Better Capital: In a Nutshell

Vaibhav Domkundwar
Dec 15, 2019 · 11 min read

Better Capital is an early-stage venture firm that builds and invests in innovative ideas and teams in their formative years.

Asia’s largest small business neobank Open, India’s bike-sharing leader Yulu, gold loans disruptor Rupeek, test prep leader Testbook, engineering skilling rocketship Skill Lync and neobank for India’s emerging class Yelo are all examples of our early bets. You can see our full portfolio here.

The purpose of this note is to provide a comprehensive perspective of Better Capital for the benefit of (1) founders who want to raise their earliest capital from us and (2) LPs (individuals as well as family offices) who want to invest in startups with Better Capital.

The Numbers

Numbers speak volumes and are the easiest to provide a birds-eye view. Here is what Better looks like in numbers — since Jan 2018 with a few prior investments (this is updated every December — last updated Dec 2019):

  • 45+ companies
  • 150+ founders
  • 15 pre-seed investments
  • 30 seed investments
  • 7 Series A investments
  • 1 Series B investment
  • 13 companies raised follow-on up rounds
  • 4 exits
  • Co-investments with top tier VCs in India, Europe, and the US
  • Co-investments in the world’s best accelerator companies from Y Combinator, TechStars and HAX (YC of Hardware)
  • 5 single founder companies
  • 6 husband-wife teams
  • 500+ LPs spread across India, Singapore, London, and Silicon Valley and other major startup hubs.
  • 30+ close advisors from companies like Google, Facebook and others, across global markets and bringing wide-ranging experience and advice for our portfolio founders

The India Thesis

At Better Capital, we are primarily investing in “India as a thesis”. We believe that India will produce some of the largest and most important companies globally, in the next 10–20 years. India has almost stopped its brain drain and is retaining its most ambitious & entrepreneurial talent who is creating a new generation of companies with Flipkart being the torchbearer of this new India.

We invest in 2 broad categories:

  • Indian startups building for the Indian market: This is a bet on the large domestic market that hit an important inflection point with the proliferation of smartphones and the availability of cheap data connections on smartphones enabled by Jio.
  • Indian startups building for the global market: This is a bet on an emerging group of Indian startups who are building best-in-class software products (SaaS, software, deep tech) with cross border teams largely based in India.

In addition to this, we are tracking well-known founders and teams from our global network to invest in their earliest stages. A good example of this is our investment in Bridge which was started by former TechStars Berlin MD, Connor Murphy. Another example is a Silicon Valley startup founded by two experienced technology entrepreneurs (one from my alma mater UC Berkeley) targeting the internal data security space.

Early Conviction Building

Our key focus is to identify teams in their formative months, understand their core inspiration for building what they are building, absorb the key insights behind their ideas and build conviction in these teams and ideas very early, drawing on our deep global operating experience in product, sales, and marketing.

We actively cut out ecosystem noise and stay away from momentum investing to create an unpolluted focus on finding unique companies.

This has helped us to be the first check or a part of the first check in stellar companies like Open, Bon, Skill Lync, Bijak, Jai Kisan, Inito and many others.

Market First

We are a market-first investor in the sense that we have to be convinced about the core market problem, opportunity and the size of the opportunity to be excited about a company.

Founders are a close second but we believe the best teams who can create the most amazing companies have to clear a bar so the first or second is almost immaterial as they have to be the best-in-class founders.

Our market-first focus helps us ensure we do not take wild bets on hype cycles and keep a strong focus on fundamentals.

Sector Agnostic

Our investments are broadly sector agnostic though we restrict to sectors we understand well and have a good pulse of the overall market, challenges and opportunities.

For our India-for-India bets, we believe the market is too shallow to become focused only on specific sectors at present.

Having said that, we have built a deeper conviction on certain sectors where we have a larger concentration of investments like in Fintech, Agritech, SaaS and Edtech.

“Better” Capital

We like to ensure that the “true value” of our capital is 100X the actual monetary value of our investment and this multiplier comes from what we bring to the founders and the company from the earliest days.

It is hard to measure value and we do not intend to do it. We believe our founders are the best judges of that and we listen to them carefully to improve what we can do for them.

