CA turned Partner at a early-stage VC firm answers questions about startups, angel investing and fund raising
- Meet Ninad Karpe, a chartered accountant (CA), start-up investor and Partner at 100X.VC, an India-based early-stage VC firm.
- Over the last two years, they have invested in 60 early-stage startups and their intention is to invest in 100 more in the year 2022.
- As part of our Start-up and Angel Investor Series, we spoke to Ninad to gain an understanding about angel investing, mistakes startup founders make and fundraising.
Can you tell us a little about your career?
After qualifying as a CA, I got into practice and worked as a consultant for 13 years, specializing in foreign investments and NRI taxation.
During my consultation years, one of my clients was a large computer software company valued at $4-$5 billion. After formulating a business plan, they asked me to implement it and that is how I became their first employee.
I was with them for 13 years, running their India operations. The transition from consulting to a multinational company was not easy, but I enjoyed it.
After that, I got the opportunity to head Aptech, a multinational listed company in the education sector.
In 2019, with the startup boom and my vast experience, I thought I should collate all my knowledge into something meaningful.
Venture capital (VC) was the right place, so I joined 100X.VC as a partner in 2019 with the founding team of Sanjay Mehta, Yagnesh Sangharajka, Shashank Randev and Vatsal Kanakiya.
In my career, I have written a couple of books on business strategies, one of which is called “BOND to BABA”.
With a serious passion for supporting theatre, I have produced two plays in Marathi, the regional language of Maharashtra. I encourage everyone to support local theatre too, irrespective of their location.
My fondness for pocket squares influenced me to create my own brand, KARPE DIEM Pocket Squares.
I sold a lot of them on Amazon India and this made me believe one person can launch a brand singlehandedly using e-commerce and outsource everything.
Anything is possible in the new world we live in today.
After a long stint in the corporate world, you joined 100X.VC? How unique is your experience as a venture capitalist?
The journey has been so exciting.
We invested in 60 out of almost 14000 pitch decks as a firm. All kinds of ideas. It made me realise that technology and the human mind can make anything possible. It is not about what we can and cannot do, but about what we want to be done.
Although I wish I had started earlier, I believe everything happens for the best, so maybe I got all the corporate experience to be able to give valuable advice to startups.
What is your advice to finance professionals who want to venture into angel investing and contribute to the growing startup world?
Let me start by saying that the start-up ecosystem is growing rapidly in India. To contribute to this rapid growth, one must invest in start-ups in their early stages.
However, you have to be aware that startup investment is a very different model.
Startups are high-risk investments but have the potential to give massive asymmetric returns.
If you think the failure rate is going to be low it isn’t going to be. Be patient to invest in at least 20 start-ups before expecting any returns.
Initially, you can invest small amounts of about 5% of your portfolio and gradually increase it to anything between 8% and 15%, depending on your risk appetite.
As a first-time investor, one can reach out to 100X.VC and invest through our VC platform.
We have a pitch day every 2-3 months where investors can find potential investees and invest in them.
How do you deal with investments that fail?
I think this is one thing that finance professionals need to relearn. In the startup world, nearly 50% of our investments fail and we must be ready for this.
These are high-risk investments, so the failure rate is not low. Have a positive mindset to accept that your investments will fail.
Hopefully, the other people who are going to make tons of money will compensate, that is the business model.
It is different from the traditional investment models one normally gets.
What is the normal procedure to decide which startups are suitable for your investment?
In the last few years, we invested in 60 out of almost 14000 pitch decks. I must say that the startups we did not invest in are not bad. Instead, we had to make a difficult decision and they can prove us wrong by being unicorns. All the best to them.
Firstly, we analyse the size of the market, as we only invest in companies that have a large market size.
Secondly, we critically evaluate the founders to see if they have the passion and ability to scale.
Lastly, we assess their hunger to build a scalable business as these are companies that will make us money.
We follow guidelines and intuition to decide on the right start-up founder.
What are the biggest mistakes you see startup founders make?
Firstly, founders fall in love with their product to a point that they forget about the customer. Between the product and the customer, love the customers first and the product after.
Secondly, founders focus on other things and forget that the business must scale. A startup should scale and make money, do not forget this.
Thirdly, founders neglect technology. Whether one likes it or not, technology is a backbone for everything. You have to have either a good tech team or a tech co-founder to take care of technology because it is magic in every company.
Today, we have a problem. Tomorrow, we have a solution. Technology can do that.
Your advice to finance professionals who aspire to be startup founders?
India will be a fintech capital of the world because of the kind of depth and breadth of fintech as well as the finance-related problems which exist in the market.
From high-tech to low-tech and unbanked to highly banked companies, identify friction points and find a solution in the fintech space.
For technology, get a tech co-founder who will help you with tech, but it is your job as a finance professional to find a solution to a problem that can become huge.
What do you have to say to startup founders who pressure themselves to scale quickly?
I would not suggest doing something reckless which destroys brand value and reputation. That is never the intention when people say measure your growth in days.
The intention is to just change your mindset to ensure that you scale. I tell many startup founders to either “scale or fail” and this does not mean they should scale recklessly.
You have to keep going without destroying your brand name and value. Be patient and resilient, the journey ahead is long but exhilarating.
(Edited by Preeti Mondal and video by Jasper Jothi)
Lastly, your message to startup founders who find it challenging to raise funds?
Well, they have to be ready for an exhilarating ride. The journey of a startup founder is a journey of wealth and not just income. You have to be patient.
You have to live frugally until you really do well and be resilient. If one investor says no, do not lose heart.
Today, money is chasing ideas. So if you have a great idea then you will get funded. There are so many opportunities, so just grab them and you can become a successful startup founder.
Also, take note of the general mistakes I highlighted above. Avoid them.
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