Investors back top execs venturing out on their own

On Monday, Farid Ahsan, the co-founder of Sharechat who quit six months ago, said he has launched General Autonomy, a startup to help automate factories. The firm has already found backers in IndiaQuotient and Elevation Capital, who provided $3 million in seed funding.

The funding wave of 2021 and the following winter have taught the investors that it is safer to bet on experienced hands. Some of these executives include Dale Vaz, chief technology officer (CTO) of Swiggy who left to start Aaritya Technologies (a trading company); Shanmugam Krishnasamy, CTO at Freshworks who left to start Smukk (a surplus management software provider); Karthik Gurumurthy, senior vice-president of Swiggy who is to start his own firm in offline space that will mirror Swiggy; Ankur Jain, chief product officer at BharatPe who has left to start his own venture in the artificial intelligence (AI) and machine learning (ML) space; Jaynti Kanani, co-founder, Polygon Technology who left to start two ventures, Morphic and Mozak, in the Generative AI and Web3 space, respectively; Anurag Arjun, co-founder, Polygon Technology who left to start his own venture called Avail Finance (a fintech venture), according to data from Native, an executive search firm.

“Around 90% of our portfolio founders have worked in or ran a startup in the past. In the last couple of years, we are seeing an increasing trend of CXOs of established startups quit to build for themselves. They come with a deeper understanding of the customer problem, have been part of scaling-up journeys and have the required network to build teams. Having learned from mistakes in the past, they are well-suited to avoid them in their own startups,” said Rahul Chowdhri, partner, Stellaris Venture Partners, an early-stage venture capital firm.

CXOs and former co-founders are also more familiar with handling investors and fundraising compared to first-time founders, and can raise capital on their own terms.

“In my experience, the investors were still very careful in assessing founder-market fit,” said Dale Vaz, who raised $7-10 million from Elevation Capital and Accel for his wealthtech venture Aaritya Tech. “Experienced CXOs do come with a track record that makes them a known entity. So, investors have more information when making a bet on them. However, at the end of the day, the investment is still made based on an assessment of whether the CXO would make a good founder, and whether they have the skills/knowledge/passion to win in their chosen market,” Vaz said.

From navigating onerous clauses to bargaining hard on valuations, the experienced brass know how to negotiate with investors.

“Investors see a great value-add in funding these ambitious professionals since they come with vast experience in their respective domains, understand the market well and more importantly have seen enough scale to manage the show without many hurdles,” said Sai Gopal, partner and head engineering and digital technology, Native.

“It is a no-brainer that we are seeing more technologists taking the plunge even during these tough macro-economic times,” he added.

There are times when being part of the inner circle helps one raise capital faster, said Anand Lunia, founding partner, India Quotient. “From angel investors to early-stage funds, knowing the right people helps and former CXOs of established startups enjoy the strength of that network. But funding CXOs or returning founders has become a lazy way of conducting venture, almost without nuance,” Lunia said.

“This group (former founders and CXOs) sometimes brings ability to execute, but they also ‘know’ things versus younger first-time entrepreneurs who bring innovation, discovery and willingness to learn along with essential stupidity to believe in the impossible. Yes; while we also fund CXOs for known gaps in the market, we feel that sometimes fresh entrepreneurs can take real moonshots,” Lunia said. He said Ahsan’s venture where India Quotient invested has immense growth potential.

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Updated: 15 Nov 2023, 12:56 AM IST