Finding Exit Velocity: Flashback! [Part I]

For the last 3 years, at every mid-Dec Blume offsite, we have tried to understand the State of the Blume portfolio. And as a forward looking corollary, what should we expect for the portfolio in the year ahead given the larger VC trends in the country. The investing, the scaling, the pipeline selection and the portfolio management are all consistent discussion points, but what ends up as a theme on our Blume T-shirt on Blume Day in February is a manifestation of what’s top of our mind as a team.

In 2015, this was “Go Big or Go Home” – the year ended with 3 great exits (serendipitously, within a quarter – TFS, Zipdial, Promptec), 4 acquihires which returned 1-2x of capital, many write downs + “fractional price” acquihires. It also marked the first breakouts in the portfolio that were either companies reaching profitability / sustainability early or finding larger Series B and C rounds. It was a year well executed – the Blume team and the portfolio got the message and we rode some of the expected macro-momentum for that year.

In 2016, the focus was in figuring out Fund II’s portfolio construction. The legendary punchline from Hans Solo: “Never Tell Me the Odds” in Star Wars V (“The Empire Strikes Back”) guided our courage to pick outlier founders once again as we constructed the first 50-60% of the Fund II portfolio over late 2015 and all through 2016. It was also weaving the then new Star Wars “The Force Awakens” to show the power of 5 years of work – that Fund II portfolio would experience a much superior Blume platform and community offering.


In 2017, while witnessing some incredibly strong businesses coming out of Fund I, we yet realized that there are NO Series A/B/C formulas or templates to building a credibly large and profitable business. One has to fight the incredible odds of building in India with very little capital and all the constraints that crowd startups looking to head from Zero to grand Exits. “Exit Velocity” is an aspiration and a guide for our buildout of Fund I portfolio for the next 3-4 years (we’re 6 years in already! Feels like just the other day when we went in with our hopeful pitch and begging bowls to raise a 100cr Fund I – a miraculous 100% Indian LP fund). We knew it then but were guilty of wishing away this issue of Exit Velocity. Indian LPs were always incredulous about our pitch since they knew that if we are funding at seed over years 1 to 3, we can’t get to Exit Velocity in time for the 8-10 year exit period for the Fund. The historical evidence was on their side. It’s still our onus to prove them wrong. They are right in most part but if I have a few examples in the next couple of years that can help me return my principal at least + lots of marked up gains to harvest (that’s the target we’re playing for at Blume), we can make a huge point.

I think we can win the argument that we have started a revolutionary startup cycle of birth to exits for investors and founders in India, if we reach these milestones in more and more funds between now and 2020.

We convinced ourselves that there will be small M&A’s, large M&A’s, the emergence of more aggressive IPO buyers into growing but loss-making companies and we hoped that the relaxing of rules for smaller IPO’s on a small cap exchange will trigger another listing option. All these trends are, at best, half-hearted today and, at worst, non-existent.

So, the discovery has begun in earnest – to learn the paths to Exit Velocity, I think we will have to park most of the seemingly glorious stories of the last 7-8 years and flashback all the way to pre-2005.

Revenge of the Profit-Seekers

What’s common between these companies:


All public or on the verge of getting there.

All at 100’s of crores of net revenue.

Most fascinating fact – even if a couple of these firms were born/reinvented post 2001, the founders all turned entrepreneurs pre-2001. This was the era of the pre-2001 founder – who didn’t know he would be ever allowed to build an unprofitable company beyond a few years. No one told them it was possible – and the VCs hadn’t come in – and that was a good thing!

There are many others – this is not an exhaustive list – there are companies like Directi, and Photon and Zoho in Chennai which have never even raised a single $ of VC money though their journeys.

The scarcity back then (coupled with no funny money to back their competitors much more than them) helped them build robust profitable models even if they took a couple of extra years in the process. Eventually, this healthy business model helped them go public and continue to grow at a healthy 20-30% growth clip for years after going public as well. It’s wonderful. How and when this became so unsexy is beyond me.

And then over the last week, as I bring up this topic, everyone I speak to has a few names to add to this list. Citius, NetroPlus, Rategain, Fractal, lots of B2B plays that exited etc. Of course, we’ve built  incredible stories post 2005 similar to the ones above. They sit across many VC portfolios. However, the VCs’, the media and the new-age post 2013 founders have not at all played up these companies and their arduous journeys of profitability and value creation enough. They should be given the pedestal to speak from. In between, there was a joke that it was too unsexy to be profitable.

We’ve had companies like E2E and Printo in the Blume portfolio be profitable from even before we invested. They’ve grown 3-10x and stayed profitable every year in between and with ZERO outside capital and yet, there is no respect for what’s achieved – just the scale issue of whether they can get to $100’s of millions of valuation has become a holy deterrent. Now, in the last 12-18 months, we’re adding more and more to that list – Exotel, Mettl, Threadsol, Grey Orange, IDfy, Webengage, Nowfloats – some are investing in growth with their new rounds and some are boostrapping away to sustainability from their last round. I think every one of these can easily grow 5-10x from where they are today with very little growth capital over 3-4 years.

