1Mby1M Virtual Accelerator Investor Forum: With Anirudh Damani, Managing Partner at Artha Venture Fund (Part 4)

Sramana Mitra: You have made 27 investments. Let’s talk about some of the Artha case studies.

Anirudh Damani: We could look at HobSpace. All 27 deals we have done were referred to us. We’re getting so much deal flow these days that it’s very difficult for my team to keep up even with the best ERPs and systems we are using. We’ve added a filter where for every investment we do, we only take a look at a deck if it’s referred by somebody on our network.

In India, we’ve got these class-led gyms called Cultfit. They were almost at a unicorn valuation and then got acquired by India’s largest conglomerate Tata. Now their CEO is heading the Tata digital platform across India. The founders were trying to build Cult but for kids. Parents would not have to ferry a child from one class to another.

They would go to a school and they’ll create all classes under one roof. A parent can test out different classes with their child and then decide to sign up for a longer duration. They had a number of schools that signed up and then the pandemic hit. The business went through a tremendous change. They had to quickly think about offline to online classes.

They tried doing the online marketplace model. I thought the idea was very interesting because I have a lot of friends who have children. I see how they ferry their children from place to place. In India, going 10 kilometers can take an hour. That was a pain point they solved. Also, parents want their children to be exposed to a number of activities. This is solving a huge market need.

Priya and her team were motivated. We led a $250,000 seed round. They decided to do an online marketplace once the pandemic hit. The customer acquisition cost kept skyrocketing. It got to a point where there was no possibility that the kind of CAC that HobSpace was paying was going to get covered by the LTV.

One of the things we do with our founders is speak to them and track their numbers on a weekly basis. One of the things they realized was they were never going to make money. They would burn through the entire $250,000 if they didn’t pivot into something that is more sustainable. Through this data, they realized that chess was a game where they had a very strong LTV/CAC ratio. It was 3 to 4x. They needed assurance that we and other investors would back them. We said, “You focus on chess and own that category. We’ll write a follow-on check.” That motivation helped them to pivot to chess.

Today, they are doing almost half a million dollars a month in revenue. They’re growing their platform by about 20% month on month simply because they have become the de facto platform for chess with 80% of revenues coming from the UK and the US. They were tracking the numbers minutely and they were really trying to understand how to create a sustainable business. We just did their Series A round about six months ago. They’re now valued at $25 million.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Anirudh Damani, Managing Partner at Artha Venture Fund
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