1Mby1M Virtual Accelerator Investor Forum: With Gaurav Jain of Afore Capital (Part 2)

Sramana Mitra: When you say early, can you put a bit more color around that? Are you willing to do concept financing?

Gaurav Jain: The short answer is yes. These days, it has gotten so cheap to build an MVP, especially if you’re building a software product, which is where 80% to 90% of our investments are going to be. To get something out there to show some interest in customers, you don’t need a whole lot of money.

Between Amazon Web Services and all the open source software, all you need is a laptop and access to the internet to build a prototype. Human labor is where the bottleneck is. That’s what we look for – founders that are able to build the product themselves. The challenge is when founder are non-technical where they need to hire engineers before they can write a single line of code. Those are a little bit harder for us for a lot of reasons.

In most cases, the founders have been able to get something out there without needing any capital. Typical trajectory would be you’re working at a tech company with a couple of founders. There’s this idea they’ve been toying with for a few months. Maybe they’ve been hacking evenings and weekends. They get excited and leave their jobs. That’s when we get to know them. We stay in touch with them and help them for a few months as they’re hacking on the product.

Part of the reason we don’t invest in that concept stage is because, a lot of times, that concept changes. You don’t want to raise money too early. If you raise money and get investors excited about this direction, but you realize later that it’s not the direction you’re excited about, the situation becomes tense.

Because the cycle times are so short in the first few months and so much is going to change, we encourage founders to wait for three to four months until they have some semblance of the direction they want to run. There will still be a lot of iteration and micro-pivots in the first 12 months, but that’s okay. We need some level of clarity for the next 12 months. Hence, we rarely invest in concept. We like to wait for a little bit.

The cases where we have invested is where we’ve known the founders for a while. They have launched products before. We just want to be in partnership with this founder. 90% of the companies, if not more, have some prototype.

Sramana Mitra: Your sweet spot is technical founders who have tinkered for a few months and built something. Then you take it from there. You’re okay with the micro-pivots, but you have some directional movement already in swing.

Gaurav Jain: We’re very comfortable taking on traction risks. Maybe a hundred customers love it. Does that mean a million are going to like it? We don’t know. That is something we’re comfortable with.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Gaurav Jain of Afore Capital
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