Emerging Entrepreneurs

This VC firm can be a SAFE bet for early-stage start-ups

N Ramakrishnan | Updated on February 17, 2020 Published on February 17, 2020

Sanjay Mehta, Founder and Partner, 100X.VC   -  N Ramakrishnan

Mumbai-based start-up 100X.VC aims to invest in 100 companies every year

The experience of investing in start-ups from his own funds and putting money in ventures outside India for the last two years gave Sanjay Mehta a different perspective into angel investing. He has built up a portfolio of over 130 start-ups as an angel investor, has exited 14 of them with two being blockbuster ones. As an angel investor, he says, he realised there were quite a few issues. There were not many willing to take the lead in investing; they were quite willing to join in when someone else was the lead investor. Sanjay says he also saw that it was taking anything up to five months to close a deal, which put enormous pressure on the ventures.

The culprit here, he says, was the shareholder agreement and the regulations that had to be complied with in getting all the investors in a round to complete the formalities. “In the last two years, I started investing quite a lot of my investments outside India through other platforms. The speed of investing was really fast. That was because there was a document called SAFE Note. I wondered why people were not doing it in India. I worked backwards and created an India version of the SAFE Note,” says Sanjay.

iSAFE Note

He came up with iSAFE (India Simple Agreement for Future Equity) Note and made it open source. The Note is meant to be founder-friendly and assures entrepreneurs of quick closure of the funding round. Sanjay wanted to do deals quickly and also wanted a steady pipeline of deals. Since neither of that was happening, he felt he needed to do something on his own. His thesis is to put in small capital in large number of deals, unlike venture capital firms that put in relatively large sums in fewer deals.

“We created with this thesis 100X.VC. It is a discovery platform, where we have to invest in 100 companies every year. We will do it in a class model. Every quarter we will have 20-30 investments,” says Sanjay. 100X.VC will invest ₹25 lakh to ₹1 crore in ventures in the country adopting the iSAFE Note route. It will take a fixed percentage of equity. “This whole process we streamlined, adopting a cookie-cutter approach. We wanted to become a feeder to the VC ecosystem.”

Ropes in VC firms

He formed 100X.VC in July 2019, with money for investing coming from his family office. The firm invested in 20 ventures in the first class and the next class is scheduled for April. 100X.VC has tied up with a large number of VC firms and it feeds these firms with a steady stream of potential companies for them to invest in. The iSAFE Note, he says, is a standard six-page document.

Unlike other investors, 100X.VC does not take any rights and only specifies that when the ventures raise institutional funding later, they have to give 100X.VC a seven per cent equity stake. He says he is not in a hurry to exit his investments and is prepared to wait till such time that he gets a good return on his investments.

Apart from putting in small sums of money, 100X.VC also has 60-70 hours of master class for its portfolio companies, when it brings successful founders, CEOs and other experts to share their experiences with the founders.

A sector agnostic

Sanjay says he looks at the founding team, market size opportunity, business model strength, the moat that the venture has built and conviction that he will get a minimum 20x returns before putting in money in the start-up. He is sector agnostic but will not look at old economy companies and real estate. “If I don’t see a 20x return for us minimum, it is not worth investing. I am not here for averages. My frequency of success is not what creates outlier. The magnitude of success builds me. Even if one company with 1000x return can create the average of my portfolio then I am looking for that moonshot,” he says.

He uses a baseball analogy – the Babe Ruth effect – to further explain his strategy. “Every ball you hit, you want to hit out of the park, you are not here for singles. The reason why I chose this path of investing in so many companies is I get so many chances to hit out of the park,” adds Sanjay.

Published on February 17, 2020
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