For five years, Shailendra Singh’s appearance at TechSparks has been a crowd-puller. People never tire of listening to what the MD of Sequoia Capital India has to say. Singh is neither flamboyant, nor controversial. And yet, for entrepreneurs and aspiring entrepreneurs, he is an investor spokesman of sorts: one that speaks straight, no jargon, and no artifice. Once the fireside chat gets underway, the audience hangs on to every word.
Shailendra Singh: Enjoy the winter. It’s a different season. Cultures get built when companies go through hardship. No company has a great culture if it got tens of millions of dollars in funding and it was smooth sailing after that. This winter, from my personal experience, most companies are in a much better position today than they were this time last year. I think we tend to underestimate is the elastic power within companies; how much founders can really push themselves, like Olympians.
Our teams are extremely elastic, and many startups this year have made shockingly good progress. Last year, they were in bad shape or didn't have good unit economics or metrics, and they've surprised positively. We had wind-chill, if not winter. And we're all the better off for it. The green shoots are already visible.
Shradha: Give us a cheat sheet for raising funds this year.
Singh: Present what you believe in; not what you think is hot. Fintech is hot this year and it's very ironic. I joke with founders that it's almost as though once Silicon Valley says this sector is hot, you'll start believing what I've been saying for a couple of years. (Sequoia invested in fintech startups as far back as 2011.) Founders should look to build sustainable companies, build great value, give customers a great experience then doors will open (whether it's a good market or a bad one).
Shradha: So why has fund-raising become a benchmark that separates the “good” companies from the “not-so-good”? It’s something that every entrepreneur struggles with. (Heads nod in the audience – they want a clear answer)
Singh: The media fascination with funding is way overdone. Let's assume one of you found a product/market fit, had a 40% EBITDA margin and 30% PAT and growing very nicely. Competition is low. You’d keep it quiet. The irony is that nobody writes about them. When people hit a great formula they don't need to come to conferences, they don't need to dilute their equity. WhatsApp (a Sequoia portfolio company before it was acquired by Facebook) never raised large amounts of funding. I want to see many more founders start as bootstrapped, or raise small amounts of money - the industry should have a mix of companies that are capital-light and never take VC money.
Shradha: We talk about the next 500 million consumers and internet users and mobile users. But the depth and breadth of the market, and its ability to pay for is yet to be tested.
Singh: Whenever I ask people about unicorns, metrics, I ask them what time-horizon are we talking about. In the 2001 dotcom bust, the same thing happened. The entrepreneurs then probably grossly underestimated the power and potential of the Internet and mobile in 1999, and yet they were wrong in the short term. It all boils down to the right calibration of where we are in the cycle. It’s a good thing that people are asking questions about how much of the market is truly addressable. At Sequoia, we feel we will be surprised on the upside.
Shradha: So where are the exits? (The audience laughs)
Singh: Exits are a function of the quality of the portfolio, the maturity of the market and how big the companies are. India has historically been more challenged on that front. Our personal belief is that in 3-5 years people will be surprised at how much the startup ecosystem has turned around from the current gloom-and-doom. When you are in a new market, why would it be smooth sailing? Not everybody will find a smooth exit, and that's okay.”
Shradha: As a firm believer of the India story, where do you see us moving?
Singh: There are plenty of catalysts available. Data usage is off the charts. There’s a potential UPI wave in the offing. At Sequoia, we invest in good markets and bad. Founders aren’t going to not start up because the markets are bad. I see founders digging in this year. Some people enjoy and thrive in the winter. They’re going to be fine.”
Shradha: What’s the one mistake that entrepreneurs make all the time? (The anticipation is thick. You could almost hear a pin drop.)
Singh: Too many founders are trying to build their business for their investors, and that's a very big mistake. They're guessing what we might like. We want founders to be motivated, authentic, and original. We don't want buzz words in a meeting. Some founders have taken salesmanship too far. One board meeting I attended featured a 12-minute inspiring video, and no financial metrics.”
Shradha: Is that because investors are asking for too many of these metrics? (Laughter)
Singh: Things are changing and evolving. It’s tough in tough markets. But we also love to beat ourselves up. It takes someone from Silicon Valley to tell us that Indian startups is a great place to be in, and then people get excited. We just need to believe more in ourselves.”
And that there, is the crux of it all, for every entrepreneur and every stakeholder in India’s startup ecosystem, straight from the oracle himself: Believe that we can make all the difference.
Shradha then unlocks her phone and unleashed a Koffee-with-Karan style rapid-fire round of prompts at the fireside chat. It certainly sent the mercury soaring! Here are the “bullets” that Singh sportingly braved before signing off.
Success – There’s no destination; it’s a journey
Money – Overrated
Investing – A privilege
Valuation – A highly transient meeting of the minds
Sequoia – Close to my heart, stands for creating enduring companies
Role model – My brother
Ambition – To remain young at heart as I grow old and not lose the urge to learn
Cliché – Obsession with unicorns
Saying no to an entrepreneur – Painful, heart-breaking; toughest when we love the founder
Favourite entrepreneur – Too many to name
Advice – Advice is cheap; help is valuable. Figure out who can really help you; surround yourself with such people
Critics and criticism – Ignore; it's probably a sign you're doing something worthwhile.
Attitude – That of a sportsman - lose with grace; play to compete with yourself; play to enjoy
Happiness – Family and friends