It’s been a while since I did this on behalf of us. We at a99 have been making measured strides into the big boys’ VC world in the past 6-8 months. It’s a strange place, the venture world; one day we think we are in control of the proceedings, and the next day we realize we are not.
Like they say, “It’s a strange world of language in which skating on thin ice can get you into hot water!” As always, the learnings for the team and me are tremendous. Some of them are hilarious as well, for instance, if an investor says “I am in, I will invest”, it doesn’t necessarily mean he is going to! Or a few investors saying “Why are you not a SAAS fund? I think that segment only will do well, and you are from Chennai also!” To serious insights like “I would like you guys to do a mock founder interview with me so that I can see how you guys judge a founder and an idea.” When we asked what is the idea for which we are judging a founder, he replied, “Pick an idea that you think will not work, now interview and judge me.” This went on for 4 hours.
We did go on roadshows to the US, Oman, Singapore, Wild Indian west, amongst other places, and each place was significant in terms of understanding ideas and investor mindset, especially the US. I quite literally had to go under office desks to find investors hiding! Jokes apart, it is a tough market to raise money from now, considering the seasonal political and economic crises they seem to be having every year!
In a span of 8 months, we have committed (soft and hard) in excess of 50% of our fund. A couple of large institutional checks are awaited. We have made 2 investments in the hyper-automation+ AI and the Switched Reluctance Motor segments. Both are fantastic teams with whom we have been in touch with much prior to establishing the beachhead for this fund. It gets me thinking if an average period of 10 months is the time one should take to actually finalize and invest. I have been told it is a lot of time for an investment, but also the other side of the argument holds that to quadruple returns, it’s okay to spend this kind of time. I think both arguments are correct and incorrect. I guess we will learn as we go by.
There are a few tools that have helped us along the way as well. The usual suspects include Notion, Teams, Zoom, amongst others. We have actually built a bottom-up Investor Checklist which tries to capture most of the boxes that we need to tick off to understand a business. Largely it is WIP, and we are going to keep perfecting the checklist. We have been speaking to quite a few senior VCs/PEs to get better as well, shout out to Arun from Z5 capital, Abhishek from Banyantree, Arul from Barings PE, Anoop from Chiratae who have been gracious enough to show us a few skills of the game and give timely counsel. I should say that I expected the general tone when you ask other VCs for insights to be rather admonishing or mocking, but these gentlemen have been very forthcoming with guidance and understanding. Guess we will pay it forward.
In terms of ideation, we have built a free-flowing funnel with my analysts hard at work to show my principal (Ash) and me 5-6 ideas a week. Keep it going, Rishab, Khushi, and Shreya! There is a lot of movement in the Pre-Series A, Series A space , I some times wonder is there really a funding winter? Maybe Anne Hathaway, in a dance, will tell me, “There is a funding winter coming, Mr. Shankar,” and the bane of a funding winter may hit. Hopefully not!
We are aligning ourselves to make investments in the EV last mile, AI-driven credit management, digital content generation, recycling tech, amongst others. Frankly, we like the business and we like the founders, but there is always a 10% that we are not sure of. The last time I checked with senior investors, this was normal, and the percentage of not being sure increases. So, we’re hoping for the best. As the world is throwing out a new AI or tech opportunity every week, the latest craze being AutoGPT, which is setting GitHub and Reddit on fire, I started thinking, if every tech that VCs are funding today is getting disrupted the next week or the next month or the next year with GPTs and AI, etc., is it a good contrarian strategy to invest in low tech real-world physical businesses? Say, manufacturing, fastening, physical gyms, boating services, sports, etc. I guess we will need to debate. I am crystal-gazing a time where GPT will automatically analyze and allocate funding to a tech idea, and the need for a human VC behind this fund may become null and void! Hmm… doesn’t look like I’ll have a job if this happens!
In terms of exciting news, we just concluded our first exit from our Fund 1, where we exited 90% from Futurice UK (in the digital transformation space) investment. We were able to return pre-tax 77% IRR over two years. We are satisfied with the return, kudos to the Futurice UK team for helping us achieve these returns. The remaining investments in Fund 1 are performing well in spite of the markets being tough for Series B fundraise and for general business ops as well. We hope to have a similar return from the other businesses as well. (Fingers crossed)
Also, we are looking to do a podcast called “The Mama VC” (Iyer mama investing, or a motherly venture capital, whatever pleases the audience) with our invested companies in the mix along with a few interesting people and a lot of humor. Not that we are following a fad, but I like talking a lot, and most of my team does as well, so we might as well use our chief skill set.
Lastly, thanks to Asha, Ganesh, Balaji, Prem, and the extended team at a99 for putting up with me. Please continue doing so, and remember I am doing the same as well! 😉
Cheers,
V
Write in to Pitch@a99.vc or Vignesh@99.vc for any bright ideas or just general brainstorming.