1Mby1M Virtual Accelerator Investor Forum: With Suresh Shanmugham of Saama Capital (Part 4)

Sramana Mitra: Your primary business is in the small investment area. You have a $100 million fund and you’re doing Series A and pre-Series A. What is your current e-commerce strategy in terms of early-stage investments?

Suresh Shanmugham: From our standpoint, we are certainly open to looking at e-commerce opportunities. I don’t think there is much of an opportunity in horizontal plays. That game is over. There are opportunities in vertical categories that we will continue to look at. I don’t think we have a particular sector.

Our only remaining e-commerce investment is a company called BlueStone, which is in jewelry. We were a Series A investor there. That company continues to grow and develop. The market size for something like that is fairly huge.

Sramana Mitra: My thesis on e-commerce investment going forward is private-labeled brands. In any niche or category, you can come up with a branded e-commerce story that is an internet-first brand. Then later on a channel brand. That is going to be a more defensible business-building opportunity.

Suresh Shanmugham: Absolutely. BlueStone is in line with that thesis.

Sramana Mitra: Part of the issue we’ve had in the e-commerce category has been in trading and very little in actual branded product development.

Suresh Shanmugham: Agreed.

Sramana Mitra: A little bit more on the exit question on India. The Walmart acquisition of Flipkart was a very big event. It needed to happen. It had tremendous validation of the India story. What is your assessment of the exit scenario outside of the Flipkart deal?

Suresh Shanmugham: It’s happening. One of our portfolio companies from fund one just announced that it’s being acquired. It’s a strategic exit for $240 million in cash. We were Series A investors there. This is the fourth exit in our portfolio in 2018. You’re seeing it happen. Three out of those four exits are strategics.

Sramana Mitra: Let’s talk about those exits.

Suresh Shanmugham: The other one is a company called Mezi. Mezi is an AI company focused on travel. They were acquired by American Express. The other one is a company called Mobiliya. Mobiliya was bought by Quest Global which is a services company. We were also an investor in a company called Shubham. We sold our position in a secondary sale.

Sramana Mitra: In the two cases where you talked about strategic exits, what kind of capital infusion and what kind of exit prices are you seeing? You described the $240 million exit. How much money went into that deal? How much money went into the other deals? What kind of price point did they exit at?

Suresh Shanmugham: Scio raised under $30 million. It was very capital efficient. The company has been profitable for four plus years. On Mezi, they did a financing that we participated in the summer of 2016. We exited in February of 2018. It was a $9 million raise and they still have a good portion of that cash on the balance sheet.

Sramana Mitra: The exit price was?

Suresh Shanmugham: It was not disclosed.

Sramana Mitra: Can you give me a benchmark on whether it was under $50 million?

Suresh Shanmugham: Over a hundred.

Sramana Mitra: What was the other one?

Suresh Shanmugham: We had a company called Mobiliya. They got bought by a company called Quest Global. They had very limited outside capital that went in – under $4 million.

Sramana Mitra: The exit price was?

Suresh Shanmugham: $25 million plus.

Sramana Mitra: Excellent. Nutanix acquired a company recently. Minjar was doing $4 million in revenue and they didn’t have any financing. Qualis has acquired three or four companies.

Suresh Shanmugham: I think Minjar did have some financing. They had some angel money, but it was a small amount.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Suresh Shanmugham of Saama Capital
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