1Mby1M Virtual Accelerator Investor Forum: With Mohit Gulati of ITI Growth Ventures (Part 6)

Sramana Mitra: That actually gives me a segue into my other question. India stupidly fell into the unicorn mania as Silicon Valley did in that period. All this unicorn-chasing valuation and this kind of mania around being an entrepreneur took off.

My original thought was India is a more conservative country. People are frugal. People don’t have this crazy, excess-driven mindset and we’re going to develop a little bit slower. We’re going to develop more sustainably. But boom! In 2014, all that changed. It went exactly the same kind of unproductive destructive way that it went here.

Mohit Gulati: Two or three of the largest fund in the US who have offices in India are actually to be blamed for this.

Sramana Mitra: Yes, I agree. How do you view this? You seem to be a bit more optimistic about the 2017 trends. Talk about what’s happening with the unicorn mania. How is the ecosystem moving?

Mohit Gulati: I think the unicorn mania has dried down completely. The good part is all the people who got into entrepreneurship just for the heck of it are out. To see it to the end are the ones that are still at it, and they know for a fact that it’s such a hard life to just get that hundred million mark. The billion market is so far away.

Why even dream and talk about something which is not realistically going to happen in the near future. Entrepreneurs as well as investors are now getting a little more sane with regards to keeping more realistic targets for themselves. It’s always better to under-quote with regards to what you’re going to achieve and then achieve higher versus the other way around.

Sramana Mitra: I’d like to hear your thoughts on this. Because of these longer cycles, the seed fund and the early stage funds often exit into the later stage funds. Is that something that you expect to see still? How do you view that trend?

Mohit Gulati: I’ve had a great run with regards to exits in my own personal portfolio. The success mantra is simple. If you build a great friendship with the entrepreneurs that you’re investing early on with, they will take care of you and your rights at a later stage. They will negotiate for you.

When a very large B fund is negotiating with your entrepreneur, you will not even get a seat at the table. To be very honest, if you look at the pecking order of who can sell shares in a company, the entrepreneur is the last human being.

Sramana Mitra: That’s another bad practice that has happened in the last few years. Some of the later-stage funds, to get into the deals, have given liquidity to the entrepreneur. It’s happened in India too.

Mohit Gulati: I agree. I’m not saying that the entrepreneurs should be the last preference. Just by virtue of  how agreements are being structured, it’s unfortunate that they are amongst the last preferences and which is where a relationship with the entrepreneur comes in handy.

He can actually go out and say, “Listen this is the guy who bet on me when I was nothing, and he deserves to make an exit at a good price right now, so please look at it.” Our entrepreneurs have actually stuck for us and said, “Listen, you better give them an exit or else, I’m not taking your money.”

Sramana Mitra: So you are exiting in series B or series C.

Mohit Gulati:  Absolutely.

This segment is part 6 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Mohit Gulati of ITI Growth Ventures
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