Investing in Innovation: Funding Deals and Diversification in the Tech Sector

CXOToday has engaged in an exclusive interview with Kamal Bansal is the Managing Director of GVFL Ltd.

1. Tell us about your recent funding deals in the tech sector and the diversification you look further?

We are committed to supporting the startup ecosystem and we are investing in innovative ideas and promising business models across a whole range of areas. We are a sector agnostic VC. We have recently invested in two very exciting companies. We led a $1.2 million investment round in Video SDK, a leading live video infrastructure company, that aims to drive the future of live video using generative AI, advanced video compression, and media routing technologies. Video SDK is the first live video infrastructure company in India to work on changing the fundamental building blocks of live audio and video over the internet. It will use the funds to further research, develop and enhance its protocols and infrastructure for audio and video conferencing and interactive live streaming.

Our second investment was in biotech startup Zero Cow Factory, where we co-led a $4 million seed funding round. Zero Cow Factory uses precision fermentation technology to produce animal-free milk proteins and dairy products. The funding will help it accelerate R&D activities, scale up production capacity, and obtain regulatory approvals to hit the market. We are always on the lookout for good investment opportunities.

2. Recently, startups are not able to show potential returns to investors as well. We see a lot of funding being reconsidered by the investor community. What are the key governance parameters you check before funding?

Yes, there is a mismatch between Valuation and Revenue realized and potential return for investors. This is due to the influx of capital infusion into the ecosystem by new and existing investors during the past year, as a result of accommodative monetary policy. There is adequate funding available if a startup or business is backed by a good solid idea.

The specific key governance parameters may differ from each deal but broadly speaking, the key factors include assessing the competence, compatibility, and ambition of the founders, the market size, the technology, the business model, scalability, competitive landscape, past performance, proposed fund utilization, assess the potential value creation, shareholding pattern, financial modelling, validating key assumptions, discussions with key customers and other stakeholders, identifying sector experts and seeking their advice, among others.

3. How do you see the startup funding and ideation stage for FY 2023-24?

As I have mentioned earlier, adequate funding is available for good ideas. Until a few months ago, there was a surge in investments and valuations, but the recent correction due to economic concerns has come as a reality check. It is not a funding winter. Investors want to invest but they have become choosy about the businesses and startups they want to put money in. They are not just looking at ideas, but also studying the business model and potential profitability.

4. What are the 3 points of advice that you would provide to young founders and new startups?

As a venture capital firm, here are three points of advice that I would give to young founders and new startups:

1. Focus on solving a real problem: Startups often succeed when they address a genuine problem or pain point in the market. It is essential to understand the needs of the target audience and build a product or service that provides a compelling solution. Conduct thorough market research, gather customer feedback, and iterate based on the insights you have gained. By staying laser-focused on solving a real problem, you increase your chances of building a sustainable and scalable business.
2. Build a strong team: The team you assemble is critical to your startup’s success. Surround yourself with talented individuals who complement your skills and bring diverse perspectives to the table. Look for team members who are passionate, adaptable, and share your vision. Hiring and retaining top talent is a constant challenge, so create a positive and inclusive work culture that attracts and motivates exceptional people. A strong team will not only drive innovation but also impress potential investors who value a capable and cohesive founding team.
3. Develop a clear go-to-market strategy: Having a great product or service is just the first step. To succeed, you need a well-defined go-to-market strategy. Identify your target market segments, understand the most effective channels to reach them, and develop a comprehensive marketing and sales plan. This includes building brand awareness, acquiring customers and establishing strategic partnerships if applicable. Additionally, pay close attention to your pricing strategy, ensuring it aligns with the value you deliver while considering market dynamics and competition. A robust go-to-market strategy will help you acquire customers efficiently and generate revenue to fuel your growth.

Remember, these are just three key points among many factors to consider when building a startup. Each journey is unique, so adaptability, resilience, and continuous learning are crucial throughout the entrepreneurial process. It’s also beneficial to seek advice and guidance from experienced mentors, industry experts, and venture capital firms like ours, who can provide valuable insights, connections, and financial support to accelerate your startup’s growth.

5. A piece of advice/observation for the investors.

One important piece of advice for angel investors as a VC firm is to thoroughly assess the alignment of interests between the angel investor and startup founders. It is crucial to evaluate the business potential and financial viability of the startup, but it is equally important to consider the founders’ vision, values and long-term goals.

Founders and investors are partners in the entrepreneurial journey, and their alignment is vital for success. As an angel investor, it is essential to understand the founders’ motivations, drive and commitment to the business. Look for founders who are passionate about their idea, possess industry knowledge, and demonstrate resilience in the face of challenges.

To ensure alignment, investors should consider the following aspects:

1. Shared Vision: Evaluate whether the founders’ vision aligns with your investment thesis and long-term goals as an angel investor. Assess if their vision is scalable, realistic, and has the potential for significant growth.
2. Values and Ethics: Examine the founders’ values, ethical standards and their approach to conducting business. Ensure they align with your firm’s values.
3. Communication and Transparency: Look for founders who are open and transparent in communication. A healthy and open dialogue enables both parties to address concerns, share insights, and make informed decisions.
4. Founders’ Commitment: Assess the founders’ commitment to the venture. Understand their level of dedication and willingness to put in the necessary effort, and their ability to adapt to changing market conditions.
5. Long-Term Goals: Discuss the founders’ long-term goals for the startup. Evaluate whether their objectives align with your firm’s investment horizon and exit strategy. A shared understanding of the desired outcome helps avoid conflicts down the line.

By considering these factors, you can increase the chances of establishing a successful partnership with founders and build a portfolio of investments that are more likely to thrive and generate strong returns. Remember, angel investing is not just about financial support but also about nurturing and guiding promising entrepreneurs towards their goals.

6. Any specific value addition that you would provide to the startup ecosystem?

We have recently launched the accelerate for excellence (a4X) platform to strengthen the startup ecosystem. It is aimed at promoting the early-stage investment ecosystem by bringing closer all stakeholders. With a4X, we will leverage our experience of 30+ years of supporting startups through investments and mentoring to provide a conducive environment and handholding Seed to Series A startups and investors who are new to this asset class.

a4X will support Seed to Series A startups looking to raise anywhere from Rs. 50 lakh to Rs. 8 crore. Startups will be able to connect with a varied set of investors, close funding rounds online, and leverage the a4X community. Similarly, investors like family offices, angel investors, High Net-worth Individuals, and venture capitalists will get the benefit of highly weighted deals, combined evaluation, due diligence reports, and a transparent investment process, among others. The initiative can be instrumental in driving innovation, nurturing entrepreneurship, and creating a thriving environment for startups to flourish.

The platforms like A4X  will help in creating transparency  in overall start up deals.