Will invest in India's metaverse, crypto startups: Antler's Rajiv Srivatsa

The real foundational businesses still take 10 years to build. You can't fast forward it beyond a point, says VC fund's India head

Global early-stage venture capital (VC) fund Antler plans to invest more than $100 million across Indian technology startups in the next three years. It has already made over a dozen bets in India after its launch in the country earlier this year. Antler India partner Rajiv Srivatsa, who was a co-founder of online furniture startup Urban Ladder, talks about the fund’s investment thesis in India, the branding game of VCs and the vagaries of a booming market in an interview with Aditi Verma and Deepsekhar Choudhury. Edited excerpts:

What is your investment theme? Which sectors and themes would you be most interested in?

We've done 13 investments till now and we will probably do approximately around 100 in three years. To deploy this capital, I think the number one theme would be Web 3.0 as we have a lot of expertise across the space. The second  is to support companies which are building for a global audience from day one -- be it in SaaS, fintech or broader consumer tech.

The third theme that we track is a clubbing of companies working in ESG spaces such as climate change, human potential and happiness, the metaverse or even something like building alternate proteins. We believe all these three themes are where the unicorns and the decacorns of the next decade will be built.

If we can have 80-90 per cent of the companies across these three buckets, I think we'll do a good job.

What kind of stakes and ticket sizes would you be looking at?

Our sweet spot is $150,000-300,000, but the figure can vary based on different factors. For example, in Web 3.0 and crypto, companies hold tokens and it's not purely equity. So, we might even ask to go as high as $500,000 for the first cheque. We are still figuring that part out.

Otherwise, we have kept a reasonably consistent amount for the first 13 companies, but there will be certain exceptions. The other way to have flexibility is to take slightly different equity percentages. Let's say if the standard round size is of $2.5 million where we take a 10 per cent stake, there may be some cases where we may take 7 per cent, 6 per cent or 8 per cent. So, instead of altering the cheque sizes, we might alter the equity size.

What did you miss in early stage VCs as Urban Ladder founder that you will look to do better?

There have been very few in the VC community who understand the founder journey or are able to empathise with the founders beyond just providing capital. So, the first thing that we said is anyone and everyone interacting with start-ups from Antler should either have been founders, or have closely worked with founders. The entire team till now, barring a few associates who are fresh from college, has the experience of being a founder.

Because we've all been founders, we can brainstorm and help remove bottlenecks in  engineering, product, UX, hiring, marketing, branding, or whatever it is. We go that deep even in the early stage.

VCs have historically operated from the shadows. But today there are firms coming out in the open and engaging on social media to build distribution for their portfolio companies. What all does a VC need to do today apart from bringing money to the table?

On one hand, there are the likes of Tiger Global who do not market themselves much. And then there are the ones doing podcasts and write ups and are active on Twitter. Both styles will continue to exist. But I think there's a third bucket as well where there will be differential marketing and today at the global level,firms like Andreessen Horowitz and Sequoia do that really well. This third bucket does outstanding, crazy marketing.

If you want to win, you have to get into bucket three. There's a lot of competition in the earliest stages and there is a limited brand recall. So, you have to be out there. And being a successful VC is a brand game in a big way at the end of the day.

How has the phenomenon of large funds swooping in with cheques as large as $15 million cheques and more even in Series A impacted funds like yours?

It's too early to tell and I'll tell you a very fundamental thing. Pre-seed is a bit more of an emotion. It's not just a stage. Because there is nothing at that stage. You can give $1 million or $2 million, but a founder won’t get through their first 12 months just because they have more money. They can't buy their way to product-market fit. No one has ever done it and no one will ever be able to do it.

While 2021 has seen a mad rush in terms of capital, I think the real foundational businesses still take 10 years to build. You can't fast forward it beyond a point. Bad capital does a lot of things. I've seen this story play out multiple times.

Don’t you think a funding rush like this could be pivotal for the tech ecosystem as a lot of people get the chance to start a company?

I think that is the good part. The bad part is when that money goes into inflating salaries, or spending crazily on marketing and discounts. There's both a good and a bad to this excess capital. Hopefully, we have more startups training people to work in startups which is a good thing.

What has happened with salaries skyrocketing is that a lot of good companies, which have not been able to hire people at those rates, are suffering. There is a huge power equation that's unnecessarily being twisted because of capital.

Marketing dollars being spent and donated to Google, Facebook and TV companies. These things have a negative effect on the ecosystem as you don't know whether there is a fundamental consumer behaviour change or if people are buying only because of a lot of freebies.