2am VC is a US domiciled India-focused venture fund for Gen Z entrepreneurs. “We are a sector-agnostic, Gen Z centric, ‘India Only’ early stage venture fund,” says Hershel Mehta, co-founder and partner, 2am VC. Brendan Rogers is the other co-founder and partner in this venture. “The Indian Gen Z is a force to be reckoned with. They are digital-first, have great national pride and identity, and are huge in number. This segment is the next big thing, and missing it would be the mistake of the millennium,” he tells Sudhir Chowdhary in a recent interaction. Excerpts:
What do you think about the US venture ecosystem? And how has been your journey?
The US ecosystem is operating at an all-time high in terms of micro funds and angel capital available. Covid-19 transformed popular investors’ belief as they now firmly state that great companies can be built anywhere, not just in Silicon Valley.
I started investing full-time over three years ago and have made over 40 direct seed-stage investments across all industries, with 20-plus of them going from Seed to Series A. The US market is open to working with startups at all stages, which helps startups quickly find product-market fit.
Ten years back, working at an early-stage startup was considered risky and not desirable for high-achieving college grads. However, today it’s just the opposite. This trend is giving a comprehensive push for more startups and funding. Overall, this is clearly the highest point of the VC ecosystem.
What potential does the US as a market see in the Indian startup ecosystem?
Founders usually tend to check all the boxes to build strong and sustainable high-growth startups that are technical and ambitious. The Indian market exactly offers that owing to its impressive size and tech adoption rate.
Also, because of geopolitical tensions with China, it is clear as day to US investors that India is most likely the next true hyper-growth market. Therefore, it is wiser to bet on a developing market that will probably give them notable value propositions in the future.
Tell us about your individual professional journey.
I started my journey by gaining extensive insights from my cousin, Sanjay Mehta. After building up a base of strong portfolio companies and gaining VC ecosystem knowledge, it became evident that I needed to take the next step. Hence, I partnered with one of my most substantial deal flow sources, Brendan, and took a plunge into a full-fledged partnership.
How and why did you get the idea of creating a cross-border fund?
We have a competitive advantage in India through my family’s built-in network and knowledge of the Indian investment culture. The post-Covid scenario showed that the Indian ecosystem is ripe for new players with different vantage points. Also, our LP and co-investor base was pushing for more access into India. These are a few drivers behind our Indian entrepreneurial and venture capital ecosystem journey.
Why did you choose to invest in early-stage GenZ-centric startups?
The Indian Gen Z is a force to be reckoned with. They are digital-first, have great national pride and identity, and are huge in number. They are far more interested in leading than following a set path. During our initial interaction with Gen Z startup owners, we realised that this segment is the next big thing, and missing it would be the mistake of the millennium.
How many investments have you closed so far? Tell us about your selection process?
We have invested in 16 firms and expect to close 20 more partnerships by the end of this financial year. Our selection is pretty straightforward. We look at the earliest stage, that is, the founder’s vision, ideation, personality, and overall knowledge must fit the startup idea. The business model should be scalable and bring something unique to the table. Most importantly, founders must have the ability to ship products quickly and move fast. Even if the product is weak but has the right leader to spearhead the process, growth is scalable.
How are you combating the geography differences for startups sitting here in India?
The pandemic has given acceleration to virtual platforms like Google Meet, Zoom, and Microsoft Teams, thus equalising the playing field. Given that the world we are living in thrives on digitally-native technology, we are adopting just fine. So, geographical differences don’t make much difference to our plans.