Nick Kingsbury (Amadeus Capital Partners): We are a DeepTech investor, so we do like things with solid IP and outstanding technical teams behind the product.
23 Feb, 2021
Sasha Mirchandani is Founder & Managing Director at Kae Capital. He is a Co-founder of Mumbai Angels, India’s first Angel Investment group. Prior to this Sasha was the Managing Director for the India operations of Blue Run Ventures. He is passionate about working with startups and also interested in the development of entrepreneurship in India.
I made my first investment during the dotcom era somewhere around 2001. The first company I invested in was a comparison-shopping site. I realised within a few months that the idea didn’t make any sense. However I liked the team a lot and told them that we should immediately shut operations and try to come up with a new idea that was more fundable. They came up with an interesting business plan for Analytics. Though Analytics was very early in 2001, I decided that as I liked the team quite a bit, I would proceed with the investment. This is how I entered the venture investment business.
We have a whole bunch of things we look at. Eventually it all comes down to the quality of the management team and how large the market is. These things are critical – how big is the market and how good is the management team. But before we invest, we look at a lot of soft skills like how determined is the founder, how conscientious is the founder and a few other attributes. Obviously, the market size and product importance are important factors, but those soft skills are even more important.
We come before product-market fit or right at product-market fit stage. We can come in even earlier if we really like a team or we have worked with them before. Generally, we come in 2 to 6 months after the start, usually it is 6-9 months.
We have done a few US deals, but with our second fund we decided to focus only on India. We fund companies in two major areas – Indian consumer internet and India consumer brands. We also invest in SaaS companies that started in India, but later aim to become active mostly in the US, moving to San Francisco or, maybe, New York. The first company that I funded which I mentioned earlier, Fractal Analytics is a great example of a cross border B2B company. They are based between Mumbai and New York and recently raised $200M from Apax.
First and most important thing is they should validate their market. Many companies think they know their market and have validated it, but they don’t. We are looking for Founders first and business model second. We believe a great set of Founders can always figure out the business. Therefore, its a Founder-first philosophy for us.
Determination is the quality #1. Any business is very difficult, so Founders who are obsessed and very determined are the ones that eventually succeed. Then we are looking at several more qualities. How transparent the founder is, is he willing to share the information, especially bad news. Right now, in this COViD-19 situation, is a founder ready to make tough decisions, how he operates in bad times. How they work as a team and with employees, are they team oriented? These are some of the qualities we look for.
Data shows that one person startups, generally, don’t work and therefore we prefer not to work with single Founder companies. However, we have made exceptions for Founders that we truly like.
I think it has to be Steve Jobs, because he was by far the best Founder of his generation. There would be a ton of things that I would learn from him that I could take back to other Founders in our portfolio.
We get more than 3000 pitches per year. We have a system “D1-D2-D3.” D1 is all the inflow we get. D2 are the companies we spend some time on. D3 is deep due diligence, after which one of the partners presents the company to all of us.
We definitely scout actively as well as we have a lot of inflow as well. A lot of our LPs are tech founders or prominent people around the world and they send us a lot of deals as well. Some of the larger VC funds also send us a lot of deals. Of course, we scout: if you want the best deals in the world, you have to hunt for them.
We can do it for about a month, generally, in a couple of weeks, but, frankly, we can do it in 3-5 days if we really want a deal. We can move very quickly. The most important thing is actually to do due diligence, because if we skip it, it will be a huge mistake. And if we decide to do it in those 3-5 days, we have to compress time really hard.
Our usual investment is $700k to $1m. We can go smaller, like a couple of hundred thousand. This is for the seed stage. At the Series A round we can put another million or so. If we like the company, we can invest another million at the Series B. So, it will be $2-3m in one company, max.
Our goal is every investment getting 100x return. Frankly, if I will ever have 100x in my career, it would be awesome. Still every time we invest, we hope to get 100x. If we don’t, we will end up doing safer bets. Our business is about getting home runs. Every time we invest we expect to get a huge home run. If we think otherwise, we shouldn’t invest – it’s not our business.
At the first stage we take between 15 and 25%, most often it is 15-20%.
If a founder doesn’t even listen, thinks he knows it all – it is a red flag. If we find any ethics issues during the due diligence process, then we definitely won’t invest.
Oh, yes, so many times! Some of them are unicorns right now. I don’t really regret it because our business is about missing some great ones and hopefully catching a few of them as well. Yes, I feel bad sometimes, but it teaches me to make better decisions going forward.
It is a good question. Because we, investors, usually don’t invest in exotic startups, we make conventional deals. We met one interesting defence company which made cameras for defence. Actually they did very well, and last year Goldman Sachs and others invested a lot of money into that company, so it was a very good deal for us. I know, for some people it would sound like out of our space startup. Otherwise, no, nothing too exotic. We invested in a company called Wysa, which is a mental health AI chat bot. I wasn’t sure if we might do that investment, but my college pushed me into it. Today, with the COViD-19 situation, when everybody stays at home feeling lonely and depressed, that company is doing very well. The team is very good: the founders are husband and wife and worked at Goldman Sachs before starting the company. Today it is a global business with most of its traction in North America.
We’ve already invested in pretty much every industry we have ever been interested in. We are industry agnostic.
Yes, why not? The problem is that every founder wants to build his own team and be a king in his own house. Sometimes it is possible to marry such teams, and we have done it on a few occasions, but it takes a lot of patience, negotiation etc to show them that the combined companies could potentially have more value.
It is both a threat and an opportunity. In order to survive, companies will have to understand their cash position and extend their runway to atleast 12-18 months. The companies unable to adapt will die. On the other hand, those who are agile and have raised enough money to help them survive the next 12-18 months will come out of this situation very strong.
There’re so many books and movies. Of course, Zero to One by Peter Thiel and The Hard Thing About Hard Things by Ben Horowitz. These two books are classics, and I recommend them, for sure. Also Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies by Chris Yeh and Reid Hoffman. The blogs I listen to our Masters of Scale by Reid Hoffman and Acquired.
My Top-3 would be a very boring answer: Apple, Google and Amazon. And I would like to add Microsoft as well which has survived so many ups and downs. Many thought it would be completely irrelevant by now, but it is still among the top companies of the world.
Yes, I’m happy. I like working with entrepreneurs and helping them in any way I can. I can’t think of anything else I’d like to do at this stage of my career. I feel blessed and lucky to be in the position that I am. I haven’t thought too much about the future at this stage. However, I am sure that at some point I’d like to do something else. I will figure out what that is at a later date.