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6 thoughts on India’s Gen Z from 2am VC

Written by Moulishree Srivastava Published on   3 mins read

2am VC aims to back startups across themes like e-commerce, fintech, wellness, mental health and fitness, crypto, and NFTs.

Hershel Mehta is a certified public accountant and two-time entrepreneur who heads US investments for his Mumbai-based family office, Mehta Ventures. In late 2019, he invited his friend Brendan Rogers, co-founder of SoftBank-backed American petcare startup Wag Labs, to his home country to attend a startup demo day organized by 100X.VC, a seed-stage investment firm founded by his cousin and serial investor, Sanjay Mehta.

After spending three weeks with young founders, the duo realized that India’s massive young population contains immense tech talent. This led them to set up an India-focused, Gen Z-centric micro fund, 2am VC—a name they chose because they believe most action in early-stage startups happens late at night.

By 2020 end, Hershel and Rodgers raised USD 10 million for their fund. Since then, they have cut 15 seed checks. They expect to invest in about 60 startups by the end of 2022.

KrASIA (Kr): What’s the thesis behind shaping your fund with Gen Z at its heart?

Hershel Mehta (HM): There are 600 million Indians under the age of 27. Compared to six years ago, when top-tier talent was leaving the country because of a lack of opportunities, the talent retention in India is very high now due to the available venture capital, the number of startups that are popping up, and the need for engineers. We believe the best people are now staying here and looking for opportunities in India. We invest in young Indians building for young India and anything that fits that realm.

Kr: You entered India at a time when there is massive liquidity. Does that make it harder to locate good deals?

HM: India is a notorious cyclical economy with periods of boom and bust. Frankly, it’s been underwhelming. We are in one of those boom cycles. The amount of foreign direct investment coming into India is unprecedented. Although it is hard to extrapolate where the market will go, with China cracking down on tech companies, we believe the timing is correct.

In India, while deal prices have shifted up, the market is catching up quickly. Young people, for the first time, are able to command high salaries. When you are in the high-income bracket, your time becomes more valuable than your wallet, which leads to convenience-buying.

If we’re investing in good companies, our fund will perform well. There’s no reason to price them low. We cannot fight the price, so we skew for quality.

Hershel Mehta and Brendan Rogers, co-founders and partners at 2am VC. Courtesy of 2am VC.

Kr: What’s the competitive landscape for early-stage investing in India like? 

HM: We have a founder mentality—you compete to win, that’s what makes it fun. We are working with a lot of local investors—they’re friends and not direct competitors. We complement each other because we bring diversity of thought, mentality, and geography.

Brendan Rogers (BR): Many founders are looking to scale overseas or hire remotely, so they like our Silicon Valley connections and mindset. Being on the younger side, we immerse ourselves in technology and understand new spaces like crypto and NFTs. That’s why founders enjoy working with us.

Kr: Is there a particular trend among young Indians that stands out for you?

HM: The desire among young people to invest is at an all-time high globally. They want to have financial acumen regardless of their occupation. The world is shifting—young people want autonomy for their time and income. They want ownership of what they do. That’s permeating throughout the Indian ecosystem as well. Anything that supplements the economy of being autonomous is appealing to us.

Kr: What similarities do you see between Silicon Valley and India’s startup ecosystem?

BR: The pace of investment is very similar—hot deals move very quickly. The level of technical talent in India is extremely high, on par with the high-level engineering talent in Silicon Valley. With liquidity from international investors and active funding and M&As, the spotlight is on India, which is turning out to be a place to be for startups. There’s so much perseverance, grit, and passion in Indian founders—they just want to build businesses for India. That’s definitely the mindset in Silicon Valley as well.

Kr: What are the two key factors that help you decide whether to invest in a startup?

BR: It’s really about the team and the total addressable market. Are the founders skilled? Is the scope of what they are building big enough?

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