YourNest, founded in April 2011 by Sunil K Goyal, Sanjay Pande and Girish Shivani, is an early stage venture capital fund that invests in the new connected economy represented by the Internet of Things, Electronic System Design, Artificial Intelligence, Advanced Robotics, Enterprise Software and Mobile Internet. In 2016, the company brought Dr. Vivek Mansingh on board as a General Partner. YourNest is among the top quartile of pre-series A stage venture funds. Acting as a lead investor in investment rounds of upto USD 1 million, YourNest co-creates successful companies by mentoring and closely working with start-ups. The portfolio consists of 16 companies, including Uniphore Software, mycity4kids, Rubique, Arya.ai, Smart Software Testing Solutions Inc, Simpli5d, SmartQ, seeDoc, Fashalot, aahaa stores, MoMark, and GolfLAN. The first fund launched in 2012 saw subscription from 144 individual investors as well as 3 institutional investors - SIDBI’s India Opportunity Fund, IIFL Seed Ventures and Northgate Capital (a Silicon Valley based USD 5 billion Fund of Funds) with a corpus of Rs 90 crore. In October 2016, YourNest announced its second fund called ‘YourNest India VC Fund II’ for Rs 300 crore targeted at investing in 25-30 start-ups over the next 4 years.
Replying to IIFL, Sunil Goyal says, “The government’s focus on Startup India and Digital India, as well as the India stack of Aadhar, UPI, BHIM, NPCI etc has given a boost to the growth of internet-based businesses in India.”
Which are some of the segments your fund has been investing in?
YourNest has been an early mover in identifying and investing in startups with globally-focused B2B and B2B2C models. As the ecosystem matures, we are bringing in specific focus on startups that are working on technologies like Internet of Things, electronic system design, artificial intelligence, advanced robotics, enterprise software and mobile Internet. From the 17 investments across 2 funds, 9 are B2B platforms and 2 are hardware product companies.
To what extent has the government’s initiatives on start-ups helped the industry?
Government has put a lot of focus on promoting startup ecosystem in India. The government’s focus on Startup India and Digital India, as well as the India stack of Aadhar, UPI, BHIM, NPCI etc has also given a boost to the growth of internet based businesses in India.
Walk us through how your journey has been and what significant changes have you seen in the start-up space in recent years?
Indian start-up ecosystem is very vibrant right now and startups now have established themselves not just in India but are starting to compete at the global level. From a point where, even the term “start-up” was not talked about by many, to people talking about Unicorns, India has moved many steps forward. It is now home to the one of the world’s largest number of start-ups.
We have seen the ecosystem gaining in depth in terms of the number of players. When we started in 2012, there were only 5 structured funds, about 120 Angel investors, 3 or 4 Angel Networks and we used to get about 50 opportunities every month from an investment perspective. Today, there are 30+ structured funds who are focused on this space form an investment perspective, every large city has an Angel Network, close to 2000 Angel investors, and we get to see close to 550 opportunities to invest in every month. And entrepreneurship has become viable career alternative.
Tell us a little about your ambitions early in life and how did the idea of YourNest come about? How did the founders get together?
The idea of YourNest initially was discussed between Sanjay Pande and me in 2010-2012. I had became a member of TiE, IAN and Mumbai Angel while on a sabbatical and an angel investor with an aim to understand the nitty gritty of investing at an early stage as well as to study the inherent challenges while investing in Tech startups. Sanjay, who I knew for 20+ years and who specialised in leadership development and team productivity, assessed entrepreneurship development and challenges for entrepreneurs in the Indian start-up eco-system. We launched YourNest in 2011 after putting together a blue-print for success. Other partners joined in due course to address the skill gaps. We got our first fund close at a very modest Rs 18 crore from 35 angel investors in 2012 and it’s been a wonderful journey till date.
Nest is the place where eggs hatch for continuity of species. At YourNest, we would like to be the preferred partner for entrepreneurs and startups when it comes to institutional capital. Our philosophy is to encourage risk takers and nurture them in co-creating great businesses through the resources of our eco-system.
What are the trends being seen in the start-up space? Is there a conflict as many start-ups seem to be chasing the moneybags rather than bringing about change or identifying the gaps in providing solutions? What has been your experience with the companies you have invested in?
Indian startup ecosystem is at an evolving stage and neither similar to nor as mature as the West. We feel there are some spaces that have become too crowded. We believe that startups that work in the niche technology areas and who differentiate themselves with their specialised offerings have better chances of success.
Of the 8000 startups in India today, a significantly large percentage will fade away in the next few years and for the remaining, it will be a journey of various challenges. Amongst the problems they will face will be lack of investor focus from those investors who have invested in large number of opportunities. We firmly believe that it is imperative for startups in India to get due time and attention from the investors to successfully navigate to their destination. We are focused on startups that deal with high-end technology such as IoT, machine learning, predictive analytics and artificial intelligence.
You have invested in around 16 companies. How many of them have got follow-on rounds of funding after your initial investment? By when do you see some of them getting listed?
Out of our 16 investment, 11 have received follow up rounds of funding. It is too early for these investments to be listed.
Artificial Intelligence is gaining traction. How are you viewing this space? Any investments done here?
Artificial intelligence is a technology for the future. We are highly optimistic about the startups in artificial intelligence domain and believe that the next Indian unicorn could be a startup from this space or from digital advertising. We believe AI is here to change the way machines operate for us. That is going to create disruption in every sphere of life and we will be going with anybody who has wonderful solutions in that area. We have already invested in a startup working in artificial intelligence domain - Arya.ai - which is a Deep Learning platform offering tools for enterprises and developers to build and manage deep learning applications and are actively looking out for more startups in this domain.
Explain to us your business model. How is YourNest proactively supporting and engaging start-ups?
We believe that co-creation is the only way to create value for all stakeholders. We work closely with the startups to engage and support them in building up their businesses. At any given point of time, we - the 5 partners - work with a maximum of 20-25 startups so that we can get deep understanding of their business and operations.
What is the amount of money raised so far? To what extent have you deployed them?
In 2012, we raised Rs 90 crores from 144 individual investors and 3 institutional investors, which we invested in 16 startups. We are now in process of raising Rs 300 crore. One of the investments made from the second fund is in a Defence IoT startup CRON Systems Pvt. Ltd.
CRON deploys border security solutions, some of which have also been adapted for commercial markets. The company has bagged orders from the Border Security Force (BSF) and the Indian Army to install its products at army camp airport and border areas.
Our investments have zero mortality and are largely robust, with 11 of the 16 investments having already received up rounds, and another 3-4 in the process of closing rounds in the next 3 months. The outlook for Fund 1 is good and we are looking at a large deal flow to identify great opportunities for the second fund.
What are the challenges you face?
There are two challenges for us. The first is to raise capital from the market for deployment and the second is to identify the right startups that we would like to invest in to generate value for our investors.
What is your team size? How do you retain talent?
We have a team of 11 people including 5 operating partners. In more than 5 years of our operations, only 1 person has ever left the organization and that too for personal reasons.
Your message to entrepreneurs?
Our message to entrepreneurs has always been that they should go out and build sound businesses around unique ideas dealing with large scale and relevant problems. The rest everything including funds, valuation will come automatically.
We believe that the Indian start up eco system is very unique and completely differentiated from any other in the world. It takes an in-depth understanding of the challenges and opportunities present in this system to build great companies. We do not believe that replicating ideas from other economies and geographies is the way forward. And we believe that it is imperative for talent across various domains to come together and co-create the future.