Bengaluru, 2016. The brief was clear. The potential investors were keen to meet the top five people working at a consumer tech startup, which was at the final stage of a sizeable funding. The pre-funding diligence was crucial for the largest and the oldest Singapore-based venture capital firm, which had rolled out its first fund of $12 million in 2012, and had backed early to growth-stage startups in India and Southeast Asia, and had counted mobile tech firm ZipDial as its maiden investment in India back in 2013. “We killed the regular process in 2015," recalls Amit Anand, founding partner at Jungle Ventures, alluding to the ritual of entrepreneurs pitching to the investment committees (ICs) of the VC fund as the penultimate step before bagging the funding. “It was a completely wrong process," reckons the VC, who had flown down to India along with his senior team to spend at least a day or so with the founders who had ticked all the boxes, and had to just clear one last hurdle before becoming part of the Jungle portfolio.
Anand explains the flaws in the ‘regular’ process. For years, explains the venture capitalist—who had once donned the mantle of a founder with his Singapore-based animation studio Ettamina in 2006—Anand and his team used to meet scores of brilliant founders. All of them had amazing pitches, most were brilliant storytellers, and everybody flaunted ambitious strategies to conquer the world. They knew how to woo investors during the IC meetings. The problem started when the promise and the vision didn’t match the execution.
There was one seminal learning: The success of the business doesn’t rest on the founder. “The success is on the team that the founder builds," says Anand, who had exposure to sales and business development during his stints at the Nasdaq-listed IT firm Progress Software, and Epiva and Tata Infotech before he took a plunge into the investment world. “We changed the IC process, and now we would go and meet the founders and their team," he says. “We want to see what they would order for lunch," smiles Anand. “We also see how they behave in the office."
Back in Bengaluru in 2016, Anand and his team reached the startup’s office that they were interested in funding. The co-founders had huddled the top five executives of their company into a room. No marks for guessing, each one had the best LinkedIn profile in terms of educational and professional experience. “This is the team you should meet," stressed one of the founders. “They are most articulate and they can explain to you the best," he underlined. Anand, though, was not impressed. His logic was interesting. The people who have seen the ride since day one, and have been through the ups and downs are the ones that must be among the top five. “If you want to know the organisation, you have to meet them as well," he says, underlining one of his top learnings from the investment world. “Execution eats strategy for lunch," he says.
At Jungle, there are only three rules to survive and thrive. First, one has to grow slow. The sector-agnostic VC fund, which has over $1 billion in AUM (asset under management) makes around 15-18 investments per fund. In terms of annual bets, it boils down to backing 6-7 ventures every year. What this set of concentrated portfolio means, explains Anand, is that it helps Jungle in making high-conviction bets. The founders end up getting more time, resources, and capital from the same fund. When Jungle closed the first fund of $12 million in 2012, it made under 20 investments from the fund. “Now we have a $600-million fund and we will still do under 20," he says.
Take, for instance, Livspace. The omnichannel home interior and renovation platform turned unicorn early this year when it raised $180 million in February. Led by KKR & Co, the Series-F round also saw participation from existing investors such as Ingka Group (Ikea) and Peugeot Investments, apart from Jungle Ventures. “Today, they have scale and dollars for acquisitions, but they always had the margin," says Anand, who also has unicorns Moglix and Kredivo in his portfolio.
“Margin before scale is crucial for us," he says. In their suite of three unicorns, Anand explains, Jungle’s portfolio lacks fluffy valuations. “We were never into that game," he says. Back in 2019, when Jungle was raising its third fund of $240 million, LPs (limited partners) wondered whether Jungle was into private equity or venture capital, alluding to lack of exaggerated valuation of any of its portfolio startups. “But look at the multiples. They are all venture capital returns," is how the VC defended the strategy.
The third rule of Jungle is to ‘build to last.’ Till 2017, Anand recalls, it was almost impossible to find Indian entrepreneurs who would like to look beyond India. Businesses, he argues, must be regional in nature, especially when there is a strong socio-economic overlap among the countries in Asia. “We always ask if the founder can take his business model to become number one player in a larger geography," he says.
The beginning, though, has to be small. “We have built Jungle to help startups grow" says Anand, explaining the philosophy behind the name of the fund. When you"re a new organism, you need an ecosystem in which you can survive and thrive. “Jungle is that ecosystem," he signs off.
First Published: Nov 21, 2022, 16:50
Subscribe Now