1Mby1M Virtual Accelerator Investor Forum: With Rajul Garg of Leo Capital (Part 3)

Sramana Mitra: Talk about your current portfolio. What have you invested in? What are the highlights? As you’re describing, give us some insights into when they came to you, what did you see that captured your imagination.

Rajul Garg: We only became a fund late last year and started investing. We’ve made four investments so far. One of the investments is a company called Flick Stock. Let’s say you’re a fashion commerce company in the US or Western Europe. If you put up images that are modeled images versus just a product image, your conversion is higher.

If you’re selling a shirt, you’re better off putting a model wearing a shirt versus just the image of the shirt. However, the cost of getting a modeled image is fairly high because you hire a studio, hire a model, and do editing. For smaller commerce players, it can be as much as $4 to $5 an image. Even for large ones, it’s $4 to $5 an image.

Flick Stock generates these images automatically solely through AI. You can send them your product images. They have their own model database and they combine the two and send them to you at a fraction of the cost. It’s a global SaaS play. I’ve known the company for the last couple of years. We came in October last year and closed it at the end of the year. They were post-revenue. They were doing half a million ARR. They had good customer validation. This would be important for us.

This would be a play that doesn’t have a large enough market in India. In this case, what attracted us was they’ve been able to sell to the US market, service one or two customers, and get this going. If this company had not done this much, it would be very hard to get in because the Indian market is small. The go-to market risk is very high. How do you know if a company can sell to markets if there is no validation?

Sramana Mitra: Let’s talk a bit about some of the trends that we are seeing. I’d like to hear you reflect on the Indian counterpart of that trend. The first one is, how do you process the current investment climate where capital is moving further and further upstream. How does a seed investor mitigate the Series A gap?

Rajul Garg: A Series A gap in India is not new. It has always existed. We’re seeing this trend in the Silicon Valley newly emerge over the last couple of years.

Sramana Mitra: More than that. It’s growing. We have a lot of seed capital that has come into the system. Right now there are 600 to 700 seed funds and a much smaller number of Series A funds. That has accentuated and aggravated the Series A gap problem, but it has been there for a while now.

Rajul Garg: In India, the Series A gap has always existed. It has never been a market flushed with funds with the exception of 2014 to 2015. Before and after that, capital in India has always been conservative. There has never been plenty of it. I’ve never seen a situation where there is a shootout for getting into an opportunity the way I’ve seen in the Bay Area.

The Indian entrepreneur knows this going in. India has a handful of Series A investors in tech. There are about 10 funds who are doing 90% of the investments. It’s always been a concentrated market. I think entrepreneurs have learned to live with that. Seed has grown in India. While there were two or three super active funds three years back, now there are six or seven. The numbers are still small if you add them all up. Still the supply and demand equation in India is still horribly skewed in the favor of investors. Entrepreneurs have learned to deal with that.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Rajul Garg of Leo Capital
1 2 3 4 5