(every company in this above paragraph is already at 20cr-50cr actual annual revenues OR ARRs with the exception of GOR which is a breakout)

EVEN IF the 15-year old stories highlighted above are NOT fair comparisons to the slightly more “VC-led capital-dumped” startup frenzy of the last 3-5 years, there are some great lessons from those good ol’ founders and their startups. Talking to Hitesh @Naukri/Infoedge and Ashok@Teamlease at Blume Day (Feb 10, 2017), we picked up some valuable lessons which compound the learnings of the first 6 weeks of inputs we’ve had in 2017 – from bankers, small cap fund managers, strategics etc. All that and more coming soon in part II.

Note: The videos of the fireside panel with the both of them and the 1-on-1’s with Hitesh and Ashok will be published shortly and I won’t be able to do justice to all their wisdom (you’ll have to wait for the full recording for that) but will share my takeaways in Part II.


EXIT VELOCITY (Fluchtgeschwindigkeit!)


“What the Flucht is that?” asks my colleague!

“It’s German for ‘Escape Velocity’” I replied, “and Flucht is ‘Flight’” – more inspiration, or perhaps goal setting, for this year’s #BlumeDay.

Why German? There is a subliminal connection. The word ‘Blume’ is not just a phonetic play on the English word Bloom, but won the naming match for our fund in 2010, primarily, since it was the German word for ‘flower’. And with this new word discovery, I quite loved the velocity of Fluchtgeschwindigkeit!

It’s our 6th edition of Blume Day. Wow! We’ve been feeding off our own optimism for a long time. Time for a shift of gears now. Ditto for the rest of the VC ecosystem. If our founders and us (and I speak for all of India VC in some sense) don’t get our act together, we’re going to lose more precious time building the promise that is the Indian startup story. It’s inching along but inching isn’t quite the mandated acceleration towards the requisite Exit Velocity.

It’s the Year of the Rooster in China. It’s the Year of the Exit in India. Correction: It’s the beginning of the Exit Era in India. 6 years for Blume Fund I, 10 for most other Fund I’s in other Fund portfolios, even 12 years in some cases. Lets collectively figure out what engines need to revved to achieve EXIT VELOCITY. In this same timeframe (post 2005), Elon Musk has built rocketships that Escape Earth and land back too, at will. Long way to catch up. We’re just figuring out Escape Velocity from India-only revenues in most cases yet. Just saying.

No – I’m not talking paper markups, I’m not talking about the one Hail Mary (NFL jargon) exit in some portfolios. I’m talking about building a systemic and endemic path to EXIT. That doesn’t mean every company and/or its founders have to sell – it just means the company has to become good enough that someone wants to buy. There is a difference in wanting to Fund and wanting to Buy.

Exit Velocity (for the purposes of this post) is interchangeable with the concept of Escape Velocity. Without delving into the depths of physics, I tried to adapt the conventional formula for my own ability to rationalize why this isn’t working yet in India (see Inset – it’s just me trippin’, wired in with some Coke Studio music).




What the Flucht is wrong with the Indian startup ecosystem? How does one make sense of the vast amounts of $ deployed and nothing back in terms of massive profits in these companies or acquisition-led $ returns or listing-related capital gains back to the investors. What’s gone wrong?

We have not invested enough into understanding what it takes to hit Exit Velocity in India. I’ve been trying to sit down and understand this with Avendus and other bankers, strategics like Amazon and Ad giants, from the online and offline worlds, Small Cap managers in the Indian public markets and it’s only been 6 weeks into 2017. Lot more of this to be done all year, hell, actually all of the coming decade. Every VC in India needs to wake up and set up a dedicated force (even if of 1 person!) to ponder, scope, build new “accelerators to Exit Velocity” and obsess about this full-time. Instead, we keep building more wannabe YC-clone accelerators, seed funds, angel groups and shoving more and more down the funnel that’s clogged the drain to Series A and how!

I can write a multi-part series on the thoughts/angst in my head. However, let me just summarize as thus.

We are, and should be, a country proud of building many many $100-$250 million exits – both in the local and cross-border markets. In INDIA CONSUMER, this means profitable businesses and/or great gross margins in sub-sectors that are growing at 2-3x of GDP growth rates. In India-built B2B, this means highly profitable $20-50 mill revenue businesses. If the ingredients hold after these milestones, just keep building – trust me, no one is complaining post that point. Just get there (Yes – am hoping founders are listening – play for the goals that matter – not just some mumbo jumbo unicorn math)

Prospective and existing LP’s in India VC also collectively need to wake up and smell the hatti kaapi at B’lore airport once in a while rather than the Java Chip Frappucino at Starbucks (which I admit, is my favorite Sbux, as is the mini small print Rs 20 kaapi at the former – the budget kaapi is the real India, jfyi). I’ve been unashamedly telling all the LPs that I meet that we need to design Funds for India where we are proud of seeing 8 of 10 great portfolio co exits being in the $100-$250 mill range and the other 2 escaping to another Orbit and then hitting a $500 mill to $2 bill exit velocity. That latter goal alone screws with too many heads of too many Series A VCs in India – who apply the entry framework of an Unicorn exit too often to all 10 of 10 – hmmm, that’s not right at Series A stage.

