1Mby1M Virtual Accelerator Investor Forum: With Sarbvir Singh of WaterBridge Ventures (Part 4)

Sramana Mitra: The second question I have is what is your analysis of the trend of small funds like yourself that are doing the early-stage investments exiting into the later rounds. Do you see that happening a lot in the Indian ecosystem right now?

Sarbvir Singh: We look at it in two ways. It is a trend. After the emergence of Reliance, it brought a lot of this access revolution in India. This is the second most important VC. I think it’s a global trend to some extent.

When you have $100 billion funds, they act as an exit vehicle. When that happens, it goes down the chain. In India, it’s a very important trend. It takes a long time. IPOs are few. Even the domestic companies don’t buy that much in terms of startups. We do understand the importance of looking after the founders as well as the investors.

Sramana Mitra: Absolutely. The lack of exit issue has plagued India for a long time. The fact that these practices are settling in is a good thing. Otherwise, the market is going to get choked. 

Sarbvir Singh: Absolutely. We also believe in the concept of a right-sized fund. $30 million was our first money. We just wanted to get it out there and start investing. In India, you cannot just apply the US model.

In the US, $300 million is perhaps the right size for an early-stage fund. In India, a $300 million is too large for early stage. You have to return three to four times that money. Somewhere in the $70 million to $100 million range is a good size for India where you have to return $300 million or $400 million.

If you do the math, you can still get by by having outcomes which are $300 million rather than having to depend on this massive outcome of billions of dollars, which will be few and far between. We have to think about exits and the size of the fund.

We believe that this business model of trying to always have very large funds is not a business model that is sustainable. We would rather back ourselves. We would like to believe that we can generate returns and move in that direction rather than just increasing the size of the fund.

Sramana Mitra: If you play the real game of trying to return money in multiples of investors investment, then you can play that game in many stages of the venture capital ecosystem just like with your $30 million fund. You can play that game even with small funds.

There are different kinds of opportunities. If you haven’t read by Bootstrapping to Exit articles, there are very interesting companies getting sold for very interesting numbers. We have a company from our portfolio that, 10 days or so back, sold for $60 million. This is a bootstrapped company with just two guys. There’s no outside money.

You can also look at scenarios where there is a little bit of outside money. Maybe a million to $5 million. With a $60 million exit, you can still make a very good return.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Sarbvir Singh of WaterBridge Ventures
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