Yagnesh Sanghrajka: Navigating Early-Stage Investments in India’s Thriving Start-up Ecosystem

In the ever-evolving landscape of early-stage investments in India, Yagnesh Sanghrajka is a seasoned investor who believes in the power of stickiness. As the co-founder and Chief Financial Officer of 100X.VC, an early-stage investment fund, Yagnesh Sanghrajka shares his unique approach to deal-making and emphasizes the importance of start-ups offering a unique value proposition with enduring appeal. 100X.VC, founded in 2019 by Sanjay Mehta, Ninad Karpe, Shashank Randev, Vatsal Kanakiya, and Yagnesh Sanghrajka, has established itself as a prominent player in the early-stage investment space. The fund is known for providing a standard investment of ₹1.25 crore for a 15 percent future equity in start-ups, serving as a first institutional investor and identifying promising opportunities in India’s dynamic start-ups ecosystem.

Yagnesh Sanghrajka places a strong emphasis on the concept of “stickiness,” where a start-up’s product or service must offer a unique value proposition that keeps customers engaged. To illustrate this point, he highlights BuildNext, a tech-enabled home builder based in Kochi, Kerala. BuildNext provides a comprehensive suite of solutions that encompass visualization, estimation, product selection, procurement, budget control, and project tracking for consumers. By leveraging technology, BuildNext enhances transparency, reduces costs, and eliminates time overruns in the construction of buildings. However, what made BuildNext particularly compelling for 100X.VC, despite already having other backers, was the strategic partnership with Pidilite Industries.

Yagnesh Sanghrajka reveals that Pidilite Industries, known for the iconic Fevicol adhesive brand, expressed a keen interest in investing in start-ups with innovative business models. The offerings of BuildNext were aligned with Pidilite’s interests, creating a harmonious match. This led to a $3.5 million Pre-Series A investment by Pidilite in BuildNext in July 2023. It was a testament to the unique synergy that can be achieved by strategically connecting start-ups with corporate investors who share common goals and interests.

100X.VC’s approach is not limited to BuildNext alone. The fund has identified various investment opportunities in collaboration with corporate partners. One such instance is Kaarwan, a learning and upskilling platform tailored for architects and designers. Another promising venture is Finemake, an online platform that simplifies the selection, customization, and booking of designs for modular kitchens, wardrobes, and TV units. These partnerships between a corporate giant and a venture fund are at the forefront of a unique experiment in India, where traditional companies are actively seeking opportunities to engage with innovative start-ups.

Yagnesh Sanghrajka points out the two-fold advantages that 100X.VC offers in this endeavour. Firstly, as an early-stage investment firm, it possesses a deeper involvement with start-ups, which can lead to early entry into the growth trajectory of these companies. This engagement goes beyond advisory roles and transaction fees, focusing solely on the long-term objective of a successful exit. Secondly, 100X.VC takes an active role in portfolio review, monitoring, and management even after a corporate partner has made an investment. This continuous engagement ensures that the start-up’s progress aligns with long-term value creation.

Despite economic fluctuations, early-stage investments in India have continued to flourish. The ecosystem expanded from $5.1 billion in 2019 to $8.7 billion in 2021. Even during the challenges posed by the COVID-19 pandemic, the numbers rebounded to reach $7 billion in the first three quarters of 2023. Yagnesh Sanghrajka remains optimistic about the future, emphasizing that the early-stage investment landscape has not been impacted by funding winters, which mainly affect growth-stage start-ups.

Yagnesh Sanghrajka attributes the resilience of early-stage investments to the unique dynamics of the pre-seed, seed, and Pre-Series-A stages. Start-ups in these phases are at the 0 to 1 stage of their journey, focusing on experimentation, product-market fit, and growth. For these companies, capital serves as a lifeline rather than rocket fuel. As a result, there is no frantic rush among venture capitalists to secure investments, and the emphasis remains on careful consideration and strategic partnerships.

While early-stage start-ups continue to thrive, Yagnesh Sanghrajka acknowledges the growing influence of angel investors who are cutting significant checks and providing start-ups with ample capital. Although this trend has increased the accessibility of capital for founders, it has also created credibility challenges for many early-stage investors. The rise of angel investors and late-stage funders entering the early-stage investing landscape has raised concerns about distinguishing between VC-fundable businesses and lifestyle businesses. Yagnesh Sanghrajka warns that overlooking these distinctions could lead to complications when seeking exits.

In light of these challenges, Yagnesh Sanghrajka emphasizes the importance of a structured approach to financials, cash flow, and burn for founders. While the early-stage investment ecosystem may be crowded, he believes that 100X.VC’s role as a bridge between corporates and start-ups, combined with its rigorous investment approach, provides an invaluable resource for budding founders. As early-stage investments in India continue to thrive, Yagnesh Sanghrajka’s insights and 100X.VC’s unique approach will play a pivotal role in nurturing the growth of innovative