We are fortunate to partner with some of India’s best founders and the help we provide is a combination of one or more of these:

  • We listen.
  • We give unfiltered and honest advice.
  • We co-create & brainstorm with founders.
  • We bring in global experts at all stages of the company.
  • We make introductions to stage-matched investors — globally.
  • We help founders recruit from our large network.
  • We connect the dots and constantly bring new insights to founders.
  • We help with tactical advice on fundraising and structuring.
  • …and more.

It is almost impossible to make a comprehensive list as every situation is different and demands a personalized approach.

“Vaibhav has been an ideal angel investor for us. As a product person himself, he has been our goto guy to help us with goto market and product market fit strategies. He understands board dynamics (with VCs) very well and advices founders keeping both sides in mind. He gives honest & blunt feedback which I personally think is very important for founders to hear in early days.” — Shachin Bharadwaj, Founder of Markk & TastyKhana (acq. by FoodPanda)

“Vaibhav will listen, support and then add his perspective and landscape view no matter what stage of the entrepreneur journey you are — from a coffee to discuss your next gig; to fundraising globally.” — Bosky Kode, Founder of Bon (backed by Omidyar Network)

Vaibhav is one of the few seed-stage investors in India who can see the big picture and able to ask the right question to judge the potential of the team. He helped me with my seed-stage funding where he exceeded the funding goal by 140% in a matter of 5 days. If you have a crazy dream, determination to chase it and can build the right team to execute, I strongly recommend talking to him to help with your funding.” — Amit Gupta, Founder of bike sharing leader Yulu & former founder of Unicorn InMobi.

The simplest way to communicate value is to hear what our founders say, so we actively encourage new founders to speak with our portfolio founders to get unfiltered feedback :-)

Diversity and Uniqueness

We believe the best companies are built by a unique and diverse set of teams so we work hard to not fall into the trap of finding an archetype of a founder or defining what is an ideal team or investment for us. A quick look at the last 25 unicorns reveals how unique and diverse the founders, teams, ideas, and beginnings have been at each of these companies. We have successfully funded:

  • single founder companies
  • women-founded companies
  • husband-wife founding teams
  • experienced founders in their 30s and 40s
  • young founders just a year or two out of school
  • and more.

We embrace diversity and uniqueness in founders as well as ideas and want to stay true to this across our investments.

Open Fund Structure

Globally, we have seen leading venture firms become multi-stage venture investors covering the entire spectrum from pre-seed and seed to Series A and growth stages. This is a sign of times to come where venture investors may build unconstrained investing vehicles to ensure they can invest early or late, varying check sizes, covering global markets and more — to get the most out of their venture investing mojo.

Taking a cue from this, we have created an open fund structure for Better Capital which helps us invest without constraints:

  • across stages of pre-seed & seed to Series A, B, C and beyond
  • across global markets
  • in varying check sizes
  • across sectors
  • …and more.

Our open fund structure also creates a deal-by-deal fund that brings the next level of flexibility, access, and optionality for our LPs so they can:

  • get access to the best-in-class deals
  • get access to invest in pre-seed to A/B/C rounds based on our pro-ratas
  • get access to invest varying amounts as needed
  • get complete optionality to review and choose deals that are apt for their particular way of thinking
  • …and more.

We believe this open fund strategy will continue to evolve and will become more of a norm going forward across global markets. Currently, we have 2 structures: Better Capital India structure for our India registered company investments and Better Capital USA structure for our US and globally registered companies. Both structures are currently hosted on AngelList and we intend to continue to optimize the structures for the benefit of our founders and LPs.

Finally, we have taken a pure performance-focused approach at Better Capital — we are a 0% fees and 20% carry structure for all our investments. There is a small documentation fee for every investment which is detailed in the investment memo.

Top-up Strategy

One of the major advantages of our open fund strategy is that it enables us to continue to invest and top-up into our best performers across all stages leveraging our pro-rata access (which we insist on right from the beginning) as well as super pro-rata allocations that we are able to secure as we are the earliest supporters of most of our companies and have strong bonds with our founders.

While our existing investors can continue to re-invest in follow-on rounds (and get the first priority), we see a new set of investors join at different stages as the risk reduces in follow-on rounds as the company makes more progress.

We believe it is important to double down on our winners and our current structure will continue to help us scale our investment in our winners and continue to top-up and maintain or grow our ownership in these companies.

