DTM E47. Using iSAFE Notes & Five Stages of Deep Tech Startups - Shashank, 100X.VC

From the Deep Tech Musings Podcast - Get actionable and tactical insights to take your Deep Tech startup from 0 to 1 [Idea to Traction].

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Shashank is the Co-Founder of 100X.VC - India's first venture fund to invest in early-stage startups using iSAFE Notes. He brings entrepreneurial and investment understanding with 15+ years of cross-functional expertise. Shashank’s professional ability in developing, launching, and making the first move when it comes to products and solutions is reflected in the novel model of 100X.VC. As a Co-Founder of 100X.VC, he is part of the Investment Committee and works closely with portfolio companies on how to improve the chances of new products succeeding. He also helps them raise follow-up capital from growth-stage VCs, CVCs, and family offices. Apply for the Class 10 cohort for INR 1.25 CR funding here: ⁠www.100x.vc/class10

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Social Links:

Shashank Randev, 100X.VC - shashankrandev (LinkedIn), @ShashankRandev (Twitter)

100X.VC - 100X-VC (LinkedIn), 100X_VC (Twitter)

Pronojit Saha, DTM Podcast - pronojitsaha (LinkedIn), @pronojits (Twitter)

Links & references from the episode:

- Emerging Deeptech Article: https://www.100x.vc/blog/emerging-indian-deep-tech-ecosystem

- Generative AI Trends Article: https://www.100x.vc/blog/generative-ai-8-futuristic-trends

- 100X Investment Thesis - https://www.100x.vc/investment-thesis - 100X.VC portfolio: ⁠www.100x.vc/portfolio

Show Notes & Summary:

(00:31) Founding story of 100X.VC. What was its motivation?

• 100X.VC is a venture capital firm founded by five partners with different backgrounds and experiences in the ecosystem.

• The firm's goal is to invest in 100 companies per year, focusing on the bottom of the pyramid and providing early-stage funding as a first check.

• The firm simplifies the funding process by investing through India's iSAFE Notes, which allows founders to raise capital without diluting equity upfront.

• 100X.VC provides an opportunity for founders to focus on their product and raise money within ten to 15 days, addressing a gap in the market.

(02:30) What is iSAFE Notes and how startups can take advantage of it?

• iSAFE is a founder-friendly convertible security note for fundraising that was introduced in 2019 to simplify the process of raising money for early-stage startups without assigning a valuation.

• An investor makes a cash investment in return for a convertible instrument, which is not a debt instrument but a CCP that is convertible on the occurrence of a specified event, usually the next funding round.

• iSAFE has been used in 105 investments by 100X VC, enabling startups to continue building their product without worrying about assigning a valuation.

• iSAFE allows for a quick transaction and closing time of ten to 20 days, which is critical for early-stage founders.

• Investors who use iSAFE are committed to long-term involvement and value addition, which benefits the founder.

(06:01) How can startups apply to 100X.VC and what's their program structure like?

• The fund provides seed capital to early stage founders after an ideation stage.

• The fund evaluates and shortlists companies from a large pool of applications and deploys capital in the selected ones.

• The fund works closely with the founders for 90 to 120 days, helping them achieve product market fit and other metrics to prepare them for the next funding round.

• The fund has invested in 80+ companies through seven classes with a check size of 25 lakhs per company and 25 companies in class eight with a check size of 1.25 crores per company.

(09:55) How does 100X.VC define deep tech?

• India is seeing the emergence of product and deep technology companies, which are business models based on high tech innovation.

• 100X works with deep tech ecosystem folks, incubation centers, and founders working on engineering breakthroughs in domains such as AI, advanced manufacturing, biotech, nanotech, blockchain, and others.

• Deep tech sub-sectors can extend beyond the mentioned categories, including life sciences, retail, mobile, telecommunication, and healthcare.

(11:31) Some portfolio deep tech startups of 100X - Accio Robotics, Confider Health, Emo Energy, Meta Shop, Think Metal

• 100X has invested in a portfolio company called Accio Robotics which automates the process of order picking in warehouses using autonomous systems.

• Another portfolio company, Confider Health, is a healthtech startup focused on remote patient engagement using computer AI tech.

• The firm has invested in clean tech startups, including Emo Energy which builds powerful battery packs for two-wheelers that can be charged in minutes.

• Another deep tech portfolio startup is Meta Shop which creates photorealistic 3D models in minutes.

• They have also invested in a hardware-based deep tech company called Think Metal which offers a compact metal 3D printer.

(15:10) Shahank’s 5-stage deep tech startup lifecycle framework & how 100X helps deep tech startups to move through the stages

• Founders should categorize their deep tech company based on prolonged timeline, availability of infrastructure, and capital.

• Deep tech companies have five stages: research and development, proof of concept, deployment, diffusion, and commercial maturity.

  • research & development - generate ideas and begin to generate intellectual property from there on

  • proof of concept - design a prototype & pilot

  • deployment - develop the technical validity in the field

  • diffusion - prove that your technology can be scaled economically

  • commercial maturity - selling and distributing proven technology

• Many deep tech startups in India struggle to move past the first two stages and require collaborative mindsets for deployment, diffusion, and commercial maturity stages.

• 100X aims to provide capital and support for deep tech startups at stage three, where they help them develop proof of concept and diffusion to attain economical value. It helps startups move from stage two to stage three and eventually to commercial maturity.

(19:50) Shashank’s advice to deep tech founders to take their startup from 0 to 1

• Deep tech is seeing increased adoption across multiple sectors, making it a great time to start a deep tech company.

• Focus on mastering the product and its outcome.

• If possible, have a co-founder or second in command with commercial sense to help with adoption in the market.

• Funds like 100X are available to back such opportunities and help with testing out a proof of concept.

• Shashank gives examples of these through portfolio startups in the episode.

(23:21) What does 100X look for in deep tech startups while deciding to invest?

• When investing, the founding team is the most important factor for 100X.

• The founding team should be complementary, with different skill sets.

• The investor also looks at market size opportunity, business model strength, unfair advantage or mode, and internal conviction.

(27:44) What are some future initiatives being planned at 100X?

• The major initiative is to deploy in 100 companies a year and achieve a portfolio company of 500+ in the next two and a half to three years.

• The organization has already funded 105 companies in three and a half years.

• They are open to evaluating pitch decks of companies in deep tech, specifically for class ten.

• There are other non-profit initiatives like a gurukul and founder dating initiative to identify and invest in the next opportunities.

(29:41) What are some future opportunities in deep tech domain that Shashank wished a startup could capitalize now?

• Generative AI space is picking up, and startups are focusing on data generation, text generation, image generation, music and video generation, personalization research, and drug discovery.

• Health tech, logistics and back-end supply chain, agritech, robotics, and clean tech are expected to evolve and be disrupted.

• Deep tech can become horizontal in multiple sectors, and the next few years are expected to be exciting for India.

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