From an Investor’s Lens – Empathy and Entrepreneurship

“I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” – Maya Angelou

Make no mistake – the world of venture is about making numbers work ….

  • Starting with a broad funnel to attract the best startups
  • Finding your Facebook or Flipkart early on
  • Having deep reserves to keep backing them
  • Which in turn possibly return X times your fund

The cornerstone pillars of angel investing and venture capital are indeed numbers – with power laws and other such key constructs! This is the science of early stage investing.

What about the art – the people, or human side?

In early stage, we like to think of sourcing not as ‘deal flow’, but people flow

As much as VC is about finding that secret formula to produce superior returns, it is as much as about –

People flow, entrepreneurs…. and empathy

Empathy (noun): the ability to understand and share the feelings of another


“I remember this meeting [with a particular VC]. It didn’t matter that they chose to not invest; what bothered us was how our team felt after the meeting – like we were being talked down to, with our sense of self-being and entrepreneurship questioned. Without a doubt, I won’t be approaching them for our next round”.  – a serial entrepreneur we know well (and respect)

Empathy – translated to our startup world

  • We are in the people flow business. Networks, relationships, reputations. As angel investors/VCs, we can yet reject the value proposition of the business idea being pursued and choose not to invest, without questioning the sense of being and entrepreneurial integrity of the founder
  • Being empathetic doesn’t necessarily mean agreeing with the founder’s thesis or views (applies to portfolio founders too – not just pipeline) – it essentially boils to seeking to understand the motivating factors, the what’s and why’s that are important to the founders

Case study in point

After a recent funding round, it emerged that one of the best skilled and available candidates for hiring a CxO level role was the founder’s spouse.

One response from us board members could have been [despite the candidates’ superior skills and eminent fit] a blanket policy statement – “this won’t work, as there is a conflict of interest”

We instead came up with an approach that the spouse be interviewed by one or two board members independently, in the absence of the founder, to better vet, assess and double-check the fit. The team [including the other founders] appreciated the maturity, transparency and objectivity of how this was handled.

The good news was the subsequent onboarding of the spouse, seen indeed as the best available candidate.

So, some quick takeaway thoughts [from an investors’ lens]

  • Our business is driven by a funneling construct – accepting a small pool of applicants for funding, while rejecting a vast majority of the rest
  • Putting ourselves in the founders’ shoes and thinking proactively / empathetically how we’d react and act when faced with the same situation [yes – we’re talking here –
    • founder fights / breakups
    • disgruntled employees stealing customer data
    • illegal competitor actions
    • grave health issues
    • untrue accusations
    • even prison time threats ]
  • For both segments [even those accepted, who become our portfolio founders], listening and operating with empathy, “listening to listen and not necessarily to agree”
  • You could call these hats a mix of FPG (Friend + Philosopher + Guide), chief sounding board, chief listener-at-large – rather, all of the above!

Ultimately, results are all that matter….. creating value = translated into exits remain the key defining metrics

Yet – as investors we can be both objective as well as empathetic – as we continue to back great founders and see them charge ahead, on their arduous but fantastic voyages !





Blume Day VII – in a word: Scale!


Feb 9th, Blume Day 2018, our 7th edition saw….

  • An attendance of over 300
  • More than 100 Blume founders (Blumiers, as we like to call them!)
  • Panel / speaker guests from Zomato, Bain, Youtube, Unilever, TFS/Ola, Uber, and more
  • Overseas visitors not only from the traditional Western hemisphere, but increasingly from nearer-shore regions like Japan, China, SE Asia, and UAE

Lets rewind for a moment – to 2011, our inaugural year ….

Blume Day Edition I – at Mumbai’s Breach Candy Club – saw all of 30-40 guests, half a dozen portfolio (actually fairly large even then, by Investment Year 1 standards!) ….

The past 7 years in Blume’s journey have flown by so quickly!

 What’s stayed the same 

  • First principles – all our events, and the sessions and keynotes around them, have always been designed around – our founders.  The intent of inviting guest speakers, domain experts, entrepreneurs and business leaders has always been two pronged – an opportunity to keep learning new new things, and expand connections

What’s changed – in two words: Scale and Maturity

  • Scale delivered on a different magnitude-of-network level – has risen from a dozen founders to over 100+ today!
  • Maturity of the ‘founder collective‘ – which has evolved significantly as a group, with individual emerging winners further breaking out.  Many have secured follow-on financing rounds from leading VCs including Sequoia, Accel, Tiger Global, Nexus, Kalaari, Lightspeed, and many more; and also corporates and strategics including notably, Google (into Dunzo), Unilever (into Milkbasket) and more.

