Why VC fund Disruptors Capital believes in demonstrating its value to startups before investing

As an investment banker, Raj Snehil Juneja got first-hand insight on how startups, in their eagerness to raise their next round of funding, were lacking in many areas or were just not prepared for the tough questions from investors.

It was then that Raj decided he could bring his skill sets and network to the table as a venture capitalist for early-stage startups to be part of their next phase of growth.

This led to the founding of Disruptors Capital in 2021, a venture capital firm that focuses on investing in tech startups at the pre-series A stage. The core focus of the VC firm will be on tech-focused startups in segments such as SaaS, fintech, edtech, Web3 Blockchain, and others.

“Investors wanted certain things in place like product-market-fit, powerful business model, and demonstration of a strong competitive advantage, but many startups were just not ready,” Raj tells YourStory.

However, Raj was very clear from the beginning that Disruptors Capital would not be just another VC firm which makes investments, but he wanted to demonstrate its value to the startups before investing.

Here lies the differentiating factor of Disruptors Capital where Raj roped in a large number of entrepreneurs and founders of well-established startups as limited partners or investors into the fund.

This structure had a win:win objective, where early-stage startups could tap into the experienced founders for guidance or advice and the latter, remained strongly connected with the ever-evolving ecosystem.

Investment thesis

According to Raj, Disruptors Capital will always follow the path of discovering startups to invest in an organic manner, which means that it would like to make the first investment and then get other investors into the round.

Raj is also very clear at what Disruptors Capital would be looking at into the startups. It will give top priority to the execution ability of the startups and how they are able to generate real business through their product or service.

“We rely a lot on the pedigree of the founder and credibility of their product,” says Raj.

Raj has also developed his own methodology of rating these startups on four parameters – management strength, experience of the founder, market opportunity, and exit route.

This ensures there is clarity on how Disruptors Capital will go about investing into the startups. It typically invests anywhere between $100,000-300,000 into a startup and also gets other VCs into this round.

Disruptors Capital has partnered with other VC firms such as Accel, Inventus Capital, IvyCap Ventures, and Inflection Point Ventures while investing into startups.

Having started operations since June last year, Disruptors Capital has made around six startup investments in companies including Purple Tutor, Playto, AndOR Communications, and Lincode.

The VC firm looks at startups based out of India, South East Asia, and the US. The underlying theme being the startup founders will generally have to be of Indian origin.

Founders as LPs

The big differentiation for Disruptors Capital is having experienced startup founders as investors into the fund. Around 80 percent of the limited partners (LPs) in the fund are startup founders, and the rest are CXOs from corporates.

Some of the prominent LPs in the fund include Edurekha founder Lovleen Bhatia and Simplilearn founder Krishna Kumar.

Raj says, “A lot of founders want to invest in startups in a systematic manner and are keen to connect with other entrepreneurs.”

Typically, it is noticed that founders tend to invest in numerous startups and are not able to keep track of the developments. Disruptors Capital provides a more curated and deep approach into startup investments as it believes in long-term play.

These startup founders also play an important role in the investee companies as they act as a sounding board for new entrepreneurs.

Raj says, given the diversity of founders as investors in Disruptors Capital, they come with varied skill sets, which can be leveraged by investee companies in their different stages of growth.

Simplilearn CEO Krishna Kumar says, “Early-stage entrepreneurs not only need access to capital, but also a lot of help in refining their business model, product thinking, and go-to-market strategies. This is where I see Disruptors Capital making a lot of difference.”

The firm has been set up as a rolling fund and has received SEBI approval as Category-1 alternate investment fund. It aims to raise Rs 120 crore in the first fund, which is expected to close this year.

“Disruptors Capital will raise capital only from people that we know and this is by invite only,” remarks Raj.

As part of its future plans, Disruptors Capital is not looking at a large number of investments in its portfolio and is aiming at funding 10-15 startups this year.

“We will not compromise on the quality of the asset and would like to measure ourselves in how we have helped our portfolio companies,” says Raj.

The VC firm believes in playing the long term game where it is building customer centricity with sole focus on how well their startup founders are doing.

“We would like to help startups to get into the next orbit of growth,” says Raj.