How 100X.VC creates ‘social proof’ for seed-stage startups and drives deal flow for larger funds
Veteran angel investor Sanjay Mehta set up 100X.VC as a first-cheque fund that would back seed-stage startups and make them discoverable and ‘fundable’ for larger VCs and corporates. Two years on, it has funded 50 startups in four cohorts.
In the middle of 2019, Sanjay Mehta, an angel investor with 130+ startups in his personal portfolio, launched 100X.VC to fund “100 interesting ideas”, and curate a pipeline of “fundable companies” for larger VCs.
It unveiled its first cohort of 20 startups later that year at a gala event in IIT Bombay.
Eighteen months later, in May 2021, the Mumbai-headquartered fund crossed the 50-startup milestone, with its last 21 investments coming inside two quarters. Did India need yet another early-stage VC?
Sanjay tells YourStory, “India lacks lead investors who can curate deals and give social proof for fundable companies. We wanted to create a discovery platform by funding the company, and having our own skin in the game. We don’t take any transaction fees. We tell the world that these are our moats, and you can join the cap table. And we make money along with other investors only when we make an exit.”
100X.VC, which is sponsored by Mehta Ventures (Family Office Investments), is a SEBI-licensed Category 1 - Alternate Investment Fund. It helps even idea-stage and MVP-stage startups to get their first cheque.
With an average cheque size of Rs 25 lakh, what Sanjay calls a “cookie-cutter model” of investing, 100X.VC has backed 109 founders from Proof-Of-Concept (POC) to the go-to-market stage, generated 460 jobs, and helped 60-70 percent of its portfolio companies raise follow-on funding.
The sector-agnostic fund has investments in agritech, automation, D2C, deeptech, dronetech, EV, edtech, fintech, Future of Work, gaming, healthtech, IoT, SaaS, social commerce, and so on.
By the end of the year, 100X.VC plans to double its portfolio by funding disruptive business models and high-growth startups. “The pandemic interrupted a bit, but we want to invest in 100 companies every year,” Sanjay reveals.
What makes 100X.VC different from a plethora of early-stage VCs today?
Unique investment model
In 2019, 100X.VC became the first Indian VC fund to use SAFE Notes, an alternative mode of investment that is gaining popularity in the West.
The homegrown VC devised the concept of iSAFE Notes or ‘India Simple Agreement for Future Equity’, which allowed investors to make a cash investment in return for a convertible instrument. The compulsorily convertible preference shares (CCPS) can be translated into equity when the startup they back goes on to raise capital.
Founder-Partner Sanjay explains,
“SAFE Notes is a popular investment mode in Silicon Valley. It gives investors the right to future equity and simplifies the term sheet process. The documentation is 1:1 between the investor and the founder, and it helps startups close the funding round in 24-48 hours instead of waiting for 8-12 weeks to get money in the bank.”
Essentially, iSAFE Notes allows early-stage startups to skip the tedious paperwork, avoid the pre- or post-money valuation games, and also prevent large equity dilutions that are typically associated with traditional venture capital rounds.
100X.VC claims that over 400 angel investors have funded its portfolio companies directly using iSAFE Notes.
Ninad Karpe, Partner at 100X.VC, said in a recent statement, “2021 is off to a good start. After reviewing 1,677 applications for Class 03, we selected 10 startups. Each has a breakthrough idea, which has the potential to scale into a globally successful business. These startups can impact India significantly by improving the standard of living and changing our outlook to work/life.”
100X.VC unveiled its third cohort in January, and Class 04 in May.
Scaling startups in a pandemic
Sanjay says that the pandemic has created huge tailwinds for its portfolio companies, and taught the founders to go beyond limited geographies.
He shares, “D2C brands can sell online today because people have come online. Earlier they would have to set up offline distribution networks. Because of the pandemic, the horizons have expanded multi-fold.”
Overall, investor engagement has improved 5X, he says. “Founders are now able to connect and validate their ideas from experts anywhere in the world. We’ve had mentors from Hong Kong and the US conducting masterclasses and attending our VC Pitch Days”.
Manas Madhu, Founder of Kerala Banana Chips (Class 03 portfolio startup), concurs. “Pitch Day is surely one of the most important parts of the 100X.VC journey. Thousands of investors from around the world attend it, and what's better than that?” he says.
