No spray and pray: Focused bets underline Good Capital’s startup investment philosophy

New Delhi-based micro enterprise capital (VC) agency Good Capital believes fewer investments with excessive conviction in an entrepreneur’s thought is a greater technique moderately than sprinkling capital in every single place.

Established in 2019, the corporate makes about seven investments in a 12 months with cheque sizes between $100,000 and $1.2 million.

“This forces us to construct excessive conviction and take away many of the different distracting optionality from investments,” says Good Capital Basic Associate Arjun Malhotra.

In accordance with Malhotra, the seed stage of funding has a excessive mortality fee. Nevertheless, a targeted strategy on a choose group of entrepreneurs helps Good Capital higher perceive their enterprise, facilitating extra significant engagement.

“We’re at all times targeted on entrepreneurs who’ve a sure distinctive perception on client behaviour available in the market and this helps in constructing greater market share,” says Malhotra.

This strategy has paid wealthy dividends for Good Capital as a couple of of its portfolio corporations have been acquired by giant world gamers. For instance: YouTube acquired ecommerce firm Simsim; Ford acquired car connectivity platform Autonomic and Groq purchased generative AI startup Definitive Intelligence.

Good Capital declined to touch upon its return on investments.

Startup bets

Earlier than beginning Good Capital, Malhotra launched an accelerator platform Investopad together with his brother, Rohan Malhotra, in 2013.

Amongst Good Capital’s most notable investments is social commerce startup Meesho, which is now a unicorn.

Different startups in Good Capital’s portfolio which have secured investor curiosity embody at-home diagnostic providers supplier Orange Well being which raised Sequence B funding from Bertelsmann India, Basic Catalyst and Accel. Photo voltaic options platform SolarSquare, which raised $13 million in Sequence A capital led by Lowercarbon and Elevation Capital.

Other than these, Good Capital has backed startups equivalent to bus ticket reserving supplier Apnibus, e-learning platform Entri, and renewable vitality startup Neufin.

Given its various pursuits, the micro VC agency has largely been sector agnostic. Malhotra believes segments like edtech, ecommerce, and providers present sturdy potential.

Good Capital has two fund automobiles. Within the first fund, it raised $25 million in 2019 and its second fund, with a dimension of $50 million, is predicted to shut this month. The VC agency will dedicate round 50% of the corpus from the second fund in the direction of synthetic intelligence (AI) startups.

Within the second fund, Good Capital goals to speculate round $1-$1.5 million in every startup. The VC agency goals to be the lead investor within the startups that it funds.

The way in which forward

Malhotra is a powerful believer in AI being a sport changer. He says many providers can have optimistic outcomes for the purchasers if AI is deployed meaningfully.

As an example his level, he says persons are not fairly comfy dealing solely with automated providers for any buyer question and search a human component of their interplay. It’s right here that there must be an excellent mixture of AI expertise and human enter.

Good Capital is in dialogue with such AI led startups in India.

This targeted strategy of investing additionally offers them a stronger platform of being the lead investor in a startup. Malhotra says Good Capital will at all times be within the area of a really early stage of funding. This could additionally imply that any deliberate third fund in two years might be of comparable dimension.

The Basic Associate of Good Capital additionally sees a few of the startups from its portfolio heading in the direction of the route of preliminary public providing (IPO) within the subsequent two to a few years.

Malhotra has been within the funding enterprise since 2014 and has seen the numerous seasons of the Indian startup ecosystem. He believes the present surroundings is hard for entrepreneurs as elevating capital will not be as straightforward because it was previously, particularly throughout 2020-21.

On the identical time, the funding crunch has additionally caused sure optimistic adjustments because it has led to the emergence of high-quality startup founders with cheap startup valuation.

“Immediately there are significantly better corporations accessible for investments at far more cheap entry worth,” says Malhotra.