Blume Day, like every prior year, is also a time for introspection and reflection, and hence, while thoughts are still fresh in mind, this blogpost is meant to share the most significant highlights.

  1. Momentum and scale of value creation and exits is increasing IMG_8425

It was timely to have Deepinder @ Zomato and Mohit @ Runnr share their parallel journeys of their paths converging, culminating in the latter’s acquisition by Zomato in 2017.  This further builds on earlier exits, from Little Eye Labs/Facebook (~$18M), Zipdial/Twitter (~40M), to TFS/Ola (~ $200M) – showing the evolution and growing maturity of the exits landscape.

Another interesting revelation – while we all continue to get excited about today’s e-com soon-to-be-unicorns, usually funded by giant Chinese strategics (or SoftBank) – we also re discovered a new breed of existing startups from our own portfolio, that have been profitable for 3 years running!  With positive EBITDA and decent growth rates, these are actually qualified for an IPO listing! (in turn, resulting in tangible and immediate wealth creation for the founders, VC, and Fund LPs) on SME exchanges, for example.  This represents a new avenue for liquidity creation, and is worth noting

2. Moving beyond the traditional base of investors 

Lunch with our Japanese investors 

Above the $100M level, the ecosystem has always seen active and growing interest from the West (Amazon and Naspers being two prime movers).

Recently, there has been a visible shift to the East – the Japanese (though at late stage growth stages, there’s still only Softbank), Chinese (adding to the BAT trio – now more recently, Xiaomi, Meituan, and even more early stage investors like Shunwei – the latter coming into two of our Blume cos) and a host of SE Asian VCs leading the charge.

Whats more interesting – this overseas interest continues even into the earlier stage.  Witness a broadening contingent of Japanese and Asian corporates, strategics and family offices – interested in both financial returns and also in helping entrepreneurs via portfolio synergies or taking them to their Japanese corporate clients

Most importantly, it is a positive and welcome trend to see these new breed of investors making investment decisions and moving quickly!  Google’s first ever India investment into our Dunzo is a prime instance.

3. The two Indias 

Beyond the SMB, the definitions of B2C and B2B have also undergone a shift –

a.) Consumer internet 3.0 – solving India-specific, nuanced problems

Horizontal e-commerce is more or less done, ergo – more a battle between the top 2 or 3 (Amazon vs Flipkart and Paytm)

Vertical e-comm is also similar, with category leaders in different verticals having already emerged (e.g. health care / pharma / medicine delivery; online furniture and so on)

What we’re seeing today is founders thinking carefully and creatively, creating solutions to solve very India nuanced/specific pain points.  From Blume’s portfolio, these include Railyatri (your single stop for all things related to online rail travel – full stack platform from bookings to ordering food to tracking minute to minute delays); Milkbasket (super-local grocery and related daily deliveries), etc.

b)  B2B : life beyond Saas!  

For the past decade, B2B was synonymous with SaaS, from CRM to Payroll to HR to Salesforce effectiveness and other such functional products/platforms.  When asked the question “is real product-driven tech innovation happening”?, one could point perhaps to the same base players existing since the 2000s e.g. Inmobi, Druva, and Capillary.

Fast forward to today – where IoT, robotics, life sciences/biotech, healthcare tech and other sectors are seeing deep tech platforms like AI/ML, AR/VR, data science etc applied to them and becoming a reality

Within Blume’s portfolio – Locus (AI/ML driven routing optimization for logistics), Tricog (again an AI driven ‘virtual cardiologist’ platform with an integrated hardware and software stack), Grey Orange (robotics for warehousing automation) are just three examples of deeper-tech IP driven enterprise startups for global markets.


4. Evolution of the SMB !

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Panel of Evolution of SMBs with NowFloats, Instamojo, GreytHR and Zopper

5)  Lessons from a founders’ personal journey 

The audience at Blume Day were keenly awaiting the keynote finale with Zomato’s Deepinder Goyal being “interviewed” by Bain & Co Chairman Sri Rajan (interestingly, where Deepinder began his career!)

What made the fireside exchange even more engaging –

  •  It brought to the fore, the full stack virtuous lifecycle of an entrepreneurial journey – showing the founder’s genesis as a consultant, eventually leaving after 2 years to start Foodlet (that then became Zomato) and here today, sharing the same stage as his former Bain Boss !
  •  Hearing what a large war chest of capital (a further $200M from Alibaba recently) changes – yet doesn’t change
  •  Finally and most importantly, hearing first-hand candid insights into the personal journey of a founder.  We all know founders/ceos have lonely lives, and the nature of their cycle is go thru ebbs and flows, dips and spikes, and the cultural aspects of acquisitions (“people, not balance sheets”)
  • Hearing this personal side of a founder’s journey was one of the more striking parts of the evening – and a special thanks to Deepider and Sri for making it !