I’m not letting founders off the hook here. Most don’t understand the construct of the VC industry as it exists in India and expect capital to be available at will and at any size of round and at terms that are dreamy. I wish it were that simple. The collective responsibility of the Exit lies with all stakeholders. Haven’t delivered any? Don’t have friends who have delivered any? Then, don’t try to teach rules of engagement to capital providers. Run your story without Venture Capital or play by the rules of the capital’s goals. (Can write more separately about what founders’ roles are in propagating this cycle – Write to me if you want me to elaborate via a new post re: my expectations from founders)

Back to VC’s – my suggested mantra for India VC is:

Raise small funds, get these “relatively smaller” exits, keep a deep reserve for the BIG hits and park this reserve outside the fund, deploy quick, put harvesters (Read EXIT VELOCITY generators and EXIT teams) in place, go back to planting seeds and saplings and flowering plants before another harvest and rinse/repeat with 2-3 year primary sowing cycles of deployment with smaller corpuses.

The local EXIT Velocity formula should drive Fund sizes – not the other way around – by salivating for Valley Exit Velocity formulas (see Inset again on how to benchmark).

The VC Fund Structures should budget and accommodate add-on capital at will (maybe through a perpetual capital entity or listed entity)– not force fat fund sizes upon managers at inception of the Fund, accompanied with the pressure of a “big 3-4x multiple” Gun-to-the-head on that fat fund.

VCs need to revisit their own operating models in India. Least innovation and the most cut/paste in India has happened in the mothership of capital guzzlers of the startup industry – the Venture Capital Funds!

Cut/paste works if the Exit Velocity frameworks converge – they are nowhere near convergence relative to China and the US (this is probably true of overfunded cut/paste startups too)

2017 will mark the beginning of the Exit era; where the needle gets pushed by both VC’s and Founders, with whatever means available, towards EXIT Velocity on the speedometer. May the best portfolios prosper! Jai Hind!



Author’s Note: I don’t claim any scientific veracity of my adaptation of the formula – its something that I came up with to humor myself and wasn’t why I started writing the main piece. The formula doesn’t matter that much actually. It’s just a ploy to illustrate the principle. That said, I will see if the formula holds the test of time and valuation math.

Start ups liquidity management post funding – Fixed Deposit (FD versus LF)

Largely due to demonetisation, banks are flushed with liquidity. Natural outcome of this – falling interest rates. This means that fixed deposit rates that banks offer shall be lowered. 

Implications for start ups 
Startups typically raise chunky amounts during their fund raise and plan is to deploy that over a period of 12-24 months. This means that, there could be considerable time between capital being raised and money being deployed. This idle money should be placed in liquid funds or Fixed deposits so that it earns interest.  And these can be meaningful returns. For a seed plus round of US$ 1 Mn that a young startup may have raised, the interest income over a one year period can be as high as ₹20-40 lakhs. This could well be a month of burn. 

Before I proceed, let me explain the above modes of parking of capital:

1. Fixed deposits (FD) – these are to be placed with larger banks only because smaller banks do have their issues and theoretically riskier than larger banks like SBI, ICICI, HDFC and the likes. 

2. Liquid funds (LF) – these are funds that primarily invest in money market instruments with low maturity period. Its a type of mutual fund that is aimed at bridging the liquidity gap between needs of large corporations and even government for their short term needs.

FD has a lower risk return profile vis a vis LF. It means – FDs are less riskier and have lower returns relative to LF. It’s about relative risk between the two. In absolute sense, FDs also have risk in case the bank that one has opted for, collapses. But credit to RBI and india’s banking system, such instances have been very rare. Nevertheless I would always opt for larger banks and not fall for smaller banks who offer slightly higher rates of interest. 

Between both the above options, I have always recommended that startups should consider investing their surplus liquidity with FDs and less with LF. 

Selling point of an LF is that it could deliver greater returns that range from 1-3% by and large and that they could end up being tax free. Also, if there is a sudden need for money, breaking of the FD attracts pre payment penalty which isn’t the case with LFs. 

