1Mby1M Virtual Accelerator Investor Forum: With Mohanjit Jolly, Partner at Iron Pillar (Part 3)

Sramana Mitra: Why did you make the decision of focusing on India-for-the-world?

Mohanjit Jolly: One of the reasons is I’m sitting in Palo Alto. I don’t have my finger on the pulse of what’s going on in India. Having said that, I have colleagues who are in India and the Middle East. They do have their fingers on the pulse. Here are the three reasons why we went down this path for fund two.

One is, because of the democratization of the technology stack thanks to hyperscalars like AWS, GCP, and Azure, you can have world-class people sitting anywhere building world-class products for the world. Who better to do it than software engineers and just brilliant minds in India? One thing that the pandemic has taught is, you don’t need to be in a particular geography. We were thinking about this well before COVID happened, but COVID seems to have accelerated that thesis.

The second is the currency risk. From our standpoint, the Rupee depreciates 3% to 5% a year. To get returns in dollars, you have to run 50% harder to get the same returns in dollar amounts. I was in India from 2007 to 2012. In 2007, the rupee was around 38 rupees to a dollar. When I left in 2012, it was at 62. If the portfolio does really well, it doesn’t mean a whole lot because, in dollar terms, we’re taking a 50% hit purely based on currency.

When you have this India-for-the-world thesis, currency depreciation actually helps you. The revenue is in dollars and the cost is in rupees. For most of the companies we’ve invested in out of fund two, 70% of the headcount is in India and 20% in the US. It’s a wonderful outcome from a unit economic standpoint. The dollar goes much further.

The final piece is, we looked at hundreds of companies and we sliced and diced the data. What we figured out is that the India-for-the-world story has 2x the exit outcome. For every dollar invested, you’re able to extract twice as much out of an enterprise company versus a consumer-centric company. Enterprise-centric companies tend to be more capital-efficient. They take about 50% of the capital to get to “unicorn” status. The final thing is exit optionality. If you have companies building from India for the world, you have a lot more options.

Sramana Mitra: I have a couple of questions about what you said. You hinted earlier that there was a story behind selling Now Float to Reliance. I’d love to know the thought process behind that. Reliance has become a very interesting player in the startup ecosystem. They completely changed the game with Jio.

Mohanjit Jolly: It had less to do with Reliance but more to do with the fact that we’ve realized the company was hitting a bit of an air pocket in terms of predictability, replicability, and scale. You’ve got to figure out your go-to-market engine which the company was struggling with. Then you have to have a retention strategy. You can’t just be constantly churning and acquiring. It’s not scalable. It was an early investment. We invested in the company in 2016. Timing was everything. Jio hadn’t quite happened yet. Some of the prerequisites for that company to succeed weren’t there yet.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Mohanjit Jolly, Partner at Iron Pillar
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