Thanks again to all those who could make it to Blume Day!

Connecting Dots, Discovering Constellations: Sharing Stories, Part II

Part I 

The perfect night sky is a plethora of possibilities – shooting stars, manmade satellites streaming at a steady speed, a Tesla gliding in orbit (courtesy Musk), new constellations and old. And while we barely have time to pause and take in the beauty of that vastness and make sense of it all, our lives rush by in 24 hour cycles around our parent star. We seek North Stars in our startups, but in the spirit of our 7th anniversary, we look to a constellation of 7 guiding stars.

Our startup Saptarishis would spell as:








in no particular order, as is with the beauty of any constellation form, each star-gazer to their own construct.

These characteristics define a great startup’s core reasons for existence, much like the promise and birth of a star and its planets in a distant galaxy. What are the odds of life on such planets? The same odds as the dent that these great startups want to leave in the Universe (to paraphrase the Steve Jobs quote). Its tough! To possess and practice any of those qualities at scale.

Towards late 2017, we shared the Havells’ story with our founders. The book was a memoir, a son’s homage to his father, the patriarch and founder. As I wrote a personalized note to each team in the portfolio, the above 7 words were the most recurring themes. Almost all my notes had some of those words interspersed. They were the phantom thread that spoke of each team’s journey to date. They were also what made Havells a great showcase of Indian entrepreneurship. These 7 stars are what guide Blume’s pick of founders. These are what define Blumiers – a new Constellation in the making.

Shoe DogHavells

The unintended virtue of gifting all Blumiers a book is that the return gifts are trickling in. The Blume team now gets the founders’ favourite books for its own office library. The one I managed to breeze through over this weekend was Phil Knight’s Shoe Dog. An amazingly refreshing and brisk read, its worthy of a movie script. More importantly, the stars are similarly aligned. In the 2 decades of the Nike origins that the book captures, every one of these 7 stars shone through the moments of darkness.


Footnote: I asked Vijay why he gave me the Young Readers Edition of Shoe Dog :-). Was it to make me feel a bit better about rolling into the mid-40’s? He smiled and said it was because it would be a faster read. My daughter thinks it was meant for her and she’s devoured through half of the book in a couple of days, before I can share it with the Blume team. 


Connecting Dots, Discovering Constellations: Sharing Stories, Part I

The Blumiers arrived at Sariska on a chilly mid-December evening. A small bus-load of team members, half a dozen portfolio founders and a couple of colleagues from our extended family, Constellation Blu. We gathered around the bonfire for the feast – the feast was just not a warm drink and homely food, but a feast of dialogue, ideas, and, of course, music.



Like many a Blume Day (our 7th one comes up this week) and many an annual offsite, this year’s offsite too would be iterative, another orbit of the virtuous cycle until we reach Exit Velocity. We discussed everything from wildlife spotting to startup stories. The night descended into further darkness. The bonfire revealed nothing but the warm yellow glow on Blumier faces and the bedecked Rajasthani winter sky. Some of us fired up our Night Sky and Star Walk apps and the names of the Constellations unfolded in 180 degree arcs in every direction of the horizon.

It provided the spark for the Blume Day message. After all, the core skill of most venture capitalists is to connect dots. The joy is, however, in discovering Constellations.

You may have heard the sports phrase “in a zone” – a player or team hits a surreal form and all patterns congregate. Constellations emerge from a splattering of stars. These stars are connected to the naked eye, but millions of light years apart in reality. Constellations are cosmic connects, much like many unexplained facets of our life.

The Big Bear would keep looming above us through the night, rotated a few degrees further everytime we spotted it. The Big Bear is also known as Ursa Major or the Big Dipper and in India, by the ancient name “Saptarishi”. It is undoubtedly the most popular 7-star constellation that planet Earth knows.


Curiously, the Saptarishis (the Seven Sages) change with every Yuga (aeon) in post-Vedic texts. The names of the current Saptarishis are Kashyapa, Atri, Vasistha, Vishwamitra, Gautama Maharishi, Jamadagni and Bharadvaja. (these won’t change for a long time – Kalyug has about 426,000+ years to go)  

We decided on the Blume Day theme “Connecting Dots, Discovering Constellations” in early Jan and the graphic was finalized. It was going through minor font tweaks as we reached the Republic Day weekend. As the Blume team was nailing this down for printing, the logo design emerged, with the Big Bear in the middle of it, showing off its signature question mark form or wheel barrow shape.