For start ups – their interest income from FDs will be tax neutral because they can offset it with losses of their burn anyways. So technically interest on FD becomes tax free and you can claim refund of the TDS. And if you file a lower deduction certificate with Income tax department, you could even get the benefit of a near zero tax deduction on the FD.  Varun and his team from Constellation (@urConstellation) have helped a few of our portfolio companies obtain this certificate and can assist in this process. In fact, we have been taking this certificate for Blume each year. This is the right time to start thinking about this certificate for lower deduction of tax for Financial Year 2017-18

Coming back to FD versus LF argument…

There is a school of thought that LFs aren’t too risky. Fair point.  LFs are a money market instrument and have market risk and on paper it’s possible in some stray scenario that their value falls due to some money market developments and we loose money as we try to redeem the funds around the same time. This doesn’t happen most of the time but given the above tax neutrality of FD, why take additional risk is the only point in question.  Besides, for urgent needs of capital, bank FDs can be structured in such a way that one doesn’t loose much of penal charges. Again team at Constellation has been doing this for quite a few of our portfolio companies. Mitul’s team should be able to help in case needed. 
And finally, if you would like to invest into LFs only, make sure you do it with advise of expert who understands the risks and can help with a decision of choosing the fund accordingly.  Do reach out to Shriya at Constellation and she may be able to assist for this. 

Spending 10 minutes on liquidity management by one of the founders personally on a daily basis will go a long way in giving a startup the financial stability that could be well be a difference between a good start up and a great startup. 
Liquidity management is much more than just the decision of FD versus LF. It includes managing burn, receivables, payables, taxes, salaries etc. Will try and extend this in the next write up. 

Prepathon: the (now, seemingly) inevitable evolutionary outcome of Pagalguy

prepathon-logoChapter 7, The Portfolio Chronicles

Sometimes organisms grow slowly year after year and wait patiently for a dramatic change in environmental conditions to morph into a more powerful and stronger creature. One doesn’t expect this phenomenon to occur at a startup but we’d decided against conventional wisdom to back such organisms in the past and while the verdicts are always delivered after a long gestation period in our business, we are clearly not shying away from such risk.

pagalguy-logoWhen I was told in late 2015 that I should meet Allwin Agnel of Pagalguy, the reaction was knee-jerk: “Hasn’t he been around for a long time? And we’ve been rather disappointed with the ideas around transforming education in this country. Is this really for us?”

And though I had indeed met him about 8-9 years (between his semesters at Wharton) and though he went to same b-school that I did and though every Indian b-school aspirant post-2005 seems to know of Pagalguy, what could he possibly want from Blume? He’s clearly found himself a niche educational media company that’s profitable and independent of venture funding. So, what gives?

Its rare for a small early stage fund like ours to advance an investment decision into a company that’s over a decade old. When we spoke first,  I had no idea that there was something afoot – Allwin and Sandeep  had found that there was a mobile first approach to solving more problems for college and professional courses / entrance exam aspirants.

We had the debates that every founder and investor have – is the idea mature enough that someone will back it with a few million $? Will a small Blume cheque even matter for this goal? And then eventually, I think I convinced Allwin that we are the partner to guide him there with a small cheque and a large dose of enthusiasm. We knew that the market is ripe for a take-off.

We’ve been invested in Prepathon since middle of 2016. A gradual build-out of an assembly of bots that simplify communication and clusters of partners for each of the key prep test areas from the offline world now position Prepathon for what can be a staggering 2017!

A marketplace for connecting students with top experts and courses in the country, aided by various guidance mechanisms built by Prepathon. 

In the interim, I must admit that we didn’t anticipate Byju’s success in fundraising and selling its proprietary content through its own distribution channels. However, it only showed that what Byju’s exploited was the inability of the traditional offline coaching and tutorials businesses to morph into a winning product offering for students and learners in the online world.

This intuition of Allwin’s – to convince the offline partner that he can never create a better platform than Prepathon for their own content – is the winning strategy. Prepathon will, both, a) deliver their high quality offline content online now and b) evolve the process of learning, that is being constantly made more and more intuitive and powered by their “let the bot guide thy learning process” approach.

Prepathon’s focus is the Student, as was always, since the inception of Pagalguy. By taking the best brands in the country and making their courses available to students, the best teachers are being made available. And Prepathon has become the only way to directly access star teachers at these brands. We’ve already onboarded Bansal Classes, Khan Study Group, GATE Forum and several others.

Bots are not the product but they keep evolving to assist the student through the learning process and is important to keep engagement high without human-assisted intervention.

2017 will mark the first full year of the Prepathon’s marketplace, one that will shape and guide the future of millions of competitive exam aspirants.

While I’ve not blogged about the other related portfolio additions as yet, we quietly built out a thesis of education and edu-towards-employment through late 2015 to mid 2016. They’ve all been announced – Unacademy, Mockbank (, and Flipclass, in addition to Prepathon. We are very bullish that rich content marketplaces aided by mobile-first learning tools finally deliver the promise of widespread quality education to millions more in India. Ergo, this portfolio. We’re very happy with it and are unlikely to add much to it though in 2017, other than follow-on cheques.

