In this episode, we chat with Mitesh Shah, who has headed finance at startups like Ola, BookMyShow & Being Human Clothing, and currently is the co-founder at Inflection Point Ventures.

IPV comprises about 4,000 investors, who are CXOs at various top-of-line brands across the globe. Till date, it has been part of 55 deals and these include names like Milkbasket, Blusmart, Truly Madly, and Multibhashi among others.

During the podcast, Mitesh emphasizes how the average early startup mortality rate is generally 70-80% across industry and has been brought down to 30-40% in the case of IPV portfolio companies. And he credits this to the robust support system between startup founders and IPV’s extensive network of CXOs who guide and enable them to solve problems across hiring, growth, and monetization amongst others, with their rich experience.

For any early-stage founder looking to raise funding, or CXOs who wish to contribute to the Indian startup ecosystem, this conversation can be of great value, and help them take their first step with a structured approach.

Notes –

02:20 – From being a traditional CFO to become a VC

05:47 – What role does Inflection Point Ventures play?

07:01 – Helping the founders with CXOs on platforms

09:35 – Back Story: Investing & exiting from BharatPe

10:56 – IPV Thesis: “Businesses will keep pivoting, invest in great founders.”

19:05 – Portfolio investments in E-vehicles, Healthcare, SaaS among other sectors

28:02 – Message to founders: “Be very selective & critical while choosing the investor you want to have.”

Read the full transcript here:

Siddhartha Ahluwalia 00:02

Hi. This is Siddhartha Ahluwalia. Welcome to the 100x Entrepreneur podcast. Today we have with us Mitesh Shah. Mitesh is the co-founder of Inflection Point Ventures. Welcome, Mitesh to the podcast.

Mitesh Shah 00:15

Thank you, Siddhartha. Great to be here. Lovely to be now on this podcast and good to be in your company.

 

Siddhartha

Mitesh began his career with Mandhana Industries Limited, an apparel manufacturing company in 2001, where he handled various projects including the company’s IPO in 2010. And its exclusive global licensing deal with Salman Khan’s Being Human brand in 2011. He joined Ola as CFO in December 2013 and played a pivotal role in the evolution of another biggest startup story of India. Then he came to Bookmyshow in 2016, as a head of finance, where he spearheaded finance function and played an active role in strategic business management. In 2018. Mitesh Shah, along with Vinay Bansal, Ankur Mittal, co-founded Inflection Point Ventures from 283 investors on their platform in 2018. They have over 3500 investors. Now who are all CXOs at different companies. So Mitesh would love to know you what made you shift to venture that tell from you know, being traditional CFO. CFOs are more risk-averse in their nature?

 

Mitesh Shah 01:28

No, very well puts Siddhartha, I think that’s the general notion. But if you look at the recent breed of CFOs, and all, I think there has been a tremendous shift, right? I think the community as a whole CFOs have realized that, I think, where you try to kind of protect that, you know, 1x downside, there is greater merit in actually trying to capture the 20x upside. And that’s how, you know, there is a way to look at every potential idea. That’s what I’ve learned, you know, in my career, working with three of the top most consumer brands, starting with Being Human and then Ola then Bookmyshow, I’ve been fortunate enough to work with two of the top most digital consumer brands Ola and Bookmyshow. And, you know, my fascination or penchant for the startup, investment or mentoring started with my OLA days. My first investment I did somewhere around 2015. Right when I funded a company, which was founded by one of my ex-colleague from Mandhana, appear to be a lending company called LenDen Club. The idea was that I was working on a digital startup OLA and looked at new ways of doing business. I think we started again, when I joined Ola was a very small company, we were about 115 size, present across only three cities, right? Running only two categories of cabs also. And as we grew, we grew across 11 different categories, even beyond mobility, to finance to fleet technology, to food servicing, you know, foodtech, and a lot of other things. So, the way OLA changed, you know, I got a fair bit of insight into startup world and digital world where, you know, founders will have certain sort of ideas, their strengths and all, I think they need something more than capital. And that’s what I think kind of I love this space, I thought there can be a lot more that I can contribute to the growth of these startups and founders are beyond capital, right? And that’s how my journey as Angel Investors started and that sort of always intrigued me. Even when we started Inflection Point Ventures, me Vinay and Ankur and 3 of us, the idea was that while you know there is capital available in the market, but there is dearth of smart capital in the market by smart capital, I mean, founder at his place, needs early stage investors to be on his side of the table, rather than the opposite of your table and asking him about questions around (kab grow kar rhe ho,kab next round hoga, kab exit milegi), this is a breed of founders where you’re catching them young, they need your support, and they need your support something more than plain simple mentoring. mentoring, probably to me is a very abused word in India, people say we have mentor to a particular startup, but it’s just about plain simple words. What a true mentor needs to do is not only put his skin in the game in the form of capital, but also help the startup open a lot of doors. Today inflection point venture, as a group of top notches CXO in the country that we are, we are able to open those across any sector, any industry, any company within less than an hour and this strength of the group with this able, you know, investor base, pedigreed investor base, we are able to curate also great ideas and that’s what founders and investors would love about this. So that’s my journey as an angel investor. For me, this means something more than investment, in fact, a lot more than investment. I think it’s that passion of creating successful businesses or helping founders to create successful businesses that keeps me driven.

