Giving Young Startups a Chance
Grow Your Business, Not Your Inbox
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After successfully building an altruistic ecosystem to support early-stage entrepreneurs through seed-stage incubator Investopad, brother duo Rohan Malhotra, 32, and Arjun Malhotra, 30, have set out to double down on their investment strategy by establishing Good Capital, an early-stage fund.
“Our proven early sourcing and nurturing placed us in a position where we could observe the breakout potential of companies early in their lifecycle and as we started focussing more and more on investing, we set up Good Capital,” says Rohan, managing partner, Good Capital.
Founded in 2019, Good Capital is a venture capital firm that invests $100,000 to $2 million in pre-seed to Series A funding rounds.
The Entrepreneurial Journey of the Investors
“Arjun and I had an unwritten pact of building something together in India,” says Rohan, who along with his brother completed formal education followed by a few years of work overseas.
The idea originated in their early years seeing their first-generation entrepreneur father, who established ICS (Informatics Computer Systems) that provided turnkey computer education to schools and other institutions with a vision to make India computer literate.
“Though neither of us had anything to do with the business, we were always awestruck by the incredibly positive impact it had across the country and always hoped to be able to do similar good.”
But why become a venture capitalist and not an entrepreneur?
“The entrepreneurial DNA runs in our blood. We have never really viewed ourselves as investors but instead as entrepreneurs whose product happens to be capital,” points Rohan. “If you're building a company, then that becomes your primary focus for the next decade at the very least. By choosing to build a platform instead of a company, we could work with dozens more entrepreneurs like us.”
Moreover, Arjun, the younger of the pack, has always worked in venture capital so he understood the space in and out. He then persuaded Rohan to leave his job at a global sports agency as a sports agent and move to the Silicon Valley, where he landed a job with a small San Francisco and Toronto based accelerator and seed fund.
“After learning the craft, we decided to move back home in 2014 with a view to build an ecosystem and investment firm.”
Arjun has played the character of Alia Bhatt’s fiance in the movie Highway.
Catching Them Young
As the fund is focussed on early-stage startups, the founding team is the most important factor it considers while making an investment bet.
“At the seed stage whatever has to go wrong, will go wrong. Are the entrepreneurs tenacious enough to be able to grind it out, be open enough to take customer feedback yet focussed enough to be able to execute on their vision?” says Rohan.
The sibling duo prefers backing those entrepreneurs that solve problems bottom up; they have lived the problem they are trying to solve.
Since Good Capital is about backing teams and not companies per say, Rohan says in the deals that happen over calls due to COVID-19 led movement restrictions, they really miss the soft signals over zoom calls vs. meeting in person. “The hardest part of WFH has been investing in entrepreneurs we have only met via zoom.”
Apart from a solid founding team, Rohan also considers a large addressable audience an important criterion to make investment decision. “Some businesses are interesting but chase relatively small markets and may be better as lifestyle businesses.”
The fund is sector-agnostic. “Technology by its nature is disruptive and it's difficult to predict what industry or behaviour will next be disrupted. At a seed-stage where we operate, we believe it's important to be generalists and learn about an industry/sector through the lens of the entrepreneurs,” says Rohan.
Further, the fund has an eight-year lifecycle, extendable to up to 10 years, and Rohan aims to make first investments in the first three years and reserve the remainder of the period to harvest investments.
Rohan and Arjun have so far made a total of 19 investments, that include video-based e-commerce startup SimSim, wealth management company Wealthy, Entri, a vernacular learning app to secure a job and augmented reality startup Spatial, among others, via their two portfolios in Good Capital and Investopad. They count social commerce platform Meesho as their star investment.
Seven of the 19 companies have had successful exits.
Support Beyond Capital
Apart from the capital, the Malhotra brothers support their investee companies by bringing relevant co-investors and advisors to the business, opening up business development opportunities, helping companies set up their MiS and even doing sales calls with the team.
“We are always very happy to roll up our sleeves and be as involved as an entrepreneur wants us to be,” says Rohan.
Their initiative Crosstalk, developed by Investopad, helps put together the resources of playbooks, guides and communities for the startups. Crosstalk provides forums that bring together founders and senior operators at some of India's leading startups who can act as soundboards on operational matters and organises online and offline events that bring subject matter experts closer to startups.
The initiative also runs podcast series where founders share their stories on the ‘non-glorified’ side of running a company with the intent of helping entrepreneurs navigate the daily grind and gives out actionable resources curated by founders who have built and scaled products in India.
Rohan believes it's important for investors to have a granular understanding of how their investee companies are performing across a multitude of functions.
“We structure a bi-weekly sync with each of our portfolio companies where we go over financials, opportunities, challenges and blind-spots. This helps us all be honest and take a candid view of the businesses progress or struggles. At a portfolio company level, we can then choose to double down on a strategy that's working or retract on a strategy that isn't.”
On being asked whether he would suggest an entrepreneur to sell his startup to make money or advice to build an everlasting business, Rohan says since they back businesses with a long-term horizon, they would expect them to build everlasting businesses.
That said, there can be situations where it may make more sense for an entrepreneur to sell their business, so good mergers and acquisitions (M&As) can be really advantageous to both the parties.
Rohan Malhotra made it to the list of Entrepreneur India’s 35Under35 list of 2021.