Listen: Sanjay Mehta on ‘all weather’ businesses and making the best of the Covid-19 induced crisis


The ongoing Covid-19 pandemic has precipitated yet another funding winter in India’s startup ecosystem. Not surprisingly, most early and later stage private capital investors active in this market have started to slow down on writing out cheques for new deals as they assess the medium to long term impact of the rapidly deteriorating environment in the country and elsewhere.

In the second episode of our special podcast series, #CapitalCall, TechCircle spoke Sanjay Mehta, founder of 100X.VC, a Mumbai based early stage investment firm that backs startups at the seed stage. Mehta spoke about how the firm is helping portfolio companies navigate the prevailing downturn, the quest for ‘all weather’ businesses and why he’s personally never been more productive.


100X.VC, which invests proprietary capital, was founded last year with a goal to back at least 100 seed stage startups every 12 months and accelerate them to the next funding stage. In December, the firm unveiled its first batch of 20 startups and is currently working on rolling out its second cohort.


TechCircle (TC): Hello and welcome to Capital Call, a special podcast series in which we talk to investors from across India’s venture capital ecosystem to understand how they are navigating the Covid-19 crisis.


I’m your host Snigdha and today I’ll be talking to Sanjay Mehta, founder of 100X.vc, a seed investments focused fund that works out of Mumbai.

Hi Sanjay and welcome to Capital Call.

You said on Twitter recently that you’ve never been more productive than during this lockdown. How come?


Sanjay Mehta (SM): Couple of things which have changed in your daily routine, right… you spend a good amount of time traveling and going to the office, setting yourself up… so I think we save another hour or two over there. Typically, being a VC, you are out there in the market, trying to discover, solicit deals and stuff, which… is now longer required. You are no longer attending events or any engagements… so that takes away a large chunk of your time.

Another part of that in terms of the team meetings and the preparations which typically would happen across or… you would have entrepreneurs visiting your office… so the available time has increased multifold… I don’t think this situation will last forever. This is a temporary situation and so make most out of it.

So that’s where I’ve taken a plunge in terms of rather than using an escape route and bingeing on Netflix, this would be a much more productive period, which I don’t think so we will ever see again.


TC: You’re obviously working on multiple fronts with the portfolio. But what’s taking up most of your time? What’s top priority?

SM: Today, in this situation, my maximum time allocation is to my existing portfolio. I’ve never seen a better opportunity to engage with your founders. So first, priority wise, it goes to all the existing portfolio company founders. The next is talking to VCs (venture capitalists), exchanging notes with them, trying to understand what’s happening in their portfolio, how they are navigating, learning from their experiences, sharing notes at my end. So that takes the second one, as a priority.

Third is the new deals because that’s where you can start looking for opportunities within this sector for the so-called all weather businesses which can work across…


TC: How do you define all weather businesses?

SM: All weather businesses are businesses which would be able to get customers, get growth, sustain in every period. These are not seasonal, right. So, for example, hospitality, travel, these are very seasonal businesses which have taken a hit. So what kind of businesses are all weather businesses will be attractive to most of the VCs.

Let’s say I’ve got an omni-channel retail outlet for lingerie, or a large chain of luxury restaurants… anything that would require for me to physically go out. All the consumer journey has to start at home. First mobile, right. So anything that goes mobile, any business which is an online enabler… so there are going to specific attractive sectors.


TC: Taking those factors into account, let’s look at the 100X portfolio. How many of your companies would you say are already all weather businesses or have the potential to become such businesses?

SM: So a lot of the companies within our portfolio are getting traction. For example, we have a company called Knorish which is helping do online academies. It helps all the training professionals, media companies, content where people want to do training courses or do some training engagement, they can use their software to build a complete online academy. For them, 20 times growth is happening.

We have got a company called FnV Farms which is into daily supplies. So they have come out with a subscription model, it’s working very well, their demand has gone through the roof… cost of customer acquisition is down for them. So, those are huge positives for that business.

Then we’ve got a couple of healthtech products. The company is called Renal Project which is into kidney dialysis chain… so the unique way we are working with the founder right now is while they have a micro dialysis center… people are unable to travel far and they need services nearer to their home, so the micro dialysis center model works. We are going a step forward. We are talking to the founders and working out a model, can we bring the dialysis at home… If we are able to do that, what are the standard operating procedures that work on that new business model. Then it’s a big upside for those guys because now, in future, they would be able to give dialysis at home…See the idea here is to use this crisis to see how we can bring in new models, new engagement for customers, how do we improve the lives of the customers and in turn build a growth business. Various companies have various business models and how do you work with each of the founders to find out what are the right ways to go about it, the legit ways and our very clear thing from the first day at 100X is do not innovate in legal and finance… outside that we work with any of the founders to help them with innovation and engagement.

So you spend time on each company and this takes a large amount of your time. Because now you are actually trying to think like a founder, work like a founder, be in his shoes… it is less of an opportunistic mindset like a VC but more of a business growth enabling (mindset). So you are wearing an entrepreneur’s hat rather than a VC hat in terms of how do you create value before valuations.

TC: Could you share some of the things you’re doing proactively to help the portfolio? Are there any imperatives that you’ve set down for founders for the next 3-6 months?

