The Exchanges

Q Would you like to talk about the GPs and LPs you're mentioning, but what are the GPs? Uh, joining the advantage and who are the LPs that have the belief in the advantage philosophy?

A So on the, on the GP front, apart from me, we have about two, three other people. Um, they all have entrepreneurial experience. Um, you know, many of them have sold companies. Some of them have started companies and learned from their failures. They bring those learnings and, and experiences on board. Um, we have two more members joining us shortly. We're expanding the team, because we realize now with fund one having almost 21 portfolio companies, fund two will be adding another 24 portfolio companies, 24, 25. We think we need a larger team. Uh, from an LP perspective, our, our anchor investors, um, for fund one, and fortunately, they've decided to come and double down on fund two. Uh, one is the family offices of the Mother Sun Sumi Group. Uh, one of the world's largest auto component manufacturer. Um, and they work with, uh, pretty much every leading auto OEM player in the world, including everybody from a Tesla to one end, to a Toyota and Maruti the other end. Um, another anchor investor is, uh, uh, uh, from the Hero Motor Corp group. Uh, this is the family office, um, who's the managing director of Hero Fin Corp. So from there we get a lot of insights into not only the FinTech side of, of, Investing in business, but also on the two-wheeler mobility side. Um, we have almost 50% commitments of the targeted 300 crore fund to, ah, from across four or five LPs. The majority of …

AI assessment note: “from an LP perspective, our, our anchor investors... one is the family offices of”

Q Would you like to talk about your first investment in Mobility Shuttle? How did that happen? And what excited you to put money behind Amit in the first phase?

A So I think this was almost three and a half years ago. I think we were just starting out on the fund. Um, uh, we were still sort of, uh, figuring out the fund thesis and the focus area, and at the fortunate, um, uh, was fortunate to meet with Amit, and we sat down and discussed the opportunity. Initially, of course, Shuttle was trying to, thinking of running intercity, uh, micro buses, which are Innova's in a shared Way. And I think we did a little bit of brainstorming and discussion. We realized that the larger opportunity might be Intracity, which we did. Um, but Intracity also initially we thought we'll do last mile, first mile, but then after doing a pilot for a few months, we realized that this is the wrong fact, wrong form factor for last mile, first mile. So we ultimately decided on point to point. Um, so I did, we had enough data to show that there is a huge unfelt, uh, an, an, uh, need Uh, for providing a comfortable solution at the price point of between 75 to a hundred rupees. Um, so private mobility or, or when you're commuting to work in your own four-wheeler used to cost about three to 400 rupees a day, back and forth. Uh, Uber or Nola at that time, in spite of being highly subsidized, would also cost somewhere around that price point. And public transportation was in the forty-fifty rupee mark. There was really no Option for people to commute, um, at that 50, 75 …

AI assessment note: “we had enough data to show that there is a huge, an need”

Q So let's talk more about Rapido and Shiloh. How they have panned out from the right world when the founders met you?

A So fortunately for us, both these investments have come out, have come panned out really well. Rapido, as I, as, as I already mentioned, we were the lead investor. We came in at, you know, two, two and a half million valuation. And the first three years was a lot of hard work. We started with the initial thesis of actually rolling out a bike taxi. Model, ah, that, but within a few months we realized that, ah, that a bike taxi model being, ah, more of a, of a, because of regulation would be more challenging to scale rapidly because it required the individual to purchase a new bicycle, ah, motorcycle to come on the platform. Which is why we pivoted and got into the ride sharing or a bike sharing model which we thought would be easier To truly leverage the existing supplier, existing capacity of two wheelers on the road, sort of like the, what the original Uber model in the U.S. was, but for two wheelers. Um, that sort of was, in our opinion, was a breakthrough, uh, pivot for us, because that is what allowed us to now ultimately roll out Rapido across almost 35, um, 35, 36 cities. Um, on a good day we could even do 150,000 rides. So I think that was the right thing for us to do. I think Chalo is also an extremely exciting business on our portfolio. Um, Chalo is building a full, uh, stack solution for improving the efficiency of public transportation. Um, think DTC, think Best, thi…

AI assessment note: “fortunately for us, both these investments have come out, have come panned out really well.”

