1Mby1M Virtual Accelerator Investor Forum: With Dr. Aniruddha Malpani, Founder of Malpani Ventures (Part 3)

Sramana Mitra: Let’s take those two sectors – SaaS and the fintech sectors. In SaaS, the metric is MRR. Do you have a particular metric that you measure by when you’re doing your SaaS investments?

Dr. Aniruddha Malpani: No, numbers can be easily gamed, and they are often not necessarily representative. As long as the entrepreneur has a plausible story and he can convince us, we’re more than happy to look at these investments.

Sramana Mitra: The same is true then for fintech. You want product-market fit and you want qualitative fit with the entrepreneur.

Dr. Aniruddha Malpani: Yes. Some pleasantly surprise you, and they do far better than you think they would. You also have the ones who you thought would do very well but don’t. I’m very forgiving these days. Startups are complex and adaptive systems. We take the attitude that we’re here to help you grow. If you reach out, we’ll be happy to help. Some of them do, and some of them don’t.

Sramana Mitra: What is your relationship with the venture ecosystem that comes after the angel investment? The traditional venture ecosystem is chasing unicorns. The amount of capital going into companies in India is mind-boggling. Do you exit into these VCs?

Dr. Aniruddha Malpani: I think it’s great that they’re pumping all this money. What happens is you’re going to have young and bright people who, instead of ending up in a job, would rather do a startup. Do I understand anything about these valuations and why VCs pump so much money, and why these valuations magically go up every six months or 12 months? None of it makes sense. I don’t even pretend that it makes sense.

My thesis is I don’t have that kind of money, but if I need to make money in the startup space, I need to do two things. I need to be contrarian and I need to be right. Therefore, I’m quite happy in taking contrarian bets and putting money in startups which VCs aren’t interested in right now because these are not hot areas.

The hope is that, at some point, if these startups continue growing well, they’ll find themselves in that sweet spot where VCs will come to them. It’s not something we’re trying to push to VCs. If you’ll build a good business, you’ll automatically pull that attention.

Sramana Mitra: Let’s say a company you’ve invested in has spent two to three years executing well and has become attractive to VCs. Do you exit your portion or do you stay in the deal?

Dr. Aniruddha Malpani: If I had the choice, I would want to stay. Sometimes, entrepreneurs will tell us, “I want you off the cap table. They want a significant secondary sale.” We will do what is in the entrepreneur’s best interest.

The good thing about being an angel investor and having white hair is that I care more about my reputation and my legacy versus just a financial return. That’s what entrepreneurs don’t understand – the difference between angel investors and VCs. There is so much blurring. It’s an immature ecosystem and we spend a lot of time in information therapy.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Dr. Aniruddha Malpani, Founder of Malpani Ventures
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