How Rocketship VC uses data to make investment decisions –from the other side of the world

Madhu Shalini Iyer, Partner, Rocketship VC

As a venture capital (VC) firm, Rocketship VC was founded by a team with a strong history of entrepreneurship in Silicon Valley.

Prior to founding the firm, Partners Anand Rajaraman and Venky Harinarayan had co-founded Junglee and Kosmix –both companies were acquired by Amazon and Walmart, respectively. The two of them were also credited as the co-inventor of the concept that underlies the Amazon Mechanical Turk, which played a key role in the development of Machine Learning and Deep Learning.

This background story alone might be enough to get people to turn their heads towards the company. But Rocketship also has a unique approach to investment that sets it apart from its peers.

Six years since it was founded, Rocketship has invested in 44 companies across India, Southeast Asia (SEA), Latin America, Europe and North America. In August, it announced the closing of its second global fund at US$11 million from the likes of Vulcan Capital, Adams Street Partners and family office of Marc Andreessen and Chris Dixon. Following an earlier US$40 million fund, this fund was intended for early stage startups in India and Southeast Asia.

To understand more about the company and its plan for Southeast Asia, e27 speaks to Rocketship VC Partner Madhu Shalini Iyer in this interview.

Data, data, data

Iyer begins by explaining how Rocketship uses data science models to figure out the companies that they want to invest in.

“We are a global investor ‘by chance’. We just started to invest based on what we are seeing with our data,” she says.

Also Read: Indian O2O startup Fynd brings latest in-store fashion online; raises US$500K from Rocketship

She continued by explaining how Rocketship’s team works with its database of startups which it claims to be the biggest in the world. “We curated and created an algorithm on top of it,  and we see companies that we find interesting. We started in 2014 when we begin to see activities outside of the Valley. So we talked to these founders and began to invest globally over Zoom calls –before the pandemic happens.”

She gives an example of how the firm discovered and invested in Khatabook, an India-based startup that helps small businesses digitise their financial transactions. With the use of their data, Rocketship was able to identify the potential of the startup even before the VC firms on the ground was able to.

“Spotting a company before it becomes [popular], before everybody else recognises it, is hard. It is something that we see our data giving an advantage over and over again,” Iyer stresses.

Iyer also explains how she had had other VC firms coming up to her and asking how Rocketship is doing their investment in a time of pandemic like this, where it is almost impossible to travel and visit founders at their offices. Again, their heavy emphasis on the use of data saves the day: It enables them to weigh in the potential of a startup without having to conduct extensive travels.

Prior to joining Rocketship, Iyer was the Chief Data Officer at Indonesia-based unicorn gojek. In addition to that, she also sat at the company’s board and had expanded the company’s presence to Singapore.

This was not Iyer’s only foray into the world of data. She was part of the founding team of Intuit’s Quickbooks Lending Platform where she helped grow the platform to US$300 million and holds three patents in the areas of user data augmented algorithms for financial inclusion.

Southeast Asia, the next frontier

With a focus on early stage companies, Rocketship is aiming for the Indian and Southeast Asian startup ecosystem with its new fund. When asked about any specific countries that the firm is aiming for, Iyer says that it has no preference over a particular country and will go where the data lead.

“What we look for in potential companies is a strong model, a good thesis about what they are building. Just being very product-focussed … a direction that is interesting for us as it shows up on our screen,” she elaborates.

Also Read: Why SOSV’s William Bao Bean thinks the pandemic is good for early stage startups

As a VC that is based in Silicon Valley, there are advantages that Rocketship can offer to its portfolio companies.

“One of the advantages that we have is, obviously, the connection to all major VC funds here,” Iyer points out. “The other thing is our data. There are not too many VCs that have a data science background in the capacity that we do, and we can really help founders with that.”

“The fact that we have all built and grown our own businesses is also a huge added value,” she continues.

During the pandemic, many investors have shifted their attention towards verticals that are gaining popularity at the moment, due to its ability to facilitate digital transformation in every aspect of life. As the data suggested, Rocketship is looking at opportunities in both B2B and B2C fronts.

“We are also looking at cloud-based collaboration … and it was kind of spiking, coming up on our screen more than other things. So we have been particularly interested in that,” Iyer says.

Closing the discussion with e27, Iyer says that she is “very excited” by the quality of the founders that she has seen in SEA.

“We are very excited to lean in and talk to people and figure out if you can make investments there. So, we are very actively looking at the region and hopefully, you will be seeing much more of us there,” Iyer says.

Image Credit: Rocketship VC

 

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