Favcy VB 2022 Round Up: From the Founders Desk
One of the perils of being an innovating company is that there is literally very little precedence (or none) to know if what you are doing is challenging enough. With this in mind, I humbly submit my 2022 annual round up.
A venture builder, unlike a venture capitalist, not only helps with capital investment but also helps in methodically creating a new business. Venture builders create and build the business from the initial concept to product launch, and then subsequently formulate the plan for the continuous growth of the business.
While the VC model is a time tested model, their approach is to catch trends early. Juxtapose that to the VB model, where the VB is either trying to catch a trend that VCs will catch 3 to 4 years down the line or will build on something that has already caught VCs attention. For the latter, the VB must believe that there is meat in that trend and that the trend will last long enough for the company to self-sustain and then potentially grow.
The second VB model, which Favcy has not touched yet, is the model where the VB enters enterprises that have great founders but are struggling due to any reason. These models subsume more weights to strategy and clarity rather than to the enterprise’s capital requirements.
Favcy Venture Builders currently are only in Model 1 and in that model follow the “Meat of the Trend” strategy.
Let me put out our customary statements before beginning the round up.
As a Partner to the Venture Builder, it was therefore of utmost importance that we closely follow the ‘Hot’ sectors of 2021. From the hot sectors of 2021, we had to then slice and dice and look at models that we believe would be in their meat of the trend in 2023 and 2024. The reason is obvious, it takes at least 12-15 months for a company to start showing some colors and therefore, our outlook has to be within a 15-24 months horizon minimum.
We saw that the most funded sectors for 2021 were
- D2C Brands
- Logistics Tech
Our thesis to support non-tech founders who are building digital-first ventures, also results in elimination of a few sectors - such as SaaS and Cryptocurrency. Although we did take a bet on a SaaS company, the year 2022 for Favcy Venture Builders was concentrated on the FinTech and the EdTech sector.
We took bets on an emerging category of “P2B Lending” or “Peer to Business Lending” and firmly believe that the P2B story in a country like India, will be hitting its meat in 2023-25.
We saw consolidation in the D2C Brand space and are looking to build another Venture Builder in that space, research on which is internally still on. I would be happy to share that research, as and when we are satisfied with it.
- VC’s and their Games.
While VCs are our elder siblings, VBs traditionally have not followed VC footsteps. Favcy VB is no different. VBs are more founder focussed and are looking to build solid businesses with their portfolio founders.
The year 2022 was an expected year of Mergers and Acquisitions. You can read more about it in my LinkedIn post below:
It came as no surprise that this artificial squeeze of capital resulted in no less than 152 Bn USD worth M&As happening in this country.
Why is this important?
As a VB, it becomes imperative to understand the capital cycles of the VCs. The reality is love or hate, we all need them. With this in mind, and with our prediction that the capital squeeze will go away in 2024, we did not go ballistic in building many companies in 2022.
We focussed on getting 7 new companies and today stand with a robust portfolio of 29 companies. Of the 7 companies, 4 are in FinTech and are solving different problems in the P2B domain.
How do we measure success?
Building a startup is a marathon and building a platform that builds startups (Read: a Venture Builder) is an Olympic marathon. You can cry, you can sweat but you have to get up and keep running.
When we started, we felt that if 10% of our portfolio companies survive, that could be a good benchmark to chase. Because well, Y Combinator funds pre-seed companies and has a public success rate of 8%. So yeah, let’s gear up for the 10% mark.
Then we met a few advisors who felt that 10% is low. Let’s raise the bar to 20%. Make no mistake, while we are doing all of this raising probability math, we had zero precedence.
So this is how we have fared
A super positive outcome of a VB is the ability of the VB to safely keep a venture. We call it, (sheepishly) ‘Safe Keeping’ of a venture. We aren't very good with internal names, you know.
So we are roughly in the range of ~45% of our portfolio ventures active at various stages of their venture journey which is a remarkably good showing as against the 20% that we had initially modeled ourselves to benchmark against. Should we take this up? I think we can. My guess now after roughly 15,000 hours of being a Partner of a Venture Builder is that we should be aiming for >=60% of our portfolio ventures in the “Alive & Kicking” category.
