Smart Launch Ventures

Startups / Raising funds / Seed / Angel / Series-A / Series-B and so on have become buzzwords in India in recent times. There is lot of action, excitement, passion and hope around Indian Entrepreneurs. Over last few years, the investment industry has matured and has become more organized; but at the same time, it has also mimicked a few fundamental flaws that are all too visible in the Silicon Valley.

Today, venture capital and the investing ecosystem treats startups as a “Passing the parcel” game. As we, all know, in traditional passing the parcel game; one has to pass on the ball to immediate neighbor as soon as one gets it. Person holding the ball when the music stops is out of the game and/or is punished.

Do you think, this describes the startup ecosystem in India today? Investors keep investing and pass the parcel around, until the ‘biggest fool’ is left holding it when the music stops. That is when the unsustainable business model probably sinks the company.

However, this game has quite a few very interesting variations.

• The first variation – In this game, people who participate do not actually pass on the ball as soon as they get it. The game is about holding it as long as you can, but getting rid of it JUST before the music stops.
• The second variation – You can continue pumping air in the ball while you hold it. Thus, the longer you hold the ball, the bigger it gets
• The third variation – You can choose anyone to pass the ball to (You do not have to pass it to your neighbor).
• The forth variation – Person who receives the ball gives you a gift that is proportional to the size of the ball he’s getting.

In most cases, investors (and entrepreneurs alike) just pump money into a startup until it becomes big enough to pass it on to someone else. The cycle essentially repeats multiple times for a startup (if it is successful).

This however is very different from how it all started. Originally, the intent was to provide help and nurturing to the innovator / entrepreneur and grow a company together.

That is where the “Tree sapling” metaphor comes into picture.

At “Investor India Alliance”, we are looking to go back to this core philosophy of investing in startups. Here, we are not pumping air into a startup to increase the valuation and then hand it over to a “bigger fool”.

Here, at IIA, most startups that we choose to work with are in very early stage of growth. We believe that is when they need our help the most. We work closely with the entrepreneur and investor to nurture a startup. It is exactly like taking care of a young tree sapling. We need to shield it from harsh sun, strong winds or torrential rains. We give it good soil and fertilizer (Investment); we also give it good nutrients (Mentoring) and make sure we protect it from being eaten up by birds/animals (Strategic Direction)

Once we have nurtured the sapling, it is ready to be grow into a bigger tree. In other words, our focus is to nurture the startup in its early stage and make it flight-ready. At that point, our work is complete. If the investors want to continue their journey with the start-up they helped nurture, they are welcome to stay invested. However, it is a joint decision between the founder and investors.

What is retail today? After all the dire warnings of the “retail apocalypse,” store closings, zombie malls and retail bankruptcies, “retail” is a loaded term. But in reality, retail is changing – and the definition of the very word “retail” is no longer what it was.

Startups in what I call the “retail sector” can be B2B or B2C. They can be marketplaces or ecommerce sites. They can be digitally native brands or fashion brands. They can be technology companies that sell into enterprise (legacy) retailers like Walmart, or they can be fashion tech companies that provide products and services for fashion brands. They can be apps or sharing/rental platforms. They can be companies that provide tech services for small and medium sized bricks and mortar retailers, or platforms for influencers that are launching their own ecommerce presence. In short, the definition of retail is expanding.

And the challenges for these companies are very specific to the sector. Retail, in every shape or form, requires a knowledge of how shoppers shop and buy. Of the specific seasonality and sales cycle that is unique to this sector. Of the legacy of promotional calendars and wholesale models. Of bricks and mortar versus online versus mobile. And marketing – both online and offline.

I’ve said in previous posts that I’m looking to invest in the future of retail. But I also want to help build it. And as I looked around at the growing retail ecosystem of New York, I realized that while there are some great incubators and accelerators locally targeting the sector, there are fewer resources for entrepreneurs who are just starting out in these sectors.

That was the genesis for Retail Series, which is launching on March 19^th. What is it? It’s a retail startup boot camp program for pre-seed stage founders who are revolutionizing the future of retail. We’re hosting twice monthly events with experts covering topics from customer acquisition, to financial modeling, to seed stage fundraising, targeted specifically to B2B and B2C retail founders. Featuring great panelists who have been there, and actionable insights for early stage founders. No equity taken, no commitment to attend all sessions. I’m incredibly excited to launch soon, and if you’re a pre-seed retail founder, I hope you can join me.

Not sure if Retail Series is right for you? If you’re a pre-seed founder in any of the following areas, take a look at Retail Series and reserve your spot now:

• Digitally native brands
• Shopping/retail apps
• Ecommerce/mobile commerce
• B2C or B2B marketplaces
• Rental/peer-to-peer businesses
• Enterprise retail technologies/software
• SaaS businesses targeting retailers
• B2B or B2C fashion tech

I’ve been thinking a lot about the concept of “third places” recently, and particularly how startups are capitalizing on this non-tech based macro trend.

