1Mby1M Virtual Accelerator Investor Forum: With Mohanjit Jolly, Partner at Iron Pillar (Part 4)

Sramana Mitra: One of my observations on Now Float is that selling to SMBs in India is hard.

Mohanjit Jolly: That’s right. The dichotomy in India is – Indians love to be pampered as customers.

Sramana Mitra: High-touch, low-value sales.

Mohanjit Jolly: Exactly. They want the high touch but the unit economics don’t work. That was a conundrum. The interesting thing is that we had a strategic term sheet on the table. It was one of the financial institutions in India.

The Board had a long deliberation around this. I give a lot of credit to my partner Anand who convinced the management and said, “Even if we take this capital, we would basically be kicking the can down the street. Rather than do that, let it find a new home where the team and employees can continue to build this platform with the right kind of depth and breadth.” Reliance was a natural home for the company.

Sramana Mitra: I completely agree with you that when the India-born global SaaS is on the deck, exits are the same exit options as any SaaS company. The exit options are standard. Talk to me about how the exit options in India have evolved for the rest of the venture-backed companies.

Mohanjit Jolly: I’ve been investing in India for the last 15 years. As you alluded to, I’ve seen India evolve. One of the biggest issues when we’d pitch India was that the LPs and other VCs would say, “We haven’t jumped into India yet because a lot of capital has gone in, but not much has been delivered.” That has changed.

Flipkart was the watershed moment. Then one can look at Freshworks as yet another watershed. One of the things I’ve been saying for a long time though is the following. This is a bit controversial. You have to look at India from a relative lens and not an absolute one. When people fall under the trap of absolute returns, then you’re convincing yourself why India is not an interesting geography to look at. It’s very hard for me to convince you from that point. You’ll just have to come to a different state of mind on your own.

If you look at India from a relative lens, India is orders of magnitude better from an exit scenario than it was a few years ago. One can argue that IPOs happen. Paytm was a bit of a tumultuous journey. Cycles happen and headwinds come. Sometimes you get caught. The good news is that there is now a pathway. There will be others. There are a bunch of folks who have reached critical mass. They’re doing phenomenally well in terms of top and bottom lines. There will be a rush when the public market comes back. There will be several Indian-origin companies in the mix.

Having said that, there has been also a bunch of M&As. M&As may not be 100% acquisition. Those have provided liquidity for employees, entrepreneurs, and VCs. Now you’re in an environment where there are billions of dollars returned. That cycle is starting to mature. Is it a well-oiled machine? Not yet. I’m very bullish on the prospects.

Sramana Mitra: There are two trends that I have observed. A lot of this is captured in my other conversations with your compatriots. One is that the Indian VCs who’ve done early-stage investments where the company has gone on to become a heavily-funded later-stage company, the early-stage investors have sometimes exited into those later rounds. This is a trend.

The second one is capital-efficient companies exiting into heavily-funded companies. That is also happening. There is a class of companies that are becoming unicorns heavily flushed with capital. Then there are others who have good metrics and good teams. They’re being acquired by those heavily-funded companies.

These are two newer trends than what we see in Silicon Valley. The trend of earlier stage VCs exiting into later stage VCs is not as big a trend in the US market. The one about capital-efficient companies being acquired by unicorns is a global trend at this point. Unicorns are having a hard time justifying their valuations. That’s where they’re looking for shortcuts to backfill the valuation.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Mohanjit Jolly, Partner at Iron Pillar
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