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Interview with Dhruv Nath

He is an angel investor, a mentor to startups, an author, and a Director with Lead Angels Network. As part of this journey, he has invested in twenty start-ups and has mentored over a hundred others. Earlier he was a Professor at MDI, Gurgaon, and a Senior Vice President at NIIT Ltd.

He has been a consultant to the Top Management of Glaxo, Gillette, Nestle, Indianoil Corporation, Thermax, Bajaj Auto, Air India etc., as well as to the Prime Minister of Namibia and the Chief Minister of Delhi. Prof Nath has a B Tech in Electrical Engineering and a PhD in Computer Science, both from IIT Delhi.

Q.1 Tell us something about yourself that not many people know.
I love humour. All my books, talks etc. have a strong component of humour. Several publishers have asked me to write textbooks, but I’ve refused - too boring.

Q.2 When should we expect your next book? What will it be about?
This one is called The EARNICORNS. It's based on stories of rare, profitable unicorns. As you know, most unicorns are happily loss-making - I’ve picked up four that are market leaders and are also profitable. These are, Zerodha, Dream11 and Zoho. I call them earnicorns - unicorns that are profitable. This book should be out in the second half of June.

Q.3 Can you describe the primary inspiration behind writing Funding Your Start-Up and Other Nightmares?
I have been an angel investor and mentor to perhaps over 200 start-ups so far. I’ve found that the successful ones do certain things right, whereas the unsuccessful ones don’t. This also applies to startups that are looking for funding. That’s when I decided to write a book about what makes start-ups successful, and how they can raise money from investors. It’s aimed at all founders and potential founders of start-ups.

The important issue is that this book is based on Indian start-ups, which founders in India can identify with. Most books on the subject are based on start-ups in the USA - where the environment is completely different.

Q.4 What challenges did you face while writing this book?
None. It was great fun to write - and readers have told me it is fun to read as well.

Q.5 What do you hope readers will take away from this book?
What you need to do to improve the chances of success - and chances of getting funding as well. In particular, I have created a framework called “The PERSISTENT business”, as follows:

P: Are you solving a Problem
E: Earnings Model
R: Risks and how you will mitigate them
S: Size of the market
I: Innovation
S: Scalability
T: Team, starting with the founders
E: Entry Barriers
N: Niche
T: Traction

Many many founders and potential founders (as well as investors) have found it useful to analyse their start-ups using this framework.

Q.6 What are some common misconceptions about startup funding that you encounter in your role as an angel investor?
Many founders assume that a great idea is enough to get funding. That’s not correct. Most angel investors need proof – and that can only come through real customers and real revenues.

Q.7 How long, on average, does it take you to write a book?
One year.

Q.8 How do you think the COVID-19 pandemic has fundamentally changed the landscape for startup funding?
The funding environment has changed over the past few years, and Covid is just one of the reasons. To understand this, I need to explain what has happened. You see when the internet came in - somewhere in the late nineties - no one really knew how internet businesses would make money. Instead, both founders and investors started focusing on getting eyeballs - or visitors to their websites. The assumption was that business would follow quite naturally.

As you are aware, that didn’t quite happen. What DID happen was the dot com bust. Eyeballs became a dirty word, and the focus shifted to revenues. “Getting visitors to your site is not enough. They need to pay you, so you generate revenues. And of course, you must scale up rapidly”. Undoubtedly, it is a great step forward from eyeballs.

Unfortunately, it wasn’t enough. Because we had actually moved to Revenues at any cost. And to hell with the cash burn - there are enough investors who are happy to fund you.

But there is a limit to this funding, isn’t there. Businesses that continue to make losses are not sustainable. What happens when the expected funding doesn’t come? And by the way, that’s exactly what has been happening over the past few years. 

Thanks to COVID-19, the Ukraine war, and the recession or near recession in the Western world, money has become a bit scarce. And investors started looking for sustainable businesses into which they could put their hard-earned money.

Now, investors are not necessarily looking for profitable companies. But what they are looking for, is a Path to Profitability. And this is the key - for such companies, funding is available.

To summarise, for companies that are either profitable or moving towards profitability, funding is not a problem.