100X.VC’s just-announced fourth cohort includes 11 seed-stage startups:
a) BHyve (a Future of Work SaaS platform that helps companies document the tacit knowledge of their employees and launch peer-to-peer learning networks)
b) Clinify (a marketplace of live interactive courses for students to learn new skills)
c) CRE.CLUB (a social payments platform that allows shoppers to pay through social media posts at the point-of-sale)
d) DataKund (a no-code, intelligent browser tool that allows users to build software robots to automate their work)
e) FieldProxy (a SaaS platform that helps field servicing companies to better manage their on-field teams)
f) Inzpira (a curated marketplace for live English language learning that allows students to instantly connect with trainers anywhere)
g) Kroop AI (a service that detects deep fakes and helps enterprises authenticate audio and video samples)
h) Moving (a go-to platform for crypto news, insights, verified knowledge, and connections)
i) Powerbot (an energy analytics service that helps industries and commercial buildings optimise their use of electricity in real time)
j) Quizy (a skill-based real money gaming platform that lets players win cash through online contests)
k) Talkie (a voice-only, real-time chat platform for remote teams to communicate effectively)
Some of its earlier portfolio companies like CORA Health, Accio Robotics, Vitra.ai, SAWO Labs, Pickright Technologies, and Knorish, have gone to raise follow-on funding within six months. “We are a first-cheque fund, but our focus is to invest in companies that can scale,” Sanjay says.
Manas, of Kerala Banana Chips, adds, “I thank the 100X.VC team for shaping our idea into a well-prepped startup. Sanjay's suggestions for growth and network, Yagnesh's mentoring on the finance and investing side, Vatsal's efforts on masterclasses and pitching, Ninad’s wisdom, and Shashank's thoughts on how a startup should be — it has been transformational.”
Creating a mentorship and guidance network
In May, 100X.VC announced a partnership with LetsVenture, which will allow its portfolio startups to reach out to 7,500+ investors (angels, ultra-high-net-worth individuals and family offices) through the platform.
Shanti Mohan, Founder, LetsVenture, said in a statement, “This partnership provides an early opportunity to participate in companies funded by 100X.VC and support founders in their venture-building journey, with time and capital. LV will invest through its SEBI-registered angel fund. We see this partnership growing as 100X.VC continues to build their cohorts.”
The partnership will offer LetsVenture members a credible and curated list of companies identified, mentored, and funded by 100X.VC.
“LV has a syndicate of small-ticket investors who will pool in the money and appear as a single name on the cap table. For a startup, it becomes easier to manage investors that way. LV members, on the other hand, will get a credible deal flow of 100X.VC-funded companies,” Sanjay explains.
Last month, 100X.VC also rolled out its not-for-profit initiative Entrepreneurship Gurukul, which provides an education platform to aspiring entrepreneurs at no cost, no equity, and no fee. The platform aims to catalyse the conversion of ideas into actual businesses, with the help of masterclasses conducted by experts.
The course includes pre-recorded video lectures by entrepreneurs and investors as well as live sessions for personalised learning. 100X.VC claims it has already onboarded 200 founders for the 12-week programme. At the end of Entrepreneurship Gurukul, the founders will receive a certificate of completion and an opportunity to get funded by 100X.VC.
Ninad said at the programme launch, “One of the main focus areas is upgrading skills related to developing scalable business models, pricing the product, and understanding finance. Under this programme, we also emphasise on soft skills like presenting and pitching for fundraising.”
Future investing roadmap
100X.VC, which completes two years next month, reckons that the pandemic has fundamentally changed the way we live or work. And the next wave of successful startups would be those that service the new normal.
“Life is always going to be hybrid now. It is not going to be an either-or situation in the short-term future (of three to five years). We are looking at Future of Work as an emerging segment. The home economy is also growing crazily. All services that can be delivered at home, including subscriptions, D2C brands, etc. will see big growth. And we will continue to fund a lot of consumption-driven businesses.”
100X.VC also believes that India will see a sharp growth in corporate venture capital in the next one to two years — a trend already visible, with the rapid acceleration of deals led by the likes of Reliance and Tata Digital.
The fund has rolled out a programme to partner with corporates that have a corpus to invest in startups, and will create a bespoke deal flow for them.
Sanjay says, “Corporate venture capital did not exist in India even three years ago. But the Walmart-Flipkart deal shook everybody. Every established business today is looking to invest in and work with startups because that is where the innovation lies. Or else, what explains SBI funding fintechs [Cashfree] or Mahindra buying out Meru Cabs?”
The answer could well be blowing in the wind.
Edited by Teja Lele