Episode 141 / October 31, 2021

Kushal Bhagia, CEO, FirstCheque on Early Stage Investing and building moat as founders

43 min

Episode 141 / October 31, 2021

Kushal Bhagia, CEO, FirstCheque on Early Stage Investing and building moat as founders

43 min
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As per a recent article by Economic Times – “Early stage investing is at an all-time high in post-pandemic India with the country averaging one seed round a day this year.”

As of Sept, so far over 240+ companies have secured their first funding in 2021 v/s 302 companies in 2020, and 257 in 2019, and with a few more months remaining, this number is expected to cross last year’s benchmark.

In today’s episode we’ve brought Kushal Bagia, CEO of FirstCheque, to talk about the current scenario of early-stage funding in India.

So far with their first fund, they’ve done over 100+ deals, and some of the well know portfolio companies are Giva, Kaagaz, Able Jobs, and Mailmodo among others.

During the episode, Kushal talks about the influx in pre-seed investing post the pandemic, how they’ve created a moat for themselves and much more.

Notes –

01:19 – Background prior to FirstCheque

03:00 – Various domains where they’ve invested

05:35 – Performance of the companies from Fund-I

07:48 – Change in valuations in early-stage funding

13:18 – Top performing portfolio companies

16:50 – FirstCheque’s edge in early-stage investing

25:49 – Value addition by FirstCheque to founders


Read the full transcript here:


Siddhartha Ahluwalia 00:00

Hi, this is Siddhartha Ahluwalia, welcome to the 100 entrepreneur Podcast. Today I have with me Kushal Bhagia, Founder firstcheque. Firstcheque is a pre seed and seed stage fund and has invested in approximately 100 startups. Kushal, welcome to the podcast.


Kushal Bhagia 00:17

Thanks Siddhartha. Thanks so much for having me.


Siddhartha Ahluwalia 00:20

Kushal, I would love to know how your journey of firstcheque got started, how firstcheque got built?


Kushal Bhagia 00:27

So you made one factual error while introducing me. I’m not the founder of FirstCheque. I’m CEO at firstcheque. So firstcheque was actually conceptualized by India Quotient Seed Fund, you know based in in Mumbai. we wanted to create a program which will basically back founders through a network of other founder angels, right. so, India Quotient had been doing seed investing for a long time. Gagan there used to run Powai Lake ventures which was the network of founder angels from IIT Bombay, who were re-investing founders and graduated from IIT Bombay. And that really worked. they ended up backing you know, Ola, Housing, Toppr, Fynd. So, gagan really wanted to ensure institutionalize this model and he found me and we knew each other for a while and then we decided okay, let’s go try and set up a fund which basically backs founders angels and then let those founder angels pick companies for the fund and the fund will basically just invest with them wherever they do. So that is how the firstcheque was conceptualized and started. We started all this in Jan. 2019. So yeah, that’s been my journey before we started firstcheque I graduated from BITS in 2012. And after that, I ran my own ed tech startup for four years Nayi Disha studios. At that time, we didn’t know what is large market, what is high growth, what is VC fundability, and learned all those things the hard way. And so that company didn’t work out. After that I was with upgrad which has recently turned a unicorn, Ronnie Screwala as online education venture, I was getting corporate BD there and post upgrad when firstcheque happened. so yeah, that’s the story.


Siddhartha Ahluwalia 02:09

So India quotient founded firstcheque and you joined like sometime after, or at founding stage.


Kushal Bhagia 02:16

At the founding stage, basically about two, three months after they conceptualize it. I came on board.


Siddhartha Ahluwalia 02:21

Got it. And how has been the journey for the last two years.


Kushal Bhagia 02:27

It’s been pretty epic. We’ve backed almost 100 companies now through the first fund. It’s been very fast paced, lots of learnings. You know, like, I think we’ve seen startups from every possible corner and every possible sector of the ecosystem, you know, right from space tech, deep tech, AI startups, ecommerce, payments, FinTech, EdTech, you name it, we have done it. So and we’ve got quite an opportunity to partner as so many great founder angels, like, you know, Fareed from Sharechat, Chad with it from Vidit from Meesho, Harpreet from CoCubes, Farooq from Fynd. And we are learning just learning from these guys who have already built and run businesses, working with them to support startups that they find working with our own entrepreneurs. So it has been an awesome experience.


