The Amit Shah of Mehta Ventures

On last Saturday, I had the opportunity to participate in the event “Breakfast with the youngest VC Mr.Vatsal Kanakiya in Mumbai ” which was an informative and interactive session organized by Tie Mumbai which gave a rare opportunity for the entrepreneurs to have a close interaction with the Mehta Ventures.

Mehta Ventures is no stranger to the VC world. It is a successful family office with more than 100+ startup investments in their portfolio.

Vatsal comes from an engineering background and in the last few months, he has analyzed about 30+ startup ventures.The objective of his session was to provide guidance to engineers to understand the business aspects from the VC’s angle, and his explanations made justice to the session objective.

He covered the importance of networking when pitching to the VCs, and touched upon the valuation methodologies and the key metrics that are used by the VCs when evaluating the startups.

Further on elaborating the importance of networking, he mentioned that there are mainly four ways in which entrepreneurs can strengthen their network and capture the VC’s attention.

• First, to participate in events that promote networking such as TieMumbai, this would help entrepreneurs to connect with VCs and closely interact with them.
• Secondly, to build a strong relationship with the founders of the Startups to which the VC has funded because the portfolio founder referral is a legit way to get VC’s attention.
• Thirdly, to optimize the use of professional networking platforms such as LinkedIn to connect with VCs on regular basis.
• Finally sending emails to VCs, which is usually considered as the last option that would attract VCs attention.

Moving on with the valuation methodologies and key metrics he stressed on some valuable tactics that could be followed by the entrepreneurs in obtaining funding.

He said that during the initial few meetings, an entrepreneur should try to get VCs attention rather than ask for funding.

1. It is always better to be ready with a short elevator pitch about the problem, the solution, the team, revenue model etc.
2. The introduction should instigate the curiosity to know more about the firm and that’s how ideally the conversation should start.

Avoid Jargon:

He urged the entrepreneurs to not use many jargon such as AI, Neural network, Crypto etc.

Entrepreneurs have to explain the idea in the simplest possible way so that VCs can decide whether to invest their time or not on the particular technology or business as a whole.

Problem with Vision:

He further stated that he has observed that a lot of founders have a promising vision, but they fail to look into the core features.

Usually, customers use 20% of the product’s feature which will generate 80% of the revenue.

As an example, he spoke about Whatsapp, whose core feature is texting and not Whatsapp payment. Thus he reinforced his point stating that first,

The founders have to focus on the core features rather than spending resources on visionary products at the initial stage.

So What Test? and 3Es Test

These are the two evaluation techniques used by Mehta Ventures when evaluating the startups.

In order to get investment, every founder has to pass the SO WHAT TEST? And 3Es test.

For the purpose of providing more understanding of these two evaluation methodologies, let me explain with the following hypothetical conversation between Vatsal (V) and an Entrepreneur(E),

SO WHAT TEST?

Entrepreneur: Hey, Vatsal, there is a 100 billion market opportunity available in the logistics sector.

Vatsal: So What?

E: The MSMEs are struggling to transport goods from one place to another with the existing truck booking based system and spend 40% of their time on logistics rather than core manufacturing activities.

V: Hmmm So What?

E: I have a technological solution which can be used to locate trucks, track the shipments, and carry out partial booking as well as initiate booking at a most affordable price which would be better than the conventional cost structure and all could be done within 5 clicks using a mobile app.

V: Sounds Interesting!!

3Es Test (Education, Experience, Experimentation)

V: Ok, Do you have any relevant education qualifications?

E: I have completed MBA and majored in Supply chain management from a reputed institution and my partners are from the tech background.

V: Impressive! Could you tell more about your experience in the Logistics Sector?

E: I was the operations head in TVS Logistics, and I have 5 years of experience in this field and my partners are from IBM

V: Awesome, Have you done experimentation on this idea?

