1Mby1M Virtual Accelerator Investor Forum: With Vivek Ladsariya of SineWave Ventures (Part 4)

Sramana Mitra: Can you talk to me a bit about how you view TAM? I’ll give you the context of where I’m coming from in asking this question. We are in April 2018. Lots of stuff have already been built. Nowadays, there aren’t as many wide-open opportunities out there to build these billion-dollar TAM businesses.

Some people only want to invest in $10 billion plus opportunities which are fewer and farther between. I actually see that there are many, many niche opportunities out there. Some of these businesses need to be built for small amounts of capital whether it’s the $200 million TAM opportunities or $600 million TAM opportunities.

In some cases, where you build companies for $1 million to $2 million and sell for $15 million, you still make good returns.

What is your TAM perspective? What is acceptable to you? Your fund size is still small where you could be playing in the niche opportunities and seeking early exits. It sounds like in the case of this Uber deal, you have done exactly that. Can you reflect on how you view TAM?

Vivek Ladsariya: You brought up a couple of things that are important. I don’t necessarily agree with the first part. I don’t think we are at a time where a lot of the big opportunities are already done or covered. The nature of the market that we are in today is very similar to what the market has been like for a long, long time. With every major breakthrough company you’ve seen in recent history, it’s been that way where initially, it seems like a very small company. Then the company tends to grow from thereon out and branch out to peripherals.

Sramana Mitra: That’s not my point. My point is, we have a very large number of micro-VCs and small VCs. That number has exploded to over 700 just in the last couple of years. I just don’t believe that if everybody is chasing unicorns, it’s going to be possible to find many unicorn opportunities. Unicorns, by definition, are rare.

Vivek Ladsariya: Which is what I was going to say. What you mentioned which I agree with is that especially for a smaller fund, the idea tends to be, invest in things that can return decent amounts of capital so you can raise larger funds if that’s your objective. There’s absolutely no shame in a $100 million exit.

A $100 million exit can be great for early investors. It’s great for founders. Investors should be happy as well, especially if you get a deal at the right price. There is no shame in that. I haven’t spoken to investors about this. It might be that investors don’t totally agree to this. Every investor would be happy to invest in companies with that outcome.

Every investor wants massive exits but smaller exits are as good especially because from an IRR perspective, smaller exits tend to happen earlier. You can return a higher IRR to investors. Going back to the TAM question, there, invariably, comes a time when the company is evaluating a mid-size exit or a funding round to hit big. That’s a situation that everyone faces.

Sramana Mitra: The synthesis of what you said is that you are open to the smaller, capital-efficient investments and earlier exits.

Vivek Ladsariya: Absolutely. Regardless of what size of a market they’re going after, we need our entrepreneurs to be capital-efficient. That’s healthy even if you’re trying to build a massive business.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Vivek Ladsariya of SineWave Ventures
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