Yagnesh Sanglakka, 100 X. VC Co-Founder and CFO, discussed with ETCFO the outlook for the venture capital firms behind the recession story. He said the story of early stage startups remains intact and his company has plans to roll out Rs 125 crore to 100 startups (Rs 125 crore checks per startup). , he added, these investments would be sector agnostic. VC is venture capital. By April 2022, he has invested in 80 companies with a total deployment of $60 million. Edited excerpt from the CFO’s dialogue.
Q: How many startups are you considering investing in over the next 12 months and how much money do you plan to invest in those companies?
Yagnesh Sanghrajka: Using the I-SAFE note, we are looking to invest Rs 1.25 crore each in about 100 companies over the next 12-15 months with a future stake of 15%. (iSAFE stands for India Simple Agreement for Future Equity and allows investors to make cash investments in exchange for convertible securities.)
Class 9 applications are already open. We invest in areas such as the Metaverse, Web 3.0, agritech, healthtech, insurtech, and the D2C space, but the fund is mostly agnostic. We focus on capital light business..
Many opportunities exist today. A total of 100 companies are on track to meet his target of investing Rs 125 crore. And to give you a relative picture, in the past (calendar year) 2021, we funded about 40 companies.
Q: With recession fears sweeping the world, do you plan to slow down your investment?
Yagnesh Sanghrajka: The pace of investment will probably be the same. Government initiatives are encouraging the formation of new-age startups and spurring more entrepreneurs from across India to solve customer problems.
Despite rumors of a global recession, India appears relatively well positioned to deal with headwinds. India is projected to experience high levels of growth over the next decade. Early-stage startup space is emerging as an alternative investment class. Their party is just getting started and more exciting times await..
Q: What do you think of the frothy valuations in the startup ecosystem?
Yagnesh Sanghrajka: The issue of evaluation comes at a much later stage. Bubbly valuations are more common in well-funded startups in the growth stage. We primarily cater to companies at the bottom of the pyramid. We offer pre-seed and seed investments. We are very bullish on this nascent ecosystem. Q: You are a member of an investment committee that makes investment decisions. How do you decide?
Yagnesh Sanghrajka: We consider factors such as the founding team, market size opportunity and business model strengths in our investment decisions. The key question is how good or how talented are the founders?
Q: Is profitability the issue here?
Yagnesh Sanghrajka: We mostly fund pre-seed or seed stage rounds where most companies are not profitable. The company is building their product or has just finished building their product. Entrepreneurs at this stage are actually building a business and trying to get people to gain more traction. It appears when you are Profitability is therefore not a metric, at least in the pre-seed and seed stages.
Q: What is your biggest investment decision-making challenge and how do you overcome it?
Yagnesh Sanghrajka: The challenge with investing in early stage startups is that you never get a fully functioning deal. It’s hard to find a business with sound market economics, a strong model, and a founding team that understands finance. But that’s why you need mentoring and financial savvy, and companies like ours come along. It is certainly difficult to instill financial prudence. But we have a very strong mentoring team of high quality his CFO and other leaders to help us overcome this challenge.
Q: Does having financial expertise as a founder make investing easier?
Yagnesh Sanghrajka: If founders have experience in finance, it helps them check more boxes than those who don’t or take longer to learn.