For Shailendra J. Singh, MD, Sequoia Capital, there is no right or wrong season for investing. What you do need is a passionate founder, a great business idea, and an equally passionate team that works really well together.
At a fireside chat at Techsparks 2015 on Friday, Shailendra was very clear in his advice when asked about the alleged slowdown in investments in sectors like foodtech and hyperlocal:
“Well, there are a few dark clouds, but no one knows if it is going to just drizzle or whether there is a hurricane which awaits. But it’s clever to have an umbrella handy.”
From thereon, the conversation moved to how entrepreneurs should approach fund raising. Shailendra said it isn’t right to gauge investor interest according to what people are favouring at a particular time. Consumer needs keep evolving and, therefore, a company needs to try to fulfil those needs in an experimental manner.
So what really makes Shailendra invest in a certain startup? For him, he said, it often starts with the founder:
“When I started (and was) much younger, there were certain checkboxes. I think most young people start with that thinking. I always believe that the best things in life can’t be measured. Similarly, you cannot measure a startup with metrics.”
What does the trick for Shailendra, then, is the passion, clarity, chemistry, and motivation of the founding team. He describes it as a sensing process that throws up questions like, ‘Do we want to invest for 5-10 years in that venture?’
According to him, for most, investing in a company while building it sounds like a ‘sexy’ thing, but there's a lot of hard work that they fail to appreciate.
Having been with Sequoia for almost 10 years now, Shailendra can sniff out an iffy idea or two. What gives them away? “Exaggerated metrics,” he replies promptly. As an investor, he believes it is essential to be able to trust the founder.
IIT and IIM favourites of VC?
There exists a notion that startups by alumni of IITs and IIMs mostly get funded. Shailendra rubbishes the notion.
“I completely disagree. Kunal Shah from Freecharge was a graduate in philosophy. Shashank from Practo is a NIT-K graduate. Ankur Singla from Helpchat is a lawyer. And Ritesh from OYO Rooms never attended college. I believe that if you have the desire to learn, you can accomplish almost anything,” he pointed out.
In his imagination, the startup ecosystem is something of a race track and the founders are like athletes. Great founders, according to him, deeply care about their passion to chase the next big thing.
Seasons notwithstanding, what sectors, we asked him, are hot right now and attractive for investment? He said if a certain sector isn’t hot in the founder’s head, it’s not hot at all. In 2007, fashion was the buzzword; today it’s something else. However, he added that if he were to choose, he would put his money on ‘mobile’ which has been fairly simple yet had vertical growth rates.
The second was fintech where regulations are being changed with payment banks. Shailendra defined some startups as ‘mutants’ – similar to each other in some respects but with tweaked business models. In that aspect, he said, India is a heterogeneous market that will create many such ‘mutants’. He pointed out to the entrepreneurs in the room that many categories that are thought of as done (and out of favour), actually aren’t.
A member of the audience wanted to know, ‘Do venture capitalists encourage startups to spend more money?’ To which Shailendra said that in many cases they did, but a lot depended on how much more was left to build. He added,
“If you don’t raise capital, you will be left behind, especially if you work in the execution category. The Darwinian principles (are in) play here.”
Returning to the example of athletes he elaborated:
“Your investor might say let’s sprint (spend capital to scale). Then we will recalibrate and build more muscle.”
With Sequoia backing companies like Freecharge, Helpchat, JustDial, Practo, Mu Sigma, PepperTap and Zoomcar, startups were clearly hearing from an expert whose advice is clearly worth listening to.
A big shoutout to TechSparks 2015 sponsors – Sequoia Capital, ICICI Bank, Money on Mobile, Microsoft, Signal Hill, IBM Bluemix, PwC, Atom Tech, Teamchat, Govt. of Karnataka, Intel, Rabbler, Dailyhunt, Reverie, Loginext and PayUBiz; Partners – Duff&Phelps, Taxmantra, Dineout, Exotel, 360ride, Yoga Bar, Chai Point, GWC; and our Media Partners – TV9, Fortune India, RedFM and Deccan Herald.