How we decide on our investments #1
Reflections on why we invested in Ripen, Beet & Airbound; and how they changed our outlook on the future.
Many founders did not have a concrete product when we met them. Ritvik at Ripen had applied for a completely different idea on our application form! And at the interview, his ideas had changed. His pitch wasn’t even ready but we placed our bets on two things. One, his connection with the GenZs adulthood problems and passion to solve them. And passion is really hard to hide! Aakhon hi aakhon mein pata chal jata hai. And two, his approach to the problem. Shipping a quick MVP to validate his hypothesis and iterating on it. His design sense is absolutely brilliant.
Similarly, the team at Valerio had just developed their MVP. Yogender & Sandeep in YoZu had a basic functional AI bot. But all of them were just too passionate about the problem they were solving. And meanwhile, they are also convinced why these sectors are critical for the Indian story.
Here are key takeaways of what we look at when we meet founders
What is the proof that customers will want what you want to sell? You don’t need to have a full-fledged product. A simple no-code experiment can do too. Surveys don’t help.
What is the future of the world like, and where does the company fit, according to the founder?
What is the next stage for the founder, and what is the plan to get there? How will they spend the $25k we give them?
We don’t have many views on sectors & industries. And the reason is, we want to know from founders what the world will (& should) look like. However, we do end up forming views once we invest in them. The conviction is contagious. Let me share how Airbound, Beet & Ripen made us understand the future of commerce.
Airbound taught us why delivery infrastructure is currently unsustainable, and we need to quickly shift to machines to deliver groceries & meds. Taking a first-hand account from a Swiggy/Zomato delivery person, we found that their lives are becoming more unsustainable. They make bare minimum wages (with downward pressure), face uncertainty in fuel prices, and are pressured by central management. On top, delivery companies rely on fossil fuels, which is neither good for profits nor for the environment (as compared to electricity). Zomato is already investing in sustainable initiatives for IPO launch. Hence, we strongly believe the delivery ecosystem has to be disrupted on 2 fronts: One, from an energy point of view. A shift caused by government regulations & the global sustainability movement. Two, delivery partners demand better working conditions and wages. Here's evidence from a popular Twitter account that validates this trend. Here’s another example of a recent strike. These two forces will push all delivery companies to move towards more sustainable practices: for the humans + the environment. And drones are likely to be the winner. The global market opportunity for all drone use cases is larger than $20B and is likely to grow at more than 50% rate owing to the military, consumers, and commercial sectors.
Beet taught us why the future of e-commerce has to be community-based. We understood that local & rural e-commerce can never be captured by the business models of Flipkart/ Amazon. Commerce has always been socially and relationship-driven in many markets - and the convenience of fulfilling orders quickly requires a logistical infrastructure that can only be built in urban cities with migrant workers, transport infrastructure, and online payment options. Hence, commerce has to be rethought for non-urban cities as the needs, social dynamics, and logistical infrastructure differs greatly. Think about what goes into processing an Amazon order. You discover a product on a website -> pay on UPI infra -> order gets picked from warehouse -> vehicles, and workers ship it to nearby center -> a worker performs last-mile delivery.
Each step has a component that is either tech, labor, or real-estate heavy - and such capacity is not very predominantly available in rural India. On the other hand, the gap between an urban consumer and delivery person is high in terms of socio-economic status. Inequality dynamics increase more in cities and is declining in rural areas. This means that, in rural India: producers, order fulfillment persons, and consumers have a higher likelihood to be of the same socio-economic status. And hence, it requires a more community-focused approach. Where you essentially help each other out to perform e-commerce. Philosophically, this is very Gandhian in nature.
Ripen taught us that the future is young and savvy. GenZs are occupying a large chunk of our economy now. India is 27 years old by the average age. In terms of economic participation, they are increasingly earning more through tech jobs. And then investing & buying goods for consumers. Take the Zomato IPO for instance. More than 70% of people participating on the PayTM app were less than 28 years old. In a conversation with Kailash Nadh (CTO Zerodha), we learnt that the majority of their customers are young people under 27, which is a recent trend. This phenomenon is largely driven by the tech economy. With more jobs that pay young people well, for their tech & new-age skills - they are bound to be a sizeable part of our economy. And more than 70% of them are online. Hence, they exploit internet to discover new-age internet first products. They are also willing to purchase from lesser-known brands if they are authentic. This is just creating a new economic shift in brands, product discovery, and building online communities.
Ripen is addressing a piece of the problem. Now that GenZs have the economic power, they will want to solve their most dreaded problem: adulting. Think about the highlighted learnings of your youth. Moving to a new city, filing taxes for the first time, negotiating your first salary, or finding a roommate. All were challenging and many were support systems less. Ripen is changing that. It’s the support system that GenZs always needed but now have the capability to pay for it.
Meeting founders is a blessing to me. Not just do we invest in founders to make VC returns, we learn tremendously from them. They help us think analytically and creatively about the future they dream of. Next time, We will share our thesis on Valerio, YoZu, and Listnr :)