These next-generation micro VCs from Avalon Labs show startups the way to successVishal Krishna
Avalon Labs is a global technology and Blockchain company that is looking to change the nature of early-stage software startups.
This is the story of Varun Mayya and Shashank Udupa, who are on a mission to propagate young entrepreneurship in the era of global dominance of large businesses. Just five years ago, retail, oil and energy companies dominated the US stock market. Today, FAANG stocks (Facebook, Apple, Amazon, Netflix and Alphabet's Google) dominate.
With this hypothesis, in 2017, the duo founded Avalon Labs a micro-VC that invests in special ideas.
It is a 40-man profitable startup with more than $1 million in revenues (the company does not disclose the exact number though) which has made it a mission to team up with driven entrepreneurs across the world and invest in both technical and financial capital.
Millennials take wings
Avalon’s strength lies in how well the founders complement each other. Varun studied Computer Science at the Manipal Institute of Technology, and Shashank studied at Strathclyde University, UK. Both graduated in 2016. Interestingly, they are cousins who always found the idea of starting up fascinating.
Varun was an early beginner in the startup ecosystem, having founded his first venture, Jobspire at the age of 19. The popular Indian recruitment platform which saw nearly 190,000 applicants sign up and over 1,500 companies including biggies like Uber and Swiggy using it for their hiring needs, raked in over $100,000 annually. Jobspire not only became one of the youngest teams to raise VC money but also saw an exit for an undisclosed sum in early 2017.
On the concept of Avalon, Varun says, “We looked at the industrial age, where financial might was what determined the success of a company. Companies with extreme cash reserves often out-muscled the smaller ones.”
Adaptability means business
With technology becoming easier and cheaper to build, the road to success centred around the concept of adaptability. Companies that could adapt to changing customer needs, thanks to the consumerisation of IT, are those that will survive the technology game. Unfortunately, smaller companies continue to fail and cannot catch up.
“These are the companies that we bet on,” says Varun.
It became one of the few companies to invest in Blockchain, in “Enkidu” (a platform that helps entrepreneurs run programmatic companies or support the gig economy through Blockchain based smart contracts). Avalon, however, is unlike any other traditional early-stage investors. It helps an entrepreneur scale and sharpen the business model. The company has invested in six companies, popular among them being Mana Network, FoxBound and Enkidu.
Others include CalmIndia.com, Elune, and Linkhero.
“We are a hybrid venture studio that invests between $50,000 and $100,000 in every startup we work with; we also build the technology ourselves. Software as a Service (SaaS), especially mid-market and enterprise is our sweet spot. The industry itself isn’t very relevant - our portfolio ranges from sales automation tools to legal tech products.” says Varun.
Synergy brings profitability
While Varun is the computer engineer who’s known in the industry for building world-class products, Shashank is the methodical ex-investment banker who brings the numbers to the table. Their synergy is unmistakable. Having worked at IIFL, Shashank helps Avalon manage its investments across the globe while Varun helps its investments scale.
“We look at each of our businesses reaching profitability quickly and tend to invest in operationally light businesses, which is why SaaS is lucrative. Two out of six companies on our portfolio are already profitable.” he says.
How Avalon's business works
Unlike a traditional investment firm, Avalon doesn’t have limited partners. The team runs a development and content services wing that has a long history working with clients in the Bay Area. Instead of raising external capital to make their investments, the duo uses the profits generated on the services wing to place their bets. They have over 75 recurring clients on the services side, most of whom are well-funded startups. They find first time entrepreneurs with great ideas, but have zero capital to startup, but, have a business track record behind them.
“We know how other Silicon Valley SaaS companies build, sell and market their products and have the opportunity to work with them every day through our services wing. We’ve had the good fortune of working with companies backed by VCs like Andreessen Horowitz and Khosla Ventures, and we know how those companies do things internally. The ‘Labs’ part of our name comes from our penchant for experimentation. We’re always working on improvising our tools and techniques when it comes to everything we do,” says Anindya Chanda, VP Sales - Avalon Labs.
When building software and content in India, price parity works in its favour. The difference between its revenues and burn rate on the services wing was so high that the team thought it wise to place bets in startups.
In March 2017, Avalon Labs made its first bet - on Alejandro Gonzalez of MongoDB; a $2 billion database company that went public a few months ago. Together, they built Foxbound, a tool for sales reps across the world to prospect and schedule emails with potential leads via a web platform and a chrome extension. Foxbound already has over 67 million lead records - consuming terabytes upon terabytes of unstructured public data and converting it into structured persona information.
Foxbound was followed up with ventures like Calmindia.com (a mental health platform backed by Cognitive therapy), Elune (a cap table management platform in a joint venture with law firm Themis Associates), The Mana Network (a venture intelligence and influencer discovery platform), LinkHero (a link tracking tool for marketers) and finally Enkidu, a Blockchain-based platform that helps people start companies without the legal and accounting overhead. Avalon has a presence in India, Singapore, Estonia, the US, UK and Bahrain.
“If you haven’t noticed, we’re solving our own problems. As selfish as it may seem, we think we understand our problems best and hence have the best shot at solving them at scale for other people.” quips Shashank. He adds that Avalon avoids investing in companies like, say, Swiggy, which require large delivery fleets.
“Our product cycles move much faster than most companies - primarily because we embrace open source technologies and third-party APIs. The goal here is not to reinvent the wheel and custom build something from scratch, but to use technology like you would Lego blocks. The ability to quickly rearrange, remove and remodel parts of a product we’ve built allows us to find product-market fit extremely fast.” says Tejas Tholpadi, VP – Technology, at Avalon Labs.
The company competes with InfuseVentures, PiVentures and Seedfund. But, instead of just investments, the Avalon team plans to increase revenues from each of their six companies to $1 million by next year and take them all to Series-A, which is when Avalon decides to own a small share or totally exit.
The duo is determined to convert fairytales into dreams. Soon, they may even throw up a Unicorn or two!