Startup Ideas the DFJ Would Like to Fund
Mohanjit Jolly
Executive Director,
DFJ India
DFJ India
Entrepreneurs often ask a fairly simple sounding question "what do I need to get DFJ excited about my idea". The answer is really two-fold. There is a mix of sector-agnostic and sector-specific response. Let me focus on the sector-agnostic first. DFJ, as an investor, is focused on a blend of early to mid-stage investment (series A, B and C). Typically, an investment thesis revolves around team, technology/differentiation, traction/ validation and market size/opportunity. At an early stage, however, there often isn't much that an entrepreneur can offer. The team is incomplete, the technology may not be developed or fully baked and given that there isn’t a product or service, there isn’t any traction or revenues. What does matter at that stage is undeniable passion and an absolutely resolute attitude towards "making it happen, come what may".
A perfect example of that was DFJ's investment in Attero, emerging as a leader in the electronic waste recycling business in India. When Nitin and Rohan, brothers and co-founders approached DFJ, they had virtually nothing except a power point and a spreadsheet. But it was the passion that they exuded, and the fact that they were willing to back that passion by investing their family savings, that convinced NEA-IndoUS ventures and DFJ to put in $6million into the company. We were also convinced that the market for ewaste was enormous and growing, and that trying to replicate what Attero was planning on doing was going to be non-trivial (in essence, it’s not a business that would create many me-too's).
On the later stage front, the entrepreneur needs to be able to convince DFJ that, in a very capital efficient manner, he/she has been able to make solid progress, that the business model has either been proven or on its way to being proven, and finally that the market is large and growing. Examples of late stage investments for DFJ are companies like Cleartrip and iYogi where the capital requirement was for scaling the business, not for proving the business.
Finally, what has to be clear in the entrepreneur's mind is the overall potential (how big can it be over what period of time). Fund IX, from which DFJ is investing, is a $650 million fund. DFJ is looking to turn that into a $2billion+ return. For DFJ to get excited, the startup has to have the potential of returning at least $50 million or more to the fund. To make the math simple, assuming that DFJ owns 20percent of a given company upon exit, the exit value of the company has to be at least $250million.. Before approaching DFJ, the entrepreneur in his/her mind needs to be convinced that the idea is big and for a larger fund, is going to "move the needle" for a fund's IRR. I have often said, that before approaching VCs, entrepreneurs should do their homework and make sure that the funds that they approach are in line with the overall business that he/she is looking to build.
A perfect example of that was DFJ's investment in Attero, emerging as a leader in the electronic waste recycling business in India. When Nitin and Rohan, brothers and co-founders approached DFJ, they had virtually nothing except a power point and a spreadsheet. But it was the passion that they exuded, and the fact that they were willing to back that passion by investing their family savings, that convinced NEA-IndoUS ventures and DFJ to put in $6million into the company. We were also convinced that the market for ewaste was enormous and growing, and that trying to replicate what Attero was planning on doing was going to be non-trivial (in essence, it’s not a business that would create many me-too's).
On the later stage front, the entrepreneur needs to be able to convince DFJ that, in a very capital efficient manner, he/she has been able to make solid progress, that the business model has either been proven or on its way to being proven, and finally that the market is large and growing. Examples of late stage investments for DFJ are companies like Cleartrip and iYogi where the capital requirement was for scaling the business, not for proving the business.
Finally, what has to be clear in the entrepreneur's mind is the overall potential (how big can it be over what period of time). Fund IX, from which DFJ is investing, is a $650 million fund. DFJ is looking to turn that into a $2billion+ return. For DFJ to get excited, the startup has to have the potential of returning at least $50 million or more to the fund. To make the math simple, assuming that DFJ owns 20percent of a given company upon exit, the exit value of the company has to be at least $250million.. Before approaching DFJ, the entrepreneur in his/her mind needs to be convinced that the idea is big and for a larger fund, is going to "move the needle" for a fund's IRR. I have often said, that before approaching VCs, entrepreneurs should do their homework and make sure that the funds that they approach are in line with the overall business that he/she is looking to build.
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