Anirudh Ashok Damani is the Managing Partner at Artha Venture Fund (AVF) – India’s first early-stage Micro-VC Fund that invests in Companies in their Seed Rounds with the follow-ons, up to Series A.
He is also the founder of Artha India Ventures (AIV) – a family office set up in 2012, and Artha Energy Resources (AER) – a company that invests in renewable assets. Anirudh is a fourth-generation entrepreneur, who firmly believes that investing in start-ups at an early stage creates the maximum impact in their lifecycle. Currently, he holds an impressive investment portfolio of 75+ start-ups in multiple sectors, which includes Agnikul, OYO, Purplle, BabyChakra, and Coutloot, to name a few.
Apart from professional expertise, Anirudh is also a certified scuba diver with 40+ logged dives. He also writes blogs on www.showmedamani.com, where he shares his thoughts, ideas, and experiences. As a blogger and thought leader, he has amassed over 35,000+ followers on his social media channels. Every Thursday evening, Anirudh hosts #DamaniTalks – a live talk show and podcast. He also avidly answers questions people have about Venture Capital and the Start-up ecosystem via Quora and his AMA tag.
In an exclusive interview with AsiaTechDaily, Anirudh says:
My mentor gave me a great tool to motivate myself, live each day as though it were a page in the autobiography of your life; what would you like to write about today? Therefore, I am on a quest for constant self-improvement, pitting me that woke up today to do better than the me that went to sleep last night!
My life was my message, I stood up for people even when they were not around and even if I disagreed with them at a personal level. I did not back down from a fight, and while I lived by my principles, I forgave quickly.
I would recommend any founder that is just starting. Have a simple hypothesis to solve a well-researched problem that comes from a personal pain point, and finding the solution for it should excite you to jump out of bed every morning.
Anything less is a recipe for failure as the founder of a fund or a startup.
Read on to know more about Anirudh Ashok Damani and his journey.
What background and domain expertise do you have?
Anirudh Ashok Damani: I started as a door to door salesman in West Texas, selling long term electricity supply contracts to homeowners. Later on, I got selected to set up the B2B sales team, which went to become one of the top commercial brokers in Texas, landing a nationwide contract with the biggest fish of the energy industry, Suez Energy. I rose to National Sales Head with their product with 14 offices and overseeing 500 salespeople that added billions of dollars’ worth of energy contract to their US balance.
This once-in-a-lifetime-experience provided me with the base on which I built my career. I learned: how to sell, the importance of culture, how to recruit, who to recruit, how to create leaders, and, most importantly – how to scale.
Five years into the job, I got an opportunity to buy a large piece of the company and restructure operations in the Great Recession aftermath. I cut my teeth as a bootstrapped entrepreneur, and after several ups and downs, I also got a chance to sell my company to move back to India.
I attempted to set up a similar operation in India with my brother, who had graduated from Babson. I saw first-hand the massive gulf between the US and Indian entrepreneurial ecosystems, especially when setting up and operating a business.
While I set up my energy company (Artha Energy Resources), I sensed an opportunity to leverage my cross border operating and entrepreneurial experience to help founders of early-stage startups reach from zero to one. This decision, in turn, put me on the path to invest in Purplle, Exotel, OYO Rooms, NowFloats, FYND, Beardo, Tala, Interstellar, Karza, Lendenclub, to name a few of the stellar businesses that I’ve had the privilege to be a part of from the very start.
When did you first think about starting a fund?
Anirudh Ashok Damani: As the 4th generation of an entrepreneurial family that had not even taken a bank loan to do business, managing third party capital was a far cry from what I wanted to do. However, I was working with several family offices in syndicating investment rounds into my startups. One of the principals floated the idea of setting up a fund to syndicate these rounds quicker and negotiate better terms as a single cheque. When I asked other family offices if they would invest in my structure, I was amazed at the positive responses, with most of them telling me, why did you not think of this before.
Armed with their support and the excellent returns my portfolio had generated, I got my family to back the idea of becoming a fund manager.
What kind of startups/sectors have you invested in till now?
