Investment Philosophy of 2am VC
In March 2021, entrepreneurs-turned VCs Hershel Mehta and Brendan Rogers started a dedicated “India only” fund that focuses on startups building in, and for India. Over the years, 2am VC has been investing in fintech, edtech and e-commerce startups and are now gradually stepping into investing in AI, ML, and cloud computing startups. In an exclusive interview with Analytics India Magazine, the founders and general partners at 2am VC, Mehta and Rogers shared their investment philosophy, along with challenges, opportunities, tips for startups when pitching ideas, and more. “Training AI models takes a lot of time and continuous effort. It involves a lot of manual processes before a model develops and actually works”, said Mehta. He added, “It takes a lot of patience to develop a model. You cannot start with a working AI model with just an idea on day one.” “We think it’s one of the pillars for innovation for the future,” said Brendan. “We are super agnostic and believe in investing in all industries. AI and ML is a space that we’re very interested in.” 2am VC’s first AI-based investment led us to Attryb. Based in Bangalore, the startup offers an AI-enabled turnkey data infrastructure platform that enables the creation of personalized customer journeys for product and marketing teams. It was founded by Anil Bains in 2021. Since its inception, 2am VC has invested in 30 plus startups with 6 lead investments. Their most recent, Spare8 has raised $770K in funding with 2am VC being the lead investor. The company helps people make small digital savings and investments in gold. Besides these, some of the prominent startups backed by 2am VC include Karbon Card, SalaryBox, Vitra.ai, invact, Doosra, Coolberg, Mekr Technologies, Crypso, Jelly, Blitzllama, and others. Investment Philosophy 2am VC founders said that they look for founders who have extensive experience in the field of AI and ML and building models. Their focus fields include task automation and computer vision. “An idea or innovation has to have an application outside the world of AI and ML”, added Mehta when asked about what they expect in a product. For example, a company getting into web development should have a balanced approach when it comes to technology. He said: “We have had users tell us that they would sign up for a website but then are unable to create what they wanted to create because the website was too technical.” Building relationships The biggest factor when it comes to establishing a business model in India is to focus on gaining the trust of the consumers. “Online transactions in India saw a sheer rise through UPI payments during the pandemic,” said Mehta. “In the US, nobody uses cash. In India, UPI was able to form a trust in the consumers. We are seeing a massive reduction in the cash economy.” The founders believe in areas like fintech, marketplaces, and b2b Saas, startups from India that are leveraging AI and ML for building trust with their consumers. Sharing the learnings from past investments, Mehta said: “a huge part of our thesis is to ensure that we do not fall for companies chasing the short trends,” Further, he said as soon as customer lifetime value (LTV) and consumer acquisition value (CAC) get out of sync, the business will run up and then go down.” Personality over data value Rogers, the general partner at 2am VC, believes in ideas that have a personality over data. Data first approach is not part of the firm’s investment philosophy. “I am not saying data is not part of our decision making”, said Mehta, “From series B and beyond, if a company is not using data to analyze their system, it becomes hard to analyze and expect things.” Further, he said India is one of the few blessed countries that have the best institutions like IIT, BITS, and Manipal that offer a great education in the technology field. Mehta said great innovation is inevitable when institutions adapt to the changing landscape. “A lot of Indians have stopped moving out of India,” he added. The founders are currently not using any AI or ML technology in their firm. Explaining further, he said: “We don’t know what’s worth automating. When you jump into the automation state, you’re not developing relationships. You’re letting data dictate what happens and we’re in a relationship business.” Networking effect As an early-stage investment firm, 2am VC focuses on building relationships. The founders expect the startups to be transparent and communicate about issues and problems. “We bet on a team when we invest in pre-seed or seed stages. We expect a company to have a constant line of communication that is always open” said Brendan. “We have developed our network over 10s of years,” said Brendan when asked about what the team offers to the startups in return besides investing in them, “When you get a cheque from 2am VC after sacrificing hundreds of hours on your product, you inherit our network. We have very deep-rooted networks in the US that are looking for companies that offer great value.” As of now, the company does not have any exit plans. “Being early age investors, we don’t have a specific threshold when it comes to exiting, “explains Brendan. 2am VC’s two-cents “You shouldn’t ask for investments if you haven’t really attempted anything,” said Rogers addressing mistakes startups make while pitching their ideas,” You don’t need to have a million users in pre-seed. You just need to prove that you have potential and have hustled for it. You have to get your first hundred or thousand customers by yourself. Ask your friends and family for a little bit of seed funding.” Adding to this, Hershel said that founders sometimes make bigger pitches by playing cards they don’t have. “Be genuine and follow up. Don’t be disingenuous, and ask for feedback. Approach hundreds of founders before pitching your idea to investors.” Share your startup ideas with 2am VC here.
“We are super agnostic and believe in investing in all industries. AI and ML is a space that we’re very interested in.”
“We are super agnostic and believe in investing in all industries. AI and ML is a space that we're very interested in.”
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["AI", "ML", "computer vision", "analytics", "RAG", "cloud computing", "R", "Go", "Rust", "Git"]
Mohit writes about AI in simple, explainable, and often funny words. He's especially passionate about chatting with those building AI for Bharat, with the occasional detour into AGI.