M12 is committed to founder-friendly terms, says India head of Microsoft’s VC fund
M12 has been an active participant in India’s startup ecosystem. What was the reason to set up a physical presence in India?
Abhi Kumar (AK): While M12 has been remotely investing in India for the past one year, setting up an office is a logical step forward in our journey and commitment to the Indian ecosystem. Having a team on the ground in India makes the value we add more accessible and tangible. These are exciting times in India with fantastic entrepreneurs pursuing global opportunities, and we are here to partner.
How do you view the Indian startup ecosystem in the current scenario of COVID-19 especially with regard to B2B startups?
AK: Needless to say, COVID-19 has impacted the way businesses operate globally and has generated headwinds and tailwinds for sectors. The one positive for Indian startup ecosystem is that it has levelled the playing field for enterprise solution providers. You do not have to be at a customer’s front door or be in Silicon Valley to disrupt an industry or function – for the most part, we are all operating over video conferences now. There are entrepreneurs and teams across India, in both small and large towns, who are innovating daily and changing the way enterprises operate around the globe – from Tokyo to New York.
Typically, we see the greatest hurdles in a startup’s journey as they scale from local success to global challengers, and then again when they go on to become category leaders. Both these inflection points require specific and deep organisational strength, proven talent, partnerships, and global investors. M12 is proud to be co-located in the region, and to bring experience and resources that will help startups successfully navigate these inflection points.
What will be the key investment focus of M12 in India? And will M12 set aside a corpus for India?
AK: We seek to invest in disruptive enterprise software startups, across the geographical region, in the Series A through C stages, targeting both local and cross-border solutions. Our first cheque into a company is generally in the range of $5-10 million, with meaningful ownership. In terms of sector focus, we reverse engineered that based on where we can add outsized value and given our unique access and ringside view at Microsoft, supporting B2B startups that are enterprise-focussed is our core strength.
Now within this broad category, the companies can range from applied AI, business applications, infrastructure, security, and vanguard technologies. Essentially, all the areas where we have a good understanding of the market and can play an active part in helping the company scale through joint selling, produce integrations, and co-marketing opportunities.
We at M12 are committed to founder-friendly terms with no non-standard terms or any strategic clauses. Specifically, we do not seek strategic alignment to invest in a company. We are geo-located but not geo-allocated, plus we do not invest in competing startups globally.
In terms of how we operate, we prefer to lead deals, and are open to participating, depending on the deal dynamics. Our decision to invest takes into account staying committed to the entire lifecycle of the company and the intent to participate in future rounds.
How do you view the entrepreneurial quality of the B2B startups in India?
AK: As a global fund, we have presence in San Francisco, Seattle, Tel Aviv, London, and now in Bengaluru. As we assess the competitive landscape across geographies, we decisively back the team that we believe is uniquely differentiated by either their IP or their business model and commit to them all the way. Therefore, our parameters for assessment are the same irrespective of the geography, and the bar we have for all startups is the same worldwide. We are delighted to have our portfolio include category leaders such as Innovaccer and FarEye.
We build our conviction around the team of the startup which includes validated product-market fit, demonstrated ability to execute, and the founder’s ability to listen to the market and their customers.
What do you think is the USP of M12?
AK: Think of us as smart money with the vision and scale to empower amazing startups in India and globally. We provide the right resources to scale – not just the capital, but also the experience of the M12 team and the platform power of Microsoft. We maintain a technology-agnostic approach in our investments. We also actively engage with the startups that we invest in. We are a part of their boards, helping them make industry connections, and support their growth.
Post-investment, our Portfolio Development team facilitates deep engagements with Microsoft engineering groups to explore product integrations if that is of interest to the startup. We also have a robust co-sell program that enables our portfolio companies to sell alongside Microsoft’s world-class sales teams globally.
Microsoft as a company has other engagements with the startups in India like Microsoft for Startups, 100x100x100 programmes. Will M12 be part of these initiatives?
AK: M12 is Microsoft’s venture fund. We are a financially focussed, technology-agnostic investor, collaborating actively with founders, and solely accountable to the success and growth of our portfolio startups. In addition to Microsoft for Startups, Microsoft also has a Startup Pod and an active business development team – all of these are separate teams, but we collaborate with each other to offer startups the full value of the Microsoft ecosystem.