Saumyajit Guha, former chief operating officer at Calcutta Angels who single-handedly closed seven startup investments in just nine months last year, is all geared up for his new challenge at Gurgaon-based Jaarvis Accelerator. Guha, who joined Jaarvis as co-principal last month, will be mainly responsible for managing investments from the operational side and creating new revenue channels for the accelerator.
With his appointment, Jaarvis plans to strengthen its India play. The Hong Kong-based accelerator set up its India operations in 2015 and backs startups in IoT, e-commerce, online-to-offline and mobility.
In an interaction with VCCircle, Guha talks about the accelerator's investment strategy in India, new revenue channels and fundraising plans.
What is Jaarvis' investment blueprint?
Our idea of investment is to catch the startups young. When you look at funding today â€“ initially we were talking about seed, angel and venture capital. Now, between angel and VC [funding], there have been so many bridge rounds. The gap is widening between the initial funding for prototyping and the angel round, and that is where we want to position ourselves. We are interested in startups that have developed a proof-of-concept and want to go to the market.
We have a full-stack team â€“ lawyers, chartered accountants and a social media team, as well as office space. We have also helped startups incorporate themselves from proprietary or partnership firms. When a startup gets investment, we do not charge them for due diligence and the shareholder's agreement as it is done in-house.
We do not invest beyond $50,000. Our sweet spot for valuation is somewhere around $500,000. We take 10-12% stake in startups. Initially, Jaarvis used to take 15% but then later realised that taking a higher stake in the beginning is risky as a company can dissolve.
We have accelerated 14 startups and invested over $261,000 till date. Our portfolio companies include Arbunize, Comparometer, DesignDodo, Drinks on Me, Edurev, Psychd, R2 Robotronics, Sniffer, Spotwrks, Extra Carbon, iManageMyHotel, and PromOn.
This year, Jaarvis plans to accelerate 20 startups in two batches of six months each.
What are your focus areas?
Jaarvis is more focussed on startups in the areas of Internet of Things (IoT), artificial intelligence (AI), robotics and fintech. Besides that, we are also looking at the healthcare domain.
We are shifting our focus away from B2C and concentrating more on B2B. Gone are the days when people will give you money for burning money. Now, the focus is more on generating revenue and building the quality of your service and product. With B2B, the customer acquisition cost is 1/10th of that for B2C businesses.
Are you ready for exits?
We haven't exited any of our investments yet, as it is too early. By the end of 2018, we will be ready for exits. About four to five of our investments are on the verge of receiving Series A funding this year. But we are not looking for exits and would rather wait for investors to propose an exit option to us. Exits at the Series A stage are difficult as there is some taxing for startups. At this stage, startups go for massive growth and expansion, and it doesn't make sense if they have to give us a chunk of their money then.
Are you looking to create new revenue models for the accelerator?
We now look at startups trying to raise $100,000. We have partnered with Japan's Incubate Funds and are also in talks with LetsVenture to syndicate investments. If we lead the investments then they can co-invest in the seed round. For instance: If a startup is looking to raise $100,000, then Jaarvis can invest between $25,000 and $50,000, and the rest can come from these funds.
If we lead investment rounds, then it is easier for these funds to participate as we would have already done the due diligence.
We also charge startups 2% commission for a success rate when they want to raise external funding. If a startup is looking for $100,000, Jaarvis will invest $25,000 for 10-12% stake (which is inclusive of the acceleration programme). Jaarvis will charge startups 2% on the remaining $75,000, which it is helping startups raise from other investors.
We also plan to launch a corporate acceleration programme. Rolling out such a programme is very difficult. Many companies struggle with their accelerator programmes. Based on our discussions with corporates, they need a platform to release their acceleration programmes and from where they can curate vendors and clients. Many corporates outsource their innovation to a third party. Under our corporate acceleration programme, these firms would just need to sponsor certain programmes, which would also make it easier for us to make investment decisions.
What are your fundraising plans?
Jaarvis is looking to raise its next fund for its India investments in the second quarter of 2017. This will mainly be to increase investments that go into a startup, and it will also enable us to participate in follow-on rounds. We are at very early stages of discussion with some funds globally, which are trying to enter India, as well as with some HNIs.
Currently, there are many accelerators in the country. What's the USP of Jaarvis?
There are many accelerators doing similar jobs, but one area where we add value is our in-depth knowledge base and network in the South East Asian and Australian markets as Jaarvis' founders are doing businesses there.
In addition, we have a full-stack team and we do separate agreements for our acceleration programme and funding. If startups come to us only for funding, then we are not the right option for them.