1Mby1M Virtual Accelerator Investor Forum: With Mohit Gulati of ITI Growth Ventures (Part 7)

Sramana Mitra: That’s not a common practice in the US by the way. That is a practice that is more unique to India. Because of the proliferation of micro-VCs , people are starting to think. The other side of the equation of this unicorn mania is that the larger funds are doing very large series C’s and series D’s.

Now the concept of seed-stage, preeseed funds exiting into series C or series D is happening more or at least, coming to the surface. In India, it’s been happening for a while.

Mohit Gulati: Yes, also because of the fact that your cap tables are so complicated with regards to getting the entrepreneurs equity. The fact is coming to the comparison between the first check in the US versus the first check in India. It’s significantly lower, so by the time the entrepreneur reaches the check size of what’s happening in the Valley, he’s actually diluted.

Sramana Mitra: Yes. That five rounds of pre-series A is a downer for the cap table.

Mohit Gulati: The pre-series A really hurts the most.

Sramana Mitra: If it takes you five rounds to get to Series A, that does really bad things to your cap table. Last question. Talk about the niche situation. The commercial Internet has been around for almost 25 years. Lots of things have been built, so the wide open opportunities of building very big multi-billion dollar companies are fewer but there are several niche opportunities.

There is a lot of niche expertise and domain knowledge in niche areas. One of my observation is that we have to build some of these companies for very small amounts of capital – maybe $1 million or $2 million and sell for $10 million to $15 million, or even smaller.

How do you parse opportunities like this? Is it something you’d invest in? Is it something you’d ignore? How do you see this?

Mohit Gulati: Of course, we would love to participate in opportunities like this. I believe in building businesses which are sustainable and which could survive with or without external capital. If there is a niche opportunity one can enter and make a easier buck versus you know something more risky, I might even take part in it. Let’s be honest. There aren’t too many options left. The world has seen a bunch of great consumer companies.

Sramana Mitra: I think India has a cost advantage still. It’s just built in the ethos. People can be very scrappy and build something, get enough validation, and maybe the actual go-to market happens through somebody else’s channel.

Maybe your zero to $2 million in revenue happens within the venture capital timeline. Then the actual  $2 million to $200 million happens from somebody else’s channel. I don’t really invest in channels. Channel development is very expensive. It takes a lot of capital to build a full channel.

Mohit Gulati: Absolutely. The world has actually proven and showed to everyone that the second mover advantage works better than anything else. You might embark on something but there could be someone who comes in that makes it much bigger than what you thought it could be.

Sramana Mitra: What are your parting comments for the entrepreneurs in our ecosystem who are interested in working with you?

Mohit Gulati: I don’t have a parting comment for an entrepreneur, but I have a life lesson that entrepreneurship has taught me. It goes this way. Some of the best business ideas run by very, very mediocre people are bound to fail, while some of the most simplest ideas out there but run by a good set of entrepreneurs who are there to build something are bound for greatness. It might not happen today, but it will happen in due course.

Sramana Mitra: Thank you for your time.

This segment is part 7 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Mohit Gulati of ITI Growth Ventures
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