Sameer Brij Verma, director, Nexus Venture Partners talks about spotting the right entrepreneur and what it takes to become a good VC.
It’s our role to counsel young entrepreneurs to bring maturity and also build team rich start-ups. It’s not just the start-ups. It’s not just the founder who runs the start-up, it’s the team, which in some cases might have more experience than the founder themselves. It’s about broad-basing the team and the start-up in its evolution in the first 6 to 10 months and bringing in talent in areas where they really need, they might be experts in their own areas, but a lot of the passion is driven by these young entrepreneurs. These young founders have a lot of energy and make a lot of experiments, and in some cases you need to allow the founders to make those experiments and invest in those experiments because they can really open up markets for you in some cases. They might not work, but you need to iterate and move fast and not get too passionately tied down to it. Build a framework of having a very quantitative approach to experiments and make sure you are getting your feedback fast. If it does not work, you cut your losses and move fast.
Dealing with young and mature entrepreneurs
One of the things we see in younger entrepreneurs is that they are very experimental in nature. You have to encourage that in early stage start-ups, especially when you have a clean canvas for solving a big problem. It’s not that you take your main eyes off the problem you are going to solve, but areas around your business you let them experiment so that they can see if it makes sense or not, without them getting broad based and doing everything under the sun.
Older entrepreneurs get too coloured with their experience and they don’t take that many risks in terms of experiments. So it’s always a mixed bag. Younger entrepreneurs are very passionate with high energy levels and older entrepreneurs obviously have a world view. I would say it’s easier to work with a entrepreneur who is doing enterprise B2B who is slightly more matured, because he has slightly better understanding of how a B2B business done and it’s easier to work with a younger entrepreneur who is doing consumer centric stuff, because he is really building for the new generation.
I was once sent a pitch by an entrepreneur 5-6 years back where he said he plans to build a software layer which is cloud connected like SaaS and use humans as a service. You can basically instruct a human being via a messenger or any other application and make him do whatever you want. However, Sameer says he often sees ideas saying one can take on Facebook or a bigger social network and believes that at times it’s better to encourage out of the box ideas as this can lead to building great companies.
Moving from Series A to Series B funding
It’s mostly the team and the idea, these are the two main important things. Idea at times doesn’t but the team has to be capable of execute on them. The idea and the market space they are going after is important and is the team capable of building something big in that space.
Checks Made Before Moving to Series B
Ideally, when a company comes for Series B funding it should have removed some of the product market fit in some ways (i.e.) is the market really absorbing what they are building. The company should check if there are buyers and sellers for the product. The initial bit should be sorted out and if that is sorted, then you would find takers from some other investors or we could write the cheque. It’s important to check if the market is absorbing the product and are the most relevant customers seeing value in what the team is making, are there transactions happening in the business. If that is the case then we will fund Series B.
Domains to look out for in 2016
Even though I have a limited bird view, I would say for new age consumer products urban consumption is going to be pretty high. For countries like India, urban consumption is a broad theme, whether it is for consumer products, on-demand delivery services or food delivery services. Also, there is going to be a lot of innovation in the way businesses do a lot of things. The way they file their taxes, get credit, how they procure stuff, how they get work done on the ground; there is going to be a lot of businesses that are going to be created in that space. That’s a big B2B businesses either you are increasing revenues or lowering costs, so how will this company help us improve the bottom line or the top line. We would be focussed on the whole B2B space because it is getting very interesting because I see a whole part on how businesses will get more efficient. If you can increase the business’s reach and reduce its costs while doing it, that’s a strong proposition to have.
Two-minute strategy of spotting an idea/entrepreneur
You’ll get an ability to sit through and understand ideas really fast. You will get to become a really good judge of character, ideally. You should become a good judge of character over a period of time as you are evaluating people the whole day. That’s what makes you a good investor. You know when you see a good idea or an entrepreneur. You cannot be trained at school or college level to become a good VC, you become a good venture capitalist either by operating experience or by making your own start-up and making mistakes or doing venture by itself.
It doesn’t take that long, I can probably tell in two minutes. I do it all the time. You get to understand how the person is working, how is articulating. I don’t waste my time going out to events unless it’s a technical or a targeted event. I meet people who I think are valuable and they reach out to me or I reach out to them, or we catch up via our network.