Q Kunal, ah, would you like to talk about the three exits, which the fund one made, ah, and they were like two exit exit, which is commendable in just three years period of time. What does the future exist from your existing investments look like?

A So those, all three exits actually were more opportunistic really. Um, as you know, funds are typically raised for a period of seven to nine years, but we are all, we never shy away from, from if we are presented with a, with an exit opportunity, uh, where we're able to beat the hurdle rate by a significant number. We're more than happy to take, um, money off the table. Uh, fortunately our investors were not in, uh, you know, keen on cashing out, so therefore we were able to redeploy those funds, um, in companies that had started scaling well, uh, to be able to prorate in those investments as well. So those exits were opportunistic. Uh, we remain, um, open to exits as long as the, uh, you know, the returns are consummate to our expectations and beyond what we are, we are committed to our investors. And again, back to our strategy of building Indicons rather than Unicorns. Being an early stage investor, we're coming in at, you know, sub million to two million dollar valuation. So we really don't want to be, um, as part of the journey to build these companies into billion dollar companies. We are more than happy to exit at the one fifty million valuation. Um, and if we look at our portfolio today, we've got about two companies that are flirting at roundabout that mark. And one, hopefully, that should hit that mark in the next 12 to 18 months. So we are hopeful that we should be a…

AI assessment note: “we should be able to take a couple of, ah, more exits in the next 12 to 18 months”

Q So who have been your ideal co-investors who you have invested with or referred deals to in the first place?

A So we've worked with a number of funds. Um, sometimes we've co-invested with them. Sometimes they've come in after us. Um, we've actually worked very closely with a lot of, uh, super angels. Uh, we've had success, um, in the, on those fronts. Um, so we worked with Rajul, uh, on shuttle and, and we were able to raise subsequent rounds of capital from Sequoia and Lightspeed. So we worked very well with them, um, in those subsequent rounds of capital. Uh, there's a fund based in Mumbai called A-Stark. A-Stark and us, we've done a couple of deals together. We're looking at actually co-investing and partnering with a couple of more deals. A-Stark also is sector agnostic, but they have a deep, uh, understanding, um, of mobility as well, similar to us. Uh, from, from venture building perspective, um, typically we worked with the Smile Group, which is an incubator, early stage seed investor, Uh, based out of Gurgaon. So we've done a few deals with them as well. We continue to work closely with them. Um, they're very strong on the, on the digital media and online digital advertising space. So they bring in that level of complimentary skill sets to, to, uh, to what we do as well. Uh, from, um, a perspective of super angels, because we're also coming in very, very early. We've done a number of deals with, uh, with the, uh, with Sachin Bhatia, the ex-founder of Make My Trip, current founde…

AI assessment note: “A-Stark and us, we've done a couple of deals together.”

Q And how much is your time divided between managing the existing set of companies and raising money from LPs?

A So I think just like every startup that goes through different phase, um, so there's times where, where startups go into a fundraise module, uh, uh, mode, and once the funds are raised, they go into an execution mode, et cetera. Similar with funds, they, you know, funds itself also have their own cohorts. So we're, we're in the middle of the second cohort, which is the fund two, where we are, like I said, we started the fundraising process about six, seven weeks ago. We've been fortunately, ah, we've been fortunate to be able to identify people looking, who, who believe in us, um, and what we're doing, and I've committed, ah, over 50% of that fund. So, fundraising is probably taking up 50, 60% of my time. Uh, the balance amount of time is we've built a, uh, pipeline for fund two, which we will, uh, hopefully be able to close, uh, the first close of fund one we're targeting in the next, uh, four to six weeks, and we'll be able to, we have a pipeline of about four deals right now, which we would fund from fund two. Uh, once we have the first close done, then I probably, my fundraising efforts will go down to 15 to 20%, and the balance amount would be divided between making new investments as well as managing the existing portfolio companies. We're still not, uh, we're still young with only three, three and a half years into the total fund, uh, process. So we're still not in the, …

AI assessment note: “fundraising is probably taking up 50, 60% of my time”

Q What have your learnings been from the companies that didn't succeed from fund one? And how are you applying those learnings?

