1Mby1M Virtual Accelerator Investor Forum: With Dr. Aniruddha Malpani, Founder of Malpani Ventures (Part 5)

Sramana Mitra: You said many times that the ecosystem is still immature. Can you underscore the points where you see the Indian ecosystem needing maturity?

Dr. Aniruddha Malpani: Sometimes, it’s the unrealistic expectation on the part of entrepreneurs partly because they don’t understand the grind that startups need to go through. A lot of the diet they’re fed on is the Silicon Valley success stories or the Indian success stories. They don’t understand the emotional angst they need to go through.

I’ll tell you another thing that worries me. The fact that there are investors who start thinking about startups as a great alternative asset class and it’s a quick way to make money. You have a lot of these angel investor networks, which is great. This is sticky capital because it’s Indian capital. The problem is you’re not going to get quick exits. No one wants to get rich slowly.

For some reason, everyone is positioning the startup system as a place where you can make lots of money. The reality is successes are the outliers. You need someone who’s patient. Since I’m a value investor in the public markets, I understand that these things take time. No one talks about the first few years because the press doesn’t care. By the time you’re successful, you have a big PR team. That bothers me a little bit.

Sramana Mitra: One case study that we teach in One Million by One Million is a company called Taboola. Taboola did no revenue for the first four years. In the fifth year, one million. In the sixth year, $100 million. The company went public.

It takes a lot of nerves to do something for a long period of time based on conviction. It takes a lot for investors to support that kind of a journey. People pull the plug very easily. People are very trigger-happy.

Dr. Aniruddha Malpani: The stories get so distorted. That’s what exponential growth is all about. For the first two years, you don’t even understand what’s happening. When it actually starts growing, it will do it very well.

Sramana Mitra: If you have to syndicate a round, let’s say we want to raise a $1 million or $2 million round, who are angel investors you’d like to work with who share your values?

Dr. Aniruddha Malpani: I should be clear upfront. My sweet spot is investing in Indian startups. As a result of which, I don’t understand too much about startups in other parts of the world. What we tell entrepreneurs is I’m happy to be the lead. As for the risk, we think that it’s the responsibility of the entrepreneur to decide whom he wants on his cap table.

We tell them our philosophy. Ideally, we look for people who understand the importance of social impact. I can’t tell you names off the top of my head because we’ve had different people. We think as long as the entrepreneur is able to stitch the deal together, we’re happy to sign the first check. We don’t want to burden him with investors who we think are great investors but the chemistry may not be right.

Sramana Mitra: I get the idea. We have very interesting companies that are solving India-facing problems. We have a very interesting India-facing FinTech company.

Dr. Aniruddha Malpani: As a doctor, I would never invest professional income in a startup because that’s hard-earned income. Because I’ve been an investor in the public market in India for so long now and the public market has been so kind, I now have more appetite for bigger checks.

I’m more comfortable because of all of the experiences. We take pride in saying no quickly. When we say yes, we try to take our time. We understand that the entrepreneur should see value in having a check from us.
Sramana Mitra: Sounds good. It was very nice to catch up with you. Thank you for your time.

This segment is part 5 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Dr. Aniruddha Malpani, Founder of Malpani Ventures
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