Hear about the surge in the start-up ecosystem which is taking the world by storm, and how this space has evolved and adapted to the new normal. As both founders and investors continue to be important cogs in the wheel, there are best practices to be shared and new lessons to be learnt.
Summary Keywords: investors, founders, startups, IPV, invest, business, pandemic, growth, India, fintech, funding, valuation.
Rajshree Shukla 00:02
As Jeff Bezos says, "We are our choices. Build yourself a great story". Perhaps, not every bright idea gets its due, but with the right pitch and right audience, you can see your ambitions take shape and kickstart that dream project. Angel investors play a crucial role in enabling entrepreneurial journeys. With more and more startups emerging in the country, it becomes imperative to understand how the angel investing space is evolving and adapting to the new normal. In today's session, as we discuss what the future holds for investors and startups alike, and the changing landscape of angel investing and VCs, we at Management Rethink, are excited to have Mr. Vinay Bansal, Founder and CEO of Inflection Point ventures. IPV is one of the leading angel investing platforms in the country that is largely focused on early stage investing. We'll also be talking about some of the success stories, which have paved way for more disruptive ideas taking the lead this year, and IPV's plans as they continue to expand their reach. Okay, before we jump into the session, I'd love to introduce Vinay. Vinay has 20 plus years of Global Experience in Fortune 500 companies, Startups, Private Equity and Investing. Prior to starting IPV, Vinay has held several top positions in global roles in Manufacturing, Finance, Supply Chain and Sourcing. He's a Finance expert who's worked with big names like TPG Capital, GE, Hindustan Unilever Ltd. and Wildcraft. At IPV, Vinay and his colleagues firmly believe that 'Everyone can grow with startups', thereby promoting an ecosystem, which is viable for both founders and investors, and is not just focused on backing an idea, but also its execution. While 2020 was riddled with financial challenges for many, IPV successfully funded 30 companies from a range of sectors like Edutech, Sports, Healthcare, FinTech, etc. Some of their recent investment deals include Milk Basket, Mindler, Bolo Indya and Hobspace. Welcome to the session, Vinay. We are so excited to have you today and really looking forward to hearing all the valuable insights that you'll share with our listeners.
Vinay Bansal 02:23
Thanks, Rajshree for having me. I look forward to a good engaging conversation.
Rajshree Shukla 02:28
Same here, Vinay. Lets let's get started. You know, it's been an interesting last year with the onset of the pandemic and the way it has unfolded. Do you see 2021 as a different year with respect to startup investing?
Vinay Bansal 02:42
No, absolutely Rajshree. And you know, let me say it a little bit differently, right. The year that went by was very different indeed, from many respects. And since 2020 was very different, 2021 has got to be different, for sure. And let me explain this a bit. You know, 2020 was a fearful year and all of us were inside homes. We were wearing masks, not meeting people. We were fearing to shake hands, fearing to talk to people. You know, we were not on the roads, not in the malls, not in cinemas. We were at home, close to our families, etc. 2021, I believe is going to be a hopeful year. You know, where we are hoping to come out and meet people, we are hoping to go to weddings, we are hoping to go to malls, we're hoping to go to restaurants, and so on and so forth. And we are of course hoping to meet our extended families and friends. Right? So 2020 was gloom and doom, right. Stock markets fell to their lows, 27,000 or so, you know. 2020 was a year of support. As investors, we needed to support the companies that were not doing well. We needed to support our families, we needed to support our employees. 2021, instead of gloom and doom, I believe it's gonna be a lot cheerful year. You know, the stock markets are gonna pick up. And similarly, instead of support, we are going to look to invest in 2021. So yeah, a very different year than 2020.
Rajshree Shukla 04:22
That's great to hear. And I like the optimism in your voice you know. I was just wondering if you'd like to elaborate on the new trends that you've seen in the changing landscape of angel investing? Do you see any additional challenges for investors? What should they focus on? And if they need to reimagine their role, somehow?