A So we, we have two write offs from fund one. Um, I guess What we learned was that, uh, we, uh, probably the wrong team executing the wrong, uh, business model. So after making 24 investment, we have realized that if I had to up, forget verticals and horizontal, but ultimately if you had to really classify each investment, they would fall into one of two categories. There are companies that are executing, uh, businesses which require a lot of physical last mile implementation and execution. Um, these are mobility companies, these would be training companies, et cetera, where you need to recruit and manage large, ah, number of, of employees, or contractors, or people working in the gig economy. And what we've seen is that if you're doing business, you're executing businesses which are all still tech-enabled, but require, ah, a lot of last mile execution, may not be physical infrastructure, but you're still trying to acquire a supply side or demand side, um, physically, Then I think it's better to invest in slightly, uh, founders which are, uh, slightly younger in profile because these are very physical, uh, and mental, uh, mentally exhausting, uh, businesses. And it takes time to, to be able to execute those because you've got to go city by city, uh, location by location, street by street. Um, so these are physically demanding businesses and therefore predominantly go with slight…

AI assessment note: “What we learned was that, uh, we, uh, probably the wrong team”

Q Would you like to give three advices to young founders on how to deliver excellence in their business?

A Oh, it's a long list. I think every founder is different. I think it's very difficult to say that this, these three advices is one size fit all. Um, and I probably have already mentioned this in the last 20, 25 minutes of talking. I think number one, of course, is, um, identify the problem that you're trying to solve, um, and focus on that. Don't, don't worry about competition. Um, don't be reactive to what competition is doing. Be reactive to what your customers are telling you. Um, so be, be customer centric for sure, uh, but be very focused on, on being, knowing what is the problem they try to solve for and build a business around that. Um, don't, Become an entrepreneur if you want to be rich. Um, you know, wealth creation should be an outcome of your effort, not the objective of that effort itself. Um, I think the third thing is, um, you're not going to succeed immediately. Entrepreneurship is, um, is a marathon race consisting of multiple hundred meter dashes. Um, and sometimes you're going to run fast, And strong, and sometimes you're not gonna run fast and strong, and that's alright. Ah, be prepared to having a couple of near-death experiences from the business point of view. Um, I don't think I've come across a single company that's been able to grow, ah, in a linear fashion, month on month, quarter on quarter, year on year. You're gonna run out of cash. Ah, that's why …

AI assessment note: “I think number one, of course, is, um, identify the problem that you're trying to solve”

Q Kunal, ah, in mobility space, we have recently seen Uber and Lyft IPO in US, and both IPOs have not done so well. But these companies have changed how people walk, how people transport. What's your belief of how this is shaping up in India? Uber and Ola are already big winners in India. And companies like Shuttle are emerging winners. Absolutely.

A So, you know, mobility for us is a very exciting space because in India, you know, three hundred million commutes happen every day. That's a large number. Um, and this is something that happens every day, every week, um, month after month. But if you ask people, I would say 99% of people will not be happy with the way they're commuting every day. So there's a lot of, Of problems that need to be solved. Lot of businesses, um, that need to be created or improved upon. Um, so we think mobility is a big problem. We think mobility is a sustainable business. Um, actually, when you think about Uber and Lyft, if you can create an 80, ninety billion, uh, value company in eight to 10 years, I mean, I wish I had the problems that Uber is having today. Um, and if you've looked traditionally in technology companies, many of them, including Facebook, Google, Amazon, Struggled in the first two, three months of their listing, uh, because, you know, individual, uh, investors and, uh, people following stocks could not really understand, uh, how to value these businesses and, and because the traditional methods of valuing businesses, which is discounted cash flow, future profits, didn't apply to such companies. But, um, we're all aware of the fact that, uh, there is a tremendous, um, upside that if we go from here to there, Um, and which is what has been born out with the, with many of these othe…

AI assessment note: “mobility for us is a very exciting space because in India... three hundred million commutes”

Q So Kunal, when you started out the fund, what was your ticket size? And were you a lead investor or you would want somebody to lead the round and then you would put in the money?

