I am Sanjay Mehta, Founder and Partner at 100X.VC. I have written this article to provide you with some information on the importance of a lead investor for a startup.
(0:36) Let me give you a brief intro about what is 100X.VC. We are the first cheque SEBI registered fund in India who invest in Indian startups and use iSAFE, which is called India Simple Agreement for Future Equity. Our company has invested in 20 startups which were funded in Class 01. 100X.VC is a sector agnostic, a diversified investment fund which is a discovery platform for most of the VCs in India. We believe in mentoring unlimited and helping our startup founders grow to the next level.
(1:13) Let's do a poll. This will help us understand as an investor whether you are raising your first institutional cheque. You have three options:
- No, you already raised your investor funding cheque.
- Yes, you are looking to raise your first investor cheque.
- You are still thinking about whether you want to raise money or not.
Share your answers with us at 100X.VC. I'm sure it will help us refine and help you better.
The most critical step for your startup
(1:54) It is a well-known fact that while raising startup capital, finding a "lead investor" is the most critical step. It defines your probability of success and helps you to build your journey in the venture capital ladder in terms of raising your future round of funding. The whole value of a lead investor starts in a group of angels or VCs who will try to back up the findings of one person. Usually, a VC will invest in a deal and validate to make it great and successful. That is why securing a lead investor makes so much sense for startup funding as it helps to define the probability of the success.
The reason behind the non-funding of good projects
(2:49) Many good deals do not get funded. The most common reason behind this is that most of the investors are reluctant to invest in a new deal having a similar question in their mind as to why no one else is funding this deal. Many times, it is tough to become the first one to invest. Investors do not want any risks which are quite large in new startups. So, many of the good deals are ultimately ignored by the investors and hence they fail to have a lead investor.
(3:22) Most of the VCs, angels and angel networks will pay heed towards your lead investor. Everybody would like to see social proof that you have validation from somebody who knows this business, has invested much more than anyone else and understands the whole VC space. So, social proof is required saying why they are making this investment. Therefore, your lead investor is your brand as a startup.
The lead investor should not be your family
(3:53) Family money is excellent but it won't buy you a "lead investor" status. Typically, many startup owners have a rich family background who can invest a couple of crores or millions in their business. But, that does not define that they are a lead investor. A lead investor has to be an external validation, somebody who is making VC investment as a business. That is where the validation is required to make you noticeable. So, many times, from an untouchable position where no VCs are looking at you or you are not getting any interest from VCs, getting a lead investor suddenly makes you touchable. That is what your family money can't buy. You need somebody with an external validation to fund you.
Lead investor = First cheque
(5:00) A lead investor is equal to the first cheque. Very few people within India would like to go first to make that financial discovery. No one can actually ask others to start looking at their portfolio company. It is really difficult and almost impossible. This is because most of them have their regular businesses, such as in the case of angel networks. There are very few full-time angels who would be doing this very effectively. So, finding a lead investor becomes a little tricky and challenging within the ecosystem. But, it is essential to get the perfect lead investor for your startup.
(5:48) A lead investor typically is a marketeer. It will save your precious hours which are being sucked away in fundraising where instead you can do code and market and get more customers. The lead investor will help you with the next round of funding or future round success. That is where it simplifies your funding requirements which is basic while you have the time and ability to make real customer sales.
What is a lead investor?
(6:23) Lead investors are first to invest, then advice, and finally, attract investment sources of capital for your business growth. But, it means a lot to any startup founder because it is a partner whom one is hiring. It is a co-founder who is paying you money to get equity into your company by investments and also helping you build to the next round.
(7:03) What are the lead investor’s roles?
- Lead investors negotiate terms.
- They will come out with a valuation for your startup to help you with legal challenges across the documentation.
- They will advise your startup, such as converting your product into your business.
- Many times, lead investors take a board seat or become a board observer.
- They make introductions and connections to open up their networks very closely.
Lead investors help with the next round of funding to guide you with multiple things such as- at what value you should be raising or how much dilution you should be doing.
- They also help manage other investors expectations. It is always a give and take happening within the VCs.
- They bring other distribution channels, be it angel networks or family offices.
- Lead investors also participate in the follow-up funding round.
