The most respected Angel Investor shares his wisdom – Sasha Mirchandani speaks to CiteMan

Economic Survey 2010-11 Report* of India, registers an 8.6% growth for the year 2010-2011. It is further expected to register a growth of 9% for the year 2011-2012.  In the wake, of such a growing economy, when opportunities for growth are galore, CiteMan Network speaks to Sasha Mirchandani, one of the most respected Angel Investors in India. Sasha, is the founder of Mumbai Angel and  has been working on a series of investments. The exit from InMobi has been one of the best success stories registered in the entrepreneur arena. He has been mentoring and guiding entrepreneurs through business ventures. He recently spoke at TEDx Mumbai, disseminating knowledge that empowers the thoughts of leaders. His words go beyond books and can be implemented in the real world. ‘What to do?’ can be learnt from books, but ‘What not to do?’ can only be learnt through practical experience. Leaders like him, openly share ‘What should be done?’ to strengthen every learner. Here’s our effort to share that working knowledge quintessential for entrepreneurs:

CiteMan Network: What is your vision of the future of Online Community Learning in India? You discussed the scope for open learning at TEDxYLT. What are the challenges and opportunities that you find towards this online open learning platform? Here we do have peer-to-peer working knowledge sharing with a shorter turnaround time. What challenges do you see in building this cognitive surplus and what strategies would you suggest to overcome it? Both from the technological and user end
Sasha Mirchandani: There is an immense opportunity, and it is highly scalable into different verticals. The learning through this medium can reach the grass root level. The availability would increase and learners would have more access to the knowledge. The disparity in the requirement of learning is the challenge. Bridging them with an understanding of a requirement of each learner is the challenge. This is the way education can reach beyond barriers. The way information is shared by the experts can build up a robust system such as Ushadi, which can help administrative authorities to take decisions. Motivating the experts for such an information sharing is the challenge it can be met through involving a large number of people across vertical lines creating a greater knowledge base. Making it authentic will meet the demand. Integrating with different verticals merging knowledge with one another creates a greater value addition.

CiteMan Network: During your speech at TEDxYLT, you mentioned there is a global size market available locally.
Sasha Mirchandani: Yes exactly there are opportunities, which will widen. My predictions, that by 2020-25 India will have that largest base for investors. A growth rate of 10% will support the market within the country. This will allow for more investment opportunities which will be available for the entrepreneurs. We do have investment scaled up for such an escalating requirement.

CiteMan Network: Entrepreneurs operating locally face a competition from the global players. In the recent time, we have Quora and Linkedin making an entry along with other major players. In such a scenario, what strategies would you suggest for the local Online Business communities, in order to manage their growth in the market?
Sasha Mirchandani: Well, obviously the expanding markets will attract the global and local players equally. This will make the market more efficient. Staying focused to the needs of a customer would remain the game changer. Every player needs to refine their service and stay on the top of the competition. Customization would hold the key. This should be best delivered by the local players as they are closer to the customer, hence can identify their needs better.

CiteMan Network: From an investee’s point of view, at what stage should a business owner look for an investor? We know ‘going concern’ is the most preferred by the investors. What are the due to diligences that a ‘going concern’ should complete before approaching an investor?
Sasha Mirchandani: Well, it would depend on the business owner, as to what they are looking for. Whether they look for money from an investor or the support to make their business grow big would depend on them. The investment should be a result of a business vision. It cannot be the means to an end. The business Idea requires to grow and get nurtured, that should remain the focus. A research on which investor invests in the verticals, finding an alignment and then approaching the investor works best.

CiteMan Network: How to strike a balance between sharing the business idea and raising an investment? In case of an online business, there is a popular belief that businesses should not open up too much data, such as analytics or revenue sources specially while raising an investment. However, the investors would require reviewing the analytics. How would you suggest that we find a middle ground?
Sasha Mirchandani: It needs to be researched by the business owners on what kind of data is required by the investors. It can be easily found by talking to the companies where these investors have already invested. The data needs to be provided on similar guidelines. Every investment firm follows a definite pattern for data representation to make a decision The information needs to be provided to suit that pattern.  This information is held by the privacy policy, hence trusting the investor with the information will not affect the business. It would rather support the decision making.