On the subject of the financial health of the VB, I would also like to highlight that since 2021 we have been operationally “Break Even Plus” and more. We liquidate a part of the Favcy owned equity from various portfolio companies, enough to keep our gas bills going. We are frugal as hell. Occasional business class travel, we do on accumulated points :)
For SaaS companies, we love the "Rule of 40", a principle that suggests that the combined revenue growth rate and profit margin of a company should be at least 40%.. We do not technically qualify as a SaaS company but track the “Rule of 40” for ourselves as well. As of March 31, 2022 we had met the criteria for being a “Rule of 40” positive company. We are looking to achieve the same feat in the upcoming closing for FY 22-23 as well.
Are you in safe hands?
2022 saw Favcy VB boost its top tier senior management team. I was acting as a Sr. Partner and I handed over my role and responsibilities to Vikrant Bahl and Francis Simisim, both of whom have years of experience and are now looking at building capacity + internal efficiencies of the Venture Builder and finding growth levers for the Venture Builder respectively. Portfolio management has also moved into their safer hands.
Yamika Mehra retained the 1st Cheque platform that she had so painstakingly built and also doubles up as the CRO for the VB. She also represented us at the “Horses Stable Season 4” and turned out to be one of the most popular judges. Which if you ask me, did not come as a surprise.
Harshit Joshi handled two roles of being a Partner, who scouted talented founders and also managed the operations of OpenBook VC, the fund that we had set up in 2021 and has been instrumental in supporting some of our top portfolio companies.
Nischaiy Pradhan, managed the Product division and is looking to move towards a bigger role in 2023, which will be extracting value from our dead ventures. That’s a new role, which you will be very keen to hear of if you are a 1st Cheque investor, whose company hasn't done well.
MilapSinh Jadeja joined us as a Sr. Partner in March 2022 and is looking to boost our OpenBook VC fund as a General Partner.
We have also seen some great leaders shaping up and strengthening the overall Favcy Assembly Lines. Notably:
- Kashiff Ibrahim, who managed Growth (Growth Marketing, Community Led Growth and Product Led Growth) for portfolio companies.
- Ragini Sharma, who joined as an EIR and additionally expanded her wingspan to include founder selection and building more EIRs.
- Devang Jain, who managed the founder selection and further strengthened the Idea Validation and Business Model assembly line.
- Vaibhav Trisal, who led Project Management and his KPIs around digital wastage management.
- Akshay Anand, who led Product Design and shaped up the overall Brand Assembly Line to make it more robust.
- Rosh Cadorna, who led overall Brand Strategy and doubled up to lead the Project Management of all portfolio ventures.
- Diksha Ohri, who led Brand Communication for portfolio ventures and further leading some exciting internal initiatives in the VB pipeline.
- Piyush Verma, who managed the Founders Office and the Content Repository which now hosts roughly 1000 GB of video content on Venture Building. Yes please, that's 1 TERABYTE of Venture Building data. Trust me even my mind was blown.
To top it all, we are a 50+ strong workforce now. They are the real superheroes that enable us to do more.
Since early 2020 and all through 2021, we had moved fully to a WFH environment (led by a combination of factors) and it largely worked like a charm. After a few growing concerns internally on capacity utilization eventually leading to our first employee termination in February 2022 made us question the veracity of the “Work from Home” model. With growing teams and super active portfolio ventures going strong, the model surely wasn’t going to work.
Consequently, we expanded our office spaces and moved to a hybrid work environment. You will be pleased to know that as of December 15th, 2022, Favcy VB has offices in New Delhi, Kolkata and Ahmedabad.
Favcy VB also has set up an INBY workspace for its founders to utilize for meetings. Currently that space is in South Extension, New Delhi and our founders are utilizing it for their board, internal and investor meetings.
Favcy VB is conscientiously moving its product and investment banking team to the Philippines under our new Sr Partner, Francis Simisim. As a team, we found great quality in the Philippines and have a headcount of 4 professionals who work out of there already and are further growing as we speak.
In due course, we are also looking to set up our first VB for SE Asia in Singapore and/or the Philippines.
