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    Startup founders who scored big exits are rebounding with a second venture

    Market

    Story outline

    • A number of such successful entrepreneurs who sold their first or second ventures and struck pay dirt are finding that they have become startup junkies.
    • Many who thought once they exit for the big bucks, they will retire and play golf, travel or pursue gardening, discover within weeks that leisure doesn’t bring much fulfilment.
    • The market has grown and become more conducive from the time these founders seeded and grew their first ventures.
    The market has grown and become more conducive from the time these founders seeded and grew their first ventures.
    At an entrepreneurship event in Bengaluru in September, Kunal Shah was treated like a veritable celebrity. The hackathon for wannabe financial technology entrepreneurs was meant for some 100-plus startups to showcase their technical chops. Instead, young engineers & managers milled about around Shah, curious about his secret sauce for startups.

    Having sold his previous venture, Freecharge, to Snapdeal for $400 million in 2015, the serial entrepreneur took some time off to turn angel investor, venture advisor and also to mentor dozens of startups for a little over a year.

    It was only so long before the entrepreneurial bug bit him again. In April 2018, Shah got started again, this time with Cred, which rewards credit card users for paying their bills on time. It seems to have taken off.

    In barely 10 months, the valuation of Cred has crossed $500 million and appears on course to become India’s next startup unicorn. Marquee investors, including Sequoia Capital and Tiger Global, have scrambled to jump aboard India’s hottest fintech venture in years.

    Shah is today aware that the stakes are high. Having shown off his skills in building one venture, scaling it and, most vitally, scoring a blockbuster exit, the ecosystem is watching his every move. In August 2019, he added to the speculation around Cred’s fortunes when he raised $120 million in the venture’s latest round of funding, taking the total to $176 million.

    During a conversation on the sidelines of ET Startup Awards, he brushed off the contention that serial entrepreneurs like him were cornering a chunk of investments in the space, queering the pitch for newbies. Booting up a start-up, whether as a first-timer or a veteran, feels the same, he reckons. “There is nothing like the thrill of starting up,” he says.

    A number of such successful entrepreneurs who sold their first or second ventures and struck pay dirt are finding that they have become startup junkies — can’t sleep well too long away from the crushingly stressful life of a founder.

    Many who thought once they exit for the big bucks, they will retire and play golf, travel or pursue gardening, discover within weeks that leisure doesn’t bring much fulfilment.

    So they swing right back and start a new venture. Now that India has a significant number of successful entrepreneurs who have profitably sold their first ventures, there is now a recognisable phenomenon of rebounding founders, and the ecosystem comprising funders, rivals and customers are reacting to this tribe in interesting ways.

    “After a while, you can’t resist the urge. You can only garden and potter about so long,” says Saurabh Kochhar, founder and CEO of Meddo, an end-toend medical services provider, who earlier founded online printing service Printvenue and food delivery platform FoodPanda. Ola later purchased Food-Panda India for $250 million.

    While some markets such as foodtech have waxed and waned (leaving behind just three large players), others such as fintech have evolved from segments such as digital wallets to wider digital lending opportunities.

    As these enabling factors have strengthened, investors, executives and entrepreneurs have flocked to the market. “The market has become a lot more competitive and cluttered, even if there is a lot more capital,” says Ashish Kashyap, founder of IND Wealth, an AI-driven financial advisory platform, which counts marquee investor Tiger Global among its backers. Nearly three years ago, his previous venture, Ibibo Group, was acquired by Makemytrip for $720 million.

    “The enablers are in place to build out a multi-billion dollar business,” says serial entrepreneur Thirukumaran Nagarajan, CEO and cofounder of Ninja Cart, a B2B grocery delivery venture. Thus far, the venture has raised around $150 million (and may raise $100 million more) as it seeks to grow its business. The founders are thinking big for this business: at least a 10-fold growth from 500 small and 150 big trucks to ferry agri produce.

    The market has grown and become more conducive from the time these founders seeded and grew their first ventures. Compared with the time Shah founded Freecharge, mobile data has gone mainstream, handsets have got cheaper and the Jio revolution that has seen the addition of 300 million users and an effective 90% reduction in rates has catalysed a new wave of opportunities. Opportunities in regional languages and video have boomed, and startup funding has also expanded.

    In 2015, the year Freecharge was sold, risk capital investors ploughed $7 billion into Indian startups. In 2018, that number was $11 billion. Investors ET Magazine spoke to say that early rounds are expanding too — $2 million is the new $500,000 — and the source of this capital has expanded too. “The ecosystem is far more developed,” says serial entrepreneur K Ganesh, founder of ventures such as Tutorvista and Big Basket. “Almost everything is more organised and supportive. Both the time required and costs are lower.”

    With co-working spaces, software on the cloud, differentiated angel and seedstage investors, various accelerators and incubators and availability of talent, it is a much more conducive environment today. An investor ecosystem that seeks to minimise risks loves the second coming of successful entrepreneurs.

    While one in 10 investments usually survive and thrive, investors hope that signing up with seasoned entrepreneurs will somewhat even these odds. Accel Partners has launched Rebound, an investment programme focused on second-time entrepreneurs, as has several other VCs.

    While there are murmurs of disenchantment about serial entrepreneurs cornering chunks of investments, it doesn’t mean they are necessarily cutting into what is available to the first-timers, because the overall pie is expanding as well.

    A more mature ecosystem has emboldened a raft of bankers, for example, to start up, even as well-heeled founders ranging from Flipkart’s Sachin Bansal to Makemytrip’s Deep Kalra are providing money and mentorship to them. “Despite the headlines, your odds of being noticed are much better today as a first-timer,” says Vinay Bagri, founder of online lender Niyo.

