agree to what you’re saying that I don’t think the idea is to keep chasing those unicorns and pumping in money. I think companies can be built with a lot of discipline.
Sramana Mitra: We focus on customers, revenues, and profits to become sustainable, and then finding a reasonable exit.
Nandini Mansinghka: Most importantly, don’t run out of money until the next round.
Sramana Mitra: Running out of money is dead. You can’t die and be successful. You have to survive to be successful. That was great catching up with you. Let’s keep in touch and maybe do some stuff together.
Nandini Mansinghka: Absolutely. Like I said, if there are people who are looking and thinking that their company would like to raise money from us, you can write to pitch at mumbaiangels.com. We would like to look at it.
Sramana Mitra: Thank you for your time.