Internal Growth Initiatives
Multiple misses and some bulls eyes.
There are successes yes, but many failures that are hidden from the public eye!
- Hustlers Den: The idea was that we will provide a platform to stellar talents in the corporate world to test their ideas before jumping in full time. The key insight was that MBA loans leave an EMI burden and do not really allow some folks to take that risk leap. Hustlers Den was a platform that would provide DIY Venture Building platform, where folks could validate their ideas at their own pace.
STATUS - Incomplete, Work in Progress.
- Ideas Not Built Yet (INBY): INBY was a simple idea that came as an offshoot of Hustlers Den. We believe that talented, like minded folks huddling together, get the confidence to build basic startup fabric that is magical. As I pen finishing thoughts of the year, I am quite certain that Inby will be an impact program for the startup ecosystem and will be one of our stellar creations. Watch out for Inby in 2023.
STATUS - Beta. Successful launch.
- TellerSpot: We started another product with one of the top Merchant Bankers of India (Monarch Networth), called TellerSpot. One year down the line, TellerSpot is a finished product and Favcy and Monarch are searching for stellar founders to run it. TellerSpot is the first of its kind platform that will give liquidity to our 1st Cheque Angels. We promised, we are working on it. Well now the cat is out of the bag!
STATUS - Product built. Execution in 2023.
- Favcy Co-Life: We started working on Favcy Co-Life, the idea was to bring Founders together in a residential format. May be one of our most ambitious projects so far. We recognised the scale of this and decided to pursue it later.
STATUS - Too big for us with where we are. To be retaken up in 2023 for deliberations.
- Government Collaborations: We made our first government presentation to the Government of Uttarakhand in Feb 2022. You would be pleased to know that we have this in our priority list of action items as we look to work closely with a few state governments. The Government of Gujarat has been very forthcoming and consequently Favcy VB has set up its office in Ahmedabad in December 2022 (to be operational in early 2023).
- Venture Assembly Line Scale Up: Our venture assembly line was slowing up. We knew that we had to re-think the Venture Assembly Line and January 2022 was the first time we accepted and admitted that the current line was not going to meet the demands of our growing portfolio venture base. And we onboarded another partner in Vikrant Bahl to strengthen the Favcy operations and boost internal efficiencies. Vikrant was building a venture with us (QThrill), which we had to keep safe because we could not find enough capital to penetrate the cluttered gaming market. While we are internally working on handling this piece, I am also re-assuring the investors of QThrill that we will make good their investments as we are looking to acqui-hire the QThrill team. I reserve my comments on the nature of the transaction, but it looks like an equity swap at the current moment. So the investors of QThrill may find this note rather encouraging as they will get a swap with the Venture Builders equity. Hope that brings a smile!
- Investment Banking Team: Favcy VB’s have set up its Investment Banking team to help pre-growth founders to model themselves better and to seek capital that would be right for them. We have shortlisted a few candidates for our team in the Philippines, who are expected to be in action from Feb 1st 2023.
- SUP Mansion: Startup Mansion was conceptualized to provide visibility to our portfolio companies. The idea currently stands scrapped as our investment team with Yamika Mehra, partnered with Horses Stable. We will re-look at SUP Mansion later.
- CLG Builders: Community Led Growth (CLG) was a big miss from our Venture Builder Assembly Line and we introduced it in 2022. CLG will be a combined responsibility of the Founder and our Growth Team, whose size has been considerably upped to help portfolio companies boost their early revenues.
- Venture Villas - Venture Villas were conceptualized as a startup zone away from the bustle of the city life. A place where our teams could invite prospective founders for a weekend stay and build, break ideas.
You will be happy to note that our first Venture Villa is up in Barlowganj and is nestled in Himalayas, all set to host Founders and their dreams!
Needless to say, my annual report is an outcome of staying in this lovely cottage. A place, which will see the birth of crazy new ideas and crazy new founders. That is it from my side.
Thank you for patiently reading my annual update. Hope your belief in what we do and why we do only gets stronger from here.
Pranav Chaturvedi, from the Favcy Venture Villa at Barlowganj
31st December 2022