Episode 82 / September 13, 2020

Shruti Gandhi, Array Ventures on taking SaaS companies from Zero to $10 Million ARR

hr min

Episode 82 / September 13, 2020

Shruti Gandhi, Array Ventures on taking SaaS companies from Zero to $10 Million ARR

hr min
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Shruti is one of the few Indian-origin VCs in US who invest in Enterprise focused Startups globally. After spending 9 years of her career at IBM as an Engineer, she joined Samsung Next as a Principal, where she spent the next 2 years investing in early-stage startups. This was probably what worked out as a perfect mix of (a) Her understanding of Enterprise focussed SaaS businesses & (b) Venture funding ecosystem, which helped her start Array Ventures.

Some of her notable investments are CasaOne, Blumira & Modal among others. In this podcast, Shruti shares her experience of supporting founders building early-stage SaaS businesses focussed on solving problems for Large Enterprises.

Notes –

00:57 – Her journey from Mumbai to the US and transitioning from an Engineer-cum-Founder to a VC

02:35 – How and why did she choose to start a fund to cater to startups selling to Enterprises?

05:20 – Changing growth & opportunities for SaaS startups focussed on Enterprises in India & the US

08:19 – Her thesis of investing in Blumira based on how their automated threat detection can benefit companies

09:53 – Is the recent IPO of 6 Enterprise companies including Palantir, Snowflake, Sumo Logic, Bentley Systems, creating real value or is it a bubble?

11:20 – Her learnings from Array VC exits: Passage AI, Hivy, & Simility

13:10 – What would be an ideal exit for her – Large Acquisition (in 5-6 years) or IPO (in 10 years)?

14:13 – What value does Array VC bring to its portfolio companies?

16:10 – How’s the growth trajectory for her portfolio SaaS companies from 0 to $10M and then from $10M to $100M ARR?

19:02 – What are things which worked for her portfolio companies for exponential ARR growth?

Read the full transcript here:

Siddhartha 0:00

This is Siddhartha Ahluwalia. Welcome to the 100xEntrepreneur podcast. Today, I have with me Shruti Gandhi, Founder of Array Ventures. Array Ventures is a B2B focused fund solving big problems by leveraging deep cutting edge technology. Shruti has also an MBA from the University of Chicago where she polished her finance skill before making the switch from engineers slash founder to the VC world till now Array Ventures has five exists in the last three years two companies such as Apple, GoDaddy, McGraw Hill, Samsung and Brocade. Welcome, Shruti to the 100x Entrepreneur podcast.

Shruti 0:39

Thank you so much for having me. I’m so excited to be here

Siddhartha 0:41

Shruti, we would love to know about your journey from Mumbai to the US. How did that happen? And Key milestones along the journey,

Shruti 0:51

Yeah, it’s not a typical journey. The journey was, I came here in 99, right before college, and then, you know, there’s obviously a lot that happens in between but college I went to undergrad at a school in New York, called Marist college, I studied computer science. graduated in two and a half years, went, and continued work at IBM, which is in the same town. So I used to work at IBM, along with going to college. And then I went to grad school computer science Master’s at Columbia University also continued to work at IBM around the same time and then left to start a company, went to business school at Chicago, continued to work at different places around that time. And then after boot, I joined a Samsung in their investment arm which is now called Samsung Next. I was one of the early people that helped start that, after Samsung, went to True Ventures, and about four and a half, five years ago started my fund Array Ventures, focus on enterprise, as you know, and we write the first check into the founders, as you know, as they’re getting formed.

Siddhartha 2:18

Shruti, we would love to know about Array Ventures, you know, why did you choose to focus only on the enterprise segment? What’s your cheque size? And what’s the fund size?

