Check out the 20VC episode page
- Sheel Mohnot (@pitdesi) is a Co-Founder and General Partner at Better Tomorrow Ventures, a $225M venture fund for pre-seed and seed-stage fintech companies around the globe
- Even if you’re not a multi-million dollar angel investor like Sheel, his lessons are applicable to the everyday person trying to invest in good companies
- Host: Harry Stebbings (@HarryStebbings)
Sheel’s Indian Heritage
- Sheel grew up in India spending $1/day – was working in microfinance and decided to live exactly like his borrowers
- “There are very few monetary things that make me happy, I just don’t need any material things to be happy” – Sheel Mohnot
- We’re all a function of our histories, what parts do you rebel against, and which parts do take ownership of?
- Sheel’s rebellion: Even as a successful angel investor, his Indian mother still wishes he was a doctor
- Sheel’s ownership: Business experimentation has always run in his family
The Power Law & Venture Capital
- Beginning a venture fund is no walk in the park
- How do convince investors to give you money with no track record?
- Power Law: only a handful of your investments will truly be meaningful (pulling that 100x winner)
- “You can read about the power law, but actually seeing it for me was a big game-changer” – Sheel Mohnot
- Smaller exits (3x or 5x return) just don’t move the needle as much
- Harry believes venture firms are very “sharp elbowed” and not willing to collaborate in today’s environment
- Sheel disagrees – his fund is very collaborative
Lessons from Angel Investing and How to Spot Good Businesses
- If you fish in the same pond as everyone else, then things may get priced-up
- There’s a difference between a price taker and price maker – use your reputation to get the entry price you want
- Be price disciplined and don’t overpay in booming markets – “You can’t invest in a seed company at a $50 million valuation and expect to make money” – Sheel Mohnot
- Invest in capital-efficient businesses for better outcomes – “Businesses that constantly need venture capital dollars to acquire customers just aren’t as good businesses” – Sheel Mohnot
- Angel investors can grow and protect their ownership when they are more hands-on and have a high follow-on rate
- Retain mental plasticity – certain business models work for some companies but don’t work for others, the right founder can change everything
- The companies that are winning early (receiving lots of early funding) are not always the long-term winners
- When you have too large of a GP (general partner) commit, you begin to make decisions that favor yourself rather than what’s right for the fund/business – 10% of net worth seems like a good balance
Biggest Winners & Misses
- Biggest winner: Flexport ($0.15/share –> $25.50/share)
- Biggest unrealized winner: ChipperCash ($2.5 million valuation –> $2.0 billion)
- Biggest miss: Robinhood (didn’t see the potential it had to bring in a new class of traders by being mobile-first)
- Another big miss: Chime (didn’t see the potential of neo-banking in the United States)
Predictions for Emerging/Frontier Markets
- Harry is worried about emerging markets – “I think in the macro, we are going to see complete retrenchment away from emerging markets (SE Asia, Latin America, Pakistan, Australia, etc.)”
- Sheel agrees on the broad sentiment – You go further out on the risk curve toward emerging/frontier markets when there’s a lot of capital. But as interest rates rise, the risk is being reduced and money is being brought closer to home.
- BUT—many of these markets now have developed homegrown local funds that can sustain growth, even without international capital
- Advice to companies in emerging markets: get free cash flow positive as soon as possible
- You can’t burn cash forever
- Most memorable first meeting with a founder?
- Ryan Peterson at Flexport
- “My favorite founders all love learning, and they love learning something and then teaching me about it” – Sheel Mohnot
- What’s Sheel’s favorite book?
- Sheel doesn’t read, there’s too much fluff in books. He prefers long-form articles or podcasts.
- But if he had to say one, it would be Ender’s Game by Orson Scott Card
- What’s Sheel’s biggest strength and greatness weakness?
- Strength – willing to try anything and not afraid of failure
- Weakness – willingness to try anything can lead you to some stupid decisions
- Biggest problem in venture today?
- “There aren’t enough people solving hard problems” – Sheel Mohnot