Apoorva Ruparel is a serial Entrepreneur with 3 successful exits, angel investor, 500 Global Mentor. Apoorva is a Partner at Venturerock, a digital venture capital platform and ecosystem of founders, backers & builders building the next generation of global tech companies. He has over 20 years of experience in Enterprise Sales, Angel Investing, Fund Raising, Go To Market Strategy and Growth Hacking.
Apoorva’s profile on LinkedIn
In this episode Slash CEO Andries De Vos and Apoorva Ruparel discuss:
- Why startups fail and what the industry can do about it?
- The challenge of VCs: we don’t have a problem of choice, but a problem of quality.
- Real Venture Building has been around for a while, but is really only now arriving – but there is no perfect formula yet
- How to breakdown the VB process into 70+ milestones, the strategic importance of acquiring building blocks for each, and how to structure your VB team capabilities
- How much equity should a VB take and what is a fair equity stake for founders? We debated different models for financial inclusions between investors, founders and teams, and how those differ by region.
- VC-VB fund economics: how much money do you invest per startup, ownership targets, how much more risk can you take or should take
Listen to the Episode
EPISODE TRANSCRIPT
Andries De Vos: Can you talk a little bit about what your thesis at Venturerock is and how you came up with it?
Apoorva Ruparel: Venturerock was born about 30 months ago in Amsterdam, and built by bright, innovative entrepreneurs. The 1st main thesis was to see how we could de-risk venture capital investing. Risk-taking capabilities have been primitive in Europe, contrary to the U.S. and China, which is why the latter are far ahead now in venture building and Europe is ahead in clean technologies. We also thought of how we could bring financial inclusion to this asset class so that anybody with a small check could invest and still make a difference.
We also wanted to pick a team. We made a point of not being an impact builder, but still maintaining 15 out of 17 SDGs (the UN-set Sustainable Development Goals). Internet is now built on values, not technologies, and we see these broken values: no ownership, privacy flaws, no power to the user, centralization. There is still a huge number of opportunities – we can build startups in Web 2 that are fully ready for Web 3, for its value system. That’s the team we chose to build startups.
Andries De Vos: What is the level of support you provide to the ventures you build? Can you unpack that for us?
Apoorva Ruparel: We are pretty much obsessed with bringing investor inclusion and founder inclusion into this asset class. If you look at top-tier VC funds, they attract tier-1 founders, while there are domain experts who are shy to take a risk. We target them. We produce problem solution statements and recruit founders who bring in domain expertise in that specific vertical. There needs to be a level of fairness across all levels: fairness for founders, investors, and other executives who open doors to other possibilities.
Once you identified the problem solution statement, you need a vision statement, time and markets, proof of value, analysis of what is used today, and level of experience. We built a centralized team of shared services studio which goes into branding, positioning, culture building, recruitment, and creating fundability of the startup. The whole idea is to build more predictability of success.
Andries De Vos: How did you build your model around that?
Apoorva Ruparel: We have a huge history of startup failures and successes. Then, we look at marketplace, nuanced business, 10 success factors in terms of building supply side, etc. We basically build models based on marketplace success.
Andries de Vos: How do you structure those layers? At what point do you recruit founders?
Apoorva Ruparel: Luckily for us, the European market is still developing, there are lots of accelerators, and founders are open to taking and developing others’ ideas. There is a database of founders, which we recruit from, and we do 4 or 5 startups a year. So far it works spot-on. We aren’t 100% successful at evaluating founders from the beginning, but it’s an ongoing process.
Andries De Vos: What’s the formula for recruiting founders?
Apoorva Ruparel: We are experimenting with not only psychometrics, but also cultural thinking, stress level, problem-solving abilities. The key to finding success in a founder is execution abilities. So, we look for not necessarily founders with proven experience in building $50-60M businesses, because they come with a lot of corporate baggage – brand plays a role, such a founder may come from a well-known company with efficient procedures but fail at the startup. There are also young men who built and sold small startups, but they know how to execute them. This is a dynamics problem not just for us, but for all venture builders, and needs to be solved.
Andries De Vos: What are the key milestones that are critical for de-risking a venture? Could you highlight 3 or 4 you really want to get right?
Apoorva Ruparel: You recruit a founder, then you work on scenarios of how the development could go and you provide tools to founders to deal with different scenarios. We work a lot on the Web3 value system; it gives you a good platform to play around with the risks and de-risk because this value system ensures equal shares. We also look at success factors and deep-dive into proof of value analysis (why is the customer paying for this product, etc.). That one is the most critical success factor. Other milestones are clearly defining success factors, defining proof of value in a smaller group of people, making them pay and then scale. On the founder’s side, the one thing we noticed is execution. If they are able to execute at a smaller level, they will be able to execute at a larger level.
Andries De Vos: What about carried interest from the success of other founders, how do you solve that?
Apoorva Ruparel: We have a very VC style of venture building. Founders usually want to do 3-5% of the company, but there are those who hold 40%. We want to come in early, give the money, and make sure we have anywhere between 20-30% equity in the company so that the founders have enough to play around and create value for themselves and their teams. We don’t bring them into the carried interest rates, because we already have a lot of sharers of carried interest. We are working on sharing in carried interest in terms of climate, underprivileged, and sports development. We have specialists who work not only with the numbers side of things (opening doors, creating opportunities), but are sector experts, and there is a mechanism for them to get a slice of the shared interest pie.
Andries De Vos: Why not go a step further and do it the Rocket Internet style?
Apoorva Ruparel: While we want to be hands-on, we also have this very principled approach of fairness. More equity means more control, but we built a value system of sharing economics with everybody. The mission we focus on is to increase the success factor and keep building on that model, our interest is more about the success rather than the share we get. Besides, founders are much more motivated by keeping the equity at hand. It helps them not to feel like they are working for a corporate, which allows more investors to believe in Web3.
Andries De Vos: How many capabilities do you need in your studio to get that 100% success rate? what are the key capabilities?
Apoorva Ruparel: Venture support, portfolio management, and growth – these are the pillars of delivering successful startups in our mission. We stay on the value system side, but we also want to build frugality in venture capital, e.g., we don’t charge the 2% management fee. We are very confident about this model long-term. As soon as we start seeing returns on startup exits and value creation, our shared interest is blended heavily with these functions. You definitely need branding, initial development, CRM, and legal side of things. We don’t have a lobbying team and don’t plan to yet, but someday we’ll have to look at legalization. Fundability is also a huge factor. As for the staff side of things, we want to scale our team to 200 people, and I think it is going to happen in 3-3,5 years from now.