Investment announced: 2016 (Blume Fund II)



Servify: one destination!…for any gadget, anywhere in lifecycle

Chapter 6, The Portfolio Chronicles


Once in a while, you come across this second-time entrepreneur, even more wired than his first stint as a founder, even though she or he has a very good (sometimes, great) story already chronicled. When you chat with Sreevathsa (Prabhakar) and see him operate, flying from city to city to convince brands and service partners to be onboarded onto his new baby, Servify, its remarkable to witness the energy levels.

Sreevathsa’s first venture, The Service Solutions (TSS) was acquired by B2X, one of the companies under the German supply chain solutions conglomerate called the Barkawi Group. Sree had painstakingly convinced brands like Apple (no less) to hand over their entire backend for authorized service (software, outlets, parts, warranties etc) to the service store chain he set up for them in India. It’s a commendable bootstrapped story and since it’s a private company that’s now in B2X’s hands, I can’t reveal much. Let’s just say that B2X is very happy (revenues are now at 6x from when I first ran into Sreevathsa 4 years ago in a different context) and are, grudgingly yet willfully, happy to see him leave a new leadership team behind at B2X India and launch himself into the most challenging of problems – fixing customer service across all electronics and white goods brands in your home or office.

Clearly, from the TSS experience, Sreevathsa is the rare founder who knows how to build frugally and bootstrapped, all the way to a sizeable exit. And while this is a tougher consumer play and requires much more upfront capital to scale rapidly, he didn’t need to work with Blume from the earliest days, given his personal resources from the exit. But he chose to; and for that, we’re both glad to have partnered. We’ve always said that Blume is not about the money and we love working with founders who get that the most about Blume! Its about having a partner for a lifetime. This rare ability to know that greatness comes from partnerships is why everyone loves Sree. And he’s begun to add them in all directions – most importantly, building a versatile and seasoned leadership team: Pravin, Chandresh, Anupam, Mahesh, and Sriram; adding to the team he had when our cheque went in – Vivek, Swapnil and Naveen). Servify has already onboarded 20+ brands to work with the company. And most recently, we added Teru-san and Beenext to this party! They’re great co-investors and great allies to have, as Servify will explore South East Asian pastures sometime soon.

Sreevathsa has always believed that Customer Service and After Sales Support are seen by the brands as a pain to deal with. These are never perceived as cool jobs or departments inside companies and in a resource-starved country, top talent is NOT likely to be opting for these functions as a first priority. Its not surprising that nothing has seemingly changed even after a few decades of large foreign brands entering the country. Whether its your water purifier or an air conditioner or a TV or a mobile or a laptop, whether the frequency is once a quarter or once a year, installation or service or repair, the average experience always seems to end with an emotion = “what a nightmare!” One prays that they don’t ever have to call that brand’s service center again till they’re ready to replace the gadget / appliance.


That’s where Servify comes in!

Stripping out the nuisance of dealing with over a dozen brands, that are likely present today in every household, is going to be the promise to deliver on, for Servify. Would you guessed that the average middle class household they surveyed had between 15 and 35 different gadgets /devices/ appliances per home?! (basically, anything that needs electricity and is not a light bulb or a fan) It’s staggering when one puts the size of the problem out there as a sum total, even if we just added the numbers amongst the top 50 Indian cities. (Clue for scale prospects: And the ambition doesn’t stop with India)

And contrary to popular opinion, only about a small % of the entire market is serviced either a) outside of its warranty / extended warranty period and b) by a non-authorized repair shop. So, while every “aggregator” out there is struggling to bring sanity to this “unorganized / non-authorized” market opportunity (which is just like adding a layer of unreliability to the existing nightmare), Sreevathsa and team @Servify know the ins and outs of what they’ve done for over half a decade – delivering authorized service and the best possible service / parts / installation that you can get. In this organizing of the service network and delivering standardized pricing and predictable service levels lies the holy grail of this problem.

Servify will change the way you map your household and not deal with the randomness of gadget and appliance servicing. Next time the TV or refrigerator or your laptop or phone breaks down, don’t fret or sweat yet; see if the brand is covered by Servify. In a year, if not earlier, they should’ve mapped out close to the top 75-80% of all brands in every category!


I’m already a happy customer, with a TV repair done and a full home A/C service package scheduled for later this week. I can see every one of my gadgets getting onboarded over the next 12-24 months, as and when they are needed to be serviced, replaced or installed anew. (you can download Servify on the app store / play store and enjoy the same luxury)

Our bets on the founding teams of Dunzo and Servify are testament to our thesis on a remarkable pattern of seeking new ways to solve for the new Customer Service / Customer Delight paradigm in India. Wherever these journeys leads the founders and us, we know we’re going to be delighted by the journeys that will unfold. (We’re on the verge of announcing a third company in this space that will further augment the value chain in Customer Service in mobiles, complementing our Servify and Cashify investments)

Investment announced: 2016 (Blume Fund II) + Follow-on Investment announced: 2016 (along with Beenext and existing Round I investors)

A year’s Musings, Learnings, and a Call to Arms for 2017

Wow, and another year has flown by !