Siddhartha Ahluwalia 03:17

So earlier, I remember the firstcheque first fund was closely associated with Angel List, right? and you have raised the second Fund, which is approximately 100 Cr. So how is how’s the second fund coming along?


Kushal Bhagia 03:37

that’s still in the works, we haven’t closed it yet. We’ll launch it in maybe a month, month and a half from now. This time by setting up our own fund. Fund 1, we are done, you know, by the angel list India platform. So it’s in the works, I think, by hopefully by December, we should be live. the process of setting up a fund with Sebi and getting all the approvals in place. It’s quite lengthy in India. So it’s in the works. And yeah, hopefully all goes well it should be live by by the end of the year.


Siddhartha Ahluwalia 04:11

And it will still follow the initial model that you have various founder angels as Venture Partners who find companies to invest in firstcheque back along with them.


Kushal Bhagia 04:24

Yes, we will continue, so the model as worked in our opinion, and we are able to get into really good high quality, you know, pre-seed deals through the founder angel network. So we intend to double down on that model. And you know, write larger cheques on the fun. So, yeah, that’s what we’ll continue doing.


Siddhartha Ahluwalia 04:43

And if you have an internal scorecard of these 100 companies from the first fund, I believe the first fund was somewhere like 12-13Cr size.


Kushal Bhagia 04:53

It was 15 cr. About $2 million. Yeah, that was a size


Siddhartha Ahluwalia 05:02

So how have these companies performed? Right these 100 companies that have you invested in like?


Kushal Bhagia 05:08

It’s been fantastic, I think about 45 have already raised follow on rounds. And the last 30-40 deals have happened only in the last like 12 months or so. Right? We did basically, around 30-35 deals in 2019, 40 deals in 2020. And another 35-40 deals in 21. So all put together, the last, if you look at the first cohort, the first 32 deals we did out of those, 20-21 have raised follow on rounds. Now, if you look at our second cohort, which is next 30-35 deals, out of those 12-13 raise follow on rounds. And out of the last cohort of 30 deals, that we have just finished doing already 3-4 have raised follow on rounds. Overall, about 45 companies have raised follow on rounds, the number should go up soon, I think the last, you know, the last 40 odd companies are in the gestation mode. So we know that maybe in the next six months or so, usually what we see is once we most of our deals are pre product, pre revenue companies, like at least half of them are pre product, and almost all our pre revenue. So once we fund the company, they ship product, they show some traction, you know, build out what they set out to do. And that is when a VC round really happens. So that takes about, you know, you could say anywhere from six to 12 months to 18 months. So yeah, we’ll see how the scorecard is like in another 12 months from now.


Siddhartha Ahluwalia 06:34

And there has been a significant change in the ecosystem. Can you share, you know, the kind of valuations pre-seed round, you used to do in 2019-2020 and now 2021?


Kushal Bhagia 06:46

Yeah, so there has been a change for sure. It’s hard to you know, stick to price in the current market environment. But we, I wouldn’t say that it applies broad base to everyone. Right. So if you are a founder with some pedigree where you know, you have built and run a company before you had a exit in the past, or, you know, you worked say as VP at razor pay, or cred or FreshWorks, or Flipkart or other storied companies, then you will end up raising at a far higher valuation in today’s environment. But even then, what we see is that, like a VC round role is typically happening, I’d say, one and $1-3 million raise was happening at a 10 to 15 million, sometimes 20 million valuations. But people who only have this pedigree are able to raise VC rounds on day one, right, because otherwise a VC can’t underwrite that kind of risk without a product live. That’s generally the rule. Of course, there are exceptions. So most people are still having to do $500k pre-seed round something less than 500k, which they used to, you know, build a product, ship product, get some early learning from the market and then know have a better narrative for a VC pitch. So those rounds, I would say still happening as a 2 to 3 million valuation. Sometimes it goes less than 2 million if it’s a very raw founder. But that’s roughly the range. But yes, there’s no rules as such prices, what the you know, buyer is willing to pay and the seller is willing to agree to so it changes all the time.


Siddhartha Ahluwalia 08:22

And we have an upper cap of valuation in this market that you will not participate beyond 15 million valuations from first cheque.