Vinay Bansal 04:41
Sure, I think you've asked some really important questions here, Rajshree. One of the basic trends we see changing and this is more from the process of investing. Earlier, people were very sceptical of investing unless they have met the founder in person multiple times, right? Earlier, investors would come together in a hotel room, meet and discuss and then invest. Earlier, they wouldn't go deep on due diligence. Earlier, they would not look at the unit economics as much as much they would look at on growth.These things have definitely changed. Today, I think investors are far more comfortable meeting the founders on Zoom. This saves a lot of time for scheduling the meetings, for travelling, saving the time for the founders, etc. right? Yeah. These days, I would say investors look at cash flow far more deeply. Do they have the runway for 18 to 24 months? What if something bad happens again? Right? Are there positive unit economics? Is the business gonna make money in the long term? Those things are significantly different for angel investors, founders, and the ecosystem as a whole. In terms of challenges for investors, I would say, every challenge is a learning opportunity. If there is a challenge of not being able to meet the founders in person, learn the way how things are done on online world, right. And there are tools available, psychometric tools available to check, you know, if you like the founder or not, you know. Develop those capabilities to evaluate people working online, develop processes to do the due diligence online, or even work with your team members on it. So a lot, a lot, I think, is different for investors and that's how the landscape is changing for investors as well. I'll pause here, if you have any other thoughts, but then I could go on, you know, reimagining a role question as well.
Rajshree Shukla 06:45
I agree, technology has come in a big way now. And it's just sort of permeating every way in which we are working today. So I think yeah, that's very important. And that has definitely changed the process of due diligence and other things, like you said.
Vinay Bansal 07:01
So I think the other question you asked is, you know, what is the reimagining of the role of the investors, right? The way we invest here, and right from beginning, which others are now realising is, we always look to founders or startups as kids, as our own kids. Right? And this might be a very different comparison for you or for the audience. But yes, let's look at the various, you know, similarities. Kids make mistakes. Right? So do startups. Kids are young, and so are startups. Right? Kids don't earn on day one, they get their jobs much later. They need investments in education, in value systems. So do startups. Right? Startups first need investments, kids need right education, and the right value system, and they need support. So do startups. We need to support our founders, with the right governance. We need to tell them as advisors, where they're headed, we need to bring the experience from large companies to early stage companies and so on. But you know, kids also need acceptance when they fail. And that's what I think investors need to do a lot more of. But, kids will always be better than you in managing your TV remote, that's what startups do, right? Startups are far better than us in how to manage technology. Kids will be much better than you in managing your car, managing the household stuff and in automating stuff. Kids will be far better than you in your video games. That's what startups do. They break things, they rebuild things in a much better way. So that's the, I would say, the lens with which investors should look at startups. And if they invest right behind their education and their development and hold their hands, tomorrow, they will get great jobs, have a lot of data, and will make you rich as well. So that's my perspective on role of investors, with the startups.
Rajshree Shukla 09:08
That's a wonderful analogy, actually. I love the way you set that comparison, you know, and yes, I do agree that they do need a lot of hand holding. And that's how my second question is pretty much linked to what you just said, you know, speaking of the entire startup ecosystem, we've seen that the role of investors is actually transforming and going beyond merely funding. So like you said, you know, it's about investing in those disruptive ideas. Of course, the startups would be better at what they are doing with the technology and everything, but now the conversation isn't just about funding, right? Early stage entrepreneurs, they want advice on going global and scaling up etc. So that ways I do believe that the role of investors is now changing from being value extractors to being value creators, and a lot of it is focused on mentoring and networking.