We’re all hopefully a bit wiser and grayer after the ebbs and flows of 2016, and further hardened after witnessing the year’s notable events globally and at home.  So, some musings and personal learnings as we close out 2016 [The Year of The Monkey], and enter an interestingly-named 2017, The year of the [Red Fire] Rooster.

First, a picture of perhaps what most first-time entrepreneurs sometimes think their journey will be like…


Versus – what the entrepreneurial journey turns out to be!  


Pictures are indeed a thousand words (or cardboard boxes, or tons of G-force twists and turns!)


Brexit, Trump, Demonetization – and Startups? 

These three stood out amongst developments with significant impact

  • Incumbents will always have challengers (the status quo is always temporary!).  In the Brexit case, despite the general malaise that had crept into the Anglo-Euro bureaucracy and fabric, the British referendum holders would never have guessed the time for the status quo was up.  Moving west to the US – regardless of one’s allegiances, it is fair to say Secretary Clinton could be seen perhaps as bordering on overconfidence – especially given her proximity to the White House establishment.  Most surprising was Trump’s sudden and unexpected victory blindsided the entire world; most of all, even himself!

Why should startups care?  In a sense even the most innovative of tech startups – Facebook, Apple and Google are no longer startups per se, but have become today’s incumbents!  They have to constantly look in the rear view mirror and avoid falling into the same trap.  The words “startup” and “constant reinvention & innovation” are tightly coupled and co exist.

(Chief Digital Officer @Salesforce, @ValaAfshar has some very relevant references showing companies started in the 90s/2000s that no longer exist, and vice versa – some of the fastest growing giants today were born in only the past 10 years!)

Demonetization – our own PM Modi’s surprise announcement trumped even the US President-Elect’s surprise win in some global circles.  Of course, the devil lies in the details (and jury is mixed whether the execution so far has been stellar).  But clearly, demonetization overall throws up a plethora of opportunities, ripe for disrupting the world of fintech!  One advantage is its ability to build on the excellent foundation already laid out by the UPI, Adhaar, and other similar pillars of the Government’s ambitious financial inclusion plan.

Similarly, the advent of NSDC (National Skills & Development Corporation) for Recruiting / HR-Tech companies, and #MakeinIndia for manufacturing (covering robotics, shop floor efficiency solutions, embedded hardware etc) are similar developments positively impacting and enabling disruption.

Moving to the micro – personal learnings 

Investing, especially venture, is about backing disruptive startups who are ahead of the game and hence don’t play into any “macro” themes and trends.  As one peer has put it, the venture business is unlike the fashion business where hemlines change from season to season.  While AI, VR, Machine learning may be the next new thing, overarching, long- term first principles that guide investing, scaling, growth, and value realization are what matter.

  • Are we getting better at picking entrepreneurs?

If you had to really ask, here’s a gut answer! 


We think some of the better entrepreneurs (and this applies equally to us, as entrepreneur-VCs, navigating the shifting dynamics of early stage investing in India) : 

  • spot large-marketsize spaces but also adjust/pivot around shifting dynamics
  • never lose their love for product innovation (at Blume, we don’t generally back pure business founders, as we believe tech can’t be “outsourced”)
  • when they are about to hit a wall, quickly decide whether the biz is better scaled up OR scaled down, or find a home where the entrepreneur can paint on a larger canvas
  • are able and willing to hire A+ players to build kick ass teams around them. @Freshdesk (which is not a Blume portfolio company, incidentally) is an example I like, where Girish, founder and ceo has been able to recruit top flight talent from companies like LinkedIn amongst others. In addition, two of Blume’s companies have also been aqui-hired and are seemingly very well integrated. Our own @Nowfloats, while in early days, is also a similar example
  • know what their core metric is and have systems in place to measure how close/far the deviance is at almost any point

On SaaS (caveat – as the B2C consumer story has been chronicled fairly extensively)

  • Sales cycles are incredibly long.  Biggest reasons for failure is the “tired CEO”
  • Its quite common for the first 10-15 key enterprise accounts are usually founder/CEO led. However, the failure to scale thereon usually stems from an inability OR unwillingness to hire an experienced sales head – who in addition to closing key accounts manages the salesforce and sales processes, incentives, and targets
  • Needs a strong ‘internal champion’ buyer, often multiple internal champions, where independent threads can help re enforce the final sale
  • The ‘no man’s land’ is being stuck is the $1-3M ARR, despite attractive growth rates.  We’ve seen its not difficult for a good team with a differentiated product/platform to get to $1M ARR. However, crossing the chasm beyond $4M is the real kicker (largely due to the “long tail” / fragmented dynamic of the SaaS providers market)
  • Given SaaS companies are not as capital-intensive as their B2C counterparts, and enterprise customers have much higher switching costs than the typical “free or fremium” B2C user, B2B companies find it easier to raise from larger investors as early as Series A/A+ rounds (relative to consumer, which attracts large infusions at Series B or C)

