Cogniphy Prosper Pulse

As a Category I Angel Fund investing in the thriving startup ecosystem in India, it can be tempting to play the short game – chasing quick wins, viral growth, and overnight success stories. However, we strongly believe that taking a long-term approach is key to startup investing in India.

What do we mean by playing the long game? It comes down to three key principles:

1. Diversification across sectors, business models and stages – Making small bets in many startups rather than putting all your eggs in just a few baskets. This allows us to withstand the inherent volatility of startup investing in India and boosts our overall odds of success over a period of time. For example, our current portfolio has over 25 companies across health-tech, fintech, deep tech, retail and more.
2. Patience and discipline – Resisting the urge for quick flips or exits. Being patient with our entrepreneurs, supporting them through the boring building phases – establishing processes, teams, infrastructure. Compounding many incremental advantages over time leads to sustainable business growth. As Jeff Bezos said, “Nine percent of what separates the successful startups from the nonsuccessful ones is timing, nineteen percent is luck. Seventy-two percent is just perseverance.”
3. Consistent LP commitments – Encouraging our Limited Partners to commit capital regularly into Indian VC funds over multiple cycles. Avoiding the temptation to make short-term bets based on trends or hype cycles. Developing resilience through economic and political changes. Top successful LPs take a 5-10 year outlook on venture capital.

The long game requires us to often go against our natural instincts that are attracted to quick wins and easy gains. An entrepreneur who is optimizing for short-term growth at all costs should raise alarm bells – aggressively hiring before finding product-market fit, overspending on marketing to show vanity metrics, constantly pivoting the business model to chase new ideas without depth.

While this short-term approach may help a startup raise its next round, it covers up shaky foundations and makes real, long-term success elusive. We’ve seen too many startups stumble and crash quickly after rocketship growth because the fundamentals were missing.

In contrast, the long game focuses on:

• Finding entrepreneurs obsessed with solving real customer problems through an incremental approach vs chasing overnight success. Eg: Ninjacart’s focus on slowly revolutionizing fresh produce supply chains.
• Investing in startups with maniacal focus on building team culture, ethics and customer loyalty from day one. As Howard Schultz said about building Starbucks, “Mass advertising can help build brands, but authenticity is what makes them last.”
• Laying the groundwork early with sound processes, systems and governance; the boring stuff becomes critical as the business scales. Infosys founder Murthy’s obsessive early focus on systems and processes played a key role in its success.
• Maintaining capital efficiency and spending discipline during the early phases – growth comes from compounding many small advantages. Eg: the capital efficiency of Freshworks as it grew to IPO.

Playing the long game in India requires patience both from us as an Angel Fund and our LPs. The ability to ride out market volatility and keep investing steadily. But we firmly believe this is the way to build iconic Indian startups that can IPO/exit as multi-billion dollar companies over the next decade.

Conclusion

The long game in startup investing requires conviction and a higher purpose. We must look beyond profit motives and short term gains. Our role as venture capitalists is to power innovation, create jobs, and fund solutions to real problems. We should aim to build iconic companies that stand the test of time and uplift society.

This needs us to play the long game with diversification, patience and grit. We must back tenacious founders who wish to create lasting impact through incremental progress. We should enable their audacious dreams through early belief and steady support.

Startup investing is not for the faint hearted. It tests our conviction and character. But the rewards can be tremendous, both financial and social. We can nurture a generation of problem solvers. We can seed positive change across industries. We can earn multifold returns while improving lives. But only if we eschew short cuts and play the long game. We invite you to join us on this rewarding journey.

Would love your thoughts on playing the long game vs short game approaches in the India startup investing context!