When a De-Growth proponent goes knocking door of a Venture Capitalist....

Introduction

This article has been inspired by a particular activity that has been taking good amount of my time and mental space over the past several months - raising funds. On a precautionary note - the pursuit is not complete yet, but I have been really meaning to write this for a long time and couldn't hold back anymore. Also, any similarities to active firms or people is purely coincidental. Also, I have no standing in building very large businesses, so most likely I simply don't know - but still have an opinion to share - good, bad, or ugly.

When I started my entrepreneurship journey back in 2019, I had sort of made a promise to myself - not to dilute equity in the pursuit of capital. The conviction back then was driven by a very peculiar reasoning: the fact that I had worked with some previous employers, and that several of those end up founding/managing/leading/working in the venture capital firms. I had a love-hate relationship with the employer, and I didn't see eye-to-eye with the firm leadership on a number of things. There was more to this peculiar reasoning: I had a strong hypothesis that those bringing in the capital would be your pseudo bosses, and I was done having bosses after 8 years of corporate life back then.

Fast forward 2021, there was a fleeting instant of exploring to raise funds, but that was more driven by the state of company affairs and some existential challenges that we had faced then due to both internal and external issues. Another couple of years further in 2023, realizing that sustaining an advisory-service based organization in the largest democracy of the world is more painful, less rewarding, and least grateful than perhaps even opening a chai (tea) shop in the capital. The original plan on building technology on the backdrop of advisory profits was nothing but foolish in the hindsight.

De-Growth & VC -> Nah, or Maybe?

So, after a number of failed discussions & deliberations, one fine month in 2023, decided to suck up to all of the above, and brace myself to go raise funds. Honestly, it was a very very difficult call to take. From those brash 2019 years to slightly calmer 2023, I had slowly but steadily turned into a de-growth proponent. In fact, most of the articles in this newsletter goes around bashing growth and development, industrialization and capitalism, and what not. With that engrained in mind, the fact that there were some several hundred pitches to people breathing and drinking capitalistic growth based fervor every second of their lives and serving and managing the deepest core of capitalism - risk and growth capital - venture capitalists; was going to take a good portion of my time for months to come.

Despite being a hard-core anti-capitalist de-growth proponent, I was (still am) running a private limited for-profit company. Given that I had built sufficient level of compartmentalization in my head to manage this over the past several years, I thought maybe, just maybe, this shouldn't be that hard. So, we took the call, informed the stakeholders, and started preparing. With some external support, internal reviews, few practice sessions, we got started with the process.

With a lot of excitement, anticipation, and a tad bit of hope, we sent out e-mails to the initial short-list of investors. Then came the first pitches, followed by some rejections, and some follow-on calls. This went on for a few months - days were packed with video calls, sending responses to queries, virtual data rooms, on and on and on. Quite a few folks didn't even care to respond to emails or messages on LinkedIn, despite multiple follow-ups. But overall, we had started the process and just gave it time.

No, No, Ghost & Silence

Days turned to week, weeks turned to months, and slowly but very steadily, it started to take a toll - especially on me. Not because, folks were rejecting us, and also not because we were being ignored, but because I started questioning myself - what on earth am I doing. To keep ourselves further motivated, we ended up doing all kind of statistical analysis on the feedback received. Note that it will not add up to 100% as there were overlapping feedbacks. :)

• 90% backing out because they don't understand the sector (hydrogen). They feel that the market is too nascent, and there isn't surety whether this will really fly. Secondly, not convinced if there is an overall readiness of the supply chain.
• 30% felt that we need to get more traction, win more orders, realize more revenues, install across several use-cases, and only then there will be sufficient de-risking for the investor to get in.
• 10% were not impressed by the technology we were building, and didn't see a strong enough differentiator.
• 15% felt that this space is not a VC play in the first place, but rather that of a CVC (Corporate VC) or PE.
• 20% were reluctant due to the longish sales cycle, potential element of customization/services.
• At least 30% rejected without giving any reasons or ghosted us.
• For almost 95% of the calls, we were the first fuel cell pitch, which was definitely not in our favour. There were also a few firms where we ended up challenging their own thesis on battery storage, so that was not a very comfortable discussion to have, to say the least. :)

Handling rejections is part of life, and we do that with our head held high, and took all the feedback with both humility and grace. However, there were some which did irk me personally, and have serious reservations.

