Failure is also good for the system, says the Co-founder of the early-stage VC firm
“Chartered Accountant. Consultant at Andersen Consulting/Accenture. Former India CEO of UK’s second-largest BPO firm Vertex. Now MD of growX.
Those are the facts. The rest, we don’t really understand.
On a bad day, there’s no trace of him. On a good day, there’s no trace of him.
Notorious for: We wouldn’t know, would we?”
That is the intriguing description of Ashish Taneja (The Unknown), Co-founder of early-stage investment firm growX ventures on the company’s website. There’s no picture of him, either.
But, when you meet him, the image of this mystery man gets wiped away instantly. In a candid chat with e27, Taneja talks about the issues and future of the Indian startup ecosystem.
Taneja, along with Co-founder Sheetal Bahl, started growX in 2008 with the intention of providing managerial expertise. The model was to partner with technical experts to help entrepreneurs with domain knowledge but no managerial experience scale up their organisations.
“Today, this model probably holds more value than what it did in 2008,” he says.
With the startup scene in India heating up, growX also got a lot of proposals for investment. In 2013, it started co-investing with Mumbai’s Indian Angel Network, writing smaller cheques and gaining knowledge on how it works. The, finally in 2014, growX started this full-fledged operation as seed investor.
Here are the edited excerpts of his conversation with e27:
What do you make of the startup ecosystem in India?
The ecosystem isn’t evolved yet. I think it’s still [in its] very early days. It has definitely grown faster than what was anticipated earlier on.
While there are a bunch of quality incubators, accelerators, angel networks and seed funds, most investors including us are sector-agnostic.
That’s a sign that [it is still the] early days. We need to step up to a level that investors go deep into certain areas, they bet on certain sectors and themes and identify opportunities within that, and also help create opportunities within that.
It’s not about waiting for someone to get started and coming to you, but it’s about making sure that you use your experience and knowledge to solve a problem. I see over the next three to five years that change will happen.
How do you see the Indian startup scene evolving in the next few years?
We will see a lot of bloodbath in 2016-17. Evolution will be complete when you see a lot of shutdowns, a lot of investors losing money [and] only the serious ones staying in. That’s when the step-up will happen. So that will be another two to three years of action.
Today, we say the ecosystem has evolved because there is a lot of money available at the seed and angel level. That’s not a good sign. The robustness comes when you identify winners early on and make sure that companies that you’re investing in also last.
It’s about creating sustainability.
Today bar conversation is “Hey, have you invested in startups? How many have you done?” People talk about numbers, and that is never a good sign.
How do you pick your investments, as you said there are a lot of people with similar ideas?
What we have done is focus on the enterprise space, not too many consumer side. A lot of the ‘me too’s or the replicas you will find in the consumer side. Take any example like hyperlocal delivery, logistics, foodtech — you will see a lot of players in that because a lot of us can relate to that story. It’s not rocket science to build that.
It’s glamorous. Because India likes its more, investors like it more, valuations seems to get higher.
On the enterprise side, there is a longer gestation period before something good happens. The competition will be limited. Out of the over 18 investments we have made, 15 are enterprise and of these there is a good mix of tech-enabled businesses, non-tech business and deep technology businesses. We try to make sure there is a good mix of that.
How involved are you with the companies?
We tend to be very involved and invasive. [In the] early days of our investments, money is very important, for sure, but you have got to accelerate growth through other ways. Everyone needs to find partners, influencers, customers and we need to bring that in.
We advise them on how to utilise funds. We are the watchdogs as well as mentors. But we don’t want to reach a stage of running the company, that’s not our job. Our thesis is to back the right entrepreneur.
What is the range of your investment?
US$100,000 to half a million. We have done syndicates in the past that helped raise rounds up to US$1.5 million. Our own sweet spot is up to half a million dollars.
Do you look at the team or the idea?
The team. The idea is that if you give a good idea to a bad team, they’ll screw it up, you give a bad idea to a very good team, they’ll make something out of it.
Since we are more into the enterprise play, it means we are backing slightly more experienced people. So the ability to ref check is easier.
Are there any proposals, you now regret passing up?
I’m sure there are plenty. We are happy with our portfolio. Had we had a scenario when we had a bunch of losers in our portfolio, that’s when the regret comes. These are your babies and you help them grow and build it up, rather than thinking the grass is greener on the other side.
Have you had any bitter experiences?
None so far, but you never know. But it’s early days for us. You need to have a cycle of five to seven years for the bitter experiences to come up. Or the failed stories to come up. So far, its the honeymoon period. A lot of our investments are 2014-15 pedigree, so its still early days.
How do you see the next few years for growX?
2016 is a big year for us, a lot of the companies will be ready for follow-up rounds. That’s when the quality of the portfolio comes to test. Out of all our investments, maybe six will be up there in the course of the next 12 months, raising money in different ways.
In a short-term perspective, we want to make sure good things happen with our portfolio. And in the long run, for growX, we are going to continue doing the early-stage investing and later, we are probably going to look at Series A.
Series A would require a different kind of structure and a different set of capabilities like researchers, analysts, data scientists to help add value to our mentoring. We have already added a few capabilities and in the next 24 months we will add a few more.
There is a lot of talk of a startup bubble, do you agree?
Failure is also good for the system, because, then, you only get in serious players left in the market.
A lot of the games are about the winner-take-all or the last man standing, but that doesn’t mean it’s a bubble. Can India generate another US$10 billion opportunities in three years?
It should be easy, there’t no reason to believe why it won’t happen. So another US$10 billion ideas are created in a short period of time, it will take care of a lot of failed entrepreneurs and employees of those companies. I’m not worried from that perspective.
How do you guide entrepreneurs to space out their investments?
There is a logical way of thinking about it, that’s raise limited amounts, scale up the business, hit some milestones, hit the next round [and] logically build the enterprise, you will get more value for investors, entrepreneurs will dilute less.
But the reality is different. The reality is that money is the only moat you have to demonstrate that I’m going to be the last man standing. This essentially means that there is going to be a mad rush to secure positions through investors to make money and the logical guy will not go anywhere.
The unfortunate reality is that you have to do your rounds earlier than the business needs it. Today, people are saying it’s going to be a long winter, money is drying up, so what do you do?
Do you think money is drying up?
People are definitely being more cautious, thinking through, making sure the valuations are right, but that’s more for US$100-million funding rounds. For seed funding, angel, Series A and B there is still a lot of money available
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