Shruti 2:26

Yeah, good question, we invest half a million to a million dollars, depending on the round size of half a million to 2 million. And we like to partner with founders that are technical, that find a need in the category that is so you know, dire, that they just want to give up a very high paying corporate job to solve that problem. And, they have some friends at that time who kind of validate them by saying if you build this product, I’ll buy it. That’s when we come in and say let’s get you there and about their go-to-market of how to get from zero to 1 million ARR to 10 million ARR or 200 million ARR. And what it takes to get there. So, the reason I started enterprise was like to me I’ve been an enterprise world throughout. At our stage, I find enterprise to be more valuable and more of a playbook that I can help with. I find consumer to be obviously great companies, a consumer companies have come through, but for me, the value that I can provide on the consumer side is very minimal. So, we focus on enterprise for that reason and help companies think about their growth from the enterprise perspective.

Siddhartha 3:40

Any certain percentage that you want to have in the company or ownership at the first round itself.

Shruti 3:46

Yeah, we try to optimize for anywhere from eight to 15% depending on the round.

Siddhartha 3:53

You have also invested in some of the Indian companies like MadStreet Den and so, is the fund global in nature. You know, what’s the focus of the fund in terms of geographies?

Shruti 4:03

The fund is global meaning any company could be anywhere as long as it deliver Corp. And as long as they’re focused on global markets, not just a particular geographic market. So except it’s okay if it’s US to start with, big enough for us to and that’s where I’m based. And but we have invested a lot in companies in India and Israel. But again, they’re focused on the global markets to solving global problems, like security or cloud infrastructure, things like that. So, that’s what we do. That’s what we’re open to investing in.

Siddhartha 4:41

And what are the other companies which started in India that you have invested in

Shruti 4:47

CasaOne is another one. It’s also with Accel. I know we were talking about them right before the podcast. I think those are the two that come to mind. Yeah.

Siddhartha 4:59

Thare are this typical, you know, enterprise companies have been slow to reach IPO. But in the recent turns of events around six B2B companies palantir and the likes of others have gone IPO. Do you see this market certainly booming up for the appetite of retail investors.

Shruti 5:23

Yes, funny enough and when I was in India 2015 or 16, talking about my fund and how I was gonna start an enterprise fund, most investors there that you know, and probably work with it kind of shut me down by saying we only focused in consumer and that’s our future here, Flipkart and stuff was getting big. So, they were saying that we have a big, you know, we have a big user base in the country on the consumer side, and that’s what we’re going to use and invested. And my argument to them was like, guys, these companies become big. They’re gonna have infrastructure problem, you know, all these other problems on the back end? What are you going to do? So that’s the funny anecdote. Yeah, I think, the thing with enterprise though is the retail investor may want to do it, but one they can’t get into those deals oftentimes, because they don’t understand the stage, what the companies do. So, funny story is like, to this day, like, unless there was like a big Salesforce tower, you know, erected in San Francisco, a lot of people didn’t know what Salesforce even was. And that’s one of the most popular oldest, really, you know, good enterprise company. So, you know, companies that in the enterprise world go public make $16 billion and returns and all those things and like, they have great you know, like app dynamics was sold four, Mulesoft, it’s taken private for 16. Right like, Octi was public recently and doing pretty well. Twilio, when most people don’t understand or know these companies. So, the funny thing is when I talk about my fund, everyone’s eyes glaze over, because you pitch this fund, and then you talk about look at these exits. And they’re like, Well, yeah, but it’s not snap and Facebook, right? Like, because they don’t understand these brands. And it’s like trying to prove to them like, Look, this is a market that’s making a ton of money. So will the retail investors come into this category? Maybe, but it’s going to be through fun. And I think the changes in sec regulation might just actually allow these people to enter these kinds of funds. So that’s, I think that’s a long winded way of saying yes and no, I don’t know. Again, it’s not attractive to talk at a cocktail party as to like how I invested in like this cool new security company, you know.

Siddhartha 7:52

As compared to Uber, somebody talks, hey, I am first investor in Uber and somebody would say, I am a first investor in a $50 billion enterprise company.

Shruti 8:04

You get my point because you’re an enterprise investor. Right? So yes.