A Fund one was, ah, was smaller than fund two, um, and you're right. Ah, and since this was the first fund, we were also trying to, to, you know, figure it out as we went along. So most of the times we, we didn't lead. Um, and the reason for that was that, you know, our ability to catch large tickets, ah, check sizes at that point were low. But that I would say would probably be for the first six to 12 months of the journey. After that, our confidence grew. We were able to understand the markets better. We started getting quality deal flow, and then we ended up leading on a number of occasions. Um, I think the biggest, uh, in check that we wrote was in, in, uh, in Rapido. Uh, and the reason we did that was that, you know, having strong mobility, uh, focus and backed by a member of the Munjal family from the Hero Group, We also were able to convince Mr. Pawan Munjal to put in a personal check. I think all of that convinced us that it was important for us to take a lead role and cut the largest check in that round. Fortunately for us, that investment has panned out really well.

AI assessment note: “So most of the times we, we didn't lead.”

Q What have been the early stage journeys of those companies which grew 50 to a hundred X since you invested, and who couldn't grow?

A So I think we, like I said, in fund one, a majority of an investment went into mobility, but we did also do some investments outside of mobility to understand different dynamics, different markets, et cetera. Um, and what we realized was that asset light businesses, uh, where the focus is predominantly on just building technology and, um, uh, you know, managing customers were businesses, which where we were able to build And grow businesses 50 to a hundred X from the time we invested in. Um, so these are marketplaces. These are asset light businesses. Uh, we have a few investments which are building physical products, um, um, or are asset heavy businesses. And what we've seen is that there, there's been limited growth. Businesses have still done well. I'm not saying that they haven't, but we haven't seen that, that level of growth. So it's things like that which made us realize the importance of building, funding, and, and scaling asset-like businesses, because otherwise, if you have physical products or, or physical assets on the streets, a predominant, a majority of management bandwidth is, goes towards managing those physical assets, and, and whatever time is less from, from managing assets is when you're actually managing businesses, and I think this is an important learning, um, For my Carnation days, where we tried both, and we understand the difference between the two, a…

AI assessment note: “asset light businesses... were businesses, which where we were able to build And grow businesses 50 to a hundred X”

Q So you mentioned, ah, your expertise in the mobility space, being, ah, operating hard at Carnation, and now being able to bring Pawan Monjal, sir, into Rapid Oak. Would you like to talk in detail what advantage it brings to the table besides financing in these startups?

A So very early on we realized that, um, you know, as, as you know, startups have a very high mortality rate, you know, 70, 80% startups fail. So when we did a root cause analysis, what we realized was that startups fail, um, number one reason of course they fail is they're not able to raise subsequent rounds of capital. Um, So then we said, why do companies not raise subsequent rounds of capital? That's because other companies have either raised more capital or they've not been able to get the right product market fit. Um, so early stage companies have limited capital, um, and limited time to get that product right, the solution right, and start getting customer traction. So we said, what is it that we need to do to actually increase the probability of success? And what is it that we need to do to actually be able to achieve the right product market fit With limited resources, limited time. And what we realized was it's important to get people in, um, from a, uh, investors who understand the domain, investors who've been through many life cycle of companies in the similar space, and who come, who have the learnings and the, and the understandings of other investments, and of course, prior, prior startups. So then we said, okay, not only should the team have, uh, be only of entrepreneurs, so the advantage we only hire People who run businesses, um, and I have entrepreneurial expe…

AI assessment note: “investors who understand the domain, investors who've been through many life cycle of companies”