1Mby1M Virtual Accelerator Investor Forum: With Parthib Srivathsan of Companyon Ventures (Part 3)

Sramana Mitra: What trends do you see in general in terms of types of companies? Are there any highlights of what kinds of companies we’re seeing in 2020?

Parthib Srivathsan: We have a very specific focus. We built our deal flow relationships to deliver companies that fit those criteria. In terms of what we are seeing, it’s largely B2B tech.

Sramana Mitra: I’m trying to double-click down on B2B tech. It’s a pretty broad thing.

Parthib Srivathsan: It’s a dynamic of what we look for. Given that we are fairly industry and sector-agnostic, we see deals from AI to Blockchain. It’s a very broad base.

Sramana Mitra: Do you do cyber security?

Parthib Srivathsan: Yes. It’s more stage-specific. 

Sramana Mitra: Are you looking for unicorns? Where this question is coming from is that some of the smaller funds are trying to differentiate by looking at capital-efficient deals that would take early exits. How is your firm structured and how do you look at your investment thesis in that context?

Parthib Srivathsan: To a large degree, we’ve been seeing corrections in the way how early-stage investors are thinking about capital efficiency. It started with a series of disappointing tech IPOs. We’ve always been very pragmatic in our approach to investing.

In early-stage companies, capital efficiency is a core guiding principle. We do follow-on investments. We participate in secondary offerings. Very close to our thinking is capital efficiency. That is front and center for us all the time.

Sramana Mitra: So you’re not necessarily trying to play the unicorn game? You are open to early exits and smaller exits.

Parthib Srivathsan: Yes, we are. We’re generally investing in post-money valuations that are between $10 million and $20 million. Most of the companies that we’re seeing are already well past $1 million to $2 million ARR. We’re looking for successful exits. 

Sramana Mitra: What is your preferred exit stage? Are we talking $100 million exits? What is the point at which you are trying to look for exits?

Parthib Srivathsan: We’re not specifically looking for an exit. That’s something that the market dictates. Just as any other venture capital firm, we are looking at IRR and the multiple on our invested capital as key performance metrics. Anything that helps us deliver on those key metrics is what we look for.

I don’t think we can generalize and say it’s a dollar figure. It’s very contextual. Maybe it’s a much smaller exit in some cases, or a billion dollar range. It’s very specific to the type of investment that we made.

Sramana Mitra: Last question on this, some of the smaller funds are exiting into larger funds because there are quite a few very large funds right now who are willing to play that game. Is that something you are seeing?

Parthib Srivathsan: Given my limited view on the piece, I haven’t encountered too much of that. My partners might have seen some of this. 

Sramana Mitra: Is there anything else about your work that I should have asked you?

Parthib Srivathsan: One other aspect is, I keep about 20% of my platform deals time dedicated to companies outside of the portfolio. Sometimes this is a mentoring relationship to help really early stage companies. It could be a company that is not quite at our stage in the hope that we develop some kind of working relationship. 

Sramana Mitra: Thank you for your time.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Parthib Srivathsan of Companyon Ventures
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