Mohit Bhatnagar has come to be known as the investor with a Midas touch in the Indian venture capital space. Three companies which had the managing director of Sequoia Capital on their board – Citrus Payments, Prizm Payments and Ujjivan (from which Sequoia made a part-exit) – gave the firm extremely attractive returns of over three to four times.
In an exclusive chat with Techcircle, Bhatnagar speaks about his firm’s investment philosophy, its decision to invest in early stage companies and the emergence of payments as the next big thing.
What do you look for when backing an entrepreneur?
When we first start off with a company, we are not thinking about an exit. We are thinking – what will it take to make it a huge company. Sequoia’s decision to invest is based on the quality of the founders, their phenomenal hunger to create something big and meaningful and their clarity of thought. It’s their wavelength that we align with. Is this guy extra special? If it’s a yes, we join hands with the founder and embrace his idea to create a large company.
How is entrepreneurship shaping in India?
I have been working with founders for 10 years and every year seems better than the last. The quality of entrepreneurs we intersect with is world class. The sheer ambition, aspiration to make something massive, go global…. the emerging talent has a lot of raw energy, has hustle and hunger to succeed. Whether you are an investor or a founder, nothing beats staying hungry and humble.
What is the most crucial element in an investor-promoter relationship?
For us, building trust with the portfolio founders is the basis of everything we do. Our relationships are not based on spread sheets, legal terms or valuation – nothing transactional. We gauge our success with founders based on whether we are the first port of call when the founder wants to discuss something. When he/she needs help do they call Sequoia first? That level of transparency and trust is important to us.
You recently said Sequoia wants to be the first institutional investor in companies. Tell us about your plans with the new fund. Will Sequoia back portfolio companies in follow on rounds?
We want entrepreneurs to think of Sequoia whenever they are getting started. We pride ourselves whenever we are able to help their business succeed. Given the flexibility, Sequoia may sometimes write large cheques into companies that we have gotten to know over the years but that’s an exception, the focus remains early stage. Sequoia would like to grow investments by investing in multiple rounds as the company grows. Frankly, entrepreneurs create value, we see ourselves as supporters and catalysts in the process.
What is the next big area of interest for you?
An exciting opportunity for Indian payments right now is to enable billions of micro payments resulting from the proliferation of smart phones. FMCG taught us the importance of sachets to drive up consumption in India. Micro payments is needed to enable the consumption of sachets of digital goods. A proven model to penetrate real India is to drop upfront product cost but enjoy fair margins from the millions of transactions of small value. In India, we are at just the tip of the iceberg right now.
Early stage is most prone to mortalities. Does that not bother you?
Companies fail as much as they succeed. We shouldn’t allow either outcome to get to our heads. Failure is healthy. It means we are partnering with companies taking risks and trying new models and innovations. Success is good too but let’s not declare victory too early. Its very early days to start talking of success. India is only in the second decade of VC investing. The investors are all still earning their stripes. Everyday problems are far from being solved. There are so many white spaces for founders to go after. The thing we like is that in India, founders are building companies for the long term and that is the only real way to build a business.
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