E: Yes, We published our thesis on Indian logistics magazine and have MVP with 5 paid customers. So far, we are running by bootstrapping and currently looking for funding to upscale the tested model.

V: That sounds interesting, Please email me the pitch deck and I will look into the feasibility of funding the same.

10/20/30 Rule

This is the technique which the presenter recommended for the entrepreneurs to follow when they present their business ideas to VCs.

10 Slides:

The slides should cover 10 critical criteria such as Problem, Solution, Traction, Competitive Advantage, Business Model, Market opportunity, Team and Ask.

20 Minutes for pitching:

Investors listen to entrepreneurs around the clock; therefore their attention span is less. Hence they encourage the pitch to be simple, precise to the point and finish in 20 minutes.

Such a pitch is considered to be a fantastic start for evaluating the startup.

30 Size font:

Important keywords have to be highlighted in font size 30 to grab the investor’s attention.

One person from the audience raised a question asking,

“Whether should the startup aim to be profitable or scalable?” to which Vatsal replied that, it should be decided by the entrepreneur and not by the VC.

Vatsal’s keynote speech was followed by a Q&A session, which was conducted by Mr.Naveen who was the event head from TieMumbai.

Some of the key essences from this Q&A session were that it was pointed out that every entrepreneur starts with a good intention but not all startups succeed in fundraising, that is because frequent follow up is necessary to obtain funding.

Some more observations from the Q&A Session

1. VCs aren’t only the evaluators; they will invest if they see the potential.
2. In the early stage, VCs look more towards personality traits such as confidence, the sales pitch to VC and clarity of thoughts from the founders.
3. Entrepreneurs should always choose VCs based on their strategy and review their own investment thesis before approaching to the VCs.
4. Unit economics are important and family offices invest in the patience capital.
5. The Indian startup ecosystem is far matured now when compared to 5 years back and search on VC should be narrowed down and it should be laser focused.

I would like to share my own experience and thoughts which I believe that it would be helpful for Entrepreneurs when they plan their business proposal.

•  Entrepreneurs have to remember that the Venture Capitalist world consists of closed group of people who know each other very well.

So, I would suggest the entrepreneurs to stop complaining and start maintaining a good relationship with the Venture Capitalists, even when they aren't interested in your firm, because word of mouth goes a long way in this dynamic field.

 Also, frequent follow ups with the investors via mail or professional networks and sharing the traction, latest customer acquisitions, media coverage, key team member achievements etc will catch the attention of the investor.

Following up would always be an investment rather than an expense.

•  Most of the funded start-ups fail not because of failures in product traction, competition, funding, technology etc but due to the lack of ability in managing people including the investors, customers, employees, suppliers, family members and the list goes on, and maintaining good relationship will give long-term returns.
• There is plenty of information available online about well-known venture capitalists.

Entrepreneurs have to do their due diligence before approaching them and understand their investment thesis. Laser focus approach is needed to get the right investors into their board.

• Entrepreneurs shouldn’t be disheartened when their business proposal is rejected by VCs, because each VC might have their own investment scope and strategy, and it becomes a challenge for the entrepreneurs to identify the right VC that would invest in their business idea.

There are numerous example in the VC world where a business idea rejected by one VC has been accepted by another and rolled out successfully, hence finding your venture capitalist would become the first step in the hunt for investment.

 I would rate this investment firm with a score of 4.25/5.

Also, the initiatives taken by Tie Mumbai to organise such events are highly commendable, as they are being the bridge between VC firms and entrepreneurs and helping them to connect with each other. Under normal circumstances it would be difficult for an Entrepreneur to connect with such promising VC firms but these events have opened doors to cross such hurdles. Thank you #TieMumbai

You can check out my last article on the art of fundraising from Rajesh seghal. https://bit.ly/2L4GNfA

Disclaimer: All of the above information are my personal findings from the event and from contents via internet. I request the readers to do their own due diligence before forming any opinion on the particular firm/VCs.