That weekend, I accompanied my daughter to the Karate Nationals where she represented Maharashtra.

Venue? Patanjali campus, Phase 2, on the outskirts of Haridwar.

Opening ceremony chief guest: Baba Ramdev.


Closing Ceremony chief guest: Acharya Balakrishna.

State of being and the experience: Bouncing between surreal & calmness.

The 3-day experience deserves a blog of its own. But I mustn’t stray further.

I was walking past the hostels on the Patanjali campus (this phase housed students who studied at the Patanjali Ayurveda program) where we were put up. I remarked to my 9 year-old that the hostel names seem to be those of sages. #2 was Kashyap, #3 was Vishwamitra. We stayed in #4, Bharadwaj and so on. I wasn’t surprised – it was the Divyayoga campus. When I came back and looked up the names of the Saptarishis, the names were a perfect match – there were 7 residential buildings on the campus, named after the rishis.

As many hours passed that Sariska evening, the Big Dipper began easing into the other end of the horizon. We, on the other hand, were another year closer to bringing shape to our own Constellation: Blumiers. We sang late into the midnight sky, until the only sounds between our resort and the tiger reserve were our drummer’s fingers, the crackle of the bonfire and the music of this new constellation.

Part II

This year’s Blume Day theme is also a tribute to our own, incubated Constellation Blu that has now spawned its own little tribe, grown to 3x the size of Blume, and is gaining momentum, towards exit velocity, and towards more independence with every passing year. They complete five years in April 2018 – and are one of our prouder achievements.


(Re)discovering the valley – five insights from our recent visit

By Sanjay Nath and Rohan Paranjpey

This blog post comes after a recent visit to Silicon Valley earlier this month. Thanks to our association with the Draper Venture Network (DVN), we find ourselves, along with a handful of our founders, in the US now a few times every year.  This visit helped us discover some new learnings, while also re-enforcing earlier views.

Hope you’ll find these relevant and insightful!

With Tim Draper, founding partner of Draper Associates and DFJ at the DVN Summit


1)  India-tech is unique (moving beyond transplants from US/China models!)As a start, there is no comparison. The three are very different markets with their own set of opportunities and challenges unique to them.  For instance,

  • India’s Per Capita Income at $1,500-2,000 is still far less than China’s at $6,000
  • Translating this statistic macro economically, makes India 1/5th of China and 1/8th of the US
  • Just three of many relevant examples of such India-unique disruptive models from the Blume portfolio, here:
  • Dunzo, chat based concierge service for offline tasks
  • Railyatri, a one stop solution for train travelers – furnishing an expanse of data-based travel discovery from PNR status information and live train status/trip sharing and even fun ideas!
  • Stellapps, Internet of Things (IoT) & Big Data to improve agri-dairy supply chain including milk production, milk procurement, cold chain, animal insurance and farmer payments

2)   There are two sides to the India opportunity

Blu Matter pic.jpg
Blume, portfolio founders, supporters and ecosystem friends from Blume/DVN Day, Nov 2017

We’ve discovered a neat separation between “two sides” of India tech –

  1. Built in India, for India – this traditionally still covers a majority of startups addressing a vast array of consumer internet use cases – A few examples from our portfolio include Turtlemint (insurance), Cashify (refurbished electronic items), Pitstop (after market car servicing).
  2. Built in India tech, for global enterprise markets – this segment has been growing at a fast pace, leveraging India’s talent of engineers who have comfort with English, with customer-facing teams adept at selling B2B tech products and platforms. Some examples include GreyOrange (robots for warehousing automation), Botmetric (AI for the public cloud), Dataweave (competitive pricing intelligence and analytics for strategic/financial decision making), Squad (AI + gig economy driven liquid mobile workforce for business process outsourcing).



3)   Extrapolated to other frontier/fast developing economies, there are many similarities!