SM: First and foremost, none of my portfolio guys would have seen the 2000 dotcom bust or the 2008 recession. I’ve been a part of it. I was an entrepreneur in 2000 dotcom bust, so I’ve seen that whole journey where how as an entrepreneur… tough times. 2008 when the financial recession hit us. So, not that I know what’s happening right now. It’s all unknown so I’m also fearful.

But we know what things can get you to survive. How do get from a growth mindset to a survival mindset. So that’s where we work with each of these founders. First and foremost is to extend runway. And this where I believe that many of the founders who were in for glamour would find it tough to navigate these times. Founders who are married to their vision will continue to dig in.

So working with these founders in terms of extending their runway. Ensuring that while they are doing it their reputation of the brand, the company, is preserved. You don’t want to be… or rather you want to be doing in the right way. So for example, negotiating contracts with your suppliers, the landlords, saying that it’s a force majeure situation… how do you renegotiate contracts. Trying to use this time to build in a product roadmap which is going to help them become an all weather business. How do you see your cash on hand deployment for the next 12 months. So, going into detail like we would have never been before.

Most of the time founders are very smart. I would say 90% founders are smart. They understand that once you start asking questions… it’s just that you have to show them the mirror that this is where it is and this is how things are going to happen and most of them are recipient. They understand saying that they can’t have a fixed mindset...they can adopt the newer ways and find their way to their destination. I would say more of coaching and mentoring which is happening right now. Because at the end of the day we are not going to run that business. It’s they who are going to run the business. We can only pinpoint what are the dos and don'ts which they can do. Like most of the time I tell any of the founders… you living in your home, you will never find any mistakes in your home. Get a guest into your home, he will find out ten things because he sees it from a very different perspective. So VCs are like that. Once we start looking at your business plan we can pick out holes much better than what you would be doing for yourself.

TC: Streamlining costs, extending the cash runway… that’s important of course… but at some point companies will need follow on capital. Given that 100X is a seed stage investor, how challenging is the follow-on funding environment for you right now?

SM: So it’s tough for most of the founders and it’s going to be tough to raise money and that’s why I said… we keep on exchanging notes. The advantage for 100X, because we are a first cheque writer, our deals or our engagement within the angel space is very high, with family offices very high and these are the people who can invest small cheques. So that is where a lot of our time goes in terms of mapping angel investors to our portfolio, helping them raise money. So yes, it’s going to be tough.

Another aspect is that because we were the first cheque at each stage, there was not a lot of expansion that founders did. Typically, anybody who has raised, let’s say, between Rs 3 crore and Rs 5 crore, would have built a large team, started expanding across. Those are the expenses that typically don’t happen at our end. So anybody who is at Series A is more in trouble… they have built a 100-plus people team and they have salaries to pay… you know, the challenges are different.

So, the more funding you’ve raised, the more you are ahead of the curve and the bigger the challenge. Because we are first in line, I think we have a lesser challenge in terms of… because these are founders who are happy to forego their salaries, happy to put more skin in the game, they themselves are more or less driving the business, these are less than 10 people teams, easier to manage and there is enough equity on the cap table to incentivize employees and give them ESOPs. If you are a structured Series A, to give away ESOPs is also a challenge.

In that sense we find ourselves in a sweet situation in terms of being able to navigate with this portfolio of companies. And this is on the optimistic side.

Now on the pessimistic side, where we believe we would start seeing mortality within our portfolio somewhere in September. If things don’t change, if there are going to be, I would say, no increase in demand, then we would definitely see some mortality happening. Just to share, out of the 20 startups that we funded in December, 11 could manage to raise some money. So in that sense they have far more runway than most others. It’s not that the remaining nine are in trouble or that these 11 are safe but they have got some runway in hand.

TC: We’re seeing some deals happen… but clearly there is a slowdown compared to a couple of months ago… Also, what’s the impact on valuations in this environment?

SM: If we were seeing ten deal announcements every month we might end up seeing four or five. So 50% I would say possibly across will slow down. Companies would get funded, follow-on rounds would happen… people want to invest in great startups, there’s no doubt about that. Any business which is in any sector driven, which is rightly positioned as an online, all weather business will become a lot more attractive. And those will see more and more rounds happening. The ability of founders even to raise the round at last round valuation, I would treat that as a success rather than a failure. We always talked about flat rounds not being good… today flat rounds are most welcome. Even if you are able to raise at the last round (valuation) we are happy.

TC: So does all this mean that the next 100x batch is on hold?

SM: We were planning (for the next class) sometime in June, that was our goal. We are reworking… as we are reaching out to our portfolio, we ourselves are trying to reinvent our model. What more can we do. We have multiple thoughts. Can we start looking at a smaller class but increase the frequency or do we stay put with the existing portfolio and double down over there… we have started issuing term sheets, we are reviewing deals for Class 02. We believe that this is the best time to invest. It’s just that we are figuring out our go-to-market model so that post our investment we believe we can help the portfolio company in a much better way than what it is now. Because right now, as I mentioned, my bandwidth is only for my existing portfolio. So in that sense, if we start writing cheques and we see that the V-shaped recovery is not happening then how do you manage with these portfolio companies... we are closely looking at agritech, which we believe is an all-weather business, logistics… so we are ourselves trying to discover our own preferences and narrow and sharpen our investment thesis in the go-t0-market. So, we are open for business, we are looking.

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