 "Sunil Goyal, YourNest Angel Fund")
Investments by major venture capital (VC) funds seem to be slowing. Ask entrepreneurs and they will tell you the difficulty in raising Series-C or even Series-B rounds. But, angel investors insist there is value to be had in the Indian tech start-up market. YourNest Angel Fund sees it in the business-to-business (B2B) sector.
Sunil Goyal, the founder and chief executive officer of YourNest, says he doesn't shy away from consumer-led companies. However, he would like these to be big business houses with immediate adoption, high return and a scope of growth that is not driven by feverish customer acquisition and marketing hoopla, but by revenue.
"The fund investment thesis has been to invest in asset-light business models that have low customer acquisition costs. Hence, we have deliberately stayed away from pure B2C (business to consumer) models," says Goyal.
B2B business is considered to grow at a slow pace and the chances of exits are lower, especially in Series-A investors like YourNest. Goyal will argue this isn't really the case. He can visualise exits in plenty of his companies over the next two years, lower than the four-year cash-outs that a Series A investor wants.
He won't pick his favourites but will nudge you toward one called GolfLan.com. Its concept is very similar to BookMyShow. It develops the backend for most golf clubs and then provides a platform for enthusiasts to book tee off times.
"There is one in the US that uses a similar model. But, very few courses are actually on it. Can you see the potential that we are dealing with?" he asks. When YourNest chooses to exit, he says, it would be easy. "It will be a company with a captive high-ticket user base not just in India," he adds.
He also has the likes of an artificial intelligence company called Arya.ai. A budding star, the Mumbai-based company became the first Indian start-up to be selected by Paris&Co as one of the 21 companies in the standout innovations list.
Goyal insists that YourNest's investments are still maturing. But, he points to his personal exits that have been on the mark to showcase his business acumen. Goyal says he was one of the first to see potential in ZipDial, a missed-call-based marketing company, and when it was bought out by Twitter for $30 million, he saw it as a win not just for him but also the company.
But, there is a certain way he likes to build his portfolio of companies. "We have made 15 investments from our first fund. We plan to make four to six investments every year," says Goyal. The company runs camps where successful entrepreneurs and those who have made mistakes guide their portfolio companies. But, it isn't unusual. Several VCs have investor days.
"Yes, true. But, those are more social gatherings. This is a coaching class. We are not hands off. We are with these entrepreneurs each and every step of the way," says Goyal. And, with a Rs 100-crore fund, they need to be elbows deep to maximise the company's potential. Their due diligence even for small cheque sizes takes three months and the cheque doesn't land immediately into the company's bank account. It takes a little while until some metrics are not met.
"In those few weeks when the cheque hasn't been credited yet, that's when the entrepreneur listens to you the most," he says. The strategy means there should be no failures. But, there has been one: BookMyCab, a company that he says should have made money from day one.
And, it had hit the ground running until the landscape changed and the entrepreneur got carried away by the big-cheque enthusiasm. The company had no exits, it merged with a Pune-based company, Wings Travel, in an all-stock deal. At one time, BookMyCab was being wooed by Jugnoo and a $10-million exit for everyone was being visualised.
"Yes, it has been one of our biggest lessons. Looking back, it seems we forgot the simple principle of economics that "abnormal returns attract fierce competition". We should have raised larger funding rounds early on or should have been open to quicker exit to a larger player. Faster exits shall be the norm in case our start-ups do not reach leadership position in their space," he says.
KEY INVESTMENTS
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SmartQ: App that helps employees of big tech parks to avoid queues at food court; implemented in a few IT parks in Bangalore
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Arya.ai: An aritifical intelligence platform that uses artifical neural network to mimic the brain and constantly learn