Siddhartha Ahluwalia 04:48

And also, can you share the structure and or the platform of inflection point ventures fund, how it operates?

Mitesh Shah 04:54

Yeah, sure. So, like I said, Inflection point venture founded in in late 2018 by a few of us, it’s a platform, which has investors on one hand, and has the founders on the other hand, every month, we look at close to 200 startup ideas, you know, understand them, meet the founders, meet the market sources, try and understand this space in detail. And finally, choose a handful of ideas out of this to be presented to our investors. Three and a half 1000 plus investors were spread across 21 plus different countries of the world. So present to them through founder pitch calls. You know, on a Saturday morning over a zoom call, the ideas get pitched to the investors, we get a very structured feedback from the investors on the potential of the idea and the potential of the founding team. On top of that, with our experience, and with the subject matter experts who are typically part of our group itself, we do a thorough due diligence and analysis of the startup idea, including various aspects of the business market size, demand situation, supply situation, unit economics, competitive landscape, funding, funding structure, and a lot of other things. And then finally, we decide to invest into the startup and pass the call to our investors, who then you know, invest into this particular startup. So, we handle end to end the processes, it starts from the time we meet the startup, it starts with shortlisting of the startup to be presented to the to the investors based on which is the pre investment phase, then there is investment phase where we do the thorough due diligence, we understand the idea, we meet with the founding team and not many other stakeholders in the ecosystem. Finally, do the you know term sheet and SHA negotiation and sign up for the investment. So, this is the investment phase. And the most important and critical aspect that we focus the most at inflection point venture is the post investment phase, I believe, that’s where a lot of the other early-stage players actually get it wrong. For them, the process is only pre investment in investment. Very, very often post investment is completely neglected, thinking that investment is a transaction-based approach, you invest into a particular startup. And then I think it’s up to the founder to utilize your funding and grow. I think he needs you the most in this phase actually, where through our ecosystem, through our connect with the VCs, through our connect with other partners in the ecosystem, we help the founder to grow his business, look, founder at early stage probably will be a great tech guy, a great product guy, a great business development guy, he will not be an all-round CEO. That’s where I think cxos like us our platform like us come into picture. And we make sure that we train him. And we provide him enough education around various aspects of the business which makes him successful. Right. So, we have a full fledge export network to help the startup founder across various domains, including PR including IR, including corporate governance, legal fundraising, operations, business development, right? corporate development, a lot of these things, right. And that’s where we kind of fill in that gap into not only the founder himself, but in the founding team. Also, we also help them hire good resources, set up their business model, or guide them in terms of the correct business strategy. And that’s where the results come. So where at the early stage, you see, normally in the industry, the mortality rate is 85% plus 90%. Plus, out of 10 startups to invest, or eight of them are expected to die. And it’s the balance to which you can kind of carry the weight, or the burden of returning the capital for the first date as well. In our case, with all these due diligences, and all the support and all the mortality rate come down significantly lower. And that’s what we’ve proven with our portfolio of 70 invest in companies so far, and it keeps growing every month.