  • Some examples – India (Bangalore), LATAM (Mexico City) and SE Asia (Jakarta) all have poor last mile infrastructure, which is an opportunity; enter the likes of Locus (logistics last-mile routing & mapping)
  • In Mexico City for example, on average a 3 mile commute by bike takes 20 minutes, whereas a car ride across the same distance takes 50 minutes! Eventually, cross investment strategies could help aggregate capabilities, resulting in strategic partnerships, M&A and so on

4)   However, Global Go-to-Market does not equal simply selling the India playbook


Gabe Turner, Executive Director, Draper Venture Network

Often, sharper positioning/repositioning is needed

Typically, the first move from a founder-CEO targeting a global customer base is to hire that first “local” head of sales.  However, we see that simply taking the current playbook to market is not optimal.  What is needed is hiring someone who understands strategy and positioning equally well, tweaking the value proposition first before launching the GTM plan.  In other words, a chief strategy + business + sales/BD officer, all rolled into one!

Get out to the customer early

One of our learnings from Fund I – founders should go to where their customer is at the earliest possible. So, going to the valley only makes sense when that is indeed your target market and the startup is uniquely positioned to win.  If these criteria are met, then getting to early adopters can create network effects, accelerate customer wins and then drive virality/annuity.

In the US, think beyond the valley (not a one size fits all)                          

Broadly speaking, especially to Indian founders, Silicon Valley (the San Francisco Bay Area) offers the most comfort.  However, it may make sense to tailor your presence and be located closer to the customer especially if youre in a specialized domain:

  • Fintech, retail : ‘Silicon Alley’ (New York)
  • Hardware, AI/VR, manufacturing tech : ‘Silicon Beach’ (Southern California)
  • The intent is to be close to the ecosystem and to your early adopter user/enterprise customer base

Go big, go home OR find a great home!

Along the way, as you’re growing fast, be expected to be approached by larger companies that may offer different forms of partnering/outcome possibilities.  M&A is far more the norm than the exception (vs IPOs) and can occur at different points of your growth lifecycle

5)   The India story has been sold well, what we need to show is – performance


What we know – thanks to decades of successful ITES/BPO/KPO services stories — is that India already occupies an entrenched spot on the tech world map.

However, translated to the world of tech/venture, some elements of performance has been missing to some extent – the frequency, size and scale of value creation / exitsThe current wave of product innovation is now in full swing and only likely to further increase, thanks to home-grown growth stories like Inmobi, Freshdesk, Druva, Grey Orange [Robotics], Delhivery, and more.

We need to transition the lens thru which the world looks at India/tech – performance (size and scale of value creation/exits) is the ‘enabler’.

So, here’s to collectively taking on this challenge and responsibility, helping transition the India/tech paradigm – from “India is interesting” to “India is a can’t miss, exciting opportunity!” 


The Blume Fellowship: Leveling up

“…Bay Area, Beijing and Bangalore – that’s where the action is”, said Uber founder, Travis Kalanick, at a Startup India Summit held at New Delhi in January 2016. As exciting as that sounds for most of us in the ecosystem, it is also a pipe-dream for many when it comes to accessibility – a major chunk of the country is away from the action, with a pronounced dearth of exposure and mentorship.

Young potential entrepreneurs and students hungry to be a part of the startup world need entry into this high-octane environment. There is a large gap between some top-notch talent hidden in remote corners of the country and the kind of exposure it gets. More often than not, these students intern as cogs in the wheels of settled organisations where the internships can often be unvetted and there is seldom desire to invest time in these students.

At the other side of the spectrum – for the startups – building a strong brand is often an expensive and resource-intensive process. Nothing proliferates as rapidly and effectively as positive word-of-mouth – having these startups interact and invest time with these young students who then carry those experiences back to their campuses creates a significant ripple effect.

This gap can be bridged through a platform that seeks, screens and connects quality resources to high growth startups in need of that talent. The Blume Fellowship was conceptualized to help create branding for its portfolio companies amongst this young talent pool while attempting to bridge that gap.



In 2017, one of India’s leading tech-focused early stage VCs, Blume Ventures, explored an opportunity to create a mutually beneficial program for itself and its portfolio companies by partnering with Skillenza, an online platform, working to disrupt conventional hiring. They wanted to see whether offering internships for their large sized portfolio (70+) would elicit any response from students across the country. 3,200 resounding yeses confirmed their suspicion. There was, in fact, an overwhelming demand for a chance to land an esteemed internship within the startup ecosystem… And so the Blume Fellowship was born.

From January 2017 through March, an online challenge was held to attract applicants. Only the top 2% of the 3,000+ applicants were shortlisted to go on to the interview stage. After the 78 chosen candidates whose Java, C and C++ skills were tested, learned that they were through to the next round, they then had to pick their top 5 companies. In the same way, of the 70 portfolio companies, the 22 that had expressed interest in hosting an internship had to shortlist their preferred candidates to interview. The candidates and companies were then matched and interviews conducted accordingly.