There are two, actually three, “Indias”

1) “The China model” i.e. the B2C India consumer story.  However, here, the horizontals and verticals game has been played out already. The next big things are the enablers (or the ‘picks and shovels’) fueling the consumer story e.g. payments, logistics

2) the SMB model” i.e. products, platforms and services focused on the Small & Medium Business segment. This also includes the important hybrid Offline @ Online (O2O) sub segment

3) the “Israel model” i.e. Made-in-India enterprise tech-for-global markets. SaaS (eg Freshdesk), automation (eg Grey Orange), clothing & apparel DIY platforms (our very own Source Easy and Threadsol) are the “other India” segment

In the end, the scoresheet matters

“Winning is a habit. Unfortunately, so is losing” – famed Notre Dame college football coach, Vince Lombardi 

So while we have a long way to go, a recap of some of the year’s notable highlights :

  • closed our first fully institutionally raised fund, Blume Fund II
  • one of the first VCs to be a recipient from the Government-sponsored AIF (via SIDBI)
  • consistently ranked in the top five most-active VCs
  • Karthik & Blume featured in the ‘top 40 who matter in the ecosystem’ @Livemint
  • A number of our stellar portfolio companies including Grey Orange, Instamojo, Locus, Healthifyme, Nowfloats and others emerging as category leader contenders
  • Our portfolio companies today span >100, across Fund I, top-up pools and Fund II, making our scale, diversity and network-effects a key differentiator
  • Blume was one of the first (and few) VCs to back core-tech, non traditional enterprise startups, away from the popular B2C plays.  Automated warehousing (Grey Orange), apparel and fashion DIY and supply chain platforms (Threadsol, Source easy), carbon capture (CCS) are just three examples showing that India a) is more than just business model/process innovation and b) deep-tech innovation “made in India” does exist
  • made significant steps in building out a full-stack platform (with preferred partners to help our portfolio on Hiring & Talent management, Business Development, Investor Relations, Marketing and others)

There’s still a long way to go….. 

Looking to 2017 – All hands on deck

While we enter 2017 with firm and rooted conviction in India’s fundamentals, explosion of mobile penetration, young workforce, and attractive growth rates – one of the painful reactions from LPs when asked about investing into India goes something like this

“We think India is very interesting but we’re still studying it. We’re almost there – but not there as yet.  Can you share some data of the number of exits and their associated sizes?”

Its heartening here to see here, that both the frequency and size of exits have been increasing year on year. However, its very clear the game changer for India-tech will be a full cycle of value creation and realization playing out.

So, here’s a call to arms to us as an investor community broadly – to collectively roll up our sleeves and ensure India-tech delivers, showing the world India delivers and makes money – so we can continue backing India’s most innovative, brightest and best.

Finally, as we transition into the New Year, its worthwhile asking ourselves @ValaAfshar:

  • What will I leave behind? 
  • What (and who) will I bring with me? 
  • What can I create thats new (and who will help me)?  
  • Which global standards do I benchmark against and aspire to?

The next few days are a wonderful, opportune time for each of us as stakeholders in the community – investors, founders, early employees, portfolio mentors, advisors, board members, to self-reflect and make these simple yet core decisions as we step into 2017.

Trust 2.O – Demystifying the Blockchain

Banks, remittance giants, almost all financial institutions seem to be intrigued by the growing popularity of Bitcoin and the underlying technology of Blockchain and heavily investing into it. This long-overdue article is aimed at presenting a working explanation of the technology which will be followed by articles on Blockchain’s use in particular sectors like Banking, Governance, E-commerce, Healthcare, etc.

What is BitCoin or Ether or Altcoin?

BitCoin(BTC) is a virtual currency – which is created, stored, validated by a decentralized peer-to-peer network. For easy understanding, lets draw an analogy to a traditional currency, say the Rupee.

A BTC is similar to the Rupee in the following ways –

  1. Transactions : A BTC transaction is similar to making a digital payment – say via Paypal, NetBanking – for any goods or loans.
  2. Storage : There are BTC wallets akin to existing payment wallets like Paytm etc.
  3. Trading : Similar to USDINR forex trading platforms, there are BTC exchanges which facilitate liquidity in the BTC markets.

Now, lets look at the differences : –

  1. Clearing: Rupee’s valuation against USD or any other country is influenced by India’s monetary policy and thereby, the Reserve Bank of India (among a lot of other factors) and each monetary transaction/transfer undergoes the approval of the central governing body. In case of BTC, due to its peer-to-peer decentralised nature, it doesn’t rely on a central body. It is a completely open financial network. It doesn’t need any central clearing body to monitor each transaction. It relies on the robustness of the idea of decentralised trust to self-monitor the network, thereby democratising trust.
  2. Tracking: BTC transactions are recorded using the blockchain technology, in a special log book, which can be described as an immutable ledger of transactions (to be discussed later in the article).
  3. Acceptance: Unlike Rupee which is accepted in India alone, BTC is universal in nature as it is accepted as a mode of payment throughout the world. It is unfair to compare it to the US Dollar (which is the most widely accepted and traded currency in the world), but for the sake of over-simplification, BTC is a much better version of a universal currency as compared to the USD or the Euro.

