India Quotient, the early stage venture capital firm that focuses on pre-Series A stage startups, will play the deal market in 2014 with some small but critical tweaks to its earlier investment strategy. The shift will see the firm, currently investing from a $5 million (Rs 30 crore) fund, increase its deal ticket size, stay away from niches that are too narrow and avoid single founder companies.
“Overall the portfolio is doing well. We have several companies that are seeing traction. There are a few that are not. But that is normal in any portfolio. Based on our experiences so far, we decided to make slight changes to how we look at investments going forward,” Anand Lunia, the firm’s founder, told StartupCentral.
Since its launch in June 2012, India Quotient has racked up a portfolio of 13 companies. Nearly half of its debut $5 million fund has been invested so far. Fund I is backed by institutional investors such as Omidyar Network, SIDBI, Times Internet, Unilazer Ventures and individuals including Carwale founder Mohit Dubey, One97 founder Vijay Shekhar Sharma, Kashyap Dalal, founder of Inkfruit respectively and Sigma Corporation co-founder Ashok Mittal.
It has not firmed up plans yet on a second fund but has started to informally reach out to potential investors for a new fund. Apart from Lunia, the firm’s investment team includes Madhukar Sinha, Jaydeep Barman and Elizabeth Chapman.
While the firm is making some changes in the way it will deploy capital this year, its overall focus on pre-Series A companies remains intact.
So what’s new?
1. More money per startup: When India Quotient launched operations in 2012, its mandate was to invest anywhere between $50,000 and $500,000 (Rs 20 lakh and Rs 2 crore, according to its website) per company. Given its focus on pre-Series A stage companies, the investment team feels that companies at this stage need a little more. It has therefore decided to increase its deal ticket size to anywhere between Rs 2 crore and Rs 4 crore (between $300,000 and $650,000 per company).
2. Lead investor versus co-investor: The higher deal ticket size will allow the firm to take a more dominant position on deals that it is chasing. It hopes to lead more deals this year than co-invest. If it does co-invest it may prefer to come in at a later stage, even if valuations are higher. It will continue to invite co-investors on deals that it leads, but will bring them in earlier than usual.
3. Single founder companies: This will be a bit of a dampener for single founder led startups, but the firm has decided to avoid investing in companies that have only one founder. “W have found this to be a little bit of a bottleneck. So, as a rule, we have decided to stay away from single founder companies,” says Lunia.
4. Look for broader niches: One of the defining traits of the India Quotient strategy has been to identify niches — whether in online businesses or consumer. Some of the companies that fall in that category within its portfolio include personalized gifting company Engrave, Birchbox clone Fab Bag, and online pet products store DogSpot. While Lunia says that the niche companies currently in the portfolio are doing fine, going forward the firm will take a broader view on niches. “If the niche is too narrow it becomes difficult to scale. We will still do niches but we will look at spaces that have a broader market appeal,” he said.
What’s different in the current portfolio?
Out of the 13 companies that the firm has backed so far, two now sport different brand identities from when they started. InBetween, the first QSR (quick service restautant) in the portfolio, has rebranded to Rocket Sandwich. India Quotient, along with Unilazer Ventures, invested Rs 2 crore ($320,000) in the company last March. Vellvette, the Birchbox clone, is now known as Fab Bag. India Quotient and a group of angels had invested in the company in February last year.
Giveter, the social gifting platform that raised a seed round from India Quotient, Flipkart founder Binny Bansal and 5ideas Startup Superfuel in December, is now more focused on developing its fashion discovery site Roposo. The India Quotient website currently lists Roposo as a portfolio company.
Recent additions to the portfolio include online property search and listings site Grabhouse and Wishberg. Others in the portfolio include Red Quanta, iimjobs, Belita, TheAppKiosk, MapMyTalent and 91Mobiles.