Vinay Bansal 09:59
Sure Rajshree, I think you picked the right topic here. My view for investors, especially in the startup ecosystem- it cannot be passive investing, you know. If you want to do passive investing, maybe do stock markets, right? Or gold, and stuff. With angel investors, you have to invest just like you would invest on your kids, right? You will pay for their education, which is fine. But you also need to, you know, track them, monitor them, guide them. So let me talk about four or five key spheres, where I think investors should take a bigger role. You know, as you rightly said, giving them access to your network, giving them advice and metric. So if a startup is stuck somewhere in a deep problem, or they're trying to solve a problem, which has been solved by others, leverage your network and guide them on those problems which are solvable. For example, a finance problem or a legal issue or how to do marketing, or you know how to do sales- this basic stuff. We know, but they may not know, because they are young, and leverage where they are smart. So don't get into their technology aspects. If they are good at technology, that's what they are building, Investors should complement them by helping them build the other aspects of the business. Next; help them hire the right talent. Nobody can grow unless they have the right teams. So if you have good connects, in the right ecosystem, people looking for jobs, great guys, build them and connect them to founders. Let them hire those people who will help build your enterprise and help build value for the investors. Next; sometimes, they may need co founders. You know, that kind of a talent is also required. So look at your other startups, where the founders might be available, or look for large companies where people are itching to go and become co founders. Connect those dots and see if you can bring co founders to this ecosystem. I must tell you that, today, there are a lot of headhunting firms which will get talent for large companies, or even for startups. But if I ask a headhunting firm saying, "I need a co founder for my business", they don't have a practice there. And a huge need today in our startup ecosystem. Practically, one in four or five startups needs a co founder. And I think we need to work on that area very sharply. Next is connecting our startups for business. Let's say, you know, a startup has come up with a new technology, which can cut the cost of, let's say, doing a certain manufacturing by 20 or 30%. If you know those companies, if you know senior folks in those companies, connect the startup there. The company will benefit by reducing cost, and the startup will have some revenue, and that will help them sustain. So cash can come from two places, one from investors, the other from customers. Coming from customers is always better. Then again, you know, mentor and guide on leadership, because no founder can grow and keep a team, unless they are great on leadership. Mentor and guide there. Mentor and guide the founders on how to communicate vision, how to set up their pitches, that, you know, that training is good and great for founders. Founders typically come with a deep technical domain. If you add leadership capabilities, communication capabilities to them, they can go far higher, far better, far longer. Right. And last, but not the least, when they fail, support them. Don't act like as you lent money to them. You know, it was an equity investment, and therefore treat it like that. You know, move on, learn from them. And, you know, continue to invest behind the ideas and passion that the investor has. So multiple aspects here, Rajshree.
Rajshree Shukla 13:57
Absolutely, yeah. And this is so important, you know, to keep these things in mind. You spoke really well about, you know, what the investors need to do and how they need to be the ones looking at the holistic picture, you know, with regard to the startups, but do you also see that the founders need to do anything differently in line with the changing times?
Vinay Bansal 14:16
I have a lot of tips for the founders to be honest. So let's see, let's see how many we can cover, right? One is running the business. And the other aspect is related to those softer aspects which are not really running the business side. Let me talk about the softer aspects first. One is when you're looking for investors, look for people who can give you not just money but a lot of advice. Look for people who you admire, trust, and you know, are likeable, somebody you would want to work with. Don't look at investors who are here only for money. Right? They will trouble you later when the startup is not doing well. Look for investors who can help add value to you long term. The second part is, focus on what you really need from an investor. If you're tight on cash flows, then don't haggle too much on other items. Just focus on cash, get that cash in, get your business up and running and move on. The best of the founders focus on one or two big things, and then you know, just make sure that they do them very well. Coming to, you know how you, I would say run a business, I would simply say that founders who come with passion for a certain area of work, they do far better than those who come in because they see an opportunity. Founders who are here to solve a pain for their customers, do far better. Have a customer obsession. But be fair to investors, and to your employees. If you miss on one of the three areas, typically I've seen founders flounder, and not able to become big. Last but not the least, I would say, be very focused on what you want to do and you know, stick through that. Even if you want to do something different, first complete what you are set out to do, make sure that either it has succeeded or failed, before you pivot. There were founders during the pandemic, who just tried to take the benefit of the pandemic; left, you know, or defocussed their area of work they were already doing, and they were doing some great work, and tried to, you know, capture the three to six months of pandemic benefit. They could not develop a new business model from the pandemic, and they missed on both the boats. So staying focused, I would say, to your true mission, a long term mission, which should not ideally be moneymaking only, but you know, improving the world around you, you know, solving a pain in the in the world by giving better experiences usually leads to a lot better and a greater business.
Rajshree Shukla 17:06
True, I think this is, these are some of the really valuable insights again, because it's not about jumping the gun and always going with the trend, you also got to see long term sustainability. And that should be like in the vision, right? Yeah, yeah. So again, now I'm coming back to the specifics, Vinay. So general funding sentiment, as you said, it's going to definitely change as compared to 2020. Now, I wanted to be a little more specific here and ask you, what sectors do you see on the rise? Do you see business models being redefined to cater to India specific needs as well? And I know, you've already covered how the process of due diligence changed, but if you can share any further insights on that.