Siddhartha 8:07

Yes. Tell us about some of your companies, you know, which are doing really well and, and your thesis behind investing in them,

Shruti 8:17

You know, our thesis generally is let’s take advantage of data and see how we can disrupt any industry with that data. So it’s pretty broad. And that’s on the application side. But there’s also more on the back end side to fund, you know, need that for any of these companies on the front end. So, we go across the stack. And I think like one of our recent investments blue mirror is a good example of, you know, like, right now we’re working remotely. There’s a lot of security issues and threat. That’s not the exciting part actually, they do automated threat detection response, which is awesome. But a lot of companies do that what I do love about Bloomera is they actually highlight the false positives in a very minimal way. So you don’t get hundred alerts a day of attacks, but you get one or two, and it’s meaningful, and then they have a whole workflow around what they do with that, to tackle for the teams to really address those. So that’s what customers love about their product. And that’s an example of a company that we invested recently that is, you know, is funding basically, you know, keeping a lot of companies you know, today safe, right, like based on their product that’s working on the back end. I can talk about a few more but I’ll pause for a second.

Siddhartha 9:53

And is there a current environment in US where six companies have gone IPO, you just file on the same day for S1. Is that, do you think is a bubble or there is real value which the investors are seeing. That’s why they’re buying into these companies to take them public.

Shruti 10:14

Um, I mean, I’m too small of a player to talk to carbon and public markets. So, I would refer to this as a question, I don’t think I’m educated enough to answer. But what I can say is, we’ve believed that enterprise needs, you know, what people are calling a digital transformation right now. And, that’s a key driver as to why I believe in enterprise companies and I am going to continue to invest in enterprise for the foreseeable future. So, bubble are not enterprises are stale, they have old technology. They’re not taking advantage of data, AI, machine learning to the point that they should and in every vertical marketing, sales, HR, finance everything so we make sure that we are funding those technologies that enterprises can adopt today and five years from now and 10 years from now.

Siddhartha 11:14

And let’s talk some of your exits Passage AI, HIVY, Simility, what were these exits like for you?

Shruti 11:22

Yeah, actually, this is great for us, because we’re so mindful of when we enter into the companies. A good example for Simility was it bought acquired a barely three years after we invested 420 million, so it was almost 10x, or more, right, like so in from the initial check. And so that’s a good example and it was all cash. So, PayPal acquired that company for in cash. And so for us, it’s a great way because, you know, to invest in something, and to believe it, the founder of the company was growing, but at the same time, you know, the founders decided that was the path they wanted to take. And we are aligned with our founders on what they think we think, you know, on what they think is best want to support them. And so in that case, you know, we were happy taking that kind of a return. Obviously, if they kept going, we would have been happy, you know, with that as well. And same with Passage, we actually had, you know, we’re not talking about the number, but we had a good return as well on our end, and so with amongst these companies, and then and then HYVI was actually acquired twice. It was acquired once by managed by Q, and then second Managed by Q was then acquired by Weaver. So, we ended up getting a bunch of money back through those acquisitions and shares. So, we’ve been able to actually return a good portion of our first fund through these exits. So as a young fund, those kinds of numbers really matter. And so for us, you know, while we want founders to go after the billion dollar plus idea. And we also don’t mind if founders decided to, you know, give us a good return early on as well.

Siddhartha 13:12

And what would be your ideal exit? Would you know you would go for Acquisition in a five or six years span or you would wait for 10 years for an IPO?

Shruti 13:24

I think ideally, it’s an IPO. But what I’m saying is, if the founders decide to, you know, take the other acquisition route, we want to support them. We don’t want to fund those founders when I mean, I don’t think anyone starting out dreams of just getting acquired. There are few people who start companies in that way but I think we want to go for founders and want to dream big. If in the path, something else ends up happening, we’re okay with that outcome.

Siddhartha 14:00

Do you invest with the philosophy that you focus on goals or the philosophy that the score takes care of itself?

Shruti 14:07

What does that mean?

Siddhartha 14:07

So, means you just focus on the input and don’t worry about the process?