Kushal Bhagia 08:30

Yeah, we ideally, so we see deals in two categories. Category A is first time founders, younger folks, you know, pre-product deals, where risk is significantly higher. Those deals we don’t do beyond $2-3 million valuation. Category Two is where you have, So if one of our venture partners say know somebody senior, right, somebody would say 10 plus years of experience, somebody who has built and scaled products before or somebody who has run a company and sold it before. And for those deals, we don’t bother about valuation as much if our venture partners know the founder, right, like we need to, if we have a strong, we have a strong sort of view on the person execution capability. Right there in that scenario, we don’t we’re not too bothered about the valuation. But otherwise, we do care about the entry price. Yes.


Siddhartha Ahluwalia 09:26

And out of the 100 companies, you would have done right how many of them came through venture partner and how many were directly you know, first cheque reaches out?


Kushal Bhagia 09:36

I would say about 70% would have come out come through the VP network. So, we also get a lot of deal flow, I mean, we get I would say five to 10 deals a day. But the deals we get signal to noise ratio is very low. So, if VP sends that deal, it’s usually somebody they know or somebody they have worked with in the past. So those are almost, you know, very quick yes for us. But if it comes to us, then it we put it through a process, we then introduce a person to a venture partner who can evaluate to a domain expertise, then if the venture partner decides to do it, we then do the deal. we don’t go out of our way to unilaterally, you know, find a company without our venture partners. So effectively, all 100 deals have been done with a VP. But I would say about 70% were sourced by them and 30% would have come from our network.


Siddhartha Ahluwalia 10:29

And how many Venture Partners does FirstCheque have currently?


Kushal Bhagia 10:34

we have about 15 Venture Partners.


Siddhartha Ahluwalia 10:37

And the number keeps on increasing every year?


Kushal Bhagia 10:41

No, we like to keep it around that. So there are some folks who know that there’s some cases where people start adding larger cheques on their own, or they start writing a large volume of cheques on their own. So beyond a point, the VP Relationship always doesn’t work out. So, we add new people, we also remove some people, you know, based on if their investment strategy is changing, or if their frequency has gone either too high or too low. Sometimes, center partners also focus on building their own companies, right. So there are points of time where they may not have the time to do angel investing for the next year or so. Or for whatever reason, they may decide that I don’t want to do angel investing anymore, right? So there are a variety of factors that we need to look at. And, yeah, it’s not a constant number. First cheque as a fund will still do 30 or 40 deals a year. But that venture partner number can vary like that that’s not written in stone.



Siddhartha Ahluwalia 12:12

so, if you have to name like top five companies by valuation from first cheque, who would they be?


Kushal Bhagia 12:21

So not sure if I can disclose this because a lot of these rounds are still you know, unannounced. So yeah, I wouldn’t name them by valuation yet. But, you know, if I have to say the companies, which are doing let me name 10 companies instead of five of them, lot of them doing really well. And this is not in order of valuation. So I would say JIVA is doing really, really well. It’s d2c to see silver jewelry brand. fashinza are doing really, really well. It’s it’s a b2b marketplace for the fashion supply chain. Then fleetX is doing really well. It’s a SaaS company, which enables fleet owners to manage their operations much better then anar is doing really well. A b2b social network for SMEs in India. Then, mailmodo doing really well. it’s a AMP email based SAAS platform, then superk is doing really well. it’s, you know, oyo for Kirana stores sort of like 711 for for India.



Kushal Bhagia 13:25

Then Eplane company is doing really well. They’re building flying taxis out of India. And I would also say Savio doing really well. Savio is building a b2b pharma, b2b marketplace in the in the pharma sector for connecting retailers and distributors. So those are the companies. You know, still too early to say, you know, these companies are no guaranteed unicorns or soonicorns or anything like that, because it has been about one and a half, two years since we invested and most of them. But yeah, I think the early signs look really good. So let’s see how they progress. But yeah, I mean, I’m sure there are at least 10-20 more than I could name, which are, you know, doing which are, which are very promising. But these are the ones who have sort of raised big follow on rounds or are onto something.


Siddhartha Ahluwalia 14:26

And what what’s the evaluation process like at first cheque?


