1Mby1M Virtual Accelerator Investor Forum: With Hemant Mohapatra of Lightspeed Ventures (Part 3)

Hemant Mohapatra: We invested $60,000 in Oyo and then worked with the founder and built up a relationship. I saw them through multiple fundraising. They have raised more than a billion dollars now from the likes of SoftBank.

We have stayed together with the founder on not just capturing India’s opportunity but also expanding into China, Japan, UK, and now the US. It’s been a five-year journey.

Bejul Somaia, my partner, is on the board there. He and the founder are so close that whenever there is a birthday in a family, Bejul’s kids will write a card “This is from us, mom, and Ritesh.” They’re that close. We love that. We love this founder-and-board relationship. A lot of learning happens on both sides. Our trust is built that way.

Even though the cap table is fairly crowded with very large and powerful players, the founders seek our opinions over the years. It’s not for the lack of having the ultimate point of view, but because this relationship is still strong. We like that company building process.

Sramana Mitra: There are these very large funds like SoftBank that are flushing the market with capital. They’re doing it in India. They’re doing it in Silicon Valley. They’re doing it on a worldwide scale right now.

What does that do to the early investors like you? Relatively, $175 million is not a small fund by any stretch of the imagination but in contrast to a SoftBank fund, it’s a very small fund. They’re basically flushing the cap table.

What is your point of view about these kinds of scenarios? How do you play? Do you exit into SoftBank? Do you keep going? What’s the thinking?

Hemant Mohapatra: I’ve not been in a situation where one of my companies was taken over by SoftBank. So maybe you should ask this question in the future again. Not having been there facing the Softbank juggernaut, a lot of this is based on the founder.

Having a relationship with the founder and having trust, you can differentiate yourself from the cap table. The cap table is the cap table. You can’t really deny if you don’t have the capital to fund a billion dollar round.

You don’t have the capital, but it doesn’t necessarily have to mean that you lose power and say in the company. Those things are driven not just by capital. It’s driven by experience, by the relationship that you have with the founders, is driven by trust and value you’ve added from the very early days.

Those things don’t just go away that easily. That’s what we’re seeing in Oyo. That’s what we expect to see in other companies that we are funding.

Sramana Mitra: But if you have a lot of liquidation preferences that are preferences over your preferences, then that’s something that has to be handled by the smaller fund. I’m asking your context. It’s happening everywhere.

I’ve had lots of private conversations where people don’t want to go on the record that are facing this problem. All the micro-VCs are facing this problem.

Hemant Mohapatra: We don’t think of ourselves as a micro-VC. We have a billion plus fund that we can pull money out of if we want to retain ownership levels. We don’t really think from that lens at all. Liquidation preferences are what they are. It kicks in when there’s a liquidity event happening.

As any venture capitalist would tell you, it’s a risk and reward ratio. If you think the risks are too high for you to create liquidity for your LPs, you pull something out of the market. You pull the ratio from the cap table and turn your money back to LPs.

We continue to look at all investments that are scaled to a degree. The liquidity created by that scale is interesting to us, as a sign, when we look at those opportunities. It’s on a case to case basis.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Hemant Mohapatra of Lightspeed Ventures
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