Is Malpani Ventures the right investor for your startup?
At Malpani Ventures, we exclusively focus on and invest in startups that we believe can create long term value for all its stakeholders. We look forward to discovering, engaging, and backing entrepreneurs who want to build sustainable businesses.
So what is an ideal startup for Malpani Ventures?
Large market
We love a large market. We want to back entrepreneurs who have a right to win in their area of focus. And we are firm believers in doing simple things consistently, at scale. The reason why we prefer large addressable markets is because we want the entrepreneur to be able to operate at 10x or even 100x the scale they were operating in before the capital infusion. Scale brings efficiencies, and economies in operation. Without having a sufficiently large market, it is difficult to attain scale. We do not have any particular number in mind as to how large the market should be in rupee terms, but we understand that over a period of time, looking at your success, there will be insurgents looking to imitate or disrupt, and incumbents looking to learn from your successes and failures even. And at that point in time, for your position to be dominant, the need for a large market becomes ever so important.
A sustainable competitive advantage
We are strong believers in having a sustainable competitive advantage, and a right to win in your area of focus. We want to back entrepreneurs who have established their business model on the back of a unique technology, or distribution, or components in their offering that can solidify their market proposition. We understand the capital constraints faced by young ventures and know that an offering without a strong value proposition is indefensible in the real world. Capital infusion is not the answer to creating a competitive advantage. We want entrepreneurs to win the market based on their offering first, and then use capital infusion as a medium to scale their business.
Traction
Traction by way of a lot of small customers, or a few large customers provides strong credibility to entrepreneurs. Having traction not only reduces the chance of a product-market misfit, but also reduces the friction for adoption for prospective customers. While we may have considered investing in the concept, or pre-revenue stage in the past, today we only invest in revenue-generating companies. While we do not know what is the right amount of traction until we dive a bit deeper into a specific opportunity, we believe a threshold of at least Rs 4 to 5 lacs of monthly revenues is a benchmark for us considering an incoming opportunity.
Funding frugal innovation
We want to fund frugal innovation in India. Frugal does not mean cheap, or miserly. Frugal means a mindset to achieve more in less, be super productive in the way you operate your business. Certainly, there are business models that require massive amounts of capital upfront to develop their product first (like defence, deeptech). We are cognizant of the fact that these are the kind of businesses for which we would not be the right kind of investors. Similarly, any business model that relies very heavily on spamming the customers with incessant ads on social media and spent a huge amount of money on customer acquisition will also not be models where we are the right investors for because we do not believe this is a sustainable manner of acquiring customers in the long run. We will be wise to pass such opportunities for investors who can be on the same page with entrepreneurs building their ventures.
Two co-founders
We prefer at least two co-founders that have prior startup, or domain experience, and who can complement each other with a diverse skill-set. Having seen the world of startups closely for a long time, combined with our own experience of running our own ventures, we understand that entrepreneurship can sometimes be a lonely affair. With every passing day, the number of responsibilities shouldered by entrepreneurs keep increasing. Entrepreneurs are responsible for their ventures, employees, customers, vendors, their own families, and finally the minority investors. During such times, having the right person in the marriage of running your enterprise, an ‘us against the world’ helps go a long way. Having more than one founder also helps during the time of raising capital, where one founder focuses on the business, and the other focuses on investor relations. If you believe you can do it all by yourself, imagine what you can do with two such people!
Angel investments
Finally, our sweet spot is the angel stage. We like to come in early and work closely with entrepreneurs who are building their ventures. Our ticket size is anywhere between Rs 50 lacs to 150 lacs depending on the age, maturity of business model, and our comfort level with the entrepreneurs. At the same time, we also provide the entrepreneur with an unwavering support in their quest to grow their venture, and at times also participate in bridge and follow on rounds to show solidarity. Because we like to come in early and bet on yet unproven business models untested at scale, we prefer to have sizeable skin in the game for it to make it worth our while. While we do not like to negotiate with entrepreneurs on the valuation of their ventures and want them to propose the valuation they are comfortable with, we prefer pre-money valuations between Rs 5 cr to 15 cr above which it has to be either an extremely superior business model or very strong credibility of the entrepreneur for us to consider our participation. And until it is time for the startups to learn from professional venture capitalists, we will be happy to handhold them in all walks of life.
We are always looking for exciting new startups to invest in, and bright entrepreneurs to learn from. If your startup fits our investment thesis as mentioned above, we would love to hear from you.