Ankit Sarwahi on The Orbit Shift Podcast


Unpacking the four ‘Ts’ of investing with Ankit Sarwahi, Managing Director of Middle East Venture Partners

Ankit Sarwahi, Managing Director of Middle East Venture Partners talks about his four Ts of investing, what MEVP looks for in companies and his due diligence process in evaluating companies.

TAM, technology, team, and timing. There are the four ‘Ts’ that Ankit Sarwahi, Managing Director of Middle East Venture Partners looks for in a startup when investing in them. 

In our latest episode, we catch up with Ankit the MD of MEVP, one of the biggest venture capital firms in the MENA region whose portfolio companies include Anghami, Rain, and Nana Direct. Ankit talks to us about his early journey, the differences he sees in the Indian and Middle Eastern startup ecosystems, his four T’s of investing, how he communicates clearly with his founders, and his due diligence process before investing in companies. 

Edited Excerpts

Q. Tell us about your journey and what led you into the world of investment?

Ankit: Right after my undergrad at SRCC, Delhi University, I was very keen on a sell-side advisory role. So I got into a couple of those roles, to begin with.  

While I was doing that, I was working on a wide range of prospects and deals, I got to see what happens on the other side of the transaction which is the buy-side, and I got very curious.  

I got the chance to work with some really stellar private equity funds as my clients. So, I was very certain in my mind that my next move has to be a B-School during which I should figure out the next steps in my career.  

While I was in B School, I met a whole range of buy-side players across different modes of investments, ranging from private equity to hedge funds to venture capital. During one of those meetings is when I met the Managing Partner, Mr. Sarbvir Singh, who’s now the CEO of PolicyBazaar. 

He was managing Capital18 which was, a diversified venture capital firm putting early stage, seed stage dollars in a range of consumer internet companies.  

That was the beginning of my journey, the bug bit me in 2012, and fast forward the 10 years I’ve been in this space, it has been very kind to me, in India and in the Middle East. 

Q. What are some of the differences that you see between the Indian and Middle Eastern ecosystems?

Ankit: The challenges of the two regions are different.  Founders and entrepreneurs in India solve different issues compared to what Middle Eastern founders solve. 

In India, most of the issues or challenges stem from the fact that the unorganized or fragmented nature of the market means several internet firms and the rate at which these are adopted could either go viral very quickly or just not penetrate at all.  

In the Gulf region, a lot of the sectors are not as fragmented as the Indian sectors are and the users, are far more active on the internet. Most of the Gulf market is highly monetizable. The ARPUs and the AOVs here tend to be much larger, which basically means that the path to profitability, could be shorter than what you see in India.  

And then structurally, while India solves for logistics a lot of the time, the Middle East solves for access and competes for access. So, most of the time you would see startups competing for service and quality of service.  Whereas in India, most of the startups, at least back in the day when I was there, were competing on logistics. 

So, structurally, because the regions are different, the mindset of the founders are also aligned differently, and they’re tuned to think differently.  Also, the rate at which some of the technologies develop and their time to market in India is far shorter than what you see in the Gulf. It’s mostly because of the sheer volume of engineers and the other kinds of talent available in India. 

Q. How does MEVP look at companies and what challenges founders should be solving? 

Ankit: I still remember seven-eight years ago hearing a quote from, I think it was Binny Bansal who said something like ‘we’ll expand to every other category, other than grocery.’ Basically, he meant that it was a touch-me-not for a lot of reasons. 

When I got here, and understood the landscape and saw how the markets were organized; it’s very similar to how the grocery experience is delivered in the US. And I thought while the grocery experience in the US could give birth to an Instacart, there’s a sure-shot opportunity for something like that in the region (MENA) as well. 

That’s when the exercise starts; you zero in on the market and then wait for the right guy to show up. That’s one way of approaching deal-making.  

The other way is, you’re out there, you’re networking, you come across fantastic founders and when you meet the right person, you back them. 

What we look for is a deep market that is ripe for a technological renaissance, and then try to find the right people who can pull it off. The other way to do this is to be always open-minded about incredible founders.  And even if they want to do things that may come across as impossible, still believe in their motivation and their resilience and put serious dollars behind it.  

Then there are the four Ts in all of this. The TAM, the technology, the team, and the timing.  If these four Ts fall in place, there’s always an opportunity to do something incredible.  

Q. What should a founder keep in mind when pitching to MEVP?

Ankit: There are investors at different stages who have different levels of leaps of faith. But to an investor, typically investing, where we invest which is series A or later those four Ts play a very important role.  

For me, the first thing to nail down is the team. Because that is at the core atom of anything that they want to build in the future. I need to be very sure of the team.  So, the founder needs to make sure that they present the team well and articulate their skills properly. 

The second thing for me is what is the need gap? What is the desperate need in the market, and how is that being addressed?  The solution or the technology behind it, both of them go hand in hand, and both of them are critical for any investment to be taken seriously by a VC. The depth of that need, or in other words, the TAM, is critical to making the size of the pie bigger for all of us. 

Then there is the technology around it, and how the solution aims to cater to that also needs to be articulated by the founder. And finally, is the timing of doing some of those things. These four things are very crucial to making a pitch successful or not.

Q. Tell us about your due diligence process

Ankit: I try to build relationships over a period of four to six months; I try to get involved with founders even when it’s not the right stage for me to invest in. The reason why I do that is that it gives me more time to work with the founder and to see whether he’s able to put his money where his mouth is. So, if he promised me the launch of a certain feature in two months, were those milestones achieved or not? 

If it’s a time-sensitive deal, then the first thing to do is to immediately get an established comfort with the founders. I also check with my networks about the company, the founder, and what kind of talent they’re able to attract. 

What we do invest a lot of time in, is when we’re doing technology diligence. Wherein what we do is have some experts internally, and try and use them to stress test the entire architecture. If it’s also a startup that has a lot of vendor relationships, then we do a lot of Voice of the Customer diligence as we try and talk to their partners or vendors and see how they work with them.  

Diligence is a practical attainable exercise; it is measurable, I never call it a leap in the dark. Almost every single aspect of the business, if time permits can be checked in a measurable way without there being any obscurity around it.

Q. What are some metrics that you look at as part of your due diligence process?

Ankit: For me, the more important metrics are the month-over-month growth, rather than the absolute number of KPIs that they are at right now.  For me, the most attractive part is the rate at which it has grown to get to 500k vis-à-vis another company which is at 1 million already because the growth compounds and things change in two or three months wherein you’re working with a sharp, rapid-growing startup compared to another startup, which is bigger but has started to stagnate.  

So, for me, size is not as crucial. If it’s a B2C startup, I would love to see an NPS score. If it’s a B2B startup, then I would love to see some Voice of Customer and those are more important KPIs for me to begin with. And then, of course, the financials and the performance KPIs can follow. But an NPS and a VoC are very important.

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