Innovations and pivots can help startups survive challenging times, says technology evangelist and angel investor turned VC Sanjay Mehta, founder & partner at 100X.VC – India’s first venture capital firm to invest in early-stage startups using iSafe investing documentation. Mehta has invested in over 130 companies in India and the US including Oyo Rooms, Block.One, Box8, CoinDCX, Unbxd, FabAlley, LogiNext, WowMomo, Coolberg and Zippr. “At 100X.VC, we are on a mission to simplify the funding process,” he tells Sudhir Chowdhary as he discusses early stage investment dynamics in the current times. Excerpts:
Tell us about your entrepreneurial journey and how many companies you have invested in?
As an investor, it has been a financially rewarding journey with four unicorns in the portfolio. In 2010-11, I was introduced to angel investing by my mentor Harish Mehta (founder of Nasscom, Onward Technologies). I started meeting entrepreneurs, leading investment deals, helping entrepreneurs navigate and scale businesses. Soon, I became a reliable person for technology deals in Mumbai’s angel investing circles. I have invested in over 150 startups in India and globally.
At 100X.VC, what are the criteria for selecting startups? Why do you think first-cheques are important for budding entrepreneurs?
100X.VC is on a mission to simplify the funding process. We get investment proposals from founders on email@example.com and our team evaluates basic information. We ask for a video pitch from those we like and evaluate the team, their domain expertise. After conducting our research on market opportunity, competition landscape and market growth rate, we analyse the startup’s business model. Finally, we conduct an internal conviction if a 20X exit opportunity is possible. The first cheque from 100X.VC for the startup is proof that the idea is venture fundable, that can be leveraged for future funds.
Tell us more about iSafe Notes as an emerging investment instrument.
The use of iSAFE (India Simple Agreement for Future Equity) investing documentation was pioneered by 100X.VC in 2019. 100X.VC open sourced it for the complete startup ecosystem. Now a standard for seed-stage investing, it saves legal cost, enables quick-to-close transactions and offers founder-friendly convertible security note complying with all applicable laws in India. Since right valuation discovery is tough at the seed stage, hence iSAFE works for investors to fund a deal with a future right to equity in the startup. Pre-and-post-money valuations are no longer required. Earlier, SHA-driven transactions took 3-4 months, with iSAFE it takes 24-48 hours.
What is the role and contribution of 100X.VC in making these startups ready for the next phase of growth?
100X.VC has become a launchpad where only companies with potential are selected. We enable them to get better in every segment of the business—from pricing and pitching to product and positioning. Founders reap the benefits of 100X experience and connections. We support ideas with the potential for multiple rounds of funding, 100X.VC Pitch Day is the showcase to 1000+ investors for startups funded by us where they are ready to raise a larger round of capital.
How many startups have 100X.VC invested in so far?
We have invested in 50 startups since December 2019 and plan to invest in 40-50 more by the year-end. Our target is to be able to fund 100 startups every year and build a winning portfolio of 500 startups by 2025. We have partnered with top-tier VCs to fund 100X.VC portfolio. There is a plan to have direct and indirect investments in 100X portfolio companies from 5000+ angel investors by 2025.
What was the impact of the Covid-19 second wave on early-stage startups? One advice for startups in these challenging times?
We discovered during the annual 100X India Sentiment Outlook Survey that only 47% of the startups were experiencing growth. Nearly two-thirds of the founders (65%) were expecting seed-stage funding to increase in 2021. Even though 70% of investors said they were seeing business growth, 23% expected it in the coming months. About 68% have been asking their portfolio companies to be more aggressive while 30% were prompting them to maintain the status quo. My advice to startups is to find mentors who can help create opportunities amid crisis through innovation and pivots.