Siddhartha Ahluwalia 08:39

Mitesh, tell us about your investment in Bharatpe. How did you meet Ashneer very early, and how did the current exit happen? And what was the exit for IPV there.

Mitesh Shah 08:50

So very interesting topic and you know nostalgic Ashneer and my friend. He goes back to actually days when I was CFO with OLA Ashneer was with American Express bank. We have been interacting with each other ever since then. And then he joined Grofers as CFO. I joined Bookmyshow, he moved out of Grofers as well. And then it was, you know, we actually we were the part of the founding team at IPV as well where Ashneer was also one of the few believers early on, worked with us. That’s when actually he came up with this thought of keynote doing something in the FinTech space, by leveraging on the strength of the QR code, delivering a ubiquitous QR code which can kind of help customer to use any payment system, UPI also at the backend and pay through any other any other wallet or any other player. That was the idea for me. You know, Ashneer came pitched the idea, it was it was a very simple conviction for me two things only right one, obviously Ashneer as a founder a great guy has known him for long. And that’s one of the theses that we had IPV think we also follow always is that Invest in great founders. I think businesses will keep pivoting. There will be external tailwinds or headwinds. It’s up to the founder how dynamic he is in terms of either capitalizing on the tailwinds or kind of making his business risk proof from the headwinds that he faces. And Ashneer was one such guy that I had kind of blind faith in having worked with him or having too long. The other co-founders also were, I met them and I got that confidence. Second was the FinTech sector. I think fintech as a sector, we’ve seen a lot of trends in the early-stage ecosystem, right there have been days of health tech being the blue-eyed boy of the investors then came EdTech you know, insure tech SAAS and I think sectors have come have had their fair share of rally. And then finally kind of to a certain extent subsite are kind of normalizes FinTech along with health tech probably are the only two sectors which never loses investors pencil. And I firmly believe that you know, the way we have grown in terms of the FinTech infrastructure also in the country, we started only as a bunch of public sector banks till maybe you know, early 90s then came private sector banks, then came wallets, then came, you know, payment banks, then came small finance banks. Today, we are talking about Neo banks. Today, we are talking about peer-to-peer lending platforms. Today, we are talking about online gold loans and what not, right? The, the entire landscape has completely changed. But yet every day you hear of a new innovation, every day, you hear of a new player coming into the market with some additional offering, or some more diverse offering. So that that is very exciting. For me, we talk about FinTech, personally very bullish about it, and have done a lot of investment in this space, in my individual capacity as well as, as well as at IPV. So, these were the two things that kind of got me interested in Finally, you know, wrote the check, you know, and it was, like I said, have more belief in the, in the founding team, and Ashneer, very, very glad the way the business progressed, I mean, I always used to keep telling Ashneer that I will exit the day that you will exit I have firm belief about the business, I feel almost like a co-founder have worked with him early stage during the initial days of Bharatpe. But that is sort of believed that I shared I mean, I was just joking with somebody that if somebody tells me that there is one thing that you can change. In the past, I said, I changed the amount that I invested in Bharatpe the day when I wrote the check, and maybe add a couple of more zeros around it. But yeah, I mean, that’s the benefit of hindsight. Jokes apart. It’s the satisfaction of I think backing the right founder, the right story. And, again, a validation of you knows, that it’s ultimately about the founding teams and sectors. If you do things, right, Ashneer was very, very clear. I think it’s not about monetization or early stage. It’s about how you grow the business. It’s about how you disrupt and challenge the legacy thinking. And that’s where the growth will come from, and you delivered on whose faces so I think he’s like a, he’s like a role model for CFOs. Like us. He himself was CFO with Grofers and today’s the one of the unicorns in the country is the founder of a unicorn company. So great role model, not only for CFOs, like us, but for the founder community.