Shruti 14:11

No, goals are very important. We care about how fast you want to get to 100 million in revenue. So, you know, my philosophy is if you don’t dream big, you’re not gonna get there. And the sad part of the startup journey is that the founders always are passionate about something. But, you know, they just don’t know how to grow. So, that’s where we come in, we help think about that growth. Our focus on the fund, even the word technical is growth and go to market. And I think, you know, I was just talking about this with another co-investor yesterday that we’d invested in this company about four years ago. One company we were talking about, and you know, while the founders are resilient, and it’s great, or years ago when we did invest in them, and we would have asked them, what do you think they’re gonna be at four years from now? I’m sure they said IPO, you know,

Siddhartha 15:12


Shruti 15:14

But it’s a very, you know, startup journey is very long. And it’s very brutal. And so I’m sure four years later, they were not thinking we’re going to be in this. But that’s an Unfortunately, that’s a reality for most companies for five, six years, and they’re still just trying to figure it out. And they haven’t even gotten out of their own J curve, if you will. So that’s that’s where we are. But we do try to focus on companies that do dream big, at least.

Siddhartha 15:44

And I believe you have a portfolio of close to 50 companies right now.

Shruti 15:48

Yeah, close with 40. Yeah, it’s like about 44 45 or something like that. Yeah. Well, we invest maybe like one company a month.

Siddhartha 15:57

Shruti, what’s your observation on you know, on the average time taken in case of your companies from let’s say, from zero to $1 million ARR. And then from one to $10 million in ARR.

Shruti 16:08

That’s a good question, I think, ideally, averages, here’s the thing, there’s two milestones, because of the kinds of things we invest in, there is a tech build-up, and that takes a year plus, oftentimes, but the minute they actually have a meaningful revenue, I, you know, a million usually takes another 12 months from there. So, I would say, in an ideal world, it’s one year but in a realistic world, it’s more two years where the company takes an average I’m talking an average, right, like, not talking about like the best deals, but they take about two years to get to a million. And then I think after that they have to get to a point of like, the next year is usually three million. And it’s hard to, they all ideally, that’s a good growth company where it gets from one to three to 10 to 30. Right. Like that’s like the journey you’re ideally optimizing for, but very few companies get to that point they get from one to they usually get to 2.5 unfortunately, and then from 2.5 they’re trying to get to maybe like five or you know, they get to five or six, but not like 10 it takes there are a lot of growing pains for founders.

Siddhartha 17:27

And why do you think this is so much struggle, you know, between one to 10 for enterprise companies, is that the founder are not able to calculate churn over a period of time?

Shruti 17:38

Churn is not the only thing. Churn is good for consumer company to track and in enterprise there is just so much to set up like you know you it’s founder led sale initially then you have to find VP sales then you have to find VP marketing. You have to figure out what your go to market strategy, that content base and the tops down to the bottom up. Is it both, then you have to figure out your sales motion. What kind of team are you building and then it’s very hard to find those right sales people they cost a lot. But then if they’re not delivering you lose that momentum. And you have to fire them It takes like two three quarters to figure that out. So, by the time it’s like a year right like so it’s actually a lot around that, it’s not just like put ads out there and like that’s not the playbook really. And consumer companies obviously have a different set of problems with enterprise company this is what happens and and then most enterprise technical founders don’t know marketing. They don’t actually know how marketing truly works. So, that’s why there’s still a hidden in somewhere and then in parallel to all this, they have to convince enterprise investors that they should be funded. And so that’s what happens and so it takes a while till everyone gets in their groove

Siddhartha 18:55

and can you share you know, not naming the names but the companies in your portfolio which has crossed the $10 million or which are close to about reaching the $10 million ARR milestone, what was unique about their journey?

Shruti 19:08

You know, yeah, what’s unique about those companies is they took a while to get to that point but they figured it out they have a good sales motion and they have a good marketing motion and the team works in harmony. I think, that’s my learning here that every founder brings in a very different skill sets and goals of what they want to optimize for. So, when you invest in those kinds of teams, that just kind of gel well, that’s the magic happens basically, they’re not trying to fight each other. They’re not trying to fight intentions. They’re not trying to figure out if you know, so I think that’s big, and the biggest. Another second step is like the founders have good technical skills on board and sales skill within the team. And so the ones that have kind of gotten to that point, have good sales skills and then contact with customers but also, you know, a good technical team that can build whatever the customer is asking for fast.

