1Mby1M Virtual Accelerator Investor Forum: With Naganand Doraswamy, Managing Partner and Founder at Ideaspring Capital (Part 2)

Sramana Mitra: What is the check size that you like to write?

Naganand Doraswamy: When we started the first fund, we said anywhere around $500K to $750K. Then we would participate with another $500K in the following round. The target was about $1.25 million per company. The second is double the size.

We’re looking at $2.5 million total per company. The first check can be anywhere from $750,000 to $1.75 million. We realized that our companies needed a little bit more runway to show the traction necessary to raise the next round. $1.25 million is too small an amount to make some decisions in companies.

Sramana Mitra: Let’s double-click down on the first check and the stage at which you like to come in. You’re doing deep tech. Are you signing concept checks? Do you want to see some amount of work done?

Naganand Doraswamy: Our preference is to invest in a company that has, at least, a POC going. For the amount we give, if they have to start from scratch, it will not pan out. They will not be able to develop enough of the product or enough traction in the market to raise the next round. Our preference has always been to look at companies where the founders have spent six to nine months developing the product and having some conversations with prospects.

We don’t expect them to have revenue. One metric we definitely look at is when do they have to do the next round? For the next round, what is the traction they need to see? If you want to do $3 million next round, you need to have some revenue of $500,000 to $750,000. We want to make sure that we balance that with the amount of money we give them.

In fund one, we only invested in one company in the concept stage. We wrote a very small check for the founder to translate that into something that is tangible. We prefer to come in pre-revenue but where the product is working.

Sramana Mitra: Your assumption in the checks that you write leading to the Series A, let’s say, what is your assumption? Is the assumption that the customer is going to be in India or somewhere else?

Naganand Doraswamy: If you look at our portfolio, it’s a combination. It depends on the product they’re building. If it’s a SaaS where the annual revenue per customer is up to $15,000, then it’s easy to get customers both in India and the US. If you are crossing $25,000 to $30,000 a year, it’s hard to convert those customers in the US.

We initially got a lot of traction in India. Then potentially before you go to the funding, at least have some conversations going with prospects in the US. It’s still a hard market in India. It’s hard to build a scalable company just out of India, particularly for B2B. If you’re doing B2B2C, then there is enough market in India.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Naganand Doraswamy, Managing Partner and Founder at Ideaspring Capital
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