So, what was the point of this one of a kind partnership, that had never before been attempted in India. Blume Ventures’ managing partner, Sanjay Nath, described the opportunity as a “full stack experience” that was designed to be highly hands-on for students and beneficial to startups. It would give students insight into investing, operations, and mentorship opportunities while allowing the startups to try their hand at a completely new way of hiring interns.

For startups it was a means to explore an effective way of hiring interns. They were able to reduce their effort by 50% and cost incurred by almost 33%, while maintaining the quality of students they picked as interns.

For students it was an avenue to gain industry-specific experience, learn relevant skills and work on projects and problems in the industry currently being solved. Some of our students’ feedback can be found below:

Happy Kumar, a 3rd year student from NIT (Rourkela), maintained how the fellowship was a “great platform to kickstart [your] career” with. — [Blume Fellow at WebEngage]

Nilesh Hirani from NIT (Agartala), said the fellowship “provides the perfect platform for someone to gain industrial exposure at the right place.” — [Blume Fellow at iService]

Shubham Agarwal, a 3rd year engineer from IIT (Dhanbad), said “I learned a lot, and implemented my knowledge in a live, ongoing project.” — [Blume Fellow at Skillenza]

This is “where the action is”!

The Blume Fellowship in 2017 was a first-of-its-kind, pioneering programme in the country and started as an interactive platform for startups and students. We’re now looking at v2.0 for 2018, building on our strengths and lessons from last year, and culminating that into a better crafted experience. With exposure to a wider ecosystem, a more intense screening process, we’re leveling up.


Journey of Startup FINANCE teams in India | Outsourcing Finance teams to CFOs | (Part II of III)


The post endeavors to explain, how a startup start to hire finance talent just around their Pre A / Series A / A+ and the successful journey of scale up of finance teams mimicked with the business growth, fund raise and monetization.  Last post (I of III) was about seed funded companies and this post tries to build on that to explore how with higher round of funding and monetization role and scope of finance team needs to change.

In the situation of even a Pre A round of funding going through and company now going for monetisation it only makes it imperative for the founder to look out for a financial controller.  There is a possibility that an in house accounting professional is taking care of finance and related matters.  If such person has scaled to be able to handle finance of a growing and would be complex organization, then he can be tested to take care of financial controllership.  Else someone will need to be appointed for the same.  In some cases, the organization may have outsourced the operations to third party.  In such a case, handover is critical.  If there is an existing person it only helps.  In such a scenario, when the new person joins it acts as a great buffer to have basic things in place rather than getting a handover from an outsourced provider.  Alok of Constellation adds, “At times investors might insist a Big 4 auditor – in house FC might be in a better position to handle this as compared to a plain vanilla accounting support firm.  In house resource would also add value even in vendor negotiations etc e.g. Insurance , compliances ( FEMA follow up for FCGPR for e.g.).

At this juncture, finance structure must be developed inhouse.  That’s a non-negotiable and it has its merits too.  The caliber of the person doing the work at the outsourcing firm is never going to be way too high than the in house person, more so because the hiring of an inhouse person is in the hands of the founder and if he wants his investors. I have happily assisted few of our companies with this and it was a revelation on how much founders trust their investors. The advantage with the in house person is that – half a chance there is a deeper sense of purpose because of a long term career affinity by being in the company and growing with a startup and scaling quickly than being an accounting person and gradually moves up the value chain when a Series A happens.  Whilst most outsourcing firms may be able to do a satisfactory job on compliances and accounting entries, it does require someone within the firm to track burn and expense management on a regular basis.  While it’s inescapable to burn money at early stages of journey of a startup it’s inexcusable to loose track of the burn and preempt a need to work on raising the next round.  More importantly sounding alert that metrics are plateauing or not in line with expectations and force a discussion to consider corrective action is an important function that cannot be outsourced.

While the good founders are equipped to handle all of these, the best founder may not necessarily know it but will empower someone else to drive these with a sense of ownership.  The accounting resources in house comes in handy to support such a person. And over a period of time the system can be seamlessly handed over to the Financial Controller as and when he joins.  Good FCs can actually set up the processes, put up financial controls in place, estimate cash flows, establish revenue recognition policy, put out guidelines and framework that allows the company to launch into scale at an opportune time.  That way founders are not forced to play a catch-up and reactive approach if and when the subsequent funding round happens.  A handful of our portfolio has also benefited from appointing veteran mentors from successful biz to help and guide on these areas. These mentors have been successful CFOs and / or founders.