Siddhartha 20:15

But what you shared is quite different from you know what most enterprise founders start with, because usually they are two tech founders working in an enterprise. They get a problem day in day out on a tech front end working in an enterprise and they then they tend to solve for that. Would you agree?

Shruti 20:36

Hundred percent and that’s why you asked me that question of why it takes so long. That’s exactly why they have to get from that to this next stage what I talked about and they have to learn how to grow themselves on sales perspective.

Siddhartha 20:47

But I also see a very rare combination of a very the same good enterprise VP sales, combining with a good engineering manager in enterprise and then combining forces together to start an enterprise-focused company. Why is that?

Shruti 21:02

That’s hard because salespeople are not true like they don’t think about entrepreneurship from that perspective and they’re getting paid well. So, oftentimes they don’t know the technical people so you know, if people that have sold in the past and like made money and if they go back with the same founders and build something that’s a great team but if that salesperson then goes and looks for a tech co-founder like it’s it magic happens again with buy like you don’t just sell because you’re good at selling because there’s the team aligned everything for you as well to make that happen, right like and there’s different kind of salespeople. Salespeople who take the company to a million they’re loners salespeople who can build teams. They’re more like builders. So I think there is a unique set of skill set that kind of need that is needed and initially, when you’re starting a company you know you don’t want anyone in your team that can do anything so oftentimes you don’t just start a company with a salesperson because you don’t know what how to utilize them unless that salesperson is open to doing other things initially right? So that’s hard and that’s the combo of all these things really needs to work I always say in startup there’s like one thing that works everything else doesn’t and that one kind of works the company breakout and you have to figure out that what that one thing magic X Factor what people call it could be.

Siddhartha 22:39

And in your experience, you know, let’s take an example of your portfolio companies. How long have you seen the company keep up their moats till a large enterprise company comes after their use case which they are solving for?

Shruti 22:54

I don’t think it’s a large enterprise company that comes in after that. It’s usually another startup.

Siddhartha 22:58

and does that hamper the market immediately? Or what do you think?

Shruti 23:04

Not immediately I mean, look, it’s all about the execution. And if you’re starting a company where there is no competition, then frankly, you’re one starting maybe something that, you know, and especially if there’s no competition for a while, I mean, that’s rare. And, you know, I’m not even sure if there’s like real examples of that, per se. But if you’re starting something, and there is no competition, you don’t have any like fire like that drives you either you can get complacent. So competition is actually good and drives people, you know, and that’s the piece. Usually, there are enough big markets out there that there is room for multiple winners. There’s very few kinds of markets where only one player wins it all basically, and can exist. And so we don’t live in a world where a monopoly is an answer. So, oftentimes that’s okay. If there is a player already, it’s okay. You know, there’s always an opportunity for like a new player with the new tech stack and text changes so fast that, you know, that’s the way that the market, the approach, the user, what the user wants at the time, everything changes. And so I feel that there’s always room for multiple players that tackle the market in different ways.

Siddhartha 24:27

And Shruti, on your profile, you call yourself the Chief Business Development for your portfolio companies. How do you manage to do that?

Shruti 24:36

That’s a good question, Siddhartha. As I said, that’s the go-to-market piece and how we get to help the company think about the zero to one journey. And oftentimes, that’s where we focus a lot on how did they get from that? Zero to 1 million ARR and 10 million ARR and hundred million ARR and what they need to get there and so we help them think through all that.

Siddhartha 24:59

And you are also making one investment per month. So, how do you get to focus on let’s say the go-to-market motion of 44 45 companies,

Shruti 25:08

We don’t do it when they graduate to the next investor. So, our success is once they get a good round from the Accel or the Sequoia or other funds out there, so that’s an active basis, there’s usually like, seven to eight companies that we’re helping out.

Siddhartha 25:25

And one of the really good companies in your portfolio is Madstreet Den. How did you discover Ashwini Ashokan before she became popular?

