1Mby1M Virtual Accelerator Investor Forum: With Gaurav Jain of Afore Capital (Part 4)

Gaurav Jain: We don’t make a list of what’s been going wrong. The list, unfortunately, is too long. Instead, we look for what can go right. If the founder can accomplish these counter-intuitive things, could this be a massive business? Could this be a massive opportunity? Does the founder have the ability to execute on V1 of the product and get some traction, learn, and figure out V2. Neither of us knew what that is. Kyle did a brilliant job at that.

Another company I invested in is something called Firebase, which was two technical founders. It’s actually their fourth startup. The first three had failed. They were building a chat engine. They realized that the backend software to enable the chat was complicated. They took that engine and productized that. That’s when we came in. What I like about those founders was that they were very authentic and very organic.

They’ve been building this chat app and realized that the opportunity was actually somewhere else and then ran with that. They had a very interesting vision around how hard it is to build real-time products. I’ve worked at Google. I’ve seen how hard it is to build Google docs for example. If you can enable that for engineers to build in minutes as opposed to months, that can be pretty powerful. That was a good exit for us.

The portfolio is still new but we invested in a company called BoxBot. The founders came out of Uber and Tesla. Their insights were around parcel delivery, which is taking an e-commerce package to your house. About 50% of that cost was literally in the last hundred feet or so. What if we can enable an autonomous robot that is able to ship it? They’ve delivered this really interesting supply chain where they can shave the cost for UPS and DHL and get the car sold to your house.

What we like here is that the founders were very authentic. They had the right skillset. They’ve seen the opportunity of driverless technology in another use case.

We’ve also invested in a company called Overtime. The founder has a strong consumer instinct. What he noticed was that millennials these days are not watching three-hour games on ESPN. They’re consumers of sports content on their mobile phones in small snippets.

What he did was acquire all high school sports content. How can you acquire this content and push it to the platform? There’re millions of these video views a month because millennials just love this content. It’s entertaining and it’s short. You can see a whole mixed bag of different companies and different sectors. The connecting thread is s very strong founder in terms of product, the ability to understand what the customers want, having non-obvious insights so they can compete with the incumbents.

Sramana Mitra: You’re looking for unicorns?

Gaurav Jain: That’s the venture model obviously. We don’t get too caught up on what the eventual exit outcome looks like. Part of what we tell our entrepreneurs is stay capital-efficient. Don’t raise too much money because when you raise too much money, you’re forced to become a unicorn. If you’re raising money in a $500 million post-money valuation, you can’t sell it for $400 million.

Sramana Mitra: Exit options become limited.

Gaurav Jain: Exactly. In certain sectors, there’re just not that many M&A activities for companies to buy other companies for billions of dollars. I’ll give you an example. I invested in a company called Skip The Dishes, which is a company based out of Winnipeg, Canada. It’s a company mainly doing food delivery.

When everybody was competing in New York and San Francisco, they were in places where there was no other food delivery business. They stayed capital efficient. They stayed focused on profitability. They stayed focused on growth. They initially got acquired by a public company out of the UK for $250 million. It was a great outcome for the founders because they still own a significant portion of the company. We didn’t get diluted much.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Gaurav Jain of Afore Capital
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