How VCs are going beyond dealmaking to stay competitive

India’s top venture capital funds are going beyond just investing and working with startups. They are launching a series of community initiatives, mentorship programmes and more as the startup scene evolves, deals become more competitive, and firms with a local office seek to differentiate themselves.

Sequoia Capital, Accel Partners and Lightspeed India Partners, among India’s most influential VCs, are conducting training and mentorship sessions, selecting companies for specialised support, and launching podcasts and lectures on various areas that a new entrepreneur will need help with.

What the VCs are doing

Sequoia, which has invested in Oyo Rooms, Byju’s and Gojek, among others, last week unveiled The Guild, a series of sessions for its portfolio founders, where more experienced founders and industry experts in company building have candid chats and Ask Me Anything (AMA) sessions with top business leaders from around the world.

“While many startups are successful, only a few are able to achieve enduring success for decades. The Guild aims to bring founders together on a regular basis to share their experiences, learn from each other, hear from other world-class speakers, and hopefully make a small difference in their quest to build the world’s most enduring companies,” said Shailendra Singh, Managing Director at Sequoia India, in a LinkedIn post.

Similarly, Accel, an investor in Flipkart, Swiggy and BookMyShow, among others, last month launched Seed To Scale, a learning platform for entrepreneurs. The initiative, according to its website, promises a series of “highly curated blogs, podcasts and videos to help you accelerate your startup journey.”

Unlike many other funds, Seed to Scale is also open to people outside the Accel portfolio and the industry at large

For the last two years, Lightspeed India has been conducting Extreme Entrepreneurs, an initiative that provides eight high-potential founding teams with exposure to global leaders, business model validation, as well as aspects of pressure-testing. It addresses specific issues, such as marketing or product management, to help new founders.

Leveraging experience

These initiatives stem from the experience that these firms have gathered in India over the years. Accel and Sequoia have been investing for over a decade in India, while Lightspeed has been investing from an India-dedicated fund for the last five years (it had also invested from its US fund for a few years before that)

These early-stage investors are now using their experiences — both good and bad — and a vast portfolio of well-heeled founders and business leaders to bring newer founders into the portfolio and differentiate themselves.

“You can’t give money to a quality young founder and be sure that everything will work out. Capital is not a differentiator anymore; you have to go beyond that,” says a founder backed by some of the firms mentioned above.

According to a report from consulting firm Bain and Co., VCs in India started 2020 with $7 billion in dry powder — capital waiting to be invested. This is not even counting angel investors and the swathes of small funds or family offices from different countries that fund early-stage founders.

Brand building exercise

VCs also consider these as brand building initiatives, looking to portray themselves as more than just cheque-writers to founders and stakeholders in the ecosystem.

“A Sequoia or an Accel wants to be regarded as an institution that can bring much more than money to a company, including networks, hiring tips and management guidance,” said an experienced founder who works with younger startups, requesting anonymity.

The coronavirus pandemic, despite continuing unabated, has not stopped deal-making. And excitement, particularly in digital and internet-led sectors, continues.

Another founder backed by these investors said that as valuations in early-stage investing are rising once again, it is important for long-term, dedicated VCs to distinguish themselves from hedge funds or family offices, which may get active from time to time, or offer a founder a lucrative deal that a regular VC may not be able to match.

Sequoia, Accel and others, whose legacy goes back to Silicon Valley or China, also exercise their networks in these regions to speak to founders in their India-mentorship programmes, bringing in other investors from these regions, or founders and senior executives from companies such as Microsoft, Uber and Slack.

“If a young founder is getting term sheets from 4-5 investors, he could get carried away and go to whoever offers the best price, or seems best on paper. The VCs want to convince these founders that they are the right investor. So, initiatives like this help,” said a partner at an early-stage VC fund, requesting anonymity.