After spending more than four years at Singapore-based family office RB Investments, Harshavardhan Bothra launched his own VC fund, FounderBank Capital, in January 2020.
Bothra’s fund invests in early-stage companies as well as firms looking for Series A funding. So far, it has cut checks for companies like Indonesian digital ledger developer BukuKas, US-based energy drink company MatchaBar, Indian online logistics startup Blowhorn, and silver jewelry e-commerce platform Giva, to name a few.
As a partner at RB Investments, he has led several funding rounds for startups like Indian food delivery giant Swiggy, social media company ShareChat, and interior design startup HomeLane. The time he spent at RB opened up useful professional connections. Bothra is banking on those links to feed a robust deal flow for his new venture fund.
“At RB investments, I have built family-like relations with our co-investors as well as founders we backed. Many of those investors are going to be LPs in FounderBank Capital,” Bothra said to KrASIA.
The following interview has been edited for brevity and clarity.
KrASIA (Kr): Why did you start a new fund on your own?
Harshavardhan Bothra (HB): The idea was to create something new that changes the whole system. For that, I took a step back and thought about the issues I faced when I invested in funds at RB Investments.
I realized that management fees are a big deal for LPs, as 14% of their investment goes into that and only 86% gets invested. To amend that, we told our LPs we won’t take a management fee upfront, and will utilize that money to invest in companies.
It’s not that we won’t charge a management fee—it’s important because one has to take care of the costs to run the company. But we wanted to do it in a way that aligns with our LPs’ requirements. So, we told them we will take the management fee later, when we return the money to them.
Kr: How much money have you raised so far?
HB: Our total fund size is USD 12 million, a quarter of which will go into the first round of investments. The rest—USD 9 million—will be allocated for follow-on rounds.
We are going to invest in early-stage companies and Series A rounds. We are going to invest USD 3 million in 20 companies. The recent deal we did was with Indonesian bookkeeping company BukuKas, where we invested along with Sequoia Capital at a valuation of USD 30 million.
We have done good deals and we try to co-invest with some of the top VC firms. We tell these funds that we are not bringing much capital, but we are bringing a lot of industry know-how and connections.
Kr: What value does FounderBank Capital bring to the table for its portfolio companies?
HB: We created a back-end web app. Investors can log in and see the companies they have invested in. They can leave comments and suggestions for founders on how to optimize certain features or products. The platform is used by our LPs to help founders make connections with the right people for expansions or help them in hiring.
The reason we created this system is because at RB Investments, I noticed investors soaking up a lot of founders’ time. Their feedback process often involved elaborate speeches about how to run a company.
Kr: We’ve seen some major exits by investors in India. How has the investment ecosystem changed here?
HB: While exits are good for the ecosystem, many small and new investors have started seeing startups and the venture capital world as a lottery system. They think if they invest in enough companies, some will hit the jackpot.
India has many deep-pocketed family houses and the younger generation in these families get easy money from their parents, who ask them to create a portfolio in hopes that they will get huge returns. They don’t understand the risk involved in startup investments.
At the same time, we are also seeing a lot of quality investors who have never invested in startups. They spend time learning about the startups before deciding who to back. We are giving those people an opportunity to invest in quality deals through our fund.
We allow investors with as little as USD 200,000 to invest in FounderBank Capital.
Kr: What do founders of early-stage startups need to do to take their company from zero to 100?
HB: Currently, some early-stage startup founders find it difficult to understand that money will not solve their problems. Money, although very important, is just one aspect needed to scale a company.
You need to have multiple hands to build your company. Look at the giants of the industry, like Sequoia, Lightspeed, and Accel. Their companies typically do better, because along with deep pockets, they are extremely well connected in the industry—not just in India, but globally.
So, I would say the quality of capital is very important. There is a lot of money in the market as people are swayed by the kind of exits we are seeing in India by the likes of Oyo. If you make a good pitch, you will get the funding. That’s not difficult.
The first challenge is in picking good capital.
The second challenge is that local giants are competing with startups. Because of a few successes, large companies are now building the same products as some of these young companies. They have plenty of capital and established supply chains, so they are way ahead in the game.
Kr: What is your investment plan in Southeast Asia?
HB: All the big Indian VCs are now opening offices in Southeast Asia, because it has become the next big market. Since we already have good relationships with these investors, we want to co-invest with them in this market as well.
Having said that, I don’t want to put more than 15% of the fund in Southeast Asia, as I think liquidity is not as clear in Southeast Asia as it is in India. We will only invest in deals where there is a relevant co-investor.
The reason we invested in BukuKas was because Sequoia and B Capital were there. Since they have invested in Indian bookkeeping startup Khatabook, we were confident that they know what they are doing.