Being an early stage startup isn't always easy in India, considering the native ecosystem, loads of learning for entrepreneurs, and the evolving market. Many entrepreneurs may aspire to solve a complicated problem, but will not easily get backing in terms of the right guidance, funding, and mentoring.
That's what the managing partners at Blume Ventures, an angel and seed fund venture based in Mumbai, are hoping to change. With quite a bit of experience in Silicon Valley during its early days around 1999-2001, they bring their knowledge to help startups in India succeed right from the get go.
"We have always wanted to fund ideas that can improve things, and what better place to find things to improve than India?" said Karthik Reddy, managing partner of Blume Ventures, in an email interaction.
After working with Mumbai Angels from 2007 through 2009, they independently came to their decisions to be more involved with early stage startups, since angel investing didn't pay for any extra effort made on behalf of the group.
"We thought there was a large need for institutional pre-series A capital in India, and the idea of a fund was born and the partnership cemented in 2010," Reddy added. That's when they decided to start Blume ventures.
They invest out of the fund in two ways: Either as a member of a larger angel or seed syndicate, where they are the minority of the round, or as a lead investor playing the majority of the round and associated deeper responsibilities of board and mentorship.
"We're almost done with new investments in this particular fund, and we invested about 50/50 in above two categories and reserved the same amount of capital as we deployed into seed stage for bridges and follow-ons for the 'winning' companies," he mentioned.
Also, this meant that their first cheques were INR 2.5 million to INR 12.5 million, and their follow-ons could then take the total investment to between INR 20 million and INR 50 million. They typically will not participate in rounds greater than INR 20-25 million of capital raised.
When asked about the biggest lessons learned from their past, Karthik illustrated upon the risk involved in investing in terms of the percentage of failure today. He feels that points of failure for a startup are especially high, and arguably double in the Indian context. This was an early realization at Mumbai angels, and Blume gave it further conviction to work on more ideas and entrepreneurs, and kept tight "stop losses" in its investments.
Some of the companies that they consider their early winners are Mettl and Webengage. They look for founders who don't get intimidated by challenges and enjoy them, think global, and have an extreme focus on product. Companies such as Grey Orange robotics, CCS, and Rolocule are very interesting due to some really cutting-edge innovation in robotics, carbon capture, and mobile gaming, and though the founders are younger, they consider them to be quite promising for the future.
When asked about the next big thing in the Indian startup market, he said that India will build very powerful mobile-first, mobile-only, and mobile-human-networks businesses from India, not just to solve local problems, but global as well. According to him, China and the US have built interesting companies already in this space, but there are hundreds of new disruptions waiting to happen with ubiquitous mobile computing power.
Usually, they prefer getting referred by people who know them. For startups that aspire to raise investment from Blume ventures, Karthik advises that entrepreneurs show them that they can keep a business plan real, obsess about a problem and its solutions for the long term, and have the ability to stay in the startup world for a long time to come.
According to Karthik, the Indian startup ecosystem is very young. It's immature in large parts, and getting more crowded and noisy at the inception or really early stage. Despite the long road ahead, he also added optimistically that the right ingredients are slowly taking form, and he sees a bright future for the Indian startup ecosystem.
For Blume Ventures, technology as an enabler is key, especially in helping to build scale efficiencies in a business model. Its investment interest within tech is heavily skewed towards software — mobile, enterprise, or in the cloud. According to him, only around 25 percent is towards hardware and other emerging tech such as clean tech, life sciences, and brands and media.
Lastly, he advises young entrepreneurs to believe in themselves before they take the leap of entrepreneurial faith. He implores the aspect of conviction, and reiterated that unless there's conviction, it's not a great idea to start up, at least not just on a whim.
"Don't tread into this minefield as opportunities are interspersed with dangers 'unless' there is conviction on the problem you are solving. A VC-funded tech company is not a real option unless there is a long-standing passion to solve something. A great team and, therefore, a common goal is also a mandatory requirement," said Karthik.