Kushal Bhagia 14:34

So this is very different from most other funds, right for us, at pre-seed, only two things matter, size of market and quality of team. Right? So because most key seed investments, the team pivots, after a while they find adjacent ideas, they won’t even be doing what you thought they’ll be doing when you invest. So it’s hard to sort of, you know, go by what the product is, when they’re starting, so we look a lot at the Quality of the team, plus the size of the market. now if the deal has come through a venture partner and if venture partner knows the founder. Right and is vouching for the founder then we will almost blindly invest, then it doesn’t even, as long as it is VC fundable space, will go and invest. If the deal has not come to a venture partner, if it has come to our network, then we will apply our sort of mind on you know, what the caliber of the team, we will do some market sizing and just ensure that this is a big space. market sizing will do even for deals that that will be sourced, but usually they have already done it when they when they bring the deal to us. But if it’s not to them, then we’ll also do ref checks on the founder. And then we’ll get a domain expert to evaluate which is usually one of our venture partners, right? So if it’s a SAAS deal, I’ll send it to one of us SAAS Venture Partners. If it’s FinTech, we will send to FinTech venture partner, and so on, they will evaluate. They will give their views and then once they decide that we want to do it, then we’ll do it with them. So that’s the process.


Siddhartha Ahluwalia 16:00

And currently, you know, do you think there is a moat for first cheque in the precede environment in India, like, almost like you are seeing, let’s say 5000 companies are raising money, you will see like half of them in a year?


Kushal Bhagia 16:23

Yes, I think I would say we see three to five 500 deals a month, roughly 300 to 500 deals a month is what we see. So same ballpark as what you said. It’s hard. Ironically, VC itself is not a winner take all business, right? Like you will see funds at every stage and every sector succeed. Because finally, the power law game means that you know, even if one of your companies really, really works, you will make all your money back many times over. Right? Whereas, so I don’t view the VC world or other VC game as a winner take all and I think most other VCs would agree. So I don’t see like, I don’t think the question of a moat as such is the same as what it applies to a startup. But if you ask me, Do we have an edge in early stage investing? I think we do. Because we invest through this founder Angel Network. And people want them on their cap table Founders who are starting companies are looking for this kind of advice on product on growth on operations on hiring or fundraising. Right. And they realize that, you know, getting a founder on board is invaluable, because usually they have been there and done that. Right. And they are somebody whom they treat as, like you people treat investors slightly differently than they treat a founder Angel. founder angel is more thought of as a buddy or as a brother of sorts, you know, will sometimes yell at me, but mostly is there for me. And you know, if they’re on my side, that’s the perception that founders. And it is generally true. So that’s, that’s one big edge we have, which will continue to keep. Secondly, I think we built a very strong community of our own. So we have back almost 100 companies now. So all these guys are on one platform together. And there you ask anything from you know, how do I hire a designer? Or where can you recommend a PR agency or my Facebook account or blog, can you help me any kind of tactical problems you face, some other firstcheque founders would have also faced it, and they will resolve it for you almost instantly. So that becomes very powerful, then we are now connected to pretty much every VC in India, and a lot of VCs globally as well. So you should take firstcheque on the cap table. Whenever you’re ready to raise your next round, we can open whichever doors you want you know, wherever you want to raise in India or abroad. So that becomes a big plus. Lastly, adding because of the network, right, we end up being able to add value beyond just our own time. Like for example, if you’re a SaaS company, you probably will find 5-10 and customers within the first check portfolio. Right. Or if you’re literally building a productivity app, you will find other people who can, you know, dock for your product that becomes super valuable. Lastly, we also have this, you know, strong, like network of service providers who have partnered with us. So everything from you know AWS, notion, Webflow, Zoho, FreshWorks, like you name it, whatever tool your startup might need in the first one to two years, they will get some discounts or these are completely free, or they’ll get some heavy discounts, because of the firstcheque investment, because we have done partnerships all of them. we have, I think, 50 Plus such deals now that we have cracked. So all this put together makes it a very compelling proposition for a founder that not only do I get a founder Angel, I get more money from this founder Angel because of firstcheque, plus I get this community plus I get all the VC connects plus I get you know their help. That firstcheque does a demo day. So all of this put together I think makes for a pretty compelling reason for founder to still take our money despite the Hot funding environment and you know, all that we see in the market. So yeah, that’s how we think about it.