Vinay Bansal 17:48
So you know every change needs a different way of working, right. Yeah. And we have seen significant change in the last one year. And India has responded differently than many other countries have, and therefore, India's population works differently. They have different needs, they have different demography, and different ways of working in terms of culture. So I think yeah, India specific needs will remain. And you know, I mean, let me take an example. We all grew up with our parents telling us, 'Go and get educated, otherwise, you're gonna wash clothes or wash, you know, utensils', right? Our parents were very focused on our education, right? And that's what shows up. Today, you know, the world's most highly valued Edtech company is in India. You know, you may not know or you may know, Byju is the world's highest valued Edtech company. Right? Yes. So, our culture, and how we have adapted to it, and what we want, reflects later in the companies as well, right. Now a company like Oyo, you know, where people want a cheaper hotel and people travel, it's a large country, right. Again, you could not have done a very similar company in the US to begin with, it was very specific to India's needs. Right. So, India specific stuff will always remain. FinTech, you know, Indians have a large appetite for good financial products. And today, India's FinTech industry or startups in FinTech, are globally the most advanced, right. If you go to US, you won't see the kind of work that's happening in India, let's say that it whether it is Paytm or a few other companies like BharatPay. So, India specific work will remain. And if people just do not say, Okay, let's see what's worked in the US, bring it to India, you know, that won't work. I mean, let me give another example, right. In the US, there are a lot of laundromats. You know, if somebody was to be able to pick your laundry, and you know, do it, those kind of businesses went up very well. But coming back to India, you know, you have a maid, you know she will charge very less, because we have a labour arbitrage. And you know that business will never pick up. Right? So it's a stark comparison of what can work very well in the US may not work here. You know, Airbnb worked very well in the US, right? But it took time for Indians to adapt to it, our cultures are different. Here Oyo may work better, so yeah, Indian specific business models, our specific problems which founders are aware of, they should go and try and solve. There is a large opportunity sitting out here.
Rajshree Shukla 20:44
I think you made very valid points there. It's all very culture specific. And yes, I mean, it's interesting to see how Edutech has risen so much, and Essentials delivery, etc. So these are the sectors that are rising in this year as well. And I think some of these trends are here to stay long term, right? Absolutely. Again, we are reminiscing a bit here. And I'd like you to share if you think how the best founders and investors managed things in 2020. Perhaps there were any valuable lessons that were learned along the way that you'd like to share with the larger audience?
Vinay Bansal 21:20
Let me start with investors first, you know, sometimes we think that founders are the most important piece in the cogwheel. I think investors have an equally, if not more important role to play. Because if investors don't fund, founders can't exist, right? It's like having a parent first and then a child, you know, going back to the corollary of how do we treat founders like kids. So let me say that, you know, Warren Buffett said it also that, 'When there is fear, be greedy', right. And as I said, 2020 was a fearful year. I mean a simple example, the most highly valued company in India is Reliance. And they are known for doing great stuff. They went out and raised 30 to $40 billion during this time, when nobody would have imagined raising that much money. They went out and picked up businesses, bought businesses left, right and centre, right. They invested significantly in picking up great businesses, and therefore, they got a good valuation as well. That's exactly the kind of stuff IPV also did. So if you are seeing that others are not investing, there is a sentiment change. I think great investors will do well by going out and investing. So a couple of examples: This year between March and June, if let's say we funded about 10 startups, out of which three startups have already shown us a 3x to a 4x valuation increase. Why? Because nobody else was funding them, we got a reasonable valuation, we supported the founders growing and we helped the business grow. And that's where you see good results as well. So I would say one simple line for investors is invest behind conviction, invest behind founders, invest behind great business models and invest far more when others are not investing, right. Yeah. The second piece, I would want to add for public market investors is the same thing. In March, the number of cases were only about 140-150 in the country, but stock market was at an all time low of about 25-26,000 in Sensex, right? It had fallen from 43 to 26. Great investors would have picked up stocks that point in time. Right? Now it is up to the investors own mindset and the psychology to be able to invest in the times of fear. Today the same stock market, the Sensex, which was 25-26,000 during that time is at 50,000. It has doubled, all in less than a year. Where do you see that kind of returns and these are, you know, great public market returns. No market will give you that kind of returns otherwise, and this opportunity is available to everybody. Anybody can invest. But it is up to the investors own mindset to be able to find that opportunity, go behind conviction and take the actions that are required to be taken without being fearful. Right. So I would say that's from the investors side. Now on the founders side, we looked at a few founders which were in a similar stage, invested behind them. Some of them lost their focus, and therefore, could not get the valuations or sustain the businesses as well as others, their counterparts did. So my point to founders will be- number one, stay focused. Continue to jump towards the problem that you're trying to solve. Number three, keep the cash. During tough times, let the cash come in, even if it is, at you know, lower valuations because it's better to live than to die. And it's okay to live a little bit expensive than required, right?