(8:06) Let us do a poll again. Do you believe that a lead investor is important? What is your view? Is it important to identify the lead investor? Or, you still believe that you don't need a lead investor and as a founder, you can figure it all out? Or still, you are not convinced about the value of a lead investor? Share your views with us at 100X.VC.
(8:35) Choosing the lead investor
- Find a lead investor who you can trust. There are enough credentials which would be available for a lead investor on their past deals, how they have been founder-friendly or what is the way that they have built their credentials at the startup ecosystem. To find an investor who you can trust is very important because you are going to take the advice of the investor and build your future within your startup.
- Try to align their interests. Find a lead investor who can solve your current problems. For this, you should check their interests, domain expertise, and whether it matches your needs.
- Find a lead investor who is a thought leader, somebody who is a brand and with successful investment history. That would give success that rubs on you. You need to talk to investors who have seen enough of this kind of success.
Find investors who are just not money bags but are accessible. A lead investor is a coach and a mentor who guides you through every phase of your business. If there is no guidance, it is just dumb money- not smart money.
- Find a lead investor who has financial resources and risk appetite. He/she is not pastoring for an exit with a long term horizon with investments. Just smartly take the money with a complete understanding of the investor rather than just taking any money.
(10:11) What does 100X do as a lead investor?
- We invest the first cheque. We are the first institutional cheque writers for the startup portfolios.
- We do funding through iSAFE, which is India Simple Agreement for Future Equity. iSAFE is a very simple and smart way of investing in startups. It is a founder-friendly document which has very limited or virtually no rights to investors. You can go to 100X.VC’s website and download it for free. Hence, iSAFE has no legal cost and is quick to invest.
You become a part of a cohort. What we do is not a one-on-one investment. We invest in a batch mode, or more precisely, in a class mode. We did our class 01 of funding in December 2019. Now, we are in Class 02, which is out there and we are going to invest. This is going to continue, and we plan to have 3 or 4 classes every year and plan to invest in 100 startups every year. Soon, we will be touching those targets.
- We help with successful business planning for growth.
- 100X.VC makes the startup VC investment ready and discoverable in the complete VC ecosystem. We run a VC Pitch Day on which we disclose all these startups. We had a VC Pitch Day at IIT Bombay in December 2019 where we had invited almost 350 investors who came to see our 20 startups’ pitch. That was huge access for those startups and proved to be successful.
- We play the role of an investment banker without fees. An investment banker, actually, will go out and market your deal and charge you a high fee. But, 100X invests in your company and becomes your investment banker for free.
- We also provide unlimited mentoring.
(12:34) Let's take another poll. Have you heard about 100X.VC investments before? If yes, please mention the context in which you have heard about us. If no, please share anything which you would like to hear about 100X. We will keep you posted. Go to our website and subscribe to our newsletters. On LinkedIn also, we have a newsletter. You can subscribe over there. So, share your views with us.
(13:08) A lead investor is a magic key to successful funding or building syndicates. You are quickly able to rally other investors because they have faith in a lead investor. It helps startups establish huge credibility in the market. This is the validation that every startup founder would seek, and that is what lead investors do.
About 100X.VC team members
(13:42) Let me share my team at 100X and what we work across. In my career, I have done about 150 investments in 10 years in India through our family office called Mehta Ventures, which is based in LA. We invest in overseas companies. Mehta Ventures are sponsoring this whole 100X portfolio.
Ninad Karpeis our partner and comes with a huge experience in running a public listed company called Aptech. You can check out his LinkedIn profile. He has amazing insight and is the best mentor to have on board. He has helped companies scale to the next level.
Yagnesh Sanghrajka, our CFO, completely works across numbers. He is a person who helps you with all the taxes, your business plans, and working capital allocation. He has got great insights into the details compliance and puts you on the right track. As we say, do not innovate in legal and finance, that is where Yagnesh is very helpful.
Shashank Randev, our founder VC, is the guy who gets you started within the VC ecosystem. His connections in the VC ecosystem are unparalleled. He inspires a lot of confidence with a lot of founders.