Exits

We are the earliest investors in our companies and believe most bets will take 3–5 years to start showing their intrinsic worth and long-term potential. The ones which fail will most likely fail within this period too.

So we think about exits as a viable possibility in a 3–5 yrs timeframe from the time of investment. There are always outliers that move extremely fast like our investment in Open, Yulu or Khatabook but these are exceptions.

We actively work with our founders to create optionality for exits as companies mature and get to the growth stage and there are opportunities for secondaries. The best and the largest exits come from IPOs and large M&As which we will optimize for as well.

100% Risk

Early-stage investments in startups are a 100% risk asset class and we believe it is important for every investor who chooses to invest in startups to understand this — via Better Capital or otherwise. One must be willing to lose the entire capital when investing in early-stage startups as the risks are real and high.

Behind the Wheel

Better Capital is run by Vaibhav Domkundwar, a proud UC Berkeley grad who founded 2 companies after graduating: Roamware (now renamed to Mobileum) which was built in a classic Silicon Valley fashion from idea to a world leader in mobile roaming solutions and was acquired by PE firm Audax, and Better which was built as a completely self-financed startup studio and evolved into a multi-stage venture firm with a strong portfolio of 45+ companies.

The due diligence, tracking, compliance, and operations are run by Lalit Valecha, who is one of the best when it comes to early-stage financing, setup and compliance operations. Payal Bhalerao keeps everything on track and is the glue that ensures things happen on time. And we truly value our AngelList India and AngelList US support teams that are a crucial part of our fund operations.

Last but not least, a close group of 20 LPs from the Better Capital network form an extended advisory board and close confidantes, and who we consider an integral part of our team.

Annual Updates

We post an annual update on all our investments — in the current year as well as past years — in mid-December and you can see them all here:

Family Offices

We have a number of family offices that actively invest in early-stage startups via Better Capital. Better Capital offers unparalleled advantages to family offices who are looking to start or grow their investments in the startup asset class with:

  • Access to best-in-class early-stage startup investments evident in our portfolio
  • Access to startups in Series A, B, and C rounds when they are proven and in scaling mode — it is often quite hard to get access to at these stages.
  • And complete optionality to selectively invest in companies that are aligned with your investment thesis and other factors.

We believe we are creating one of the most valuable platforms for Family Offices to get access to and invest in the best startups. See the Important Links section below to learn more.

Angels and Super Angels

I am proud of the high-quality LP network we’ve built at Better Capital from India, Silicon Valley, London, Singapore & other locations. We have ex-founders, executives at Netflix, Facebook, eBay, Google etc., and new generation leaders of large Indian business groups and more.

If you are an angel investor, then Better Capital offers you access to the best-in-class startups at scale, which tend to be beyond normal levels of access — also at all stages including pre-seed, seed, Series A and beyond.

We are fortunate to build deep partnerships with angel investors and deeply value these relationships.

To learn more, please see the Important Links section below.

VC & Ecosystem Partners

Through our investments and beyond, we have built close relationships with all our ecosystem partners and believe that these partnerships are crucial for learning, sharing, supporting and long term success.

  • We have co-invested with large funds like Matrix Partners, Omidyar Network, Chiratae Venture, Saama Capital, and many others.
  • We have co-invested with Sequoia’s Surge program in stellar companies like Bijak, Khatabook, and Klub.
  • We have built deep partnerships with pre-seed and seed funds like EMVC, Blume Ventures, Axilor, and many others.
  • We have invested in multiple Y Combinator companies (Mudrex, Skill Lync and Inito) and now have a network of founders from the YC ecosystem that is a constant source of learning and deal referrals.
  • We have created a strong connection with global accelerator programs like TechStars and have co-invested with them.

I believe this is an ongoing effort and these partnerships are central to our investment philosophy and inevitably getting even more meaningful over time.

Our Metric: Founder & LP NPS

The real measure of a venture firm, in the long run, is not just IRR but something beyond that.

For us it is 2 things:

  • Founder NPS — how much value do our founders see in taking money from Better Capital and how much do they recommend us.
  • Investor NPS — how much do our LPs value us in their startup investing activity and how much do they recommend us.

There is a lot more that is underneath the NPS — a lot more qualitative aspects — and we are constantly striving to improve on how we make founders feel and how we make our LPs feel.

Important Links

Please review these important links:

Vaibhav Domkundwar

Written by

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