Investors must be comfortable with lack of control over the money they invest: Alok Goyal of Stellaris Venture Partners
Entrepreneurs are known for their passion, enthusiasm, and drive. But what about investors?
Alok Goyal, Partner of Stellaris Venture Partners, one of the most well-known early stage VC firms in Bengaluru, believes that he has the best job in the world as an early stage investor.
“I have enjoyed everything that I have done in the past. When I thought I wanted to be a teacher and do research, I did and enjoyed doing that. But I don’t think anything can be compared to our profession. I think we are blessed to be doing what we do,” Alok says.
A graduate in computer science and engineering from IIT-Delhi, with a master's degree in computer science from the University of Texas in Austin, and an MBA from INSEAD, Alok has worked in the Bay Area for SAP and many other companies.
“I started a company in 1994 in IT Services, and have written code in the electronic design automation space for a couple of years,” Alok says.
Elaborating on his journey as an investor Alok says,
“I spend most of my time with entrepreneurs. There is no other breed of people who are more passionate. While there are many smart people in the world, you have to be slightly foolish to start a company and dream of changing the world. These are people who have had the courage to chase their dreams; that makes them a special breed. The daily learning in a VC business is hard to beat.”
Rahul Chowdhri, Alok Goyal, and Ritesh Banglani.
Creating a fund for a segment that needs it
Established in 2016, early stage fund Stellaris Venture Partners is the brainchild of Rahul Chowdhri, Ritesh Banglani, and Alok Goyal, who have over two decades of experience in the Indian startup ecosystem and venture capital universe. While working at Helion Advisors, the trio invested in firms like TaxiForSure, BigBasket, and Simplilearn.
“During our stint in the Indian startup ecosystem, and while working in the venture capital world, we realised that the number of proper size venture funds hadn’t grown in over a decade. There were some new smaller funds, and then there were some much larger. We saw an opportunity in the Series A and pre-Series A space,” Alok says.
The primary reason for this gap was that raising capital for funds isn’t easy, especially foreign capital, which is what you need if you are raising a Series A-centric fund.
Alok says this is primarily because venture isn’t a business where a Limited Partner (LP) meets, evaluates, and puts in a cheque in three months. It takes several years for one to warm up to large institutional investors outside the country. "The asset class we operate in has been hard to raise proper funds."
Commenting on how easy or difficult it is to start a fund, Alok says: “Well, call it an infectious disease. In our job, we work with entrepreneurs day in and day out, and it was only natural for us to be bitten by the startup bug.”
Stellaris has since diversified its investment in startups across sectors such as bike-sharing platform Vogo, AI-driven healthcare startup Mfine, SaaS-based logistics service network platform LoadShare, Indian language content platform Manch, performance support platform Whatfix, social commerce platform Shop101, personal care brand Mamaearth, digital trust platform Signzy, and communication platform NoticeBoard.
Currently, Stellaris is being largely sector-agnostic within technology startups. It is looking at startups targeting the next 300 million internet users, digital enablement of SMBs, and global SaaS businesses from India.
Speaking about SMB digital enablement, Alok says: “We believe whether it is procurement, serving customers, accounting, payments, or anything across the value chain, technology is seeping into these SMBs. Depending on the business, the level of penetration may vary, but it is there. We believe that disruption in the SMB space will be massive over the next one to two decades.”
Being comfortable with lack of control
According to Alok, while the journey has been delightful, there is one aspect to the business that one has to get comfortable with. He says: “We give money, but don’t have much control over it. You have to get used to that idea. The entrepreneur runs the business; we are just participants helping from the sidelines.”
He says while investors see different startups and businesses, and may believe they are experts, the reality is different. It is the entrepreneur who has to take the difficult calls.
As investors, you also need to be bullish about the Indian VC ecosystem. “If we didn’t believe in this market, we wouldn’t have started the fund. By and large, as investors, we are not going by what the rearview mirror shows, we are looking in front and trying to predict what is going to be ahead, after five kilometres,” Alok says.
The Indian market has rapidly evolved and transformed in the last 10 years, and Alok believes you need to understand that and move accordingly. There are a few economies of the size of the Indian market itself.
“While there is enough noise on spending power of the Indian consumer, the reality is that we will be a $5 trillion economy by 2025. So, somebody, somewhere is spending the money, and we have no doubt that regardless of the size of transactions, technology will play a key role in driving efficiencies and effectiveness” he says.
He adds that the feedback loop is long. Sometimes, when a company is not doing very well post investment, it may just mean nothing. Sometimes, a company may turnaround well, and sometimes it may not.
“Things that go high up like a rocket ship can suddenly sink. You need to be prepared for that. Real feedback comes only when you return the money to your investors. This cycle can take seven to 10 years in the early stage,” Alok says.