1Mby1M Virtual Accelerator Investor Forum: With Shruti Gandhi of Array Ventures (Part 2)

Sramana Mitra: You don’t need them to finish the product?

Shruti Gandhi: No. One of our companies barely had a deck.

Sramana Mitra: You want customer validation from their network. Then you want to take that concept and shop it around in your relevant network. If all that checks out, you’re okay with writing a check for the product to be built.

Shruti Gandhi: We believe that technical founders can build the product. Especially if they’ve been at a company and with our conversations with the founders, we can be sure that they can build something. But that is not enough to build a company.

Sramana Mitra: You said you’ve invested in about 42 companies across two funds. Could you talk about the fund size you’re operating with?

Shruti Gandhi: We don’t talk about fund size, but our check size is $500,000 to a million dollars. 

Sramana Mitra: Why don’t you talk about the fund size?

Shruti Gandhi: We have a network that is different. Usually we have a lot of SPVs in the deal in addition to our core fund size. Our fund size can vary depending on how you look at it. The core fund itself can write half a million to a million dollar check. Then we end up writing millions more after that depending on our ability to convince our LP’s to do more checks. 

Sramana Mitra: We tend to not get pushed back on the fund sizes because it’s a standard model. This SPV also comes up all the time. I’m a little bit surprised that you have reservations talking about fund size. The reason I’m asking is for the follow-on question.

As you know, the ecosystem for early-stage financing has changed quite a lot. In the early days of the internet, we used to do seed financing. We used to do Series A. There wasn’t a lot of other variations in between.

Now we have pre-seed, seed, post-seed, pre-Series A, series A, small Series A. There’s this whole spectrum of things. We are not only interested in companies that are going to become unicorns. There are a lot of companies that are going to be bootstrapped success stories. These are bootstrapped to exit.

There’s a class of investors who have come to the conclusion that they can make money in the bootstrapped to exit, capital-efficient startups as well. That’s a new trend. For a long time, all VCs wanted to chase unicorns.

In the past, we used to see VCs look for billion-dollar TAMs and fast-growth rates. Those are still the characteristics of the ones that are looking for unicorns.

But there is another class of VCs who are looking at the opportunity to make money with a shorter time span, quicker exit, and small amounts of capital. What is your philosophy? What is the fund thesis?

Shruti Gandhi: We do ask our founders how to get to that hundred million in revenue. When we’re helping our founders think about the next round of funding from the typical firms, it is not possible to get that kind of funding until your company gets to that packaged product that can get to a hundred million in revenue fast. That’s one way to look at it.

For us, we’ve had a few exits. We’ve had companies acquired by PayPal and ServiceNow. If that is the case for a small fund, 3x to 10x is a great number. 

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Shruti Gandhi of Array Ventures
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