Rajshree Shukla 25:14
Again, I know that, you know, 2020 was difficult in a lot of ways, but IPV has a lot of success stories. So I would love to hear a little bit more about that. And, you know, what would you like to share with us at the IPV front? And what lies ahead for IPV also?
Vinay Bansal 25:30
Sure, sure. Let me kind of take both items one by one, you know, in terms of a few success stories. So, let me pick up in different sectors, actually, each one of them. Yeah, So, one we picked up in Virtual Employee space, you know, this, we invested about two years back, and I invested because I was looking for people who could help me scale up IPV, you know, when we just started, and we were absolutely comfortable having people available to us only online and not physically. And at that point in time, I came across this startup called Wishup, run by two very smart chaps. And they were doing virtual employees, and they were not getting funding from anywhere else. I said, Okay, I'll cut the first check, we cut the check, we started using their employees. And with our network, many other people started finding that benefit. And you know, they started growing from the verge of not getting funding. And recently, they got a term sheet at a very significantly higher valuation. And you know, the pandemic also helped move a lot of the employees to be virtual. And you know, that became the new normal. So, the example here, what, why I took Wishup is, we invested two years behind what we were convinced on, and there was a business need, right. And once you help them sustain and grow, once the things change, or situations change to their favour, they bloom. So that I think is a very good success story. And that was actually the first investment we did at IPV also, so you know, very dear to heart. You know, when you make the first investment as a platform, and that gives you phenomenal returns. The second one I wanted to talk about I think, is a company in geolocation space. This is called GeoIQ. Again, an IIT graduate, a great team of three co founders, you know, they were just an idea when we started funding them about a year and a half back. And, and they have done a phenomenal job over a period of time. And with pandemic again, you know, they started giving locational based data to many companies, and helped fix supply chains, helped fix FinTech lending during this time, and, you know, had a phenomenal round as well, recently. So again, you know, a case of a founder, which we identified earlier, worked with them, focused on the mission, continued to work through, you know, with the head down and ears to the ground. I think the other one I would want to pick up is Otipy in essentials delivery space. An IIT Delhi graduate, four years behind his mission, you know, pivoted late last year to a b2b to c, and delivery of fresh fruits and vegetables at a 20-25% reduced cost, and at least 30 to 40% better on quality, and delivered within time. You know you order late evening, next day morning, they are home. I think they have grown like 5x to 6x in the last six months. And we are looking at them to grow another 5x to 6x in the next one year. These three success stories, at least in different sectors should give you a flavour of how things work.
Rajshree Shukla 28:50
Yeah, thank you so much for sharing those Vinay, because you know, it just really cuts a very hopeful picture, and how things have really grown in leaps and bounds, you know, and that and it's just very exciting to imagine what the future holds. Because these startups are something which are growing in leaps and bounds in our country, and it's just good to see people progressing on that front.
Vinay Bansal 29:13
Absolutely. And I think, you know, our tagline at IPV is that, 'everyone can grow with startups'. You know, when your kids grow, we also learn a lot of stuff as parents, right? Yeah.The whole house is full of excitement when there are kids around, right. And that's true for the country as well. They create jobs, they help us get better at technology. They help us, you know, provide employment, they help us getting new ways of work done. They help the country grow, they bring in innovation. So, and of course they help investors grow their wealth too. So I think there is a whole ecosystem and a whole new way of looking at the economy as a whole.
Rajshree Shukla 30:01
Yeah, you've put it so well right there, you know, like how it touches almost every aspect of us. And it's brilliant that it's doing well. And it's just growing, you know, every single day. So, thanks again for that Vinay. Thank you for listening in guys. Based on my conversation with Vinay, one of my key takeaways today is that both founders and investors are equally important cogs in the wheel. Great Investors will recognise an opportunity, even in challenging times, go out and invest even when others aren't. Similarly, passionate founders looking to solve a real problem do far better than those who are just looking to exploit an opportunity. I hope you had a good time listening in.
Vinay Bansal 30:41
Thanks a lot, Rajshree. It was great talking to you.
Rajshree Shukla 30:44
Thanks a tonne Vinay.
Vinay Bansal - Founder and CEO, Inflection Point Ventures