Siddhartha Ahluwalia 20:07

Yeah. And what’s the average firstcheque size from the fund in every company?


Kushal Bhagia 20:15

The average size right now we’re doing is about $100,000. So about 75 lakhs is what we are deploying per company.


Siddhartha Ahluwalia 20:24

And how do you spend your time between, you know, finding new companies investing in them? And working with the existing portfolio?


Kushal Bhagia 20:37

I would say maybe 50-50. Yeah, this is hard to answer, it varies honestly, week to week, sometimes, whenever, basically, my rule is a portfolio founder needs help, you have to be there for them. So that is always prioritized. Usually we try and like, whatever you ask from us, we will give it to you in the next 24 hours, that is the tag that we like to keep, whether it is advice, you need connect, you need help, whatever we need, right? Like, if we can help you, we’ll help you within 24 hours. If we can’t help you, we’ll try and find somebody else who can help you. That’s yeah, that’s how we process it. every other making hour is trying to find new companies to invest in. Now, I don’t know what the split would be like, but I’d have to guess it probably be 50-50.


Siddhartha Ahluwalia 21:25

And there have been also instances where you lost companies because of you know, they couldn’t give allocation in this current scenario


Kushal Bhagia 21:34

it does happen, but very rarely, very rarely. So this will have to see in fund 2 to be honest. Because in fund 1, cheque size was much smaller, we had the option of doing 25 lakh rupee cheque also, in fund two, we will have minimum ownership targets and valuation thresholds and so on. So it’s possible that some founders may not be able to make space for us. So we’ll see. But as of now, doesn’t look like that. That is a major problem. I think only in cases where there is a large VC leading around, then there, they tend to take up a lot of ownership for their own funding, then a location for others become a problem sometimes. We’ve also seen a VCs also actually not that hard knows, right, like people want to have more people involved with their companies, because there are finally more people who are looking for the founder and for that company, making connections, giving them advice, helping wherever possible. So this has not been a major problem. But yeah, let’s see it could become one.


Siddhartha Ahluwalia 22:37

And what would change with the second fund? Like how many companies if you have thought you would back? What would be the average cheque size from the second fund?


Kushal Bhagia 22:46

So average check size, as I said, will be 100k per company in the second fund. So first fund was actually lesser. first fund itself was putting 10 lakh rupees in every company. But because of the AngelList Syndicate, we were doing anywhere from 25 to 50 lakh. 50 lakh was average excise in the first fund, that will become 75 lakhs in the second fund. So, yeah, that’s the, that’s the leg up, we did not want to have a 300-400k Cheque size because of your last question of you know, whether we’ll be able to get allocation or not, because most of our founder angels on their own right five lakh cheques with them, we can probably get in 50-75 lakhs or up to a crore, but I don’t know if he can write 300-400k cheque, for 300-400k cheques, then you have to be the lead of the round in the pre seed stage. And we are not sure if that strategy would work. So we deliberately kept on 100k cheque size, so that we can work with other people in the ecosystem, led other fund lead rounds and join them and we can also lead and people can co invest with us. Yeah, so that’s that.


Siddhartha Ahluwalia 23:51

And how many companies you’re looking to back from the second fund?


Kushal Bhagia 23:55

yeah. So we will do 100 companies again from fund 2. which will be about 30 to 40 deals per year.


Siddhartha Ahluwalia 24:02

And what the criteria be more, because you’re putting a larger cheque from the fund this side right from as compared to 10 lakhs now it becomes 75 lakhs or even 1 cr, would the criteria evaluation become more stricter in the second fund


Kushal Bhagia 24:16

No, no, it will be the same. we are convinced that the model is working so we are doubling down on you know what worked for fund one. only ref cheques something we started doing over the last two one and a half years like in the first 25-30 companies many of you should not even know that. But that we put in place and otherwise no I mean, as I said if the VP knows the founder and we are good to go. That’s what has really worked for us and that’s what we’ll continue to do.


Siddhartha Ahluwalia 24:46

And as a value add right so for example, there are different value add for different sectors from VCs have specialized arms, right, how do you continue to add value let’s say it’s a SaaS company. And as they grow, right, how does firstcheque continue to keep? Does the value add?


