Prashant Mehta and Sandeep Murthy, partners at investment firm Lightbox Management Ltd, were as candid while sharing their views on B2B (business to business) models and SaaS (software as a service) firms, as they were about their own investment strategies during an interaction with a group of over 20 entrepreneurs on Wednesday.
The interaction was a part of Walkabout, an initiative under which entrepreneurs get to visit offices of marquee investment firms and listen to top investors as they talk about their strategy and what matters to them before writing a cheque. Walkabout is the Day one of the News Corp VCCircle Startup Summit 2017 that started on Wednesday.
The hour-long session kicked off with a presentation by Murthy, wherein he gave details of the firm and its investment strategy. Lightbox invests $1-10 million, and prefers a significant minority stake, or about 30%, in a company. “Large early positions enable (us to have) deep operational involvement and influence,” said Murthy, who has led Series A investments in inMobi, Cleartrip and GreenDust as the former head of Sherpalo Ventures India.
Murthy said the hardest situation for an investor is when the portfolio companies cannot raise the next round of funding. “We investors, wonder where the next round will come from. We need to know the end game. What steps make the most difference to make a company attractive for the next round,” he said.
For instance, when they moved in as seed investors in ecommerce firm ShopClues, the focus was not so much about customer acquisition. “We started by saying that when you have more merchants, next rounds of funding will happen,” he said. Last year, ShopClues raised an undisclosed amount from GIC and existing investors Tiger Global and Nexus Venture Partners, to becoming a unicorn with a valuation of $1.1 billion.
Murthy said over 50% of the VC capital in the past three years went to 6-10 businesses that were modelled after global equivalents. “India is too unique for a copycat model. Global players are realising the need to localise offerings for a market. In the US, Uber has driverless cars; in China, Uber is out; and in India, it has dial-a-Uber,” he explained.
When asked what business approach works best, Murthy said, scalable distribution, differentiated product and smarter marketing can do the trick.
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