Interview of Mehul Mishra: Investment Manager at Brand Capital

He is an MBA graduate from ISB Hyderabad and has been working in consulting and venture capital for over 7 years. He has worked in management consulting for Accenture and A T Kearney and most recently Brand Capital which is the venture capital arm of the Times Group. Parallel to this, he has been investing in silicon valley startups for about 5 years. 

What is your investing philosophy?

Venture capital returns generally follow a power law curve in which few investments usually account for a major part of the returns. So your best investment could return 3000x and second-best could return 300x and the rest would be 10x and several would be 0. Due to this, I look for companies that are really targeting large markets both in the B2B and the B2C space. It’s important to look for traction, a strong founder and team, and a product that is far superior to the current competition.

What has been the most important investing lesson you have learned so far?

From an investor’s point of view, traction is king. It’s easy to get distracted by other metrics such as users and retention rates, cost of customer acquisition, website traffic, etc. Investors always need to be able to keep their eye on the ball and focus on the most important startup metrics.

Which has been your best investment to date?

I have three current unicorns in my portfolio that I invested in at the seed stage (Flexport, Memebox, and Weave).  Flexport which is essential “Uber for shipping” is currently valued at 3 Billion and is the best investment that I have.

Can you share any investing mistakes that you made and the lessons we can learn from it?

When I started out I got too caught up with trending sectors. When Whatsapp got acquired by Facebook for a significant sum, everyone in silicon valley rushed to fund messaging apps irrespective of whether they were any good or not. Sometimes investors get too caught up with the hottest sectors and fund sub-par companies that are building products there. 

Turns out this is grounded in history. I was watching an interview with Warren Buffet recently where he was talking about the era when televisions were invented and all investors suddenly started investing in TV companies. Most of those companies did not last.

Is there any particular investor or author who has had a significant influence on your investment thinking? 

Peter Lynch has had the most influence on my investing style. His investment thesis is simple and gives you the tools you need to develop your investing skills. I like that Peter Lynch does not overcomplicate investing and his book “One up on Wall Street” is a personal favorite.

What would be your advice to Entrepreneurs seeking funds?

Raising funds is seen to validate by founders as a validation of their start-up. True validation comes from organic growth, and most founders are too eager to raise funds when they aren’t ready for it.

It’s probably a good idea to perfect your product/service in one city before trying to raise funding to expand to other cities. Once you raise the funding you will be constantly pushed for growth by investors and it becomes difficult to really develop a great product/service under pressure.

Do you invest in specific sectors? If yes, then which are the sectors?

I am sector agnostic so don’t really track sectors that actively. That being said I invest in companies where the product is easy to understand. I have found most unicorns these days are coming out of gaps in the market. Sectors where technology has not penetrated that well. You would miss out several of these if you only had a sector-specific approach. That being said if you have a large VC firm with several partners it makes sense to have each partner cover every sector.

What is your outlook for the present startup ecosystem in India?

The outlook for the Indian startup system is quite bullish. India has the third fastest-growing start-up ecosystem after China and the USA. Global VC’s are increasingly looking at funding Indian startups and have started setting up offices in India.
Bangalore appears to receive the majority of the funding followed by Delhi and Mumbai.

The average of founders also appears to have increased. Earlier we used to see several people in their mid 20’s as founders. However this has now increased to mid-’30s and on average theses, founders have a higher probability of success.

According to you what is more important (Team, Idea, Traction, etc.)?

 Traction by far. Traction is the whole point of starting a company.

According to you what is the perfect time for a startup to raise funds?

The best time for startups to raise funds is when the demand for their product/service exceeds their ability to supply. The best reason to give to an investor for raising funds is to say that you have plenty of preorders that you cannot fulfill.

What is the value add that a founder gets, along with your investment?

Since I have been investing for over 5 years I have seen several startups go through their journey and have a fair idea on the challenges they might face and the approach by which they solved particular problems. That kind of expertise you only get after spending plenty of time in the industry. 

I have also been very close to a start-up himself, my brother started a food tech company a couple of years ago and we would work together to figure out solutions to daily challenges, his company was acquired in 2016 and has added significant perspective to his role as an investor.
That being said, I am a pretty hands-off investor, so I only guide portfolio companies if they come to me for help.

Would you like to share any of your recent investments and why did you select them?

I recently acquired secondary shares of the US-based billion-dollar startup Doordash. I had already acquired some shares when they acquired another company from my portfolio called Rickshaw for a stock-swap deal. I had been monitoring the company for a while since it acquired my portfolio company. The food delivery market in the US is huge and the company has outperformed competitors like Uber Eats, Grubhub, Postmates and now plans to expand internationally.

Answer in one line:

  • Share your original quote: “The first 2 to 3 years of setting up a company are the hardest. After that, you can manage with a lot less effort”
  • First 3 slides that you look in a Pitch Deck (in serial order): Team, Product, Traction
  • How would you define Startup: “Something that solves a major pain point”
  • What are the attributes of an Entrepreneur: Relentless and willing to adapt” 

What are your views about StartupLanes?

It is an excellent platform for startups to access knowledge on fundraising, events and get access to fundraising information