Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Aniruddha Malpani of Malpani Ventures was recorded in September 2017.
Aniruddha Malpani, Director and Founder of Malpani Ventures, is an active angel investor in the Indian circuit. He discusses what he looks for in companies he wants to invest in.
Sramana Mitra: Tell us about Malpani Ventures. What is the focus of your firm? How big is the fund and what sized investments are you making?
Aniruddha Malpani: I need to emphasize that I’m an angel investor and that these are personal funds. We’ve realized that in India, the startup ecosystem still has a long way to go, which is to say that you have people who are willing to do Series A funding. How do these entrepreneurs go from zero to the point at which they can be invested in by a VC? We want to be able to hold their hands for those 18 months to two years and then hand them off to VCs.
Sramana Mitra: What kind of capital are you committing to doing this sort of angel investment?
Aniruddha Malpani: I’ve decided that about 10% of my total worth would be for angel investing. It’s great if I make money, but at least I don’t lose any sleep over it. The base rate for most seed stage investing is that most startups are going to fail. I’m very comfortable with that.
Because these are personal funds, it gives me a big advantage that it’s very patient capital. I’m not answerable to anyone except my wife as to how I spend that money. It’s quite an exciting journey because you can actually see these entrepreneurs have a dream. Then you’re hoping that you’re going to be able to help them to implement that dream in real life.
Sramana Mitra: What sized investments are you making?
Aniruddha Malpani: Typically, about a crore to crore and a half. We have an investment thesis. We try to be open and transparent. We share it on our website. We say we want to fund frugal innovation in India which means we’re looking for companies with a pre-money valuation of about five to eight crores. We’re willing to give them one to one and a half crores.
I agree with you. You don’t want to give them too much money because they end up choking on it. As long as they know that the money is going to come, it gives them a lot more comfort. They can manage to use whatever funds they have much more carefully when they know that it’s a limited amount.
Sramana Mitra: What industry sectors do you like to invest in?
Aniruddha Malpani: Because I’m a doctor, a lot of people say, “Shouldn’t you be in the healthcare space?” Interestingly, I actually think I’m disadvantaged because I have preconceived notions, which may be completely wrong. Sometimes the entrepreneur may feel like I know what’s right because I’m the doctor. I have done healthcare startups, but I’m quite happy to invest across all domains.
For me the most important thing or seed stage investing is not return on investment. These may take anywhere from 10 years to play out. I’m much more interested in what I call my LOI – Learning on Investment. This is one of the best ways of getting it because entrepreneurs, by definition, are smart, contrarian, and think they’re going to be able to take on the big boys and beat them at their own game. They’re willing to share their insights as they’re building their startup.
It’s extremely exciting. If you talk to people like Ajit from Avaz, you get such a high because he has so many ideas. It’s great being an observer and seeing how these companies are evolving.