1. Boilerplate rejections - especially those with whom you have had 3/4/5 calls, and shared a bunch load of information, and received a "we are decided to pass on the opportunity" email is mildly put infuriating. It is not at all about the rejection, more than happy to take that, but the fact that there is no meaningful or actionable feedback despite so much of time spent. I am fine if you are passing the opportunity after just an intro call, or just by seeing the deck - but not giving feedback is almost like you feel "used" and "humiliated". They end up building their own internal "thesis" and forming "views" on the space, and leave us low and dry with nothing to look at. I do understand that they don't want to get into all kind of subjective discussions, fair enough, but writing an email with 2-3 bullet points is not at all that hard. Don't reply after that.
2. Ghosting - both after asking to send the deck or the 1/2/3 calls. This is just plain unprofessional. I know these folks are busy, evaluate 10-20 start-ups a day, but not responding is just pathetic. This is a two-sided opportunity, and there is a part of the company that is going to be sold - if they cannot even have the basic courtesy to close-out a conversation, then not really not sure where are basic mannerisms and codes. It is not as if the founders have nothing else to do, and are running after these firms forever.

Strike 1, Strike 2..... - The "Why" Again!

Anyway, in spite of the hobbles, we went along, played along, and kept pitching and talking. Finally a few term sheets started to trickle in, which resulted in several internal discussions, many of them were very difficult as they involved early exits / cap-table clearance. While doing all that, the realization came to me that this is just the very start - such re-jigging of the cap table would end up being a constant affair, where you are negotiating for very subjective value based deals. This was to a certain extent Strike 1.

We are of course highly appreciative of all those who have extended their support in the form of term sheets. Upon detailed discussions on these term sheets, we realized very quickly that most of these funds are not interested in your long term sustainability and growth. All they care about if when you will be raising the next round or at best the round after that, and will they be getting an exit at a satisfactory "X". This all of a sudden started to sound extremely delusional, given we are in this to build a business for a long term, building technology and products which make sense, rather than just be on the spree of raise-valuation-sell-raise, where the fundamentals of the industry and tech has not much role to play. By the time most of these VCs would end up forming their "thesis", China will end up having assembly line of Gigawatt factories, US would have spent billions in promoting their own industry; and we here would end up running after money, rather the real purpose of all this. This was my Strike 2.

Few more weeks passed, all this didn't sit well internally, and all those questions which I had asked in the first place in 2019, and later in 2021, and finally in 2023, kept coming back in a rush.

1. Would a sustainable business with longevity, profitability have any resonance with this core-capitalistic growth focused VC mindset?
2. Is solving for the climate, advancing the hydrogen economy, building a deep-tech manufacturing ecosystem in India has any priority for these funds in the first place? Or is it just another "growing capital" opportunity, which can flip the moment something else lucrative comes on board?
3. Isn't it the moral responsibility as the key deployers of capital from the uber-rich to be bold and back companies willing to create new markets with the goal to save the planet?

Pursuit Continues.... Staying away from Strike 3

However, as they say, you cannot have the cake and eat it to. That is the dilemma where I am in right now, as without capital it is close to impossible to do anything in such deep-tech/climate-tech pursuits. We will keep on pursuing, and hope to get the right people on board, at the right time. Maybe there is a silver lining somewhere, maybe there is a venture capitalist who believes in a sustainable development (if not de-growth) story. Maybe, some of these dilemmas will go away once we actually are able to deliver the impact, the very core reason why I started pursuing this in the first place. The hope remains, albeit tempered to a large extent, we continue to persevere.

I do sincerely hope that this article doesn't shoo the funds away, there should be at least some space for an honest contrarian reflection. There is no way I am claiming that we are the victim in all of this, in fact many discussions have been quite an eye-opener, and we have learnt tremendously from all of that. A lot of actionable feedback makes a lot of sense. This article is a personal reflection of my journey, and the difficulties faced. :)