Siddhartha Ahluwalia 13:14

So, what we all know the valuation of BharatPe right now, if 900 million, I think nine or 1 Billion but that what valuation you entered it in Bharatpe.

Mitesh Shah 13:25

I think you will be smart enough in maths yourself. As we all know, as we discussed about in the media, it’s an 80x return. So, remove the dilution impact in all I am not sure if I need to diverse the details of the investment, the price at which I entered, but the only thing that I can say is it was any other seed stage round that you will not blink your eye to kind of invest in that idea. Provided you have belief in the founder that we do come across a lot of such early-stage ideas every day in our life. Lot of them we don’t take seriously right, I think it’s that ability to identify that one winner. Right and nobody can get it 100% right. I think there is always some amount of belief and faith that I always believe that apart from everything else that you do when it comes early-stage investment. One big sector that always keeps you in the hunt, or helps your kind of separate men from boys is that faith and belief, your instinct at the end of the day has to be trained over a period of time, which will give you that insight that this is the guy probably can deliver. Return. x may vary, right that you cannot always expect 80x. But it’s the growth of the business idea and it’s the adoption of that idea. That kind of gives satisfaction.

Siddhartha 14:38

Ashneer shared on one media outlet, you know that the first-round valuation was the post money $3 million. So, I think is the size of the exit rate if we don’t consider dilution is 300 times obviously the dilution coming in is 80 to 90X

Mitesh Shah 14:54

And you heard from the horse’s mouth Yeah.

Siddhartha Ahluwalia 15:00

But what was IPV the only seed investor? There were other seed investors also in that round?

Mitesh Shah 15:05

No, there were other seed investors as well, on the round, I think he was looking to raise close to about a million dollar plus. So apart from IPV, there were other seed investors also in the round, but like I said, it was a very few chosen investor bases. Right. And because of our association with him, we were, IPV kind of one of the few chosen ones initially. And that’s how we ended up investing in Bharatpe. I mean, today, obviously, it’s a proven story, everybody knows that it’s a unicorn, and everybody knows the strength EBIDTA. Think of it two and a half years ago, when, like I said, I’m just reiterating myself that it’s that belief in that founder, at that point of time, where the idea that he came up with, you know, there was no plan for monetization, there was no plan, how the growth will actually come from, but it was something that we knew that he was, he was working on a very strong technological product, he was working with a full understanding of the market landscape, and that was most important thing at that point. So yes, I think apart from IPV there were other investors also but at IPV, we were very strong hold

Siddhartha Ahluwalia 16:11

And what have been the other exits for IPV till now?

Mitesh Shah 16:18

Well, there have been about five exits, I, again, cannot talk about with names because of the embargo in terms of the acquirers actually have not been public, and few of them are very large entities, you know, have several legislations or regulations on them, so wouldn’t take name, but we invested in a sports tech eSports company, which got acquired by a large, you know, player in the similar domain, or we invested in a fitness tech company, which got acquired by a large player of foodtech player, right, we invested in an early stage FinTech platform, which got acquired by another larger media conglomerate at that point of time. And like that, there have been another, you know, two or three exits. So, in a short duration of two years is that out of the 70 investment that we have done, you know, if you take a side 30 investments that have been done in last seven to eight months, because the funding is gone, and the founder will start deploying the money now. And you’ll see the result now, of the balance 40, if you were to consider or 35, if you have to consider, we have already, we already managed to secure five exits. And we have managed to secure 12 plus follow downs for some of these entities and with at least not less than another eight in the pipeline in the form of exits are follow down. So, I think this is a portfolio, which is enviable, like I said where the early-stage mortality rate is 85%-90%. Plus, here, we are talking about a mortality rate of less than 40%, less than 30%. In fact, right. So even those who have not gone for follow down funding, the founders have proven themselves by weathering the storm, even in the difficult times of COVID. Right. So, we haven’t had any mortality yet, in terms of the overall portfolio barring two which also are kind of supporting and will make sure that the founders do not really bear the brunt of financial calamity. But otherwise, that that’s the that’s the belief or that’s the, that’s the validation of the process that we deployed in terms of choosing the entities that we invest in.

