For an industry that takes pride in being ultra-modern and always focused on what’s next, the VC industry’s vocabulary is quite industrial. Words like pivot, platforms and portfolio are quite common. But nothing is more industrial than the most used term — pipeline. And pipeline, especially early stage, has been a big problem in India which shows up as a Series A choke every few years. Hence, it is not surprising that lot is happening in the early stage funding space. Many new seed funds have come up. Existing seed funds have successfully raised their next fund (2–3x larger). At the same time, VCs have become active in the seed stage. Even many corporate venture arms have joined the fray.
In these times, why should the launch of yet another seed fund be news? In the last few days, whenever I have spoken about this to other VCs and early stage founders, they were not only curious to know more but also had the same set of questions. In this blog, I aim to answer those questions in detail for the benefit of early stage founders and why they should take note of Axilor’s seed fund.
Question 1 : Axilor is already an active seed investor in the last three years and hence what is new?
That is an obvious question given we were rated the top institutional investor in Q4 FY18. Structurally, the investments we will make going forward will be through a new Category 1 AIF — Axilor Technology Fund. But there is more to it than this change. With the new fund, we have increased the corpus of the fund to Rs.200 crores. While most of our investments in the last two years have been in the 1–2 cr ($250–300k), we are now looking to increase the ticket size upto 3 crores ($450–500k). This will also mean we will be as prolific as before in terms of deals done, every year. We will continue to focus on tech-led businesses in consumer, enterprise, fintech, deep-tech and health-tech — with a healthy appetite for emerging areas.
Question 2 — How Axilor’s seed fund will be different? Or, Why should founders come to Axilor?
In early stages Founders need to go beyond early traction and find their product-market fit — consistent high growth, repeatable sales, a scalable business model, an investible narrative et al. Hence, to help a founder succeed, a seed fund should be able to add value beyond capital. And that is easier said than done!
So why should founders come to Axilor? The short answer is that Axilor is not just a seed fund but a platform. The long answer will have to begin with what founders need, beyond capital, to succeed. Someone rightly defined the early years of a startup as a race to find the product-market fit in the shortest time with as little capital as possible. And to achieve that, three things are critical — access to customers, access to investors and access to expertise (ideally from founders). And at Axilor, we have built exactly these in the last few years.
The Indian startup ecosystem lacks strong networks. AXENT, the ‘Axilor Enterprise Network’ program enables startups to connect with large corporates and startups across industries. This makes finding and signing up customers easy, strike go-to-market partnerships and in some cases, even funding. Within the NPS surveys we conduct among our portfolio founders, this has clearly emerged as one of the top value additions. And that is only half the story! With a portfolio spanning 40+ companies (check out our portfolio here) and with over 100 startups that are part of the Axilor community, most startups find it easy to start their customer quest from within the portfolio. If we include the customers of these startups, then in most areas, the degrees of separation to a prospect reduces to one. And the platform makes discovery and access easy.
Next to customers, founders need capital to scale. But raising Pre-Series A or Series A, often is time consuming and uncertain. But doing a few things well — some within a startup’s control and some outside — can dramatically improve the odds of success. Entering a fund-raise with the right set of metrics and an investible narrative are good points to start with. Further success will require figuring out the who, when and how. For most founders this is a process of painful discovery. It does not have to be! With over 40+ VCs in our network (and growing), many of whom have invested in Axilor portfolio or co-invested with us, the startups get the benefit of this access that improves the odds of their fund raise success.
Capital does not create value by itself, founders do. Being part of an amazing founder community endows a distinctive competitive advantage. With over 225+ tech founders, Axilor’s is one of the largest and fastest growing founder communities in India, built with a strong ethos of helping each other. Whatever be the question — technical, business, tactical, strategic, fund-raise, talent (and the list is long!) — chances are you will be able to find help from 3–4 experienced founders within hours. So, being an Axilor portfolio founder offers an opportunity to be part of this amazing, active and helpful founder network.
While the above three networks make the Axilor’s seed capital ‘Smart’, the value extends to intangibles too. One of the big differences between larger startup ecosystems and us is the templates in use at different stages. India is still to evolve a template that makes seed stage fund-raise easier for founders. At Axilor, we certainly hope to make a difference in this area. ‘Easy to work with’ is something that our portfolio founders use to describe us — and certainly something we are proud of.
As Indian tech entrepreneurship enters its second wave, we are certainly beginning to see founder quality become even better and ideas become more diverse. With enough late stage investment capacity, one of the biggest bottlenecks for realising its potential is to build a high quality early stage pipeline. Having built one of the most respected accelerator programs in the country, we, at Axilor, are now taking the next deliberate step towards helping early stage founders — through our seed fund!
An abridged version of this blog appeared on Inc 42: How The Axilor Seed Fund Aims To Solve The Key Challenges Of Early-Stage Fundraise For Startups