Kushal Bhagia 25:06

Our goal as a pre seed investor, right is three things. Primarily, this is what founders care about. So while when they come and meet you can you make my own happen and give me some capital. So speed of deployment of money is super important to appreciate founder, which we are a plus one. So if you meet us, we like you, typically in two to three weeks, two weeks, honestly, is what will get the money in the bank? We are standardized agreements, are terms simple enough to read and process and we just deploy the money. Yeah. Okay. Two ways, can you help me find PMF? Okay. Now, this, again, is where our venture partners really specialize, because they have typically done this in their own companies, or they work with the company on iterations or experiments, you know, trying different TC different ICPs. And you know, figuring out really well can the product work? helping them find PMF, right? And then three years, can you help me with my next round. So, next round is where we add the most value. So we will help you structure your deck, your narrative, will give you feedback, like there are many found like you can talk to multiple of our founders who have raised over 3 million, 5 million, 6 million round from a VC after almost all of them. And I knew that the first cheque team spent maybe one to two weeks with us on our deck, going through multiple iterations getting us to you know, improve our pitch, practicing the pitch with us introducing us to the right VC is given an intel on who the right partner at which fund that you should talk to, right, which fund would right would be a good fit for you. So all of those things, right? Navigating through the fundraise process for the next round. That there again, we are a lot of value. Beyond that, like we feel like the founder finally run a show, right? So like, then they’ll call us when they need us. And typically, we see the call out maybe once in three, four months. So they need a Connect, they need some help also on by our immediate goal as a pre seed fund to help this company ship product help this company find PMF and help them get to the next round. So that’s what we focus on.


Siddhartha Ahluwalia 27:04

And why do you think the model of first check has worked?



Siddhartha Ahluwalia 27:12

It was a very new model, which the you and India Quotient got together and succeeded? Well, you have a brand. Right? So if you can distill down to the reasons


Kushal Bhagia 27:29

so I think the thesis for us was that founder angels have an edge when it comes to early stage picking. Okay, like every in every investment strategy, right? You have to ask what is your edge? If you’re buying public stocks or private stocks or buying bonds, commodities, whatever you’re doing, you need to have some edge that is where your alpha your returns will come from, right? Our thesis was that founder angels have three edges, right? One is that because of their brand, they automatically get great deal flow, right. So like, if you look at for example, Farookh from Fynd, most IIT Bombay founders, somehow end up pitching to Farrokh because he’s an IIT Bombay alum, they see him as somebody who has been there done that built a company is what his own brand writes, anybody who’s graduating from IIT Bombay building of a payments company, SAAS company, ecommerce company would like to have Farookh onboard, where he will add value to the company, right. So they get great deal flow, that is when they see most of the deals around them. Number two is because of their operating experience; they are often able to anticipate what is coming next. So Farrokh will know ecommerce may what’s going on. What might happen next, where the gaps lie in the market, what more users want, right? Sometimes it might be a SAAS tool that he can himself use at the company, sometimes it might be a consumer product, which you know, which fits the market needs but doesn’t have yet, right. And then third is again, because of their personal brands, then almost never get a no, if they want to invest, the founder is always happy to make space for them. So these are three ages, which we see that founder angels have. And if you look at unicorns in India, in China and US right, almost all of them you will see have raised their first round or raise some money from founder angels in their early round. And that that trend is I think likely to continue and intensify even further. So that is their edge. And that is why we feel that this model works that if we keep them happy, we add value to them, we help them know deploy money better, and make better decisions. And the partnership is really working with them, they value us and we value them, then we’ll continue to have that edge and that’s what we focus on.


Siddhartha Ahluwalia 29:38

And do you also then say no to competing companies, because let’s say of founder angel or venture partner gets you a company which a sector you all already present in. So what do you do in that case?


Kushal Bhagia 29:54

So if a venture partner knows the founder, then we will still do the deal even if it’s a competing company, because as I said we are investing at pre seed, right? So the market and team is what is important to us not the current product. If you look at YC, or TechStars, or any other pre seed program or pre seed fund, right Pre seed funds almost, you can’t have a no compete clause as such, because these founders themselves pivot. Right. So it’s very hard to say we’re going to do what in the next two years. And also, we are doing such a large volume of companies that it’s hard for us to say, in this space, we will do only one company. And we disclose it to the founder, that that we are back tube, we might buy another company. And while backing also will tell the company we are backing that listen, you already have an investment in this company. But if you don’t have a problem, then we don’t, so we disclose it to both the teams and then we go ahead


Siddhartha Ahluwalia 30:45

and have there been companies in the 100. Portfolio. There been any shutdowns till now.