Siddhartha Ahluwalia 18:27

And tell us about the other companies which have gone large right way of diversifying shareholder, right, what are the other large companies from the portfolio except Bharatpe?

Mitesh Shah 18:39

Well, quite a few of them. You know, to begin with, we have Phable in health tech, which got funded by Manipal Group. We got Touch, which is an artificial intelligence, ml-based platform works with almost all the larger content players, and even, you know, media players supporting sports and all that have grown leaps and bounds. You know, very soon, you’ll hear some stories, some big news about them. And likewise, a lot of other players that have been placed on the SAAS platform, there have been players on the, you know, virtual tech platform, you know, again, given the sensitive nature of information, or at various stages of deal making that they are, won’t be really comfortable in sharing names, but like I said, there have been 12 follows on downs and five exits. So, almost all of them have been in very good stage and a few recent investments, which we are, we have invested into OTP or near erstwhile proforma, which is growing really well. Probably one of the smartest founders that we know or we have come across a platform growing very, very well. Consumers are really happy with that platform. And likewise, we have always believed in great founders so Blu Smart on the EV space mobility space, the place the space is just exploding So some great vision for there is well, Niki.ai, we have one unique thing about the platform that that is that while early stage has been our bread and butter, and we believe in catching founders young our belief is that, you know, catch them at any point of time, and invest into great founders, building great businesses and delivering at great valuations. So as long as these three parameters are met, or met, we are not even averse to taking, you know, some late-stage bets as well. We’ve been mentioning to milk basket, we are invested into blu smart, we are in invested to Niki.ai, we are invested into helo. So, these are some of the bets where we believe in the founder, we believe in the vision. And we feel that even late stage, it’s not a never too late to kind of enter, when there is still a lot of upside left.

Siddhartha Ahluwalia 20:50

And what is the average check size, you know, across both early and late stages from IPV, with combined?

Mitesh Shah 20:58

great questions Siddhartha. So, we have a very wide range, depending on the stage of the startup, depending on the funding requirements of the founder, we have cut checks from 100k, up to $2 million. Right. And that’s the range that we have seen. So, depending on their horses for courses, depending on the stage of the platform, this is the range within which we have funded with our investors and investors are already always excited about great ideas. They’ve always supported our vision and our belief in our due diligence and backed our bet our plan. So, this is the range of on an average, you know, we do a funding of for startup, if you were to see the funding will be close to about a half a million dollars.

Siddhartha Ahluwalia 21:41

Got it. And this funding the currently the individual angels come on the cap table from the IPV network, which

Mitesh Shah 21:49

that’s correct. So, you know, again, it depends on the size of the startup or the size of the cap table, how crowded it is already, or how many numbers that are already there on the cap table, we work with the founder closely and you know provide for the solution. Idea is it while the individual investors will come on the capital of the entity as of now, and very soon we are launching our angel ai as well, you know, stay tuned for an announcement on that front as well once we have something formal to announce. But today, when the individual investor invests on cap table of the company, I think the larger pain point for founder is to actually look at the follow-on actions in terms of all the other regulations or signing or the documentation or statutory requirements that he has to get sign off from investors. So, we work like a fund structure in the sense that the founder has to deal with only one lead at IPV. And that’s what they love the most about us that for them. It’s actually like working with a fund only where the entire phases pre-investment, investment post-investment, there is a lead and pulley team within the IPV ecosystem like it will be me or Vinay or Ankur, and one of our analysts that will hand all them throughout the journey of their startup, right. And for any critical decision, they need not reach out to 50 or 70, or 80, whatever number of investors on the cap table, it’s only one shout out to us. And we will arrange for everything, there’ll be only one signature that the founder will require as far as his corporate actions are concerned. So, they have this complete relief that they are dealing with somebody like a fund, and they don’t need to kind of actually go and communicate their message. Even at the pre investment. We have seen that with a lot of other platforms, that for a small fundraise, also, the founder has to go and pitch his story to different investors a different point of time now, at a stage when he should be focusing on is building a business. And building is the tech and product and platform. You know, the founder actually wastes a lot of time in pitching the same story, playing like a record in front of different investors. Or here we kind of make sure that founders’ efforts are not wasted. From the time he meets us to the time he actually kind of get the cheque from us. There is only a structured amount of time that we take from the founder in terms of understanding the business in or doing your due diligence. And that’s after also in the post investment phase, we work very closely with him and save him from the efforts or from the time wasted in terms of running behind number of investors.

