Investing in start-ups requires a deep understanding of the founder, the business proposition and a strong belief in the potential of the business.

For one Indian family office well known for investing in consumer-facing brands, it also means investing in founders who are frugal and truly appreciate the value of the investment.

“We come in at the early stage in the VC space – we are Series A investors. A business may be generating anywhere from $50,000 or $100,000 to half a million dollars a month – that’s the stage when we invest if we consider the business promising,” said Rishabh Mariwala, a second-generation Indian family business entrepreneur and founder and managing partner of Sharrp Ventures – the Harsh Mariwala Investment Office.

“At this stage, there is an actual operational business model and [the business] is generating sales, and is only starting to scale up,” he told AsianInvestor.

The business also needs to show innovation and a unique proposition to merit an investment.

“We also like founders that tend to be frugal. In today’s day and age, there is a lot of ‘burn to earn’ mentality – which means the business can often be adding losses month after month,” he added.

“We go with founders who truly appreciate capital.”

The office manages the proprietary capital of the Harsh Mariwala family, founder of Marico, one of India’s most well-respected consumer goods companies.

Marico, a listed company, is best known for its Parachute coconut oil and Saffola refined oil brands. Its stock market capitalisation was about $10 billion in mid-July.

While Sharrp Ventures invests long-term patient capital and supports portfolio companies through multiple stages of growth and evolution, the family office holds a bulk of its investments in public markets.

WORKING WITH LIKE-MINDED PEOPLE

Hailing from a business family, Mariwala understands the need for resilience to endure the constant highs and lows of start-up journeys.

“It needs grit to survive and thrive as an entrepreneur as well as an ability to work with people. We want to see ambition, but we want tempered ambition with our entrepreneurs.”

When selecting investments Sharrp Ventures always assesses whether the founders fully appreciate and understand the business they are in.

“There has to be a product-market fit,” he said.

“As investors, we bring a certain expertise to the table since we started as a consumer brand ourselves. We want to work with like-minded people. We enjoy working with more organised players in the eco-system,” he added.

Apart from direct investments, Sharrp Ventures also work with venture capital funds.

“We might invest together or share deals with them,” added Mariwala, noting that sometimes it takes multiple players in the ecosystem to help entrepreneurs build their business.

“It is important to find collaborative partners like venture funds other family offices or angel investors,” he said.

One thing that the family office steers clear from is arrogant founders.

“Arrogance is a big red flag – being respectful of people and of your team is very important. We will drop a deal very quickly if we see this. We want to invest in people we can work with, talk to, can hear us out and engage with us,” said Mariwala.

Investment partnership by venture capitalists can last up to 10 years, so it’s important to be careful and selective, he added.

The family office started its venture capital investments in 2015, so it’s inching closer to a decade of investing in this space. “We have exited some investments because they have passed the IPO stage,” he said. 

Some of Sharrp Ventures’ investments include mother and baby essentials company SuperBottoms, beer brand Bira 91, children’s food company Wholsum Foods, beauty and wellness company Mamaearth.

MAKE OR BREAK YEAR 

India’s venture capital industry saw a slump in funding in 2023, dropping to $9.6 billion from $25.7 billion in 2022, mirroring global caution on risk capital, according to consultancy Bain & Co.

 “But despite the decline in deal flow, India maintained its status as the second-largest destination for VC and growth funding in Asia-Pacific,” the India Venture Capital Report 2024 said.

“There is a lot of dry powder out there for venture capital,” said Mariwala.

“I think 2024 will be the make-or-break year for challenger brands,” he said, referring to brands that promise to disrupt the market they operate in.

 “A lot of brands that have popped up in the last 18 months are online consumer brands,” he added.

Consumer brands are the investment focus for Sharrp Ventures.

Mariwala believes the next billion-dollar revenue company will emerge from the crop of startups that eventually learn to develop offline in a smart and efficient way, while having online operations.

“The big question will be, can they do this systematically to stay in the business and do it sustainably over a period of time.”

INDIA FOCUS

About 90% of the Indian family office’s investments are in the country; only a very small proportion is invested overseas.

“There will come a point when assets under management hit a certain size and then you will need to broaden your investment options,” Mariwala added.

“As a temporary steward of wealth for future generations, its our role to ensure appreciation of the capital entrusted to us.”

For a family office with a certain level of funds, say $100 million, it might make financial sense to move some assets overseas.

“Of course, everything is relative to risk and for any family office that does that, they must also consider risks such as currency and geopolitical risks,” Mariwala said.