Kushal Bhagia 30:51

Yeah, there have been so I think about five companies are shut down already. And it’s possible that I mean, we fully expect a lot more well, because at pre-seed, we are taking the highest class of risk. So it’s very likely that a lot more will shut down. As of now five apps sort of either shut down because of co-founder conflict, or they run out of money. They’re not able to raise the next round, and so on. So yeah, about five of us sort of shut down. Let’s see what the number is in next year or so.


Siddhartha Ahluwalia 31:25

And when you think of IRR, right, so is there IRR calculation which has happened for these 100 portfolios or is too early to do that.


Kushal Bhagia 31:38

It’s too early, right? It’s honestly too early to do that, because they say like the last 30 has just been deployed, it’s been like, we literally just did the last, like last few deals in the last two months, right? So hard to say what that number would look like. And it doesn’t like its sort of pointless to calculate it at this point also. So yeah, we’ll probably check back on this maybe in a year from now.


Siddhartha Ahluwalia 32:02

And, why does, you know, being at first cheque personally resonate with you, with your, what I can say personality, because you could have joined India Quotient team directly, or you could have joined a fund like matrix directly. Yeah.


Kushal Bhagia 32:21

So all honestly, my role is very different from a traditional VC role at our IQ or at a matrix or Sequoia or any established fund. One is that this was exciting because we got to create a new brand from scratch. It’s a new concept, I don’t think evolved over people have created something like a network of founder angels investing and other founders. That was super exciting to me the opportunity to learn from these founders and you know, see how they built their businesses, what they think about companies, how they evaluate companies. So that was super exciting. And, you know, I really am grateful for that opportunity in my life. Second is I am, I don’t think I can do the traditional VC role of you know, doing three deals a year, which is what most partners at Sequoia, IQ, Accel etc., will do right because they will deep conviction, they spend a lot of time with their companies. And after investing also, they will take a board seat. And they will talk to their companies once in two weeks, at least and you know, be closely involved at that level. But as far as deal making is concerned, typically they’ll do three, maybe four deals, maybe five deals, they’re at tops eight. So I’m not sure if I’m cut out for that pace of life. I quite enjoy the action at firstcheque doing three four deals a month. And that gives me a broad exposure to different people, different sectors, different opportunities, and the learnings I get from that are I feel you know, a lot more than what I would have gotten with a traditional sort of VC role. So yeah, I that sort of my enjoyment.


Siddhartha Ahluwalia 33:59

And what are the personal strengths you bring to first cheque.


Kushal Bhagia 34:07

I think being having been a founder has been the best. The best thing that I could have brought to the table as a as a VC now, founders really appreciate the empathy that I bring. And I think most people that take our cheque, basically like that about us that we think and talk like founders, right so we have a very no bullshit, no nonsense approach to things. We are very responsive. We will get back to you within 24 hours as I said on most things that you need from us and you’re upfront and you know, very direct and what in our dealings like there are no, like once we come on board, the founder is very clear that okay, because Kushal is our team, right, like there’s no there’s no two ways about that. And they can see that in our approach and is what they really appreciate. They don’t hesitate to give us bad news today. That’s why the relationship is with almost every team in the portfolio. And I think my having been a founder has a large sort of role to play in that. I am not only able to sort of help you on companies’ issues, but I can usually empathize and give you advice on you personally, as a founder, you know, what you’re facing day to day, how to deal with a situation that is that is sort of where not only my experience as a founder, but my experience now as a VC having 100 teams, usually, if you’re facing an issue, I would have seen that issue with some other founder already. And that experience that that we bring to the table, now I started adding a lot more value. So that’s about me Otherwise, I think sectorally, we learn that themes change, Sectors change, and so on, but company building itself is an art and that that is something that even I’m trying to imbibe from working with too many themes. And hopefully, that is where we will, we’ll keep adding to our forte.


