At India’s largest conclave for startup investors LetsIgnite 2022, Anupam Mittal says that if he has gotten swayed into certain investments due to fear of missing out in the past year or so, the focus is back on investing in commercially savvy founders.
A decade and half since his first angel investment, Anupam has naturally developed his own framework and investment thesis and still makes sure to do a lot of diligence before investing but admits to having taken ‘impulsive and instinctive’ bets in the last few years.
“When you have only about 24 hours to decide, sure you can decide to sit out, but it's really, really hard to sit out completely. If you keep saying no and the companies go on to become unicorns, it is very painful because you keep reading about their next fundraise in the media,” he shares in a conversation with Shruthi Cauvery Iyer, Founding Partner of CaHa Capital at LetsIgnite 2022.
According to Anupam, the cost of omission is higher than the cost of commission. Because investing and failing has often turned out better than not investing as failures can be eventually factored in the returns.
Regardless of adopting a more structured approach, he believes gut and instinct will always play a role. “It is not some carnal feeling but an informed sense over years of what you've been doing and that's why, as you keep doing something with experience, your instinct gets better. And with confidence, your instinct gets sharper” he says.
In hiring and in investment, the Shark offers a simple rule of thumb to evaluate: Have more meetings with the founder and if your confidence grows in every meeting, one should cut a check by the third meeting. However, if it's stumbling a little bit somewhere, there’s a need to do a lot more thorough investigation to be on the right track.
Great products don’t necessarily build great businesses
Having started his career as a product manager in the US has lent itself to some bias and affinity towards product managers-turned-entrepreneurs in his investment decisions. Anupam eventually learnt the hard way that the best product does not necessarily win.
“The world is littered with examples of great products that are lying in a graveyard in Silicon Valley or in Bangalore. Great products don't necessarily build great businesses,” he says.
Speaking from his own experience of investment misses, Anupam says it pays well to bet on the founder, the team, and the general space they operate in. If the space is large, and the founder is very strong, they'll pivot into something exciting. He values commercial acumen of understanding margins and competitive strategy, founder chemistry, as well as perseverance. “Efforts compound just like money compounds,” he says.
On the market correction
Anupam is happy that focus is shifting away from fundraising frenzy to building businesses. The superangel says he personally thrives in the environment and as an investor, happy to see seed round valuations have come down from $15 million to $5 million during the market correction period. The business fundamentals are back in focus.
“These days, we get to hear a lot more of our Hindi word Dhanda, meaning the core business? All people talked about earlier was fundraising and raising the next $100 million,” he says.
Anupam says he has never been very good at the game of raising funds and capital and has raised only about $25 million for all the companies he has built combined.
“For that, I should be a laughingstock because today, if you've not raised more than $100 million, you're not allowed to come to the party. So I’m comfortable in this environment because I understand building businesses,” he says.
With more than 95 percent of his investments made in startups, some of his best bets include Ola, Rupeek, and Makaan.com among others.
“These are just some of the many stories that helped me sleep well at night but I have more that keeps me awake at night. But that’s how it goes - I believe if 50 to 60 percent of your companies are not failing, then you are not taking enough risk and hence, not generating enough returns,’ he quips.
Should founders be actively investing?
While founders can surely invest, Anupam is not a big proponent of founders setting up funds and spending an inordinate amount of time doing it while they're still running a company – despite his own experience of the same screaming success.
Anupam’s was a different time when the internet market itself was very small, with little competition as well as capital for a lot of founders. “So I had the luxury and the luck to be able to use time to my benefit. And if I wanted to do bigger things, I had no choice but to invest in other people or multiple opportunities,” he says.
But any founder looking to make investments and run funds as a big part of their career, they would be risking their core job of creating value for the primary investors.
“Today if you are an entrepreneur, having raised VC money, you're probably chasing a billion dollar dream. So doing that with the level of competitive intensity there is today, it's really very hard to take meaningful time out to make meaningful angel investments,” he says, advising busy entrepreneurs to wait till the time is right or have an exit.
At the same time, he emphasizes that founders can still invest through funds and platforms like LetsVenture but should be mindful they do not do the heavy lifting.
“In fact, LetsVenture has changed the paradigm in India when it comes to this asset class which was earlier available only to the UHNIs. It is democratizing exposure to alpha-generating assets,” he says.
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