1Mby1M Virtual Accelerator Investor Forum: With Bhaskar Ghosh, Partner and CTO at 8VC (Part 5)

Sramana Mitra: I have a rather different point of view about the definition of good. One Million by One Million has a philosophy that is completely counter to this VC-obsessed philosophy of Silicon Valley. The world has today imported the Valley’s VC obsession. I don’t like it at all.

As far as I’m concerned, a bootstrapped founder who raises a small amount of capital and continues to build a revenue business is a good founder. They may not be fundable at the scale at which large Silicon Valley funds. I’m a huge fan of solid, sustainable businesses.

I’m a huge fan of capital-efficient entrepreneurship. I’m a huge fan of bootstrapping to exit. We have sold many companies where small amounts of capital was raised or completely bootstrapped companies. I would push back on your use of the word good.

Bhaskar Ghosh: The word may not be something we are debating. It’s the nature of product-market fit iteration that the company has gone through.

Sramana Mitra: Yes, the nature of scalability and fundability. You need to have a scalable and high velocity company for it to be fundable at a Series A and beyond.

Bhaskar Ghosh: It’s much more related to the domain we’re operating in. It depends on the bucket. If you are going into infrastructure at any level, finding product-market fit takes a much longer time. Seed funds and A funds need to recognize that.

Sramana Mitra: Those are deep-tech fat startups. That’s a very different track.

Bhaskar Ghosh: It is an important track for us. If you look at horizontal SaaS and vertical SaaS, we feel that scrappy, product-market-fit-minded founded teams tend to find these use cases early. I don’t think it requires a large amount of capital, whether it’s vertical or horizontal SaaS. It’s a matter of iterating fast enough and being customer and product-first.

Sramana Mitra: Domain knowledge is key in that. I was talking to an entrepreneur yesterday in oil and gas. They’re already at $5 million ARR. There are probably 20 companies that are really their immediate TAM. Each of these 20 companies are going to be doing $2 million a year with them. This number is going to go up just because of the nature of the business.

Then there are more companies that are midsized and that are going to give them more repeatable TAM. If you can get five to 10 companies that are willing to do $2 million worth of business, that’s capital. You don’t need investment capital. Customer capital is perfectly fine. You can only do that if you have deep domain knowledge.

Bhaskar Ghosh: The other part is the cost structure is extremely important in terms of what sort of balance engineering, product, sales, and marketing talent you need, and where they are located. If you’re building in Silicon Valley, the price points are higher. The other is something that I obliquely mentioned which is the cost structure of CAC. These factors matter a lot in capital efficiency.

Founders who tend to focus on that early tend to fall into the near bootstrapped category that you were pointing to. We feel that we have always been focused on that. What you’re pointing out is there are pathways to success without raising a lot of capital with domain knowledge where you can keep the cost structure much more optimal. Whether that exits to a large acquisition or to a Series C company, that’s a separate matter.

I tend to agree with you that domain knowledge and cost structures are extremely important things.

Sramana Mitra: Also, business model. If your business model allows you to do these very large deals where large customer are willing to write you big checks, that doesn’t happen to everybody.

Bhaskar Ghosh: Very true.

Sramana Mitra: Thank you for your time.

This segment is part 5 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Bhaskar Ghosh, Partner and CTO at 8VC
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