Siddhartha Ahluwalia 35:58

And currently, let’s say you know, in a year 30 to 40 companies get backed by first cheque What do you think right? The of the current market, where there are there for so many pre seed VCs? Right. And the known ones are, first cheque is there, better capital is there, Titan capital is there, then there are so many others, right. But do you think this this trend will continue? Or do you think that the market will slow down because we are at a peak of a boom?


Kushal Bhagia 36:35

I think it will continue, I don’t think it is going to like no graph that goes like this, you know, is actually going to get crazier as what I think I don’t think it’s going to come down because see, I think what has fundamentally changed in India is aspiration of our people, right? Like the kid who used to come out of IIT Bombay, his computer science class in 2010, their dreams, where we will go to Stanford, and we will go join Google and Facebook and we will work there, that was the level of their aspiration right. Now the aspiration is I will raise $2 million, and I will ship this product and I will sell it globally. Right, and I will build a billion-dollar company. I know when you see your seniors do that, right, you see your batchmates do that. You are not going to settle for the job at Google anymore. Right? That is one. Two is the macro environment has gone dissolved. Right. Like as there is UPI is, everybody has an account. Everybody has a smartphone everybody has jio. So the market itself for software and software enabled businesses has exploded maybe 100 times in the last five years. Right. who’s thought a company like any mall will, you know, come out where people are buying cows and buffaloes online. Right? So it’s a new opportunity, right? The internet is basically now percolating under every single sector of the economy. And not just India and globally, people who have worked in India and building products from India are selling globally across the world. Right. So I think the market for VCs has actually gone up maybe, maybe 100x It’s hard to really put a number on this. today we have what 40-45 unicorns in India right? It’s possible that by 2030 and we may have 1000 unicorns right so I think this is going to get crazier I don’t think pre-seed activity is going to come down. Of course pre-seed by the risk is the highest and the rewards are also the highest if your strategy is working. So I expect more competition, I expect more funds, I expect more activity by every fund and also expect more outcomes so I don’t think it’s a bad idea to start a new pre-seed fund in India today because I feel there’s a lot of action going on and if you play your cards out you can still make a lot of money in pre-seed companies


Siddhartha Ahluwalia 38:51

and what’s your own personal goal from first cheque


Kushal Bhagia 38:56

so I really love helping founders man like I don’t think I have a goal apart from that I mean, I want to I really want to be the most helpful person on every cap table that is my goal and I just want to be in a place where no founders will ever regret taking money from first check and we should always be a positive value add in a company’s journey and every founder we back should you know be proud to tell others that first cheque is our investor and you should you should take their money to read that and people and that’s already happening and the reason it happened is because people genuinely see value from the investor right? So that’s the goal like you know, keep being like we should be known as the best pre-Seed Fund in India by far that it’s a no brainer to take their money no matter what price no matter what terms but get on board. That should be the that should be the power of the brand.


Siddhartha Ahluwalia 39:53

And I believe you have also started like various initiatives, right? Do you have a one global Funding day, once I hear which one happened like two, three months back, you are also creating a lot of content for your, like on your Twitter It is it all to enhance the brand power of first cheque


Kushal Bhagia 40:19

one is a demo day we did that we’re doing twice a year, more than brand that is to basically give our startups a platform to enable them to raise around the last one, we did five companies got term sheets after the demo day. Right. So that will do again, maybe a second version in November. And then again, we’ll keep doing that twice a year. The content we create, yes, that is definitely to build the brand. And you know, to help most startups discover first cheque, enable more of them to come which to us. It’s also to give value back to the community. The term sheet series that have done is largely to help young founders understand what is the VC term sheet what terms are involved, what to be careful about what not to be, you know, finicky about and so on. Then we have also started a new series now called portfolio shorts. Again, we are featuring our own startups. what we saw is that everybody wants to take interviews of the unicorn founders, but nobody really cares much about the early-stage founders because they haven’t made it yet. Right. But they need some visibility to be able to attract talent to be able to attract investors and to attract customers. So we thought, why not us like why can’t we give them a platform for this? So then we started interviewing our own founders or releasing, you know, those interviews on YouTube. So we just yeah, just last about a week back. So, let’s see how that goes.


Siddhartha Ahluwalia 41:35

Thank you so much Kushal. It’s been a pleasure hosting you on the podcast.


Kushal Bhagia 41:39

my pleasure Siddhartha. Thank you so much for having me.



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