Founding partner and CEO Harshad Lahoti describes ah! Ventures as a full spectrum startup funding network. Since its inception in 2012, it has made 22 investments via its many arms such as ah! Seeders, ah! Angels and ah! VCs.
ah! Seeders, its basic unit, invests $50,000-$150,000 in early stage startups which are still on the drawing board while ah! Angels invests $200,000-$600,000 on firms with proof of concept projects that have some user traction. ah! VCs follows up its angel funds where the ticket size of investment is over a million dollars.
Its mentorship platform christened ah! Mentors assists early-stage companies which look for guidance to scale. Its other initiative, ah! Impact invests in social enterprises which have a measurable social or environmental impact. CLUB ah!, which is a network of all these networks, lists ah! Ventures' 700-plus investor members and its portfolio companies.
In an interaction with Techcircle.in, Lahoti, a serial entrepreneur himself, talks about what it means to be a full-spectrum startup investment network and what ah! Ventures looks for in a startup. Edited excerpts:
How do you go about selecting a startup for investment?
We follow a hybrid of online-offline process to select startups. Nearly 350 entrepreneurs approach us every month, and every startup comes with a pitch deck. We don't believe in the deck model. Once a startup approaches us, our funding team sends them a set of questions. It's a 7-pointer questionnaire that necessitates text only answers in an introductory manner. Nearly 70-80 per cent get filtered out because while answering the questionnaire most of these startups realise that they are not ready yet to raise investments. Further analysis and inspection by our team will get the number down to about 20 startups. The investment committee â€“ co-founder Abhijeet Kumar and I -- and a couple of our investors then analyse these ideas and it usually gets reduced to eight startups.
Startups fail to realise that non-compliance can really hurt their businesses in the long termThe selected pitch emails are then sent to our network investor members. The next phase of the process is done mostly offline which involves the interested investors meeting/talking to the entrepreneurs and closing the deal.
What is ah! Ventures' investment strategy?
We are a pro-entrepreneur network. Our loyalty lies with entrepreneurs as both Abhijeet and I are entrepreneurs, so we both know the pain of startup owners. Most investors are putting the 'play money' into startups; it's a calculated risk they take. However, entrepreneurs give their 100 per cent. Therefore, we feel that we need to first solve their issues because their success is our success. Being pro-entrepreneur today is in fact being pro-investor in the long run.
That being said, we have a strong connect with our investors. Unless the number of angel investors increase significantly in India, we are not going to build a strong startup ecosystem. Therefore, we are always on the lookout for new angels. We do not charge any subscription fee from our investors to be on our network. We do not set a minimum investment amount, yearly target or minimum investment commitment from our network members.
What is the fee you take from startups? Do the promoters invest personally via ah! Ventures?
When we raise funds for a for-profit startup, we charge a 'success fee' of two per cent on average. For not-for-profit impact startups, we do not charge any commission.
As promoters, the two of us do invest, but the money is raised through our success fee. Since the last couple of years, the success fee is being invested back into the startups as an investment for equity.
Being an investor network, are you sector agnostic?
We are sector agnostic as we are a network and cannot pre-determine sectors for our investors. The only criterion is it should be a tech-enabled startup, but not necessarily a tech company.
What do you look for in a startup when it approaches with a pitch deck?
At the seed level, it's all about the team. Every idea evolves as the market evolves, but what remains the same is the team. It's all about taking the right call on a team to decide if it has what it takes to survive the toughest of times. Therefore, the focus is on the team. The founder and his team needs to be focused and grounded. Else it's usually a deal-breaker.
What's the level of involvement your network members have in the portfolio companies?
We do take one board seat, which will be one of the investors. ah! Ventures takes the observer seat. Every month, our portfolio companies update us with a short 7-pointer email. Every quarter, we and our investors get on to a call with them to understand their growth, and then there's an annual meeting between the entrepreneurs and the investors.
How do you think 2016 will be like for the startup ecosystem?
I expect a lot of product startups in the IoT (internet of things) side to receive significant traction. On the flip side, I expect a lot more consolidation in many sectors. From a funding viewpoint, 2016 is going to be a little slow because global markets have crashed in the last two months. Most of the HNIs have stock market interests and they would rather exploit the opportunity during the coming months.
What is that one major factor that entrepreneurs should keep in mind when they build their products?
Non-compliance is a major issue that I see quite often these days. Most of them are not aware of the compliance regulations. They fail to realise that non-compliance can really hurt their businesses in the long term.