The high-risk, high-reward world of venture capital is an ever-shifting place where the future of business is predicted today. Inc42’s Moneyball is series which focuses on the who’s who of the venture capital world, deconstructing the trends, how it works, the impact it has, why it works and what it feels like to be part of the world of venture funding. This week, we speak to Surya Mantha, senior partner, Unitus Ventures. Explore other Moneyball stories here.
Not many would step down after rising to the top of the corporate food chain. For Surya Mantha, the senior partner of Unitus Ventures, this is a ladder he has climbed up and down many times. Punctuating stints as CEO of Web18 (Network18) and managing director of HMV Saregama India with setting up Omidyar’s Mumbai office to Peepul Capital and now to Unitus, Mantha has repeatedly eschewed corporate top jobs to build companies from the ground-up.
At the time of leaving HMV Saregama, Mantha said that he was “looking at something more entrepreneurial.”
Unitus Ventures’ portfolio bridges the gap between the urban and rural pockets of India and the firm launched its INR 300 Cr second fund in 2018. The portfolio includes healthtech startups 5C Networks, Cyclops, Predible Health among others. It has also invested in startups through its Seed Fund. But Mantha, in particular, chooses to focus on the big impact created by some of the portfolio startups.
The VC firm is currently looking to make six investments in 2020 and closing the fund, so Inc42 caught up with Mantha to find out more about his investment thesis.
Unitus’ profile is heavily focussed on healthtech, fintech and professional reskilling. What do you think is driving these sectors?
Surya Mantha: With the growth in the economy, growth in disposable income, exposure to media, and higher aspirations, there is a hunger for utilitarian products and services, affordable healthcare, access to finance. If you look beyond India I consumers i.e digital users living in metropolitan cities, there are almost a billion people who are getting their first bank accounts, their first organised jobs, their first loan. And the good thing is that tech infrastructure is mature in India today. It’s the fastest-growing market for smartphones, Aadhaar allows us to reach so many new customers in a cost-effective way. So it’s a terrific time to be an entrepreneur and an investor. India is also an exciting market from the global perspective because of the size of the market. But the caveat is that you have to be careful that opportunities have solid unit economics and demand.
Can you give us examples of how Unitus works on addressing this demand?
Surya Mantha: So we are invested in a company called BetterPlace which helps migrant workers who come from rural areas get access to jobs, skills and training, access to banking, quality healthcare, etc. when they move to cities where they do not have too many trusted contacts. Another one is DriveU which trains drivers and provides on-demand driver services to customers. They have completed over a billion drives and their unit economics are solid. And the interesting thing is that the driver stickiness is far higher than some of the cab-hailing apps.
2019 changed the conversation around unit economics, valuations and cash burn in the VC world. What are your thoughts on these topics?
Surya Mantha: For us the filter is impact. How to create opportunities for hundreds and thousands of lives. Then next we see if the founders have the expertise or we can bring expertise and value to these companies. Then the rest of the consideration is completely commercial. There is no difference between what we do and a regular fund would do. We make sure we know about the market size, about the startup’s ability to monetise, their runway to get to sound unit economics and scale profitably. We also assess the strength and ability of the management team and finally the ability to raise capital.
On valuing technology we see if the startup is using technology to either cost-effectively reach many customers or using technology as some kind of moat.
You mentioned impact as your first priority, what are the metrics you use to measure it?
Surya Mantha: We ask ourselves are you giving access to finance? Improving skill outcomes, getting better jobs, improving educational outcomes. So every six months we look across our portfolio and our portfolio companies work with us to report the number of jobs created, number of blue-collar employees onboarded, number of loans disbursed, number of women screened for breast cancer by our portfolio company UE LifeSciences.
What do your ticket sizes look like?
Surya Mantha: Our first cheque size will be between INR 3 Cr to 7 Cr. And then we will double down on our investments over the next two-three rounds till Series C.
VC investing is a step removed from the actual action of company building, something you are well-versed with. How do you feel about that?
Surya Mantha: So we (at Unitus) are all operators, we all come from executive operations backgrounds so we do not believe in just writing a cheque and sitting back and attending quarterly board meetings. We are very hands-on. But we also understand that we don’t know everything. So we work very closely with a network of advisors, venture partners and seasoned professionals. And these people give a day, a month or so to work with our portfolio companies.
What is your personal checklist of things you work on with a founder after onboarding them?
Surya Mantha: We have our first set of discussions which are about impact, market size, operations etc. After this, there are two things that we do. Firstly just after signing with a founder, we work on a 100-day plan. And this is something we do so that we are all aligned and taking ownership of it. And that will address all the key aspects of it.
The second thing that we do is quite unique because we are specialists in the Tier 2 market rather than a Tier 1-focussed fund dabbling in other opportunities. We explore synergies between our portfolio. So our companies which deal with blue-collar workers also connect to healthcare companies or language teaching services which can give such workers more social mobility.
What are the qualities you look for in founders before funding them?
Surya Mantha: The biggest thing I look for is the qualities of the founder. If you see passion, conviction, thoughtfulness, humility and the ability to learn. Also, deep domain knowledge is very important. I think India is a fairly complicated market. You can’t just have people coming into a new field and saying “Give me money and I will build something.” We now see people who have deep domain knowledge, they could be second or third-time entrepreneurs in the sector and really understand the nuances.
A few years ago it was enough to come from a tech background to secure funding. When I was with Omidyar, it was still early in the Indian VC investing days, domain expertise was not that important but today it’s very important and a priority for us when evaluating founders and startups.