Vatsal Kanakiya is the youngest team member as CTO and works with startup founders closely on their technical requirements and getting various credits from, be it Amazon, Google, or Microsoft. He helps you with coding, SEO, and growth. Vatsal is the person to go to for any possible technical stuff.
Ours is a well-complementing team, and we have got mentors who come and help us regularly.
(16:05) Startup founders with whom 100X.VC invested
With Dhruvil Sanghvi, CEO at LogiNext , I had invested as a lead investor in 2015. Recently, we had a 16X exit when Tiger Global invested in LogiNext. Dhruvil and Manisha are a great company and a founding team. I am grateful for startup founders who take our money because we, as an investor, make returns for you as an entrepreneur.
Pankaj Aswaniis founder of Coolberg, which is a great non-alcoholic beer brand. We worked closely with him and built the first cheque. It was great to build that whole brand from scratch.
Sumit Gupta, who is running CoinDCX, a crypto exchange, worked closely with us when they had some legal challenges. We helped them raise the next round.
(17:25) As I mentioned, mentoring unlimited is the way that we look closely to build. We have helped companies continuously. It is not just a word about mentoring unlimited, it is like accessibility, a hotline available for any startup founder to help get any access or network connections. Next round of funding goes, but a lot of mentoring goes from our side at 100X.
(18:11) Would you recommend 100X.VC as a lead investor to startup founders raising their first cheque investments through iSAFE?
If yes and you think that it makes sense to have 100X as a lead investor and use iSAFE notes to raise the first round, then please share this with startup founders who you believe should be talking to 100X.
If you believe that a lead investor is not required and the founder should be talking to VCs and doing a price round on a shareholder agreement rather through an iSAFE, share your views with us.
(19:03) What are the VCs views on 100X?
Niren Shah at Norwest Venture Partners believes that 100X.VC would be a high-quality sourcing channel for them as they participate in Mid to Late. At Mayfield, Vikram Godsetalks about building a long term relationship with 100X.VC and meeting entrepreneurs who are funded by us. The same goes for Pranav Pai, who is the founder of 3one4 Capital, saying that 100X.VC is a great platform and a well-designed effort to bring structure to early-stage companies.
(19:46) Sandeep Singhal at Nexus Venture Partnersis looking for us as a pipeline for a later stage investment when he comes at series A and B.
Sasha at Kae Capitalbelieves that this is a trailblazing initiative in the VC ecosystem.
Nikhil Vohra, Sixth Sense Ventures, who is great in consumer brands, says that 100X is a great platform and should become a sounding board for early-stage companies.
It is amazing to see that these big names in the VC world look at how 100X is feeding them with the deals.
(20:21) India Quotients' Anand Luniareviews that 100X will be the launchpad of the top choice for the future entrepreneurs and will benefit immensely from the platform. Same goes for Gaurav Sachdeva at JSW Venturessaying that they are looking forward to working with 100X.VC by integrating their investments into their deal pipeline and value-adding their portfolio companies.
Vikram Chachra at 8I Ventureslooks forward to partnering with 100X and doing great deals together.
(20:56) Jatin Desai, Parampara Capital, is looking to back 100X funded companies and engage with us.
Sunil Goyal at Yournest Venture Capitalis looking to ensure that this kind of VC ecosystem boost is required across, and this will generate a lot of wealth and employment for the entire generation of Indians.
Unicorn India's Anil Joshitalks about 100X's ability to work with identified founders in their early founding days.
You can go across the 100X.VC website to see what VCs are talking about 100X.
(21:32) The first investor in your startup defines the probability of future success. So, choose your first investor wisely from whom you would raise cheque.
(21:48) Let me take the last poll. Would you like to engage with 100X.VC as an entrepreneur who wants to raise the first cheque? Or, engage as an investor who would like to invest in the 100X portfolio startups? Or, as a mentor to help 100X funded startups in mentoring? Share your views with us. We will reach out to you.
(22:21) On closing notes, lead investors are the first investors to indicate their financial funding support for the startup. They contribute time and expertise to make the business ready and discoverable with investors for the future funding round. So, choose your lead investor very carefully.
If you have any questions or comments, please write to us at [email protected]. Our twitter handle is @100X_VC. I will look forward to hearing from you.
