Unicorn’s method of investment: More than just money

Kabir Mandrekar
Before Instacab - a ride-hail app - became Roder - the country’s foremost intercity cab aggregator - the founders Abhishek Negi, Siddhant Matre and Ashish Rajput spent all their free time brainstorming with the team members of Unicorn India Ventures as to how they could create a niche for themselves in a crowded ride-hail market. Whenever Anil Joshi, the Founder and Managing Partner of the fund, would travel to Delhi, he would unfailingly make a stop at a decrepit two bedroom apartment located in a suburb of Gurgaon - the Instacab headquarters - to talk business. Until they finally hit their Eureka moment.

After combing through their quarter report, one statistic that leapt out at Anil Joshi’s trained eye was that of an unfulfilled demand in the intercity cab industry owing to an unorganised and unnecessarily expensive model of service. On the advice of the Unicorn India Ventures team, Instacab pivoted to a completely different model, rebranded themselves to their current avatar and Roder.in was born. A couple of months later they received their first round of funding from Unicorn India Ventures.

Advising a startup that shows potential and finally investing in them is a first of its kind exercise by a VC fund. This is but one of many examples of the new trends of early stage VC Funds showing benevolent support to potential investee companies. While we have seen an abundance of VC funds investing large sums of money at the growth stage for established startups in the last decade, investment at the seed and early-stage is a recent phenomenon. Newer and more recently established firms like Unicorn India Ventures are offering a more hands-on approach by investing not only the funds at hand, but also their time, expertise and industry connections in order to drive the businesses of their portfolio companies.

Unicorn’s novel approach

Mentorship Program:
Unicorn India Ventures brands itself as ‘Mentor Capitalists’ exemplifying their importance of a mentor for a particular business. The company has a select pool of mentors who are a mix of senior professionals, executives, exited entrepreneurs and researchers from different industries and domains. In case of the mentorship program, each portfolio company is assigned mentor who is an industry expert. Mentors are expected to spend a minimum of 3-4 hours per month with the founders where they advise them on product definition, course corrections, opening markets and clients and strategic vision.

Apart from mentoring, Unicorn also runs a virtual incubation program where they incubate companies mainly to help entrepreneurs grow with or without funding. During this process, the partners spend substantial time with entrepreneurs initially to help them gain traction and subsequently are available on a need-basis. In case any of these companies fit in the scope of the investment strategy of Unicorn, the entrepreneurs also have the opportunity to avail of funding apart from the initial mentoring sessions. The idea of this initiative is to help the company fine tune its business and make them funding ready.

Hiring, Compliance and Accounting support:
Unicorn is always on the lookout for fresh talent for its portfolio companies, already having scouted interns for three of their portfolio companies across functions like software development, business development, analytics and social media. “We have strong ties with the IIT’s which helps us monitor the talent out there and in turn can help feed that talent into our portfolio companies”, said Aayush Jain, Principal of the fund. Another important aspect is the complete sanitisation of the startup. Unicorn makes does an intensive due diligence of investee companies and helps them meet the requisite legal compliance and accounting norms. “This helps these companies to smoothly raise follow-on financing quickly with clear compliance and accounting standards”, said Aayush Jain.

Scaling up:
When the investee companies are ready to scale up to other cities Unicorn provides them with resources wherever possible. When one of the Pune-based portfolio companies - Pharmarack - wanted to expand their operations to Mumbai, Unicorn shared their office space and resources to ease their transition. “This helps the company focus on what is important - scaling up the business - as they don’t have to worry about other trivial issues and spend unnecessarily on a work space which is at a premium in places like Mumbai”, said Anil Joshi.

Financial modelling:
Most of the startups struggle with financial modelling, especially when they are growing. Unicorn identified this gap and created an in-house capability of this same function. With this, the investee companies can build a realistic financial model and not just an excel sheet. This new initiative has not only helped portfolio companies but also Unicorn itself, in monitoring and helping portfolio companies to be on the growth path.

Entrepreneur in Residence (EIR) program:
Brutal honesty with the entrepreneur in question is one of the chief tenets of early stage funding and sometimes the best ideas with the best intent doesn’t always lead to the best results. In such cases, while in the advisory stage of the company, Unicorn hands out a harsh truth to the entrepreneur but also offers support through the EIR program. Unicorn inducts the founder into their operations. He works closely with the portfolio companies and when there is a good fit, the portfolio company inducts the said entrepreneur into a senior role. “We worked closely with an entrepreneur by the name of Anupam Sarawagi with his startup and were happy with the effort he was putting in. However, We didn’t see much potential in the business itself, which was later realised even by Anupam. That’s when we gave him the opportunity to work with us in an EIR role and when we found a good fit with Pharmarack, they were happy to have him on board as co-founder”, said Anil Joshi.

India is at the precipice of a startup revolution and the investors are taking notice. Early stage VC funds are looking at different ways to get increased value for their investment. One such method is by using all their resources at hand to scale their portfolio companies to new heights and make them even more valuable for the next stage of investment.