Shruti 25:37

That company was recommended to us actually by one of her angel investors and, and who’s also a friend of ours. So that’s how we discovered them.

Siddhartha 25:49

And usually, for you, that’s the route how you discover your new portfolio companies through referrals.

Shruti 25:55

Yeah, basically.

Siddhartha 25:57

Great and so for how important is it for very early stage b2b investor like you to build a very good network of early angels

Shruti 26:08

Very important

Siddhartha 26:09

Because B2C companies are easier to discover you may discover Uber on the playstore to book a cab, or you may see your next person in a bar using Uber.

Shruti 26:18

Yeah, problems that you kind of face that you think this company could solve. So, it becomes a personal thing. You know, enterprises don’t work that way. Unless you have been in an enterprise and you have that experience. You can just be like, I think I’m looking for a new identity solution. You know, that you don’t do that. So, yeah, it’s usually through the referral network of people we trust and co-invest with.

Siddhartha 26:42

So, you have a network of scouts or what do you call them?

Shruti 26:46

Nothing, we just have friends.

Siddhartha 26:48

Okay. Wonderful. Thank you so much, Shruti. it was wonderful to have you on the podcast. Any key learnings, which you would like to share with the listeners who are entrepreneurs and building for b2b on the first step on the zero to 1 million journeys, what things can go wrong? And you know how to avoid them?

Shruti 27:07

Yeah, that’s a good question. I think don’t forget to validate with your customers and ask them how much they really want to pay. And when I think most founders get passionate about an idea and forget to really do the math of when they’ll get customers, when the customers will want to bet and how much and they don’t, and they’re too shocked because their technical founders, sometimes they’re too shy to ask. Like, when friends say, Yeah it is good, they forget to ask like, Is it a $50,000 annual contract or 250 k just put a number out there, right. And that’s a problem because once they put a number out there, everyone feels that they’re tied to it but then for you, it gives you a good sense of like, Okay, if this company can pay me 100,000 and this other company can pay me 100,000 and I can only handle two or three right now, that literally means I can only do 300 k in revenue, maybe by end of the year, while I thought I was going to be a million, you know, by end of the year. So, math kind of becomes more transparent once you’re more honest about your journey. And so don’t forget to really work hard with your customers. And by the way, these are customers in enterprise, it took a long time to close. So, maybe of the 300, you thought that the three friends were going to pay, you know, only one comes through in the timeframe you’re looking for. So, I think that doesn’t mean you shouldn’t start a company that just means you kind of go in with a realistic point of view. If you do that math out of like, how many companies can I convince to buy my product, for year 4 even If you do that math, most people think your four is when you start preparing for an IPO, but it’s actually your farm, you’re much, much further from it, and you’re not even halfway there by that point. So are you ready to go on that journey? That’s going to take 10 15 plus years. And that’s the piece people forget to do that kind of actual self-awareness exercise.

Siddhartha 29:24

And every year in a startup land seems like five or 10 years for the founders.

Shruti 29:32

For sure, yeah, you can’t focus on your family. Oftentimes, fam founders say it’s a lonely job. There’s so much stress, you don’t have time to exercise. People like gain weight, they feel bad, they lose hair. And it’s not easy. And it doesn’t mean after all this you get a great outcome. You know, that’s not guaranteed either. So yeah, it’s not for the light-hearted And it’s not for the rational people either, who kind of just, you know, like the salary and the comfort and all that. So, yeah, entrepreneurship sounds glamorous on the outside, but it’s truly not that glamorous. And the success stories you hear are years in making.

Siddhartha 30:18

There is a very good quote for entrepreneurship called People only focus on survivors. That’s called survivorship bias. They don’t focus on every person who survives or the thousand which are buried in the graveyard.

Shruti 30:33

Yeah, definitely.

Siddhartha 30:35

Thank you so much. It’s been wonderful to have you on the podcast

Shruti 30:38

Thank you so much for having me and I loved it and let’s find deals to work on together.

Siddhartha 30:43


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