M12 has invested in India-based startups, like Innovacer and FarEye, and has now launched its physical presence in India at Microsoft’s Bengaluru office.
Navjeeavan.express.com caught up with Kumar in a candid chat on his vision for M12 in India, the traits he looks for in founders, and the value M12 can deliver in accelerating a startup’s growth trajectory.
Here are some excerpts from our conversation:
Tell us about M12 and its vision of investments in startups.
M12 is Microsoft’s venture fund. We are purely a financially focused investor, squarely on the side of the founder, and the only metric we are accountable to is the success and the growth of our portfolio startups. One of the many ways we add value is by helping unlock the tremendous resources of Microsoft; think of us as smart money with the vision and scale to empower amazing startups in India and globally. Microsoft’s mission is to empower every person and every organization on the planet to achieve more. And startups are a critical constituent of this mission.
M12 has been investing in India for a while. What was the reason to have a physical presence in India?
While we have been remotely investing in India for the past 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.
What are the parameters you use to assess a startup globally? What will your focus be for Indian Startups?
As a global fund, we have a presence in San Francisco, Seattle, Tel Aviv, London, and now in Bengaluru. The bar we have for all startups is the same worldwide. We don’t have a geo-allocation and we do not invest in competing startups. 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 then stay with them with a single-minded focus all the way. Therefore, our parameters for assessment are the same irrespective of geography.
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, B2B startups that are enterprise-focused is our core strength. Now within this broad category, the companies can range from Applied AI, Business Applications, Infrastructure, Security, and also Vanguard bets. 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 and co-marketing opportunities.
How does M12 decide on investments?
Given that we are a financially-focused venture fund, we do not seek strategic alignment to invest in a company. We build our conviction around the team, validated product-market fit, demonstrated ability to execute, and most importantly the founder’s ability to listen to the market and their customers. The journey to success is long and arduous, and most often there are multiple inflexion points along the way, and the companies that gain the right to win are usually the ones that have been listening all along.
We invest primarily in the Series A-C stages, with our first check into a company generally in the range of USD 2-10 million and preference for being on the higher end of that range with meaningful ownership. M12 is committed to founder-friendly terms with no non-standard terms or any strategic clauses. Our decision to invest takes into account staying committed to the lifecycle of the company and intent to participate in future rounds.
What are the benefits that startups get with an M12 investment? And what is the typical engagement cycle?
We actively engage with the startups that we invest in. We are a part of their boards, we are there to listen, to help, to guide, to brainstorm, to make industry connections, to celebrate both the losses and the wins, basically to be a partner.
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. We provide the right resources to scale – not just the capital, but also the M12 team and the power of Microsoft, to accelerate growth for portfolio companies. I am humbled that we have a part to play as an enabler.
Does M12 also engage with other VCs that are operating in the country? What is the nature of engagement that happens there?
Yes, M12 is very much a part of the VC ecosystem. We partner with our VC peers and look for opportunities where we can collaborate on opportunities, or even help with their portfolio companies. We have tremendous respect for the VC ecosystem in India and continue to strengthen our partnerships each day.
In terms of how we operate from a transaction perspective, we prefer to lead deals from a conviction perspective, however are equally comfortable with co-leading, or just participating depending on the deal dynamics.
What are the traits that you as an investor look for in founders?
Personally, I think what sets a great founder apart is empathy. And that empathy can take multiple shapes and forms – empathy for customer pain points, for people in the team, for organizational capability, for the partners, for the market evolution, for the competitors. It sounds very simple but is a rare trait indeed and even harder to practice in the face of adversity.