Q.9 How do you describe your writing experience with Sushanto Mitra? If you have any different opinion on a particular situation, how did you resolve it?
We are close friends. There are some areas where Sushanto knows a lot more than me - for instance, the shareholder agreement and all the legal stuff, and therefore he provided the inputs. In general, we would have healthy debates - there was no blockbuster fight.

Q.10 In your opinion, what is the most critical factor that determines a startup's success in securing funding?
All the factors in the PERSISTENT model are important. But the most important one is the founder(s). You see, when a start-up is at an early stage, no one has any idea what direction the business will take. Not even the founders, and definitely not the investors. 

Classic example - When Zomato was launched (as FoodieBay), one of the founders clearly said that they would never get into food delivery. And today, that's exactly what they do. As another example, Planetspark, one of our investee companies at Lead Angels Network, started off with organized/digitised tuition centres for children, but now they are the market leaders in public speaking for everyone - including adults.

Sure, the business needs to be evaluated, but even more than that, the founder(s) need to be the right founders. Those founders who are passionate about what they are doing, are willing to and able to pivot if required, those who are strongly ethical and customer-oriented, etc.

And that's why, for early-stage start-ups, investors look more at the founders than the business.

Q.11 How do you balance academic rigour with practical advice in your writing?
My books are not academic. They are entirely practical. They are based on real start-ups, both successes and failures. And these are all Indian startups. I would say that these books are probably far more useful than academic books - which are based on cases in the Western world.

Q.12 How do you handle writer's block or creative challenges when they arise?
This is not very common. But when it does happen, I simply put down my thoughts, without worrying about how it reads. Later on, I revisit it and re-write the stuff.

Q.13 Could you share an anecdote from the book that particularly resonated with you?
I enjoyed writing the entire book, but the one part that I will always remember is where I coined a term called “Aam Aadmi Angel Investor” (nothing to do with the political party). And this term has now become popular amongst a lot of founders and investors.

You see, in the early part of this century, you only had a few super-rich angel investors. Angels such as Azim Premjee, Anand Mahindra, Naranaya Murty, and so on. And these people would invest, say, a crore or even more at a time. 

But with the exploding interest in startup investing, you have several people who are definitely not super rich (me, for instance), who have become angel investors. These investors can invest as little as 2.5 lakhs at a time. These are the people I call Aam Aadmi Angel Investors!

Q.14 What role do you think mentorship plays in the success of early-stage startups?
This is extremely important. Ideally, founders need investors who will also be mentors for them. You must remember that most founders are young and have very little experience. Or even if they do, it’s in one specific area. For instance, tech founders understand tech but they don’t understand marketing or finance. That’s where mentors become extremely important.

Q.15 What feedback have you received from readers that you found particularly insightful or surprising?
Lots and lots of readers/founders have found the PERSISTENT model particularly useful. Several founders who were stuck and were going nowhere, have used this model to analyse their business and modify it. This is particularly heartening for me because effectively my mentoring reaches everyone who reads my book.

Q.16 What is your writing routine like? Do you have any specific habits or rituals that help you write?
I usually start in the morning before breakfast. And whenever I have an hour to spare, I write. Since I find writing fun, I can do it at any time.

Q.17 How many books have you written? Which one is your favourite?
I’ve written 7 books, and Funding Your Start-up is my favourite so far. The reason is that this is the primary problem that startup founders face. They might have great ideas, and in many cases, they are building a great product, but they find it tough to get funding. Through this book, I have been able to help more than 10,000 founders to understand how to raise money.

Q.18 How do your friends or family feel about your book or writing venture in general?
They are delighted since I have a lot of fun writing.

Q.19 Are there any particular authors or books that have influenced your writing style or the creation of this book?
Not really. My style is very humorous, and I like to write the way I speak. I haven’t seen any business book that follows a similar style.

Q.20 Share the experience of your writing journey so far.
Great fun - which is why I keep doing it. Here’s one anecdote: I was once doing a consulting project for a client in Cairo, Egypt. My hotel was on the banks of the river Nile, and my room was on the 13th floor. The balcony of my hotel room overlooked the Nile. 

So there I was, sitting on the balcony and clacking away on my laptop while looking down at the beautiful Nile from time to time. You can’t imagine how wonderful it felt. And that’s my advice to young people. Always do what you like doing in life. Have lots of fun, and work will never be boring!!!

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