1Mby1M AI Investor Forum: Piyush Kharbanda, General Partner at Vertex Ventures (Part 2)

Sramana Mitra: When you say you write the Series A checks, what are you looking for in the ventures that you’re willing to come in at the Series A? Let’s start with your specialty, which is worldwide B2B SaaS.

Piyush Kharbanda: It’s a very nebulous definition, and in today’s world, this definition is changing rapidly. Startups are finding scale before organization level. You’ll see startups that are millions of dollars in revenues in seven to eight months.

In the earlier days when we were investing in SaaS, $7 million means going through a bunch of hoops and building resilience within the organization; it would take time. It would take a lot of pushes and pulls and failures to get there. So, you’re looking at a mature organization at that scale, or even at a $3 million scale or a $5 million scale. That has completely changed today. We are seeing the revenue attraction much faster than we are seeing maturity.

But to go back to your question, what we are looking for starts probably with founder-market fit and how well aware the founders are

of a given market, how in tune they are in solving for a problem that they’ve identified.

In some ways, we are trying to see and look for early signals of product-market fit. Especially in SaaS, we are trying to look for signals which are repeatable sales motion, repeatable problem solution fitment, repeatable ability of founder to do early stage non-scalable things that they’re percolating through the organization and trying to make that scalable.

So, early signals of product-market fit are sometimes defined by revenue, sometimes they’re not. I hate to give revenue ideas around product-market fit because it completely varies by industry, domain, segment, et cetera.

Sramana Mitra: Okay, but you are doing Series A without revenue, is that it?

Piyush Kharbanda: No, we wouldn’t. I don’t think so. I know folks would do series A without revenue. We wouldn’t.

Sramana Mitra: By and large, I think it’s not a bad thing not to do Series A without revenue because Series A also has moved, right? The size of Series A has moved; the stage of Series A has moved.

So, I think do putting in a large amount of money without understanding what the business is, what is the sales cycle, and what are the parameters of the business. It’s not a smart idea because then you end up with these companies that don’t grow fast and end up in this twilight zone where they have venture money, but they’re not growing exponentially. That means they’re not going to raise another round of financing, but they’re stuck in this weird place. So, it’s not very good to invest in unvalidated ventures.

Let’s go back to your starting comments about the trends of startups coming into Series A with a lot of revenue. Is that something that you’re seeing in your deal flow?

Piyush Kharbanda: It’s sporadic. I need to qualify this a little bit. We invest specifically on the India global leg. The trends that you see in the West are somewhat muted when it comes to what we see here and somewhat delayed.

So, in our deal flow, it’s not as much as what I hear from my friends who invest in the US directly, or in US startups, but we are starting to see faster than before revenue traction and revenue Growth.

Sramana Mitra: It’s a very fair point. There is this company in Stockholm called Lovable that is growing incredibly fast, and there’s a bunch of others here in the US that are growing very fast. VCs are salivating for deals like this right now.

Piyush Kharbanda: Yes, absolutely.

Sramana Mitra: The reason I’m probing it with you is to see how much of this is showing up in the Indian VCs pipelines? Is this real?

Piyush Kharbanda: It’s still early, but it is fairly real.

This segment is part 2 in the series : 1Mby1M AI Investor Forum: Piyush Kharbanda, General Partner at Vertex Ventures
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