What is Blockchain?

Blockchain is a distributed database that maintains a continuously-growing list of records. These records, called blocks, are secured from tampering and revision as each block contains a timestamp and a link to a previous block(working explanation provided in the next section). These are the underlying building blocks for BitCoins and other cryptocurrencies.

Blockchain is part database, part development platform (upon which newer products can be built), part network enabler and more. Blockchain exhibits the following 10 properties :

  1. Cryptocurrency
  2. Computing Infrastructure
  3. Transaction Platform
  4. Decentralised Database
  5. Distributed Accounting Ledger
  6. Development Platform
  7. Open Source Software
  8. Financial Services Martketplace
  9. Peer-to-Peer Network
  10. Trust Services Layer

The digital currency function is perhaps the most ‘visible’ one given all the talk on bitcoins. As mentioned earlier, BTC transactions are not monitored by a single central entity but rather by a decentralised set of non-cooperating nodes/entities. These nodes/entities break down the transaction details into smaller parts and store it securely in their databases with a timestamp to indicate the time and a hash pointer/key (ownership pointers) to indicate the transfer of BTC from party A to party B.

The concept behind a blockchain/digital ledger is similar to say, a safe (which has money) being operated by a master key (owner) which is made up of smaller keys given to different individuals (where no two individuals know each other) to ensure security.

How does Blockchain technology work?

Following is a visual explanation of how Blockchain technology powering BTC works.

Lets run through an example transaction, say ‘1BTC is being transferred from Bill Gates to Warren Buffet’. The information of the above sentence is first converted to a unique (to avoid repetitions/collisions) cryptic (to avoid attacks) short form (for efficient storage) via advanced cryptographic algorithms (SHA 256 in case of bitcoins). This cryptic short form, say ‘1BTC-BG-WB’, is now stored in a block and approved by Bill Gates with his secret key (akin to a password) and a public key (akin to an email id) transferring the ownership to Warren Buffet. The block which has recorded this transaction will get 0.001BTC (say) as mining fees.

A block is a part of a blockchain which records some or all of the recent transactions, and once completed goes into the blockchain as permanent database. Each time a block gets completed, a new block is generated. There is a countless number of such blocks in the blockchain. All blocks are linked to each other (like a chain) in proper linear, chronological order with every block containing a pointer to the previous block and a cryptic short form (hash) of all the data on the previous block.

To use conventional banking as an analogy, the blockchain is like a full history of banking transactions. Bitcoin transactions are entered chronologically in a blockchain just the way bank transactions are.

Why should we use Blockchain technology?

The short answer is – We should. Else we’ll fade into oblivion.

The long answer is – We should use blockchain for the following important reasons :

  1. Disintermediation – Two parties (Bill Gates & Warren Buffet) are able to make an exchange without the oversight or intermediation of a third party (banks), strongly reducing time, transaction costs and largely eliminating counterparty risk.
  2. Tamper Proof – Following up on the above example, when ‘1BTC-BG-WB’ was stored in the block, it had been signed by a secret and a public key. IF someone were to change the details of the transaction, the keys will no longer be valid, thus preventing any tampering of old records.
  3. Empowerment – Users are in control of all their information and transactions

What are the current bottlenecks?

Despite all the good things, we are still a long way to go before Blockchain and Bitcoin become status quo. Major bottlenecks in this not-so-long journey are –

  1. Regulations : Blockchain is challenging our existing version of Trust, Security and Reliability. Hence, we see resistance from government agencies and policy makers who are trying to understand and regulate this new technology. Sovereign currencies are being challenged by the emergence of Bitcoins, which in turn leads to several central banks, including RBI, to setup teams to fully understand the implications and finally regulate bitcoins.
  2. Scalability vs Decentralisation : Increasing adoption of cryptocurrencies has raised concerns about their ability to scale while maintaining the decentralised nature. While Visa does ~2000 transactions/sec, the blockchain network currently does 7 per second.
  3. Polarisation of mining power : Nations, like China, having cheaper computing hardware and energy rates currently own a large share of the blockchain mining power (the share is expected to increase further) which goes against the philosophy of decentralisation.

In conclusion, as with any upcoming technology, there is still a large amount of skepticism and reservation against the Blockchain Technology. But due to increased awareness owing to the pioneering efforts of the early adopters, this technology is now being used by several startups and corporations to develop new products and improve the existing ones. Over the course of the next few days, we shall explore the applications of this technology in different industries.

P.S – Thanks to one of Blume’s portfolio founder Abhinand Kaseti of Unocoin for lending his copy of ‘The Business Blockchain’ and my friend Aakash Rao for sharing the relevant tech resources.