1Mby1M Virtual Accelerator Investor Forum: With Karthee Madasamy of Mobile Foundation Ventures (Part 3)

Sramana Mitra: One question that arises from this discussion that I would like to explore is, how do you view long sales cycle enterprise deals? It sounds like the kind of technology that you like the most are these deep technologies catering to large enterprise customers where there is typically a long sales cycle.

If you’re doing little deals, you can get into some amount of recurring revenue quickly. You can start showing MRR.

If you’re really talking about very large enterprise deals, that is not the case often. The product takes some time to build. You can get validation through pain point endorsement but it’s not yet quite checked. How do you deal with these situations?

Karthee Madasamy: There are technologies that are solving significant problems. That’s the first place we start with. What we are seeing is that there is a natural pull from the enterprise because they’re also trying to solve this. We look for those things.

We also look for teams that understand this and are able to maneuver this. For most of the investments that we have done, there’s already pull from enterprises because they’re trying to solve it as well. That reduces the cycle a little bit.

Many of them have three to nine months of sales cycle. The good thing is that it doesn’t have to be three to nine months every time. The main thing would be solving huge problems for enterprises where the value proposition doesn’t need to be solved very aggressively.

Sramana Mitra: What I’m hearing is, you’re quite open to these kinds of situations where you understand the complexity of the selling and you’re willing to work with the entrepreneurs. There are a set of investors who are using these MRR benchmarks, and they want to see a million dollars ARR before they write the checks.

Since you’re doing deep tech, deep tech takes investments to build a product and to get to any MRR whatsoever. It’s not so easy to show those numbers.

Karthee Madasamy: We have seen companies that go from a million dollar to $20 million once their product-market fit is there.

Sramana Mitra: Some of these deep tech problems are big deals. You could have a million dollar deal. At 30 customers, you’re at $30 million. Then you don’t need much financing. 

Karthee Madasamy: Right. There’s upfront investment. 

Sramana Mitra: This is a good segue into my last set of questions, which I want to explore with you. On the tension that we face in the industry between hyperfunding versus building more fundamentals-oriented and capital-efficient companies, where do you sit in this today?

Karthee Madasamy: There is never a one size fits all. For certain areas and companies, maybe the high capital makes sense. There are sectors and segments where capital can provide acceleration. In a lot of the areas, capital doesn’t provide acceleration because innovation can only take in so much capital.

I don’t want to call it a generalization, but outside of a very few areas, this concept of throwing capital to get at hypergrowth doesn’t work. There are still certain areas where this could still apply but many of these other areas, we do not think that that is the way this would work. Capital is an important part but it cannot be in lieu of anything.

Sramana Mitra: Great. Thank you for your time.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Karthee Madasamy of Mobile Foundation Ventures
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