 "Boss, can we have a bridge round please?")
Scene at VC internal review meetings
Associate: Bhai, is China really a problem for us?
GP Bhai: China is not the problem. It's Hong Kong. They suddenly want companies that don't discount.
Associate: Bhai, what should I say to all our investees who are not able to raise money? They want a bridge round.
GP Bhai: Where we have given large amounts of money, ask them to pivot. They have enough money to manage for a while more.
Associate: And those 10-odd seed investments we made?
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GP Bhai: We will participate if they raise more money. But no bridge rounds.
Associate: But Bhai, some of them are doing good business and making margins.
GP Bhai: It's not about business. It's about scale. You will learn slowly
Associate: Salaam Bhai!
A few months ago at startup board meeting in a 5-star hotel
Associate: Hey, can we improve the cohorts (a measurement that indicates repeat transactions by the same consumer) significantly?
Founder: Yes, we are working hard on sending Big Data-driven reminders, notifications and custom offers. Suppose somebody ordered butter chicken with butter naan for dinner, our software automatically suggests a curd rice to them the next morning.
Associate: Dude, let's get to business. You remember how you gamed the cohorts when we were evaluating you?
Founder (squirms): That was just a one time offer of 100% cash-back. You see over the lifetime of a customer, that is insignificant.
Associate: Dude, how can we build scale if you talk crap? Do you remember the offer of Rs 5,000 cashback by that cab startup?
Founder: Oh! that one? Why that kind of offer will make our cohorts improve by 10 times. I will do the math of life time value and come back to you.
Associate: Think Scale. At scale, everything will fall into place. Investors need to see scale more than anything.
Founder: Boss what about the next round. What do you think? With this kind of promotion, we have money only for 4-5 months.
Associate: We need to be able to show the scale. And we will always back you, you know that. We are long-term investors.
Today morning
Founder: Boss I tried to call you a few times. Did you get my messages?
Associate: On the road. Will call back.
Founder: Boss, we need to discuss the bridge round
Associate: ______
Founder: Will you guys give a bridge as discussed?
Associate: Let me clarify. We haven't signed anything, have we?
Founder: But you said...
Associate: Anyway, we discussed with the partnership and currently we would like to see improvement in the underlying.
Founder: Underlying what?
Associate: Margins. Ultimate aim of the business is to make money, isn't it?
Founder: But should we not show scale first? And market share? And growth?
Associate: As an entrepreneur you should know what is more important to build a business. We are just investors.
Founder: Yes, you are! When can I meet you guys then?
Associate: Like I said, we are all on the road.
Anand Lunia is founder of India Quotient