Siddhartha 24:16

And what have been the biggest challenges in the last two years running IPV?

Mitesh Shah 24:23

Well, there has been no challenge. Absolutely. I think maybe I’m not feeling it because of the passion for it. But I will not say challenge I will say learning every day, right the way we got moved from you said you know at the beginning of the introduction from 200 investors to 3500 investors it has been learning every day. It’s very important in one self-realization that we had is that you know at early stage from the investor perspective, never invest out of FOMO any investor that comes on IPV platform, we categorically tell him that this is by far the most active form of investment. If you cannot spend time in understanding the ecosystem or working with the founder to help him, probably startup investments are not for you, you should actually be investing in public market where you will have access to information every quarter and everything will be transparent. Here, the idea is that information will be closely guarded. And you have to work with the founder to kind of have access to that information, right. So do not invest out of FOMO. Because my friend is invested in Bharatpe and has made 80x, that’s not the reason for you to start startup investment, right? You have to gauge your own risk appetite, and more importantly, your own ability to learn. This is a platform where we actually have investors come, just spend time with us for the first six months to 12 months, without actually pressuring them for investment, you’re not forced to make any investment you can be on the platform idea is that learn awareness is the most important thing. So, one critical thing that we do is, you know, apart from having these investor calls, and founder calls, and every other pitch call, every Saturday or every periodically, we have our master classes as well, where we educate investors, or even founders, about the nuances of early-stage investment and building great businesses. And that has been the focus probably, that’s what, you know, the CXO base, or the corporate professionals love about us, and even now, businesses and family offices. Even VCs actually, like to work with IPV companies, because they know that great amount of duration validation has already happened with these companies. And they have been built in a way where it’s not about having a theme running today, and you know, getting popular, it’s about building a sustainable business, which can kind of sustain any storm in the market. Right? I believe. You know, Ashish Bookmyshow founder always keep saying that we are like cockroach which can sustain any sort of environment.

Siddhartha Ahluwalia 26:48

Great to know, you’re not thank you so much Mitesh, for sharing your journey of building IPV. And you have seen some great successes like Bharatpe. And I wish you all the best, you know, to promote large exits, like Bharatpe

Mitesh Shah 27:06

Thank you so that I think that’s been the moto to work with founders build great businesses, I think exhibits will follow automatically. Fortunately, we are in an environment today that where there is no dearth of capital, great founders’ great ideas get funded. My message to founder is that be very, very selective and be very, very critical of the choice of investor that you have an early stage, right? example of Bharatpe again, succeeded because the kind of investors he had behind him at the early stage of investment were all very, very cordial and very, very supportive. I’ve seen businesses actually losing a lot of ground and value because the choice of investors has been very horrible. So, it’s not the money which is only important, right? It is very, very important that from which account the money is also coming in. And that’s where I think, you know, platforms like inflection point ventures are becoming very, very handy and helpful. So, I think that’s my message to the to the founders that while capital is available, be very sure. It’s not a transactional relationship. It’s a relationship that will kind of continue with you forever for the life that you are there with the startup as a family.

Siddhartha Ahluwalia 28:15

Thank you for one Mitesh for being on the 100x Entrepreneur podcast. It’s been a pleasure hosting you.

Mitesh Shah 28:21

Thanks for moderating it, so well. Thank you.

 

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