Abhishek Goenka heads RPSG Ventures , an early stage VC fund established in 2018 to invest in consumer brands and consumer enablers. This INR 300 cr fund is backed by the RP-Sanjiv Goenka Group as its sponsor investor. Prior to this, Abhishek was part of the investments team at True North & JPMorgan.
What is RPSG Ventures’ investment philosophy? LV’s Syna Dehnugara finds out…
As a family office there are many options available to you churn your pool of capital, why did you decide to structure your startup investments via a full-fledged VC fund?
For a few reasons – ensuring investment discipline, managing market optics and thirdly from a regulatory viewpoint – once you are under an AIF structure there are benefits that come to us as a fund; there are certain responsibilities that we have to bear but those are good to have. But to my mind the first two reasons, investment discipline and market optics, were more key to us. There are some family offices that are doing some great deals but to get that discipline on a daily basis in terms of scouting for start-ups, allocating money in follow-on rounds, working with portfolio companies in a structured manner, discipline in generating exits comes when you are a fund. I also find that entrepreneurs have a preference of working with funds.
Of the INR 300 cr corpus, INR 100 cr has come from the RP-Sanjiv Goenka Group so how do you maintain an arm’s length distance from the Group and allay concerns?
My background has largely been on the investment side, first with JPMorgan and then with True North, so I have seen the industry and adopted best practices like having an independent advisory board, a robust investment committee, outlining and articulating the lens through which we are seeing the world; even being transparent on how we value companies. Unlike many family offices we do not follow the co-investment model. We lead from the front so a lot of rigour goes into it and we have a full-fledged team in place evaluating startups, checking on market sizing and traction, creating roadmaps for exits. The second thing is that we have the discipline of investing in multiple rounds of the company, it is not a one-time cheque writing activity.
You were with True North before helming affairs at RP-SG Ventures – your learnings from that stint and what are the gaps you noticed in the VC/PE ecosystem that you felt needed to be plugged?
On the PE side the biggest gap I noticed was that it was relatively easier for companies to scale from zero to INR 100 cr but going from hundred to INR 1000 cr was a completely different ball game because once you are targeting this top line you are going head to head with the top companies in that space which could be MNCs or large Indian conglomerates – all listed entities. Now we saw that most of the promoters or entrepreneurs struggled with three things, one, attracting top talent, two, ability to set up systems and processes, especially tech solutions that could take you to INR 1000 cr and three, your ability to raise capital, both equity and debt. So we had a large team that True North that worked with portfolio companies to help them on these three big issues.
Now, to extrapolate this on the VC side, these challenges are going to come in when the startup hits Series A, B scale. So while the founders are able to think innovatively about their product they lack infrastructure support, they need guidance from a marketing perspective and from a distribution and sales viewpoint. So we wanted to solve these three problems for our entrepreneurs. So apart from capital, we pitch ourselves saying that we will use our network and the networks of the Group to help our portfolio companies.
Could you then explain to us your fund thesis? You have made three investments so far – True Elements, The Souled Store & mCaffeine – to your mind what is the common link in these that fits in with your overall fund thesis?
We invest in two genre of companies. One, we invest in branded consumer goods which is essentially anything that you can buy on Amazon. Two, we invest in enablers; these are companies that help brands with either consumer technology or a platform or a B2B2C marketplace. So, we can invest in a packaged good company and also a manufacturing set up that will help the former!
As far as the common thread between investments is concerned, one is the quality of the entrepreneur and by that I mean the ability of the founder to adapt to changes and the sheer execution capability. I really look for operational chops, a founder’s ability to know ‘on the ground’ realities of running a business.
Second is the market potential. There are incumbents in each of the three sectors but these startups have a differential niche that they are targeting. For example, mCaffeine is a personal care brand and there are plenty of organic, clean label companies out there but how many of these are targeted at just millennials from a ‘premium-isation’ perspective and how many can stand for the entire genre? Maybe just one or two brands. So there is potential for mCaffeine to become a category lead.
I must ask you here, the RP-Sanjiv Goenka Group itself is an active strategic investor and M&A player in the consumer brand space. Is your fund in any way aligned to the larger Group mandate? Are the startups in your portfolio a feeder to the Group for M&A or business?
There is considerable distance between the two as far investing decisions are concerned – one is taken from a pure financial lens and other strategic; our processes, like I said earlier, are very independent. There is no overlap or exchange of information to that extent. On the question of creating a feeder to the Group – I would say partly yes and also that this is a reality across all VC funds. If we look at any other consumer VC fund there are large family offices or consumer businesses as LPs and the stated intent is that these startups will be made available to them on a preferential basis i.e. they will have the first right to look at them for acquisition. In our case too that is one of objectives but we will not contain exits only to the RP-Sanjiv Goenka Group. In fact because our lens as a fund is clearly defined a lot of our startups do not even match the Group’s acquisition mandate.
There are some venerable investors in this space backing “insurgent consumer brands” like Ash Lilani of Saama Capital, Deepak Shahdadpuri of DSG Consumer Partners, Kanwaljeet Singh of Fireside Ventures. As a fund manager how is your strategy differentiated?
They are industry veterans and have done some great deals. Also, the Indian consumer startup ecosystem is large enough with entrepreneurs coming up with great products. However, there is one core differentiator in our strategy, which is our ability to provide our portfolio companies access to the RP-Sanjiv Goenka Group’s network, where the benefit is very tangible. For example, the Group owns Nature’s Basket, Spencers and Too Yumm, so we can leverage these distribution networks to help our companies initially. Also, we have used some of the Group’s businesses for generating targeted sampling and promotions for our portfolio companies. These are something that entrepreneurs find extremely valuable.
As we close this interview, what did you make of the failure of the WeWork IPO and the way the company has unravelled in its aftermath.
It’s a tough one but I will say that everything is good at a certain price. There is no doubt that the company has created real world value; would the IPO at a lower price point been a success? Perhaps. Business fundamentals are very important, you cannot have a model that is solely dependent on funding, there has to be inherent value in the business. We need VC funding to accelerate the growth but it should not come to a point where you are not able to get off the treadmill or lower the pace.
Could you share a recent book or long form article you read that has made an impression on you?
Shoe Dog by Phil Knight