The Journey So Far (Part 1)

Globevestor’s genesis and our guiding principles

As India celebrated her 70th Independence Day this 15th August, the energy, spirit and drive associated with startups was unmissable across the country. There is now a definite air of optimism and confidence all around about India’s place in the new world order and the role entrepreneurs will play in enabling it.

The day also marked two years of active investing in Indian startups for Globevestor. After a beta month in March 2014, we’ve been continuously investing since September later that year. Since then, Globevestor has come a long way in terms of number of investments made, size of our global investor community and the general outlook/approach we have taken towards identifying and backing entrepreneurs with high-impact ideas.

It’s a milestone we are really proud of and excited about, and we want to start documenting our story, our learnings, our outlook and our opinions through this blog, which we hope to keep regularly updated.

In this inaugural post, we share Globevestor’s genesis and the key principles that consciously guide our everyday decisions.

Over the past couple of years, India has undeniably turned a corner in making entrepreneurship mainstream. All around us, entrepreneurs chase big dreams with a new level of freedom. It was a belief in this reality that inspired us to start Globevestor two years ago.

The seed for Globevestor was sown as a result of our team’s prior experiences with raising early-stage capital in India & the US. We realized that, despite strong interest, global (and many domestic) investors were unable to invest and participate in Indian startups because of limited access to quality deal flow, complicated investment processes and, most importantly, an inherent trust deficit.

Our vision is to bridge these gaps by building the necessary trust and taking away a lot of the heavy-lifting from investors & founders using the power of technology. Globevestor is a new kind of VC firm that democratizes access to promising early stage investments in India for accredited investors globally. Put very simply, we invest in select, high-impact startups by pooling in smart capital from a globally distributed set of investors, through special investment vehicles and thematic funds.

At the outset, when we built our vision, we had consciously set out a few guiding principles. As we look back now, it’s become clear how important they were in defining who we are and what we do. Our three primary principles are as follows:

1. “Be founder friendly”

We understand that being an entrepreneur is hard. We wear that hat everyday too. We also know that fundraising can be highly inefficient and frustrating. Our first principle is that we’ll always be founder friendly.

For us, first and foremost, it means that the terms of investment are fair for both founders and investors. We don’t favor loaded liquidation preferences, participation rights, full ratchets, or large boards during early rounds. We have advised founders to walk away from draconian term sheets, and helped them put together revised rounds. At the same time, we have spent countless hours to help founders understand why standard vesting schedules are not anti-entrepreneur.

Second, when the going gets tough, we act in the best interest of the company and all stakeholders. We always keep the founders’ & company’s interests first and do not believe that it is antithetical to investment success. When everyone acts honorably, we believe the pain of tough times reduces.

Lastly, in a small way, it also leads us to shield the founders from the time and cost inefficiencies of usual fundraising processes. This means:

• We charge nothing to startups. No fee, no commission, no sweat or advisory equity, no commission in the garb of ploughed-back equity, no listing charges. Founders run a lean ship and the worst we could do is reduce their runway by even a tiny bit.
• We run simple, efficient investment processes. Once the founders convince our Investment Team, we agree on terms, indicate our dollar commitment, and take the process over till money is in the bank. For founders, it means no multiple reach-outs to angels, no repetitive pitches, no individual follow-ups, no back-and-forth on terms, no running around for paperwork, and no cluttered cap tables.

To be sure, being founder friendly doesn’t mean we will invest in every founder. We choose our portfolio very carefully (<2–3% investment rate), but once invested, support those founders as much as we can (which is our next principle).

2. “Be supportive as investors”

Founders need all the help they can, whether they’re bootstrapped or well-funded. Our second principle is that for the startups Globevestor invests in, we will be as supportive as we can.

Accordingly, we believe in being engaged without being nosy. We avoid board roles, but seek regular updates. We actively get involved in devising a team’s strategy and direction, unless we know they’re in better or more experienced hands of a co-investor. We also ensure quarterly updates flow to Globevestor investors through us.

In addition, we support our portfolio startups in raising future rounds. We try to make the relevant connections and help fine-tune their traction path and pitch. Importantly, we take preemptive rights and re-invest again. Till now, we’ve participated in 70–75% of all follow-on rounds of our portfolio firms. Nearly 20% investments by Globevestor have been follow-on rounds of our portfolio.

Sure, some of our portfolio startups will and have failed, despite hard work and best intentions. Everyone makes mistakes and learns on the job, including us. But we are proud of the entrepreneurs we have invested in.

3. “Align our incentives with investors”

With the rapid growth in number of startups, it has become increasingly difficult for investors to differentiate the promising investments from the rest. These real issues in deal discovery, combined with an inherent lack of trust and ground-level support, make being an investor very tough, especially if investing remotely. The membership-fee based angel groups and commission-based fundraising platforms don’t help, as the onus of deal diligence, terms negotiation, paperwork and investment management still lies with the investor. Success or failure of the investor doesn’t impact such angel groups or platforms directly.

In contrast, Globevestor believes in aligning our incentives with those of the investors. This is possibly the most important factor that has defined our business model.

First, we make money only if our investors succeed, by charging a carry (share of gains) at the time of the exit (at least a few years post investment). Hence, our aim becomes ensuring a high quality portfolio rather than chasing volume of deals. To achieve the same, we act as the Investment Team for our investor base, conducting detailed strategic diligence, pre-negotiating terms, ensuring regular updates and doing end-to-end management of the investment till exit.

Second, we encourage all investors to invest using a portfolio approach and minimize their risk. Our low investment minimums (as low as $2,000) allow investors to build portfolios with a low total asset allocation.

Finally, we make the process time- & effort-efficient for investors. We’ve built a simple end-to-end online process that includes information flow, investment reservations, funds transfers and document signing, making it possible for an angel to invest from their home or office, anywhere in the world!

We believe that the above approach has helped us remain differentiated and relevant in the ecosystem. We’ve now built a strong portfolio of startups and an engaged community of investors over the past 24 months, which has in turn helped establish Globevestor as a trusted stakeholder in the Indian startup ecosystem.

We will continue to keep our heads down and execute on our vision. A lot of exciting stuff is brewing internally, and we remain very bullish about what’s in store for our future. It’s a great time to be in India.

Jai Hind!