More than a year.. at Together (Part 2)
When I joined Together, it was a uniquely different world for me. I had been working as an operator for the past five years. The demands there were different. The way you addressed and solved problems differed distinctly from a VC’s way of doing things. This is why life as a VC has been a whole new learning curve for me.
But here, I believe, I have brought my own share of life learnings too.
I think of myself as someone who can adapt and learn in uncertain environments. It goes back to my time as a student in my first year of college. When I started out, I was not the best swimmer. In fact, I did not swim at all. But I worked hard, stayed disciplined, and managed to become the lead striker of a gold-winning, national-level water polo team. The progress was built on persistence. I think some of my core strengths kicked in when I joined Together as well.
I joined Together in March 2021, and have been part of this world for just over a year. I wouldn’t want to use this platform that has so generously been given to me to preach about what life is like as a VC. What I can do is share, with absolute honesty, what I have learnt. In an earlier post, I spoke about the culture at Together. It’ll give you a little more insight into how we, at Together, think.
Evaluating a company
It sounds very exciting from the outside. But on your computer screen are the life, dreams, and ambitions of an entrepreneur. First comes responsibility. Everyone spends a lot of time analysing and weighing each company. Every company is different and is evaluated with a different set of parameters but we have some guidelines to get us started. I’ve split this in two. Why do we invest in a founder, and what do we look for in founders? And an X factor, something that helps, that stands out in the crowd.
- The Why, How, and What
The ‘why’ is the story of your life. We like it when founders are self-aware and are comfortable in their own skin. This is what we mean when we say, “mature founders”. It’s never the age. We believe this maturity plays an integral part in defining the founder’s work around the product. In one of our first meetings, Girish had said, “Do not go for an idea, go for solving a problem statement.” And that’s what we always follow. It’s what we look for in a founder. Is the founder looking to solve a problem? The passion to solve that problem will motivate the founder. And that’s the ‘Why’.
During the course of the past year, I have seen founders of varied experience levels. Some are just out of college. Fresh-faced and enthusiastic. Others are pros with over 20 years of experience. People who understand the industry inside out. What we look for in a founder beyond the ‘why’ is also how they think tactically. Look, everyone wants to make money at the end of it. No one is doing this for charity. So, the goal is always clear but the plans to get to that goal are what we look for. And that’s everything.
Be it the GTM strategy, the brand positioning, or getting the right advisors onboard. The only thing that early-stage investors can see is how nimble a founder is and how quickly they want to learn. We discuss this often. There is a speed at which the company is growing. What makes it attractive is its potential to double, triple, or quadruple at that speed. And keep it going for years. One thing we don’t look for is their background. What we hold important is not the pedigree but the experience a founder brings with them. Sure, experience helps but it is not a deciding factor. My colleague Avinash has written in detail about how we try not to have any preconceived notions of certain founder personas.
2. The X factor
There is no fixed template that I think a successful VC applies to identify the best outcomes. I won’t deny the fact that there are definite patterns, but most of the billion-dollar outcomes that we have seen were contrarian bets. I am including this X factor to include everything else that does not cover the first two points. Be it luck or investor conviction or divine intervention. If it’s a category-creating play or a product amidst a massive market tailwind. Figure out your X factor, your right to win in anything that you are trying to pursue. Having this at the back of your mind will keep pushing you on the right path.
But this is just one part of the puzzle. Along the way of being a VC, I have made friends with a fair few founders. Some are part of the Together network, some outside. And here’s something I learnt on how to fundraise.
A. Raising capital
For a founder, it is necessary to know not just what a VC is looking for but also what you need to do to get noticed. Again, this comes from a very small sample size and there are some biases built-in. And I want to say this again. It is not a one size fits all.
B. Team
Make sure you have thought through the positives and shortcomings of your team. Usually, complementary skill-sets are the way to go to make sure everyone is pulling above their weight in their respective segment. A lot goes around about how you craft the initial team. What does your hiring pipeline look like? Have you identified candidates who you want to work with? The ability of the founder to build a stellar team is a critical parameter that goes into the evaluation process. ‘The Why’ and ‘The How’ will help you identify the best-suited candidates.
C. Product
Is your product solving a critical pain point? Be sure you are crystal clear on the value proposition of the product. One need not build hundreds of features at the MVP stage. It is critical to identify the top 3 features that your potential customers will find value in. What is the ROI? Will the product save time or money or both? Product development is an ongoing process. Make sure that you develop a crisp MVP and then iterate/add features as you move ahead in your journey. I have seen a lot of founders chasing a product with lots of features. But they don’t validate it with customers. It is critical to build with the customers and navigate. You won’t have all the answers at the start but you need to make sure you have answers to a few critical pain points your customer is going to have.
D. Competition and Market
As Paul Graham rightly says, the market is always larger than you evaluate. Yes, the ballpark market size I have seen most VCs comfortable with is anything greater than $1 billion. But this is a trap. Make a case that you can create the market, in case it looks small on the face of it. When Ola first raised capital, the TAM was small. The market existed but was adjacent to the problem Ola was initially solving. It was Bhavish’s conviction that got customers to abandon haggling with autos and taxi drivers to fire up an app. It is where the ‘Founder market fit’ also comes in. In most cases, someone who has spent a lot of time in a market can, we believe, figure out how to break into the market. We are in an economy where numerous business models are taking shape. Identify and build conviction around what your business model would be.
E. GTM
Understand who the buyer and the user is. Can the user start using your product right away without a lot of integrations or approvals? Then you have a shot at the bottoms-up approach. Top-down sales make sense if you think a lot of convincing would be needed for the buyer. Also if you are going top-down, your average contract value is going to be different. Measure how you can enter the workflow of your target audience. PLG has gathered traction for a reason but the top-down sales approach is not dying either.
We see a lot of startups who have customers ranging from SMBs to enterprises, healthcare companies to banks. Of course, the brand matters, but what investors are looking for is the repeatability of the problem statement in one particular cohort. If you are solving for e-commerce clients in the mid-market segment, it is great to have five of them on board, rather than fifteen, consisting of a spectrum of the industries and segments.
F. Fundraising
From my experience, some large VCs tend not to talk to founders unless there is a known entity vouching for them. At Together, we meet everyone. But larger firms do this because they have a flood of people writing to them. We published a piece on how founders could stand out in an inbox. It’s worth a read. Leverage your angels. They can be your champions.
It has been a year that flew by but the learnings are worth so much more. Today, when I write this I remember my last round of interviews. I was very excited when I first met Girish and Manav. They had built companies and had seen an ecosystem evolve around them. At the interview, they said what every interviewer says, “Is there anything you would like to ask us?”
So, I asked them. “Why Together? You run very successful companies with lots of moving parts. Why a fund, why now?”
“We want to build India as a product nation,” they told me. “To do that, we need everyone to come together.”
I am Together.