One can always argue as to what’s the point of keeping all this in place if the funding round (Series A) is contingent on factors that are not always within control of founders.  And if the round doesn’t happen time and money into setting these up, reporting is kind of waste.  Well I only would like to quote a small story here.

The village was going through a drought year for the second consecutive year.  The village heads decided to collect money from village and district authorities to perform a ceremony to please the rain Gods.  A young boy walked in and people started laughing becoz he was carrying a handful of umbrellas.  The villagers asked – in this scorching heat you find it funny to carry so many umbrellas. The boy’s answer stunned the seniors – we are performing the ceremony and prayers for rains to arrive.  I thought we shouldn’t get wet on our way back when the rain Gods choose to oblige.  That was faith.  If founders are optimistic enough to startup, why would they not continue the sense of optimism that it can become a biz.  Yes, appointing an FC does mean a cost and at times founders have mentioned that its better to spend money on growing biz rather than make long term investments.  Well, this is not an unreasonable point of view just that neither is it a fair argument to not appoint FCs at all.

Moving ahead in the journey of the startup, post the second round of funding (be it Pre Series A or a Series A round) as the company embarks on greater scale and traction, it does become worthwhile now to definitely create the function within the company.  No company having raised greater than Rs. 6 – 10 Cr cumulatively should not hire a financial controller and set up the function inhouse is my humble opinion as well as learning from the last few years.  It should be earlier if the company has commenced monetisation of its product.  The scales should only tilt in favour of adding some more teeth to the Finance function by adding treasury function, day to day cash flow monitoring, product pricing, unit economics assessment, forming quarterly as well as annual budgets, variances analysis between budgets and actuals to top up all of the above areas that have been listed above.

The organisation structure for finance team upon commencement of Monetisation should be Financial Controller heading the Finance function.  The ideal focus areas for FCs at this stage of the life of the company should be:

Formation of Accounting policies 

 Formation of policy and its annual review is a common process for companies but when it comes to startups, at times the company goes through change in business model.  This may warrant a change to the agreed accounting policy.  Besides, if there is a significant change in the biz model and offering it may also mean that company may have to write off of its IP costs.  This could also have a tax impact too and the loss upto that stage may or may not be available to be set off against future biz.

Day to day accounting / tax related processes

 Apart from day to day accounting this part also includes taxes (both direct tax ie Income tax and indirect taxes ie GST) management, working out the tax liabilities, deducting taxes, payment to government treasury, filling of returns within timelines.  I have already detailed out in my earlier post

Girish Rowjee, Founder, Greytip adds, “As organizations starting hiring and putting in place the first set of people, it becomes important that they pay attention to a number of hygiene factors around their employee engagement and creating a conducive and high performance work environment for these employees.

Founders generally engage team members well around the work that has to be done. But in other areas like Payroll, Leave Management, providing basic employee services like maybe Payslips for a loan or Address Proof letter for a Credit card, proper attention is not paid. Many times this causes dissatisfaction among employees and impacts productivity and sentiment. Additionally, a primary responsibility of the Founder is also to ensure that all Statutory Compliance that are required are handled. Not handling this well will lead to penalties and legal consequences.

Today good tools are available to eliminate the need on the Founder’s time and energy. These tools can easily help organizations to manage their employee information, help them move many employee processes online so as to reduce any manual work and very importantly give an assurance and peace of mind all statutory calculations that are needed are done and the Payrolls are computed accurately. greytHR is a good example of such a tool and is also widely used among startups and businesses in India. Their very attractive and startup kind of pricing helps too.

In our experience, we have seen organizations gain significant benefits from putting in good processes around HR, Payroll and Compliances at an early stage of their journey. We have seen the Founders at these organizations spend much lower time on routine activities and their employees have far lower queries on Payslips, tax, etc. Compliances are no longer a headache. Additionally, as they go into their Due diligence for their next round of funding, they are able to easily clear these with far fewer queries when compared to others who use a manual or Excel based model to managing their employee processes.”