What is a Third Place?

Ray Oldenburg is widely regarded to have been the thought leader behind the concept. In his 1991 book, third places were originally defined as “the public places on neutral ground where people can gather and interact. In contrast to first places (home) and second places (work), third places allow people to put aside their concerns and simply enjoy the company and conversation around them. Third places “host the regular, voluntary, informal, and happily anticipated gatherings of individuals beyond the realms of home and work.”

The History of Third Places

Historically, third places were the village square, local park or the community’s religious institution. In post-war America, the shopping mall and movie theater became popular and ubiquitous third places. Remember when we all used to go to the mall just to hang out, meet friends and maybe get a snack at the food court? It was a social gathering place for a mostly suburban community. But not anymore.

Online = Third Place?

Then came online. Social media sites like MySpace and Facebook and then Twitter, Snapchat and Instagram allowed us to keep in touch with our friends digitally. Technology like Viber, What’s App, Skype, FaceTime, etc. let us keep in touch with far-flung communities. But were any of these really a true third place?

Online Isn’t Enough

Evidently, online just hasn’t been enough of a third place. At the same time as we’re see ever-better ways to communicate, interact and connect to people over online channels, there’s been a renewed demand for offline places – physical locations and events where people can connect again, IRL. A new third place. But this time, it’s not one size fits all. Our third places are now interest- and community/demographic-specific. That’s a huge opportunity for entrepreneurs and we’re starting to see that play out in these sectors:

• Boutique fitness communities – You’ve heard of them all – Soul Cycle, SLT, CrossFit, and dozens more. All with devoted fanbases who are regulars and even sport their studio’s logos when not working out.
• Activity-based places – One of the clearest examples here is Massachusetts-based PaintNite and its many sip and paint competitors all over the country that provide a fun, easy activity that groups of friends can do together in a physical space.
• Co-working and co-living places – WeWork may be the best known co-working space, although there are plenty of others. Newer startups include co-living models that create communities for young people early in their careers (e.g., Founder House, Common, Krash).
• Affinity-based places – Networking communities (e.g., Ellevate, Meetup) have been the start of this trend and they do offer physical events, but I’m guessing we’ll see more of these morph into physical locations. I know of at least one startup that’s working on this, and there are probably others out there.

So why should we as investors care? Because more and more, these businesses are investable and scalable businesses – and we’re missing out if we don’t pay attention.

Over the last year or so, we’ve seen a number of new startups launching brand aggregation platforms that, among other benefits, provide consumers with curated product discovery. Many of these aggregation platforms are online marketplaces (the recently announced high profile Verishop is a great example), while others are offline (e.g., Showfields). As online customer acquisition gets more and more difficult and expensive for young DTC brands (see here for more details on that trend), We believe that platforms will become even more important. Young DTC brands will increasingly seek out aggregation platforms that curate products are relevant for their target consumer – and this will be a key way for these young brands to acquire customers.

Given these trends, it’s not surprising there have been many new entrants into the aggregation platform space. Many of these focus on a particular industry vertical (e.g., ethical fashion, sustainability, beauty, fine jewelry). More recently, I’m seeing many more startups in this space focus on a particular customer segment (e.g., millennial discount shoppers). And these platforms are interesting in that they can also build a sense of community among their users, where curated shopping is just one of the key benefits. Allowing consumers to feel a sense of social purpose is another benefit that these platforms can provide. We’re betting that these sorts of aggregation models will be among the next generation of massively successful shopping platforms.

Our thesis around aggregation led us to invest in a curated aggregation platform that launched earlier this month: Mage. Mage brings together inclusive, female-founded brands across a variety of categories including fashion, home, beauty and more. You’ve probably heard of some of the brands on the platform (like Dagne Dover and Alex & Ani), but perhaps not others (such as Avery Grey Soapery). The twist to Mage’s model is that becoming a member of Mage (for $89/year) gives you access to discounts, swag, exclusives and perks from all of these brands. The discounts and perks make it easier for shoppers to try new brands and vote with their wallets to support the brands (and the founders) they care about. And the icing on the cake is the community that Mage is creating. Currently, members can nominate other women-founded brands to join the platform and in fact are encouraged to do so. This community aspect will only grow over time.

We invested in Mage and its co-founders Akanksha Purai and Shradha Brar because we believe the time is right for a curated shopping platform that allows women shoppers to be more intentional in their spending, easily discover new brands across a wide range of categories, while still providing discounts and accessibility. At the same time, Mage is providing a new channel for young DTC brands for building awareness and customer acquisition. And all while building a community of women supporting other women.