
In the current investment climate, where capital is moving further and further upstream with all these larger funds wanting to invest in much larger Series A deals, entrepreneurs (and investors) need to find a way to mitigate the Series A gap. There’s clearly a Series A gap, with 50,000 to 70,000 seed-stage investments happening while only 1,200 to 1,500 Series A’s take place. Each of the following investors recently discussed this situation with me, along with other current entrepreneur-investor issues, during 30-minute podcast interviews. Startup entrepreneurs who need financing must be mindful of the Series A gap.
Nate Redmond, Managing Partner at Alpha Edison, a VC who has put trust-driven ventures at the center of his investment thesis. It’s a very interesting conversation for both entrepreneurs and investors to listen to.
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Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Sasha Mirchandani was recorded in February 2016.
Sasha Mirchandani, Managing Partner of Kae Capital, an early stage venture fund, is also a co-founder of Mumbai Angels. Sasha re-emphasized that Indian VCs only invest in India-facing B-to-C ventures and global B-to-B startups. India-facing B-to-B is not a sector that gets any investment, with few exceptions. We discussed the lack of exits in India, as well as the missing late-stage funding for B-to-C ventures facing the Indian market. Those of you who are working out of India would do well to keep these key points in mind.
Sramana Mitra: If you could tell us a bit about our fund and your investment in recent years and how that dovetails with the trends in the Indian industry. >>>
Sramana Mitra: I make a very clear distinction between real unicorns and pseudo-unicorns. The problem is there are a few unicorns in the market that are legitimate and it’s full of pseudo-unicorns.
Sunil Bhargava: I agree. It’s always interesting to hear those stories. They’re very educational into what is what for them. A friend of mine built a SaaS company, which made $5 million a year in revenue and then sold it. They have a very nice lifestyle. That’s not a bad thing to do.
Sramana Mitra: We have case study after case study of companies that have built incredibly good self-financed bootstrapped businesses at this point. >>>
During this week’s roundtable, we had as our guest Rob Schultz, Managing Partner at Serra Ventures, on catering to startups in under-served geographies. His point of view aligns with what we’ve heard from the likes of Nitin Rai of Elevate Capital in Oregon, Mark Hasebroock of Dundee Venture Capital in Nebraska, and others.
Online Food Delivery Service
As for the entrepreneur pitches, Antriksh Pathak from New Delhi, India, pitched an online food delivery service that is already in revenue. We discussed positioning and growth strategy.
Sramana Mitra: Sapience was our portfolio company as well. What about the more recent ones? What have you invested in the last couple of years?
Padmaja Ruparel: There is LogiNext which is in the logistics space partnered with Sapience. If you look at FarEye, they are tracking logistics. This is a completely real-time tracking system. They partner not only with e-commerce players but a lot of other B2C players. There are companies in the agri space that have grown.
In India, the marginal farmers don’t have money for capital equipments. Companies are bringing the equipment on a lease model. The small farmers are able to rent out these equipments by the hour. It’s like Uberization of farming equipment. It’s very interesting >>>
Sramana Mitra: There’s a lot going on in Vancouver, especially because the Visa situation is a much easier one in Canada. What are some of your notable companies? You’ve mentioned a few along the way. Have you had exits, for instance, that you want to discuss?
Sunil Bhargava: It’s too early for big exits. In fund two, Outdoorsy is going to go out and raise its Series B. They’re doing phenomenally well. One of the things exits and acquisitions are coming at much bigger valuations. Some of our companies are getting to the Series B level. A lot of them are getting to the Series A level.
In fund two, we had a company that was based out of India. Most of the team was in Bangalore. It’s in the gaming space. They >>>
Sramana Mitra: What you’re pointing out is the fact that even though people believe that entrepreneurship is about risk-taking, successful entrepreneurship is about calculated risk-taking and risk-mitigating.
Susan Mason: Absolutely. You have to decide what your objectives are – the risk versus the wealth equation. The early employees take the highest risk. You need to think carefully about as the company goes on, what are the risk impacts to those employees versus the later employees. We’ve been in a relatively high upturn here. That market will be changing. We go through the cycles. The economic cycle is coming up. Just understand the risk aspects of those economic cycles. You can have a fabulous company but in a down economic cycle, you’re just not going to realize that much cash on the outcome. >>>
Gary Little, Co-founder at Canvas Ventures, discusses the various types of venture capital and the evolution of the industry into a rather segmented current eco-system. For an entrepreneur trying to raise money, all this is extremely complicated, but essential to understand, or else, you will find yourself trying to fit a round peg into a square hole.
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