Financial / Book closure and audit

Significant bandwidth of the Finance team will be consumed at the end of the year in book closures and getting audit done.  Given investors are private and it’s well acknowledged that there will be losses anyways it’s natural for founders not to care about financials and audits.  To add to it, there is a thrust only on metrics earlier on in the life of the biz and not enough people really seem to care about annual financials and audited reports.  Even then, this is not a very smart thing to do.  These eventually come to haunt a DD in future or even a potential exit discussion.  Besides, things like loose financial processes would largely go uncorrected during the course of the audit if it is not done with some intensity.  Eventually, this would result into needless burn and poor use of company’s hard raised resources.  Partly due to madness of scale and because that is taken as a norm, the following should be avoided by every Series A founder team / FC of a Series A startup:

There are a high number of resources that the company would go after to chase growth. It is tough to get good people and that means, fairly over priced new hires on board somehow

  1. There is also a fair bit of wage inflation that hits the company as the salaries of existing team have to be hiked by way of an across the board hike
  2. Large part of the hiring process happens haphazardly and there is a fair bit of exceptions that become the norm

 Setting up of financial controls and policies

 How does sales payment flow?  What’s the correct method of accounting for inventory?  How do we keep a tab on payables?  Under whose signature do cheques get processed?  Policies for expenses, leaves, reimbursements, travel, onboarding of new joinees, exits of team members, acquisition of fixed assets, lease agreements, credit card payouts, etc.  These are things that need to be worked on and process frameworks be put into place to ensure that there are no re revenue leakages and expense management is in line with the intent of the founders.  Best of financial controls have the right balance between:

being tight enough not to be broken and in case violated – it does create flags as a part of the process


realistic enough to facilitate the achievement of the company’s midterm goals

Here, I have consciously avoided usage of the phrase long term only because, in the long term, financial controls would have to go through a complete overhaul anyways and savvy experienced professionals would be driving it or the existing team would have matured to fix the gaps.

 Cash management / Treasury

Firms typically get chunky amounts as investment rounds close and capital is wired by investors. These monies are meant to last till such time the company manages to raise next round of funding or till such time that it becomes Ebidta positive.  Preferably the later and not the former.  It’s the responsibility of the financial controller to work with the founders and ensure that the capital raised lasts the period it is meant to.  The immediate two to there quarters post a round of funding could mean exuberant hiring, spends on facilities and infrastructure and at times this happens beyond the quantum that was planned or still worse – beyond what is meant to be spent.  Best founders would expect from their financial controller to have a tab on this kind of behaviour and make sure that preventive mechanisms are built. Whilst it’s common practice to say – prevention is better than cure, this kind of areas are such that no matter what the cure is, and how quickly it was cured, time and capital are lost irretrievably.


Most businesses have a budget.  Startups must have a budget. Many a times a certain plan is pitched to the investor and combination of factors lead to significant deviations from the plan post funding.  Startups always evolve in their journey and there could be learnings that lead to these shifts or there is some larger opportunity set that is discovered by founders as they set out with some experiments.  Or there are some experiences that lead to the change.  All of this is fine and welcome.  In fact – it’s critical to adapt in the ever changing environment.  What ends up hurting though is when – we do it without a plan and a structured roadmap to change.  It doesn’t mean that one has to call a board meeting with a 21 days notice and revisit all cells in the excel of the prior plan, take minutely considered feedback from every person involved.  When it comes to budgets and planning – it is always meant to change and realities will be different from what was envisaged.  It therefore becomes equally important on how you do it and not only what you do.  There needs to be a brief documentation between the core team outlining the projections and a rationale on the numbers that are being projected.  The assumptions behind the base numbers and the growth rates assumed are critical aspects to be covered in the note.  One also needs to add – key factors that are going to drive these numbers and how would we react to changes in key factors.  For example: demonetisation hit plans of a very high number of consumer startups.  This could have meant higher burn.  One needs to budget for developments beyond ones control and have a contingency fund to be able to tide through such circumstances.  At times impact is semi-permanent.  Example – GST implementation.

Internal and external reporting / MIS

This is self-explanatory though what I would like to emphasize on is, both quantitative and qualitative aspects of the MIS needs to be brought out.

ERP integrated with accounting systems

A high number of startups have their own systems for backend and operations which is well integrated with the front end.  They however opt to keep accounting on tally by simply posting sub-total manually by pulling numbers from systems. This is fine to start with.  But as company raises A round, they should integrate the accounting systems.  FC and his team will have a role to play in that as well. Creation of GL account heads, sub accounts mapping of entries, balancing, etc will have to be tightly done.  As scales grow this becomes tough if not integrated earlier.

All of the above seems like a lot of work.  Well, having worked with quite a few of our companies in the portfolio over the last 5 years, I can tell you that a sound financial controller / founder combination will make this not so tough process to implement eventually.  I have also had Constellation team take on parts of this role and keep growing with the company’s needs and then keep passing on as there is full time bandwidth in the company.  The key is – do it in steps. 

In the next write up, i would take up the next phase of growth and a case for a hands on CFO joining hands with the founder and the rest of the team to focus on what is the central function of a CFO – growing shareholder wealth !