Expert Interview: Adit Parekh, Principal at Blume Ventures

For a majority of people involved in the startup ecosystem, the word “startup” involuntarily triggers another word in mind — “funding”.

What does a VC look for, before investing in startups? Team composition? What are some of the products that deliver a WOW experience?

Adit Parekh, Principal at Blume Ventures, talks about all of these and gives us a VC perspective of products.

What’s the ideal founding team for a startup?

When we look at startups, we always look for a balanced and mature team that has seen scale in the past.

The founding team should preferably have exceptional business, technology and operational chops. We are realizing that as business’ get more complex, having a larger founding team helps. Based on whether the focus is on consumer of business, the team composition might vary a little, but having individuals who have worked or know each other for a few years always helps.

What are the things you did in your investment companies that accelerated the companies growth?

It is paramount to know when to hit the growth pedal viz-a-viz reach product market fit. India has seen too many examples of the stereotypical mindset that money can buy growth and thus market domination.

I believe that each business should identify it’s moat, its unit economics and market potential in their current geography before thinking of growth, since growth is traditionally though about as expanding to other cities / geographies.

I truly believe that business’ in India will create value for themselves based on how they can economically control distribution. If you look at some of our fintech investments, namely Turtlemint (tech-driven insurance platform) or Slicepay (a micro-lending student platform), the focus has always been to identify cost-effective channels of customer acquisition with high cross-sell and repeat potential. Inherently, fintech in India is not really an online business, it has traditionally been offline, thus how does one use technology as an enabler to capture distribution.

Once PMF is established, and again one needs to realize that PMF is temporary since the venture is all about creating newer moats, economical and well thought of scale is important.

Ensuring that your backend technology along with data science can remove all the inefficiencies and thus reduce costs as you scale will ensure that one can become profitable faster and grow exponentially without breakages. As you increase the complexity of product offering, your platform infrastructure / devops needs to be stable.

What are all the product pointers you look for before investing in a company?

Team!

It’s just the people, it’s very simple.

There were a couple of companies where we made the commitment even before the company was formed since we were so confident about the team’s capabilities. In the venture journey the company will ‘pivot’ or maybe forward integrate / backward integrate or innovate on distribution / product etc, so having an agile team is critical.

In some cases, we have assisted in getting ‘co-founders’ to fill the gap in the team which would not have been possible without the promoter’s maturity.

When startups come to you for pitching, what are the common product mistakes / disconnects you have seen?

a) Co-founding team — is it ready or not, is there a co-founding team that’s well balanced, has the perseverance, and has the technical skill sets. Reference checks are very important.

b) From a business perspective, is the offering a me-too or is it differentiated enough. Moreover, are the co-founders delusional and making their decisions only on ‘gut’ or with a combination of data and gut.

c) The market they are focussing on should be large enough.

So, product for me is not critical and at the cost of repeating myself again, it’s all about people.

For me, it’s not about whether the app looks sexy or not, it’s more about testing the model with the real world and if it doesn’t work, then can we change it to something valuable.

What are some of the apps that had delivered you an “aahaaa moment” while using them?

• Dunzo — it is one of my investment company. I like the way they think about user behaviour and user interaction.
• Whatsapp — it is very intuitive, makes lot of sense, very focussed towards the usecase.
• WeChat — the speed at which they innovate and the way they control the distribution hose pipe.
• Grofers — post ordering, the UX for the fulfilment is really innovative and intuitive.

Paytm or Freecharge? and why?

Tough question. If I have to choose one, then it’s Paytm.

I think full stack works in India.

In India, unfortunately, ecosystem players work in silos without too much of collaboration and thus even though I would like to invest in products that integrate with the ecosystem, what I have realized is that one needs to build full-stack to ensure that there are no breakages.

Our investment companies — Slice Pay, Dunzo, Turtlemint, Nivaata, runnr — are also trying to build an end to end experience and they are trying to reduce the dependency / reliability on other parties.

That’s why the Paytm model of ‘we manage end to end and make sure the process really works’ is amazing.

What are the top three products you admire, and why?

• Zomato — they think consumers, they know what consumer wants. They are doing a good job in terms of customer delight and discovering new restaurants.
• UBER — for their utility.
• BookMyShow — for their engagement and information about events around.

If there is one rule that the government can launch that will boom startup ecosystem, what should that be?

Remove angel and VC tax. By this, more people will invest in companies irrespective of how well they do which will create a ecosystem of skilled individuals whether they be entrepreneurs or employees.

Have questions for Adit Parekh? Ask in comments section below.