Anirudh Ashok Damani: I’ve believed in investing in themes from the very early days of my investing career. Themes diversify your risk as they cut across sectors, while sectors (IMHO) tend to win and lose investor favor very quickly.
My first portfolio focused firmly on consumer spending on travel like OYO, HotelsAroundYou, VistaRooms, Repup, Maximojo, and business spending on B2B enterprise plays like NowFloats, Exotel, Maximojo, etc.
In my second portfolio, three tectonic shifts in the Indian economy changed my investing thesis. First, demonetization caused a quantum leap for digital payments, then Jio’s low-cost access to fast internet speeds made each smartphone a retail outlet, and the advent of GST created the largest consumer market in the world. I allocated capital into consumption plays (like Coolberg, Actofit, Beardo, Sattuz, etc.), consumption enablers (like SuprDaily, Fynd, Coutloot, etc.), and B2B enterprise (like Karza,vPhrase, etc.).
These are the themes that I had taken into my current fund as these themes were beginning to develop. The lockdowns just provided these themes another booster shot.
What types of companies do you look to invest in, and what’s your mental model for investing?
Anirudh Ashok Damani: I invest in early revenue companies with a strong team that addresses a large and growing addressable market. I love working with founders who display three specific traits viz they work hard, study hard, and teachable.
I keep a simple investing framework so the new members of our fund can imbibe it quickly and start serving the ecosystem with clarity.
What is your typical investment range, and how many startups you invest in per year in general? Additionally, could overseas headquarter startups get funding from you?
Anirudh Ashok Damani: I invest $150-$500K into early revenue companies with 2/3rds of our fund’s investible capital allocated to follow-on rounds into those companies. Therefore we could invest up to $2 million into a startup over three rounds up to Series A. We’ve equipped ourselves to invest in 10-12 new startups per year and to manage an active startup portfolio of 25-30 companies at any point in time.
We can allocate up to 25% of our fund’s corpus to companies domiciled outside India but only as long as they have significant business activity in India.
What would be the KPI that you usually check about the startups’ growth?
Anirudh Ashok Damani: It may be diverse in each industry like LTV, CAC, MoM, etc. but it will be helpful to understand more about your additional investment factors.
As a sales manager, my mentor imprinted two beliefs in my mind, i.e., numbers do not lie, and you either have numbers or a bloody good story.
Therefore, for each of my startups, I like to discover 1-2 metrics that can define the business’s health. These metrics take a bit of time and testing to find, but once the founder or I have discovered it, it makes the company’s management and our investment in it very simple.
How do you handle this COVID-19 outbreak situation for your fund’s survival in the future?
Anirudh Ashok Damani: Our Growth Partner Vinod and my first goal were to ensure our portfolio companies made it out of the crisis alive. It meant that we put in all our resources, i.e., people, time, network, and capital to work. We created a 21-point action plan from a talk that one of the founders in our Venture Partner Network gave to our founders and oversaw the program’s implementation.
We scheduled weekly calls with our founders, keeping our ears close to the ground on their progress and providing them with an outlet to air out their issues. This approach ensured that they all made it through the most challenging phases of the lockdown. In an even more critical move (in my opinion), we started scaling down our virtual interactions (while maintaining a weekly reporting regime) as the founders regained confidence and started growing again.
Therefore, as contrarian investors, I believe in investing heavily in a bear market when valuations plummet to multi-year lows. Nobody else is willing to write a cheque because that is when you get the best valuations and deals. As we had actively stayed out of investing in the frothy valuations of 2019, we had more than 85% of our fund sitting in cash, which we are deploying today.
Right after being an investor like in the early days, there must be some tough times in building up the first fund along with building up a second fund or giving back the good returns to those LPs. If there is any similar tough time like this, please tell us more about it and how you (or your team) overcome the difficult times?
Anirudh Ashok Damani: Starting a fund is very much like starting a company but only infinitely more challenging to raise money – at the early stages. I like to set up what Jim Collins calls Big Hairy Audacious Goals (BHAG). Then I get buy-in from my partners, encourage my team, and then push myself to do just 25% better than each one of our potential.
