Basic Approach to Angel/Seed Stage Investment for First-Time Entrepreneurs

Last week we published the Part 1 of the interview with Sharad Sharma, co-founder and Governing Council member of iSPIRT, ex Chair of NASSCOM Product Forum and a member of the Executive Council from 2009-13.

The Part 2 of the article talks about initiatives by NASSCOM, Sharad’s role in the organization, on entrepreneurship, funding advice for startups and key areas which interests Sharad as an investor.

[Edited Excerpts : In conversation with Sharad Sharma]

On NASSCOM

Inc42: Tell us your role in NASSCOM as a member of Executive Council and as the head of Product Forum ?

Sharad: I was the NASSCOM Product Forum Chair and EC member for 4 years till April 2013. During this time we re-invigorated the product related efforts inside NASSCOM. This included repositioning of NASSCOM Product Conclave into a community led event which made it enormously successful.

Inc42: How is NASSCOM 10k initiative and other events like product conclaves helping startups?

Sharad: NASSCOM 10K initiative adds to the pool of choices that an entrepreneur has. Once this program scales to its original vision, it’ll have a positive impact on the ecosystem. NPC will continue to be the mecca for product industry stakeholders to get together every year.

Inc42: There are too many events, summits, conferences, meetups and too many bodies like TIE, CII, NEN in the startup ecosystem. Do you feel that all initiatives by  NASSCOM in particular is adding value to startups or is like just others?

Sharad: Event calendar is now very crowded. Some time back I wrote about the Events Landscape 2.0 where pointed out that specialization and community powered learning will be the driving trends in the future. Everybody will have to reinvent around these new forces.

Inc42: How is NASSCOM targeting Entrepreneurs in Tier2 and Tier3 cities, We don’t see much action there, except for few?

Sharad: Once NASSCOM 10K program scales to its original intent it’ll be able to reach out to the smaller cities. Right now it’s in a pilot stage.

Inc42: Startup ecosystem in Delhi is far behind then of Bangalore. Also the attitude of Entrepreneurs here in  Delhi is far different from those in Bangalore or Pune. How according to you this gap can be balanced, is it a factor of time or community effort?

Sharad: I don’t think any city, including Bangalore, will emerge as a self-contained startup ecosystem in the next 5-10 years. Each city will have strengths and weaknesses. We should encourage them to import talent from other cities. For example Delhi needs to see more of Bangalore tech talent moving there. And Bangalore needs to import the sales hustle from Delhi. If we create this culture if people moving to the new city then startups will successfully mushroom in multiple places.

Inc42: What is one thing a startup or an Entrepreneur should focus on for raising funds?

Sharad: Fund raising is very different at each stage of the startup. If you have a product-market fit, then a standard VC template becomes applicable. This is where a standard approach might work.

Before product-market fit, your fund raising has to be high personalized to the angel/seed stage investor you’re targeting. You have to appeal to a set of beliefs that they already hold. For instance they might already believe in the problem that you’re out to solve. Or they might have the same view on the technology/market inflexion that you champion. Unless you research the target investor and find out where this resonance will take place its very hard to get an angel/seed investor over the hump and say yes to the investment. This basic approach to angel/seed stage investing is often overlooked by first-time entrepreneurs.

Inc42: You have been a super active angel investor, with investment in several companies. Any particular trend you look for or  any specific industry domain?

Sharad: I have 20+ active investments. I’m a thesis based angel investor. The themes that interest me are:

• SaaS filling up white spaces. This is happening at three levels of scale. iFlex, Eka, etc. are showing that this works for key account selling situations where getting to ‘500 customers is nirvana’. My investment in Peel-Works fits here. Then there is the ‘50K customers are nirvana’ segment where Fusion Charts and Zoho are posterboys. My investments in OrangeScape, Unbxd, AurusNet, Eventifier fit here. Finally there is nano-pricing ‘million customer are nivana’ plays. My investment in Apartment Adda fits here.  TECIs (Technology Enabled Commercial Intermediaries) are an untapped area right now. Overall, for all these players, India as a test market rather than the target market.

• Software infrastructure story. Indian companies can build world-class software infrastructure. It’s like investing in cockpit avionics rather than in Boeing or in Singapore Airlines. My investments in Vayavya, Druva, i7, Ezetap and AdSparx fit here.

• Data chanakya solutions. Instead of horizontal analytics, my focus is on three trends. First is digitization of workflow (BPM) which allows managers to better control organizational optimizations (e.g. Insorce though I’m not an investor there). Second, decision tools that improve heuristic decisions across the board (Frrole, Iken, Firstrain, Heckyl, Tracxn, Talent Neuron, Contify, Indix, etc. illustrate this). Third, problems are being solved anew using data science (e.g. Mitra Biotech, SEDEMAC).

• Mythical Indian consumer internet story so B2B2C is needed. My investments or Board positions in TaxSpanner, Kwench, BirdsEye, Stayzilla, Silvan Innovation Labs and Consure are related to this.

• Global consumer plays. I believe they are hard to do this from India right now and I don’t have enough competence to help the startup in this area. So far only investment here is in Hashcube.

• Disruption in marketing.

• Disruption in Education. So far my only investment is in AurusNet though I’m also associated with Themefy.

• Watchlist includes US becoming an Agent based society (have an experimental investment in TechFetch related to this), Password dying (no investmets so far).

• Anti-thesis. I don’t invest in Indian execution plays like Mast Kalandar, YLG, etc. I have no special expertise in these areas.