CiteMan Network: If an online business does not plan to invest heavily on the advertisement for growth and rather work through the word of mouth, what strategies would you suggest in an Indian scenario to such a company?
Sasha Mirchandani: Well, if a product and the service is strong, it will not require advertising. It can create a loyal customer base and grow through word of mouth. There are several big businesses, which have grown through the word of mouth. It makes more sense as it can save the cost on marketing and advertising. The business can focus more on the product development. In an Indian environment, word-of –mouth works strongest. People are most likely to buy what they hear is good and not what they are told by the advertisements. Focusing on the product should remain the key.

CiteMan Network: Please explain beyond the limits of academics, how can a business get venture capital? Such as, what should be the first steps? How should the business be prepared? What are the fundamental parameters from a business owner’s stand point to set the entry and the exit strategy?
Sasha Mirchandani: The idea behind the business needs to be strong, approaching investors would make sense when the idea will have a feasible market and a growth opportunity. Researching on the investor to know what criteria they use to make a decision is quintessential. The alignment of the investor with technology, culture, and growth rate needs to be studied. Approaching an investor who is not in the sector to which the business belongs, will only lead to rejection. The key would remain in understanding what the investor is looking forward to investing in. The entry and the exit strategies need to be understood at an early stage. Why an idea is conceptualized by the business owner will remain the key. The bandwidth for which the business is set up should guide these strategies. Few build businesses to sell them to leading players, whereas few are built to compete. Such as Bazee which was successful sold to Ebay or an InMobi that starts with a proposition and then competes with the market leader. Once this vision is set, the exit becomes easy. Not every business can run forever. Keeping a clearer view on when it would mature will help the entrepreneur decide.

CiteMan Network: Which sectors,markets,technologies and countries are more suited for investments by Angel Investors?
Sasha Mirchandani: Technology and the internet are an area that the investors find interesting. It is again based on the amount of market opportunities that the product or service would offer. Often it might be the case that the technology may seem very promising but may not offer a market in the long term. That is not an area where the investor would invest. India is definitely a launch base for ventures.  The internet is one of the largest areas we are considering.

CiteMan Network: What does an AI or VC expect from the entrepreneur? What are the red flags for an investor? How does an investor balance the domain expertise and business acumen in an entrepreneur?
Sasha Mirchandani: The red flags are generally the attributes of an entrepreneur. Often a technical expert may not have keen business acumen, hence it might work if they bring in a CEO. The technical expert would be more inclined to develop a product. The balance between the domain and business expertise might not be found in one person. However, that cannot remain a flaw forever. Either it gets supported externally by hiring the right candidate to run the business or the efficiencies are modeled intrinsically.

CiteMan Network: How does an Angel Investor manage the relationship once the term sheet is signed? Does he get into the operations/marketing side of it or does he remain a hands-off mentor?
Sasha Mirchandani: This is a good question, it generally depends on the culture of the investment firm. Ideally, an investor offers support and platform which an entrepreneur might need to grow. It would then depend on the entrepreneur to leverage on the strength of the investor. The investor can only act as a mentor if approached for help.  For e.g.:  Mkhoj becomes Inmobi and then switches their business model from the SMS advertisement to mobile web. This kind of transition is what an entrepreneur should aim for and emerge as a market leader.

CiteMan Network: What strategies would you suggest for an online business that has prioritized perpetuity over growth, such as the Wikipedia strategy? In an Indian context, what should be their strategies to stay small yet scalable to manage the market? From an investor’s stand point, what are parameters that such an organization should maintain to manage its business in the long term?
Sasha Mirchandani: There cannot be one stroke for all. What will work for each firm will remain different from what will work for others. It requires an in-depth research and understanding of the vision of the firm and its competitors to set such a strategy. Perpetuity is best planned with a view of the market and deciding what amount of the market would be targeted by the firm.

Mark De Rond, had blogged** on HBR about implementation of serendipity in business. According to him, it is the capability to see a meaningful combination in the circumstances and opportunities, where others do not. Business opportunity drives ideas in spite of scarcity of resources. India is the leader to ‘More for Less’, strategy.  As quoted by Sasha in ET***, ‘“$200,000 is the new $5 million. You don’t need more to set up a new business in capital-efficient sectors such as the internet,” This multiplies the benefit and accentuates the effort of the entrepreneurs who are working to make a difference.

* India Economic Report.

**Make Serendipity work for business.

*** Economic Times.