An example of this would be that while everyone around me suggests that I do a $20-25 million fund that would be easy to raise, I set out a $30 million target. It got all of us adequately excited and sufficiently scared to push out our best performance. Therefore, even a significant economic event like COVID did not slow us down. As of today, we have raised more than $23 million for Artha Venture Fund, but I think we will end up raising $40 million, i.e., 33% more than our target but 100% more than what we thought we were capable of doing.
Following the BHAG methodology ensures that the team looks at each problem as an opportunity to overcome, as pushing beyond your potential will cause growing pains. However, as a wise man once said, “obstacles are what you see when you take your eyes off the goal.”
Additionally, do you have advice for anyone looking to start a fund?
Anirudh Ashok Damani: It would be the same as I would recommend any founder that is just starting. Have a simple hypothesis to solve a well-researched problem that comes from a personal pain point, and finding the solution for it should excite you to jump out of bed every morning.
Anything less is a recipe for failure as the founder of a fund or a startup.
What mistakes do you see founders make when raising money?
Anirudh Ashok Damani: The most prominent mistake founders make to confuse the quantity of money raised with the raised quality. Smart and active investors will make $1 feel like $5 by providing tangible and intangible benefits. It is not fair to your venture if your investors sit passively on the capable and expect you (as the founder) to drive all the results – it is not what VC investing is supposed to be.
What’s your advice to entrepreneurs who have a chance to meet investors like you? What are the top 3 questions that you always ask the founders?
Anirudh Ashok Damani: Please explain the problem, the problem’s size, and your solution for it in less than a 4-5 line paragraph. If your business proposition takes anything more than that, then as a founder, you either do not know what the gap is or who it is addressing, or your solution does not address your target audience.
What’s your general thought about the term “Global,” and what are the important factors (criteria) for local startups to consider for international expansion?
Anirudh Ashok Damani: Every business will address a global audience if it wants to be massive, but not all businesses must have global ambitions – the founders get to make that choice.
The most important criteria for local Indian startups that want to go global are to expand operations into all Indian states. The diversity of Indian culture with over 5,000 languages and multi-disciplinary faiths is such that once a business can scale successfully in India – its people and processes can scale globally.
What kind of startup or tech industry will impact the world in the future like 2-3 years locally in your view?
Anirudh Ashok Damani: I believe in investing in tech companies with solid business models; therefore, all my investments have tech as an essential pillar. I believe that the government’s recent moves will provide massive opportunities in SpaceTech, FinTech, and Consumer. These themes will become the bedrock of economic growth for India in the 2020s.
What are the top-three books or movies (TV series) that changed your life and why?
Anirudh Ashok Damani: Several books played a pivotal role in the most important decisions of my life. The Four Agreements by Don Miguel Ruiz taught me the importance of simplifying the decision making from my emotions; Captain Gopinath’s Simply Fly convinced me to stick out as an entrepreneur-in-India. Richard Branson’s The Virgin Way gave me the type of culture I wanted Artha to indoctrinate, and I took a lot of inspiration from The Snowball written on Warren Buffet into my investing style. Therefore, I was focusing on a set of investing principles with which I would invest and looking for great businesses at fantastic prices, which could throw out tons of operating cash at the mature stages of the company’s journey.
I could also rattle off movies inspired at different moments in my career A Beautiful Mind, The Secret, Lakshya, The Blindside, and recently Gunjan Saxena.
How do you keep yourself motivated every day?
Anirudh Ashok Damani: My mentor gave me a great tool to motivate myself, live each day as though it were a page in the autobiography of your life; what would you like to write about today? Therefore, I am on a quest for constant self-improvement, pitting me that woke up today to do better than the me that went to sleep last night!
What would you like to be remembered for?
Anirudh Ashok Damani: That my life was my message, I stood up for people even when they were not around and even if I disagreed with them at a personal level. I did not back down from a fight, and while I lived by my principles, I forgave quickly.
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