Good ideas always continue to get funded. A good chunk of these businesses don’t need a lot of capital, and there are a plenty of venture funds out there. There is a shortage of great ideas and entrepreneurs, not capital.
Sanjay Nath, Co-founder and Managing Partner of Blume Ventures, resonates with this very statement of Jeffrey Glass of Bain Capital.
Last month, Blume Ventures made an exit after their portfolio company TaxiForSure was acquired by Ola for $200M. BITS Pilani and UCLA (Anderson School of Management) alumnus, Sanjay is a seed investor in InMobi (which was then mKhoj, in 2006) and has been supporting the early stage startups for almost half a decade now. Coincidently, these five years have seen a lot of change in the startup ecosystem and the landscape of early stage investments in Indian startups. Sanjay spoke to us on these changes and evolution when we caught up with him recently. He touched crucial topics like emotional side of an entrepreneur and the importance of pivoting at early stages. Here’s what he had to say:
- More capital != Replicated ideasAccess to capital for early stage startups have increased in recent past. With that, the entrepreneurs have started focusing more on the fundable startup ideas. Many a times, we see replication of existing ideas from elsewhere but there is no need to reinvent the wheel every time. Because of access to information and spending time in the ecosystem, entrepreneurs care more about how fundable their idea is.
People are thinking beyond metros and internet access, and mobile has helped in it. There are innovations in the geographies and across sectors where it couldn’t have been possible. A lot of activities are happening in tier-2 and tier-3 cities also, and the challenge is to reach out to them so that they can also leverage the venture capital and their interest.
- Pivoting – getting it right
The term ‘pivot’ in basketball refers to moving (or transferring the ball) with your one foot stationary. It can be used in context of startups, when a part of business model changes with a few things continuing as it is. A startup is pivoting every single day and it’s also important to adapt to the needs of market and consumers.
There are two kinds of pivot—
a) when founders are not sure about continuing with their idea and have to figure out the other more interesting one and;
b) when they have not found out the other idea to cling on to but aren’t sure about current model too.
InMobi and Snapdeal are two different examples, where the latter was driven by demand while the former with the founders’ vision and because mKhoj wasn’t interesting enough.
- Startups by premier institutes’ alumni (or students) v/s that of non-premier institutes
You can only get a first meeting by virtue of belonging to a premier institute or sharing the same institute as the investor. The rest depends on your product and on idea’s scalability and fundability.
Networks in your alma mater can help your startup in hiring, more-so-ever in early stage. This is primarily due to the trust and an understanding of the capabilities of the students. Grey Orange Robotics (founded by BITS Pilani alumnus) and Flipkart (founded by IIT Delhi alumni) had many early recruits from their respective colleges because of the same reason.
- Startups and investors’ influence on each other
Startups and investors influence each other a lot in terms of ideas and investments. Sometimes, if an influential angel investor or a group of them announce that they will be looking at two or three specific sectors for investments this year, we can see some interesting innovations happening in those areas. Similarly, if a lot of startups are working to solve similar problems (belonging to a category) then it’s quite possible to see some investments in that sector. Both try to stay ahead of the wave and focus on defining the trends and predictions according to their senses.
- Why was it right for TaxiForSure to exit?
Capital plays a very important role in survival and growth of a startup in certain sectors. Taxi market and e-commerce in India need heavy capital infusion. Sometimes, as a company belonging to these sectors, even if you’ve an equally capable team and technology, you’ve to take some tough decisions. Last year in October, when Ola had raised $210 million, it became important for TaxiForSure to raise another round quickly or think of other possible alternatives. For founders, it’s equally important to keep the employees interest in mind and take the best possible decision. Though the founders would have loved to go far with TFS but the given situation left one of the best solution as acquisition to take on Uber together (with Ola).
We should not ignore that the investors, entrepreneurs and corporates, all are human beings and full of emotions. Some show while some keep it to themselves. A lot of decisions are bound to be taking place under some influence of emotions. But that’s a risk this world is now used to take.
Sanjay has been busy raising next round of funds for Blume Ventures as the firm is keen to invest more in early stage startups. Certainly, they have identified many fundable startup ideas and are in the process of identifying many more.
For every sleepless night of an entrepreneur, somewhere a VC would also be awake evaluating many ideas. To an extent I agree to the following statement by Sarah Lacy,
You know what works in venture capital? A group of incredibly smart, connected people who have the financial wherewithal and risk appetite to make multi-million dollar bets on unproven ideas and inexperienced founders. People who can make decisions quickly, and who spend their time trying to help entrepreneurs make the most of that cash.