    But there is no denying that serial entrepreneurs enjoy greater access to networks that are crucial to startup success. Consider the jostle for Jitendra Gupta’s latest venture Amica — a slew of top VCs are pouring money into a venture that is yet to be launched. They bet that a past founder of a fintech success story — he sold his venture Citrus to Naspers — knows the contours of the market best and can, therefore, yield the best returns. “We are seeing founders becoming more thoughtful and deliberate.

    Hence, they are raising a larger amount to account for greater runway so that once they raise, they can focus on taking the product to market and rapidly scale up sales,” says Sanjay Nath, managing partner, Blume Ventures, an early-stage investor.

    His peers, too, are happy to back the skills of serial entrepreneurs. “Where serial entrepreneurs score significantly is the execution chops and a network that allows them easier access to financiers,” says Sanjay Swamy, managing partner of Prime Ventures.

    Serial Successes
    Serial Success
    “The market has changed massively since I last started up, and adapting will be a challenge”
    Jitendra Gupta
    Previously- Founder of Citrus Pay

    Is now Cofounder of Amica Pay
    Star power Sold Citrus Pay, his previous fintech venture, to Naspers for $130 mn; has reportedly raised $24 mn for new venture.

    What has changed - More early-stage capital - Blockbuster exits led by Flipkart-Walmart deal - More experienced talent available - Jio has transformed segments such as video and regional languages - Access to the hinterland is much easier

    What hasn’t changed -Regulatory flux around startups -Few startups have made profits - Limited exit options for investors - Investors tend to chase opportunities in herds - Investor focus on returns hasn’t dimmed

    “More people are willing to back them. It is a rare group of people who can maintain the hunger and passion the second time around.” He contends that it isn’t only the entrepreneurs who’ve scored big that are sought after. Instead, it is the hunger of those who have failed but have the drive (or seemingly a blockbuster idea) that are worthy of backing.

    Among Prime’s portfolio, Swamy points to Moneytap and Mfine as examples of having backed people who have had successful startup stints. In Moneytap’s case, the founders include a team of successful entrepreneurs (they sold Snapfish to HP for $300 million in 2005) and people like Anuj Kacker and Kunal Verma who had failed with their previous ventures.

    Ashutosh Lawania
    Ashutosh Lawania

    Previously Cofounder of Myntra, online fashion sold to Flipkart

    Is now Founder of medtech venture Mfine

    Star power Able to raise money in a tough segment; lined up $17 mn-plus in June

    “Our previous experience with Myntra was certainly helpful while raising capital with Mfine”

    Similarly, Vijay Arisetty, the founder of gated community tech platform Mygate, stuttered with previous attempts. Mygate has fared better, raising $9 million, led by Prime Venture in less than two years from launch, and expansion is underway to at least a dozen cities.

    Gupta isn’t revealing too much about his new venture, even though there is a constant constant buzz around how much funding he has raised and how he may upend existing fintech players. However, he candidly admits that serial entrepreneurs like him also have to keep up with a fast-changing market. “The market has changed massively since I last started up, and adapting will be a challenge,” he says.

    Thirukumaran Nagarajan
    Thirukumaran Nagarajan-“The enablers are in place to build out a multi-billion dollar business”
    Previously Cofounder of Shout
    Is now CEO and cofounder of B2B venture Ninjacart
    Star power Raised $100 mn in latest round of funding led by Accel

    In May 2014, Myntra, an online fashion platform, was acquired for $300 million by Flipkart. Since that deal, both Ashutosh Lwania and Mukesh Bansal have flourished as serial entrepreneurs, founding medtech venture Mfine and fitness chain Cure Fit, respectively. Both have raised millions of dollars in funding and growth has blossomed.

    “Our previous experience with Myntra was certainly helpful while raising capital with Mfine,” says Lwania. Mfine today has some 600 doctors and 150-plus hospitals on its platform and over 100,000 patients have used its AI-driven service.


    Ashish Kashyap
    Ashish Kashyap- “The market has become a lot more competitive and cluttered, even if there is a lot more capital”
    Previously Ibibo Group
    Is now Founder of IND Wealth S
    Star power Previous venture acquired by online travel industry leader Makemytrip

    Even as investors chase these serial entrepreneurs, they are also acutely aware of the dangers of herd mentality, which has seen investment bets blowing up in their faces in recent years. Nath of Blume, for one, points to sectors such as food tech that a couple of years ago saw a bubble, with some 30 to 40 startups trying to outdo each other, funnelling millions of dollars in VC money to back unrealistic expectations, only to see almost all of it disappear.

    "Investors have also been burnt and have learnt the hard way¡K 2015-17 saw a period of over-investment, whereas by 2018 you saw us enter a period of rationalisation," he argues. "Now with the growth and hedge funds - and Softbank back in - we are seeing an abundance of capital available, but mainly for category leaders (or those getting there)."

    Kunal Shah
    Kunal Shah- “There’s nothing like the thrill of starting up”
    Previously Sold Freecharge for $400 mn to Snapdeal
    Is now Founder of Cred, a fintech venture that has seen its valuation hit $500 mn in under 12 months
    Star power Between ventures, was an aggressive angel investor and advisor to Sequoia Capital

    Even then, veterans such as Ganesh warn against complacency from serial entrepreneurs. "Sometimes overconfidence and complacency can hurt you... each venture is a new start and as they say, past performance is not indicative of future returns."

    Even as serial entrepreneurs gather in strength for another go with their latest ventures, they have a new world order to deal with.
    ( Originally published on Sep 07, 2019 )
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