Alok Goyal and Ritesh Banglani : Making Contrarian Bets with Deep Conviction in the World of Venture Capital

In the world of venture capital, where risks are abundant, seasoned venture capitalist Alok Goyal acknowledges a simple truth – making mistakes is an integral part of the business. Goyal, who began his journey in venture investment with Helion Ventures, is now one of the founding partners of Stellaris Venture Partners, an early-stage and sector-agnostic venture capital fund that believes in the power of contrarian bets. Stellaris Venture Partners, co-founded by Alok Goyal, Ritesh Banglani, and Rahul Chowdhri in 2017, has gained a reputation for its high-conviction investing strategy. Goyal, the former Chief Operating Officer of SAP India, believes that most of the outsized profits in venture capital come from making bold, contrarian choices. The key, he asserts, is not to follow the crowd but to invest with conviction and authenticity.

Stellaris doesn’t follow the “spray and pray” approach that some venture capital firms adopt. Instead, the firm invests deeply in startups they believe in, committing to support and nurture them throughout their growth journey. The focus is on quality, not quantity, and Stellaris typically avoids investing in companies where they don’t have full confidence. According to Goyal, the true differentiator among venture capital funds is not their strategy, as most funds aim to spot promising entrepreneurs, invest early, create significant companies, and achieve substantial exits. What sets funds apart is their execution, which determines their success.

In an industry known for its cowboy-like behavior, discipline can be a rare commodity. Goyal explains that many venture capitalists often forget that the funds they manage are not their personal assets but belong to limited partners (LPs). These LPs expect responsible and risk-adjusted returns, emphasizing the importance of discipline in investing. For Stellaris, discipline is a critical component of building a sustainable and long-lasting fund. Ritesh Banglani, one of the founding partners of Stellaris, humorously likens their approach to investing as akin to ants – slow and steady, but capable of moving mountains when required. Stellaris does not engage in hasty decision-making. Instead, they approach investments methodically, conducting comprehensive due diligence and ensuring they are confident in their choices. This deliberate approach allows them to make fewer but higher-quality investments.

The high rate of failure is something venture capitalists must grapple with, primarily because many of the companies they invest in are in their concept or early product stages. These investments are made on the belief that the company has the potential to disrupt its respective industry over the next decade. As a result, such investments come with high inherent risks and, therefore, a significant chance of failure. Over the years, Stellaris has seen its share of startups that did not thrive, including Loca (a mobility startup), Allround (an edtech startup), Manch (a vernacular content sharing platform), and Wydr (a B2B marketplace). Additionally, Mfine, a troubled startup that faced layoffs, was eventually acquired by Lifecell International.

Stellaris Venture Partners acknowledges that the ultimate goal of every venture is to generate profit and return value to its shareholders. The focus on profitability is paramount but can vary with economic cycles. During economic downturns, investors may prefer to see returns sooner, while in boom cycles, they might be willing to wait for profitability. Banglani emphasizes that the fundamental trade-off is not between profitability and growth, particularly in the early stages of a startup. Startups often invest in growth, and profitability may come later. The key metric to consider is how quickly a startup reaches product-market fit, rather than viewing it as sacrificing profitability for growth.

Alok Goyal notes that in a downturn, there’s an opportunity to invest in loss-making companies that are not excessively cash-consuming. While it’s acceptable for startups to be loss-making in their early stages, Goyal believes that they should not consume excessive amounts of capital. Stellaris remains committed to making contrarian bets with deep convictions, recognizing that a focus on profitability may need to be adapted according to market conditions.

In the world of venture capital, where making mistakes is part of the process, Alok Goyal, Ritesh Banglani, and Stellaris Venture Partners are carving their path by placing deep trust in their convictions, advocating for disciplined investing, and embracing the entrepreneurial spirit that makes venture capital a dynamic and exciting journey.