Chris Bell

Ever since we launched SHAKTI, every quarter we write a letter to our LPs = Each letter includes an update on the portfolios, the GP's (our) view on the zeitgeist, an interview with a portfolio CEO and an interview with a TITAN = So far, we have 16 such letters = it's been on our "to do" list to share these publicly (i am lazy) = then Google comes along to save lazy people like me (thank you NotebookLLM) = here's a 10 min podcast summarizing our journey since Dec/2020 with the 16 LP letters as source = if you wanted to know what we are about, this is a pretty good place to start = https://lnkd.in/db7K2TrT cc SHAKTI

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The recently announced shuttering of The Pro's Closet (TPC) should be a cautionary tale for all early stage companies looking to raise capital… be careful what you wish for. TPC raised over $90M, with a large $40M Series B in May 2021, followed by a $5.5M “modest Series C” round in January 2024 that was likely an emergency cash infusion. To the early-stage outdoor and consumer companies that I work with, these seem like huge dollars and most founders couldn’t imagine burning through $45.5M in less than 3.5 years. But given VCs’ expected returns, those raises were probably based on a future enterprise value of close to $1B for this "revolutionary approach to the bike-buying and selling process" (per their 2021 press release). After the $40M raise and huge pandemic-fueled growth in 2020 and early 2021, TPC had to continue to fuel its business, but inventory was super tight in late 2021 and early 2022. Rather than take what was available, management likely felt immense pressure to stretch, causing them to overpay for used bikes – reportedly paying some customers more than they had paid for the bike when new a few years prior. The whole cycling (and outdoor) industry is painfully aware of what happened next. New inventory eventually started arriving months late in April and May of 2022 just as COVID lockdowns were lifted and people decided to spend money on travel and experiences… not gear. TPC was stuck with a huge new warehouse facility that was half-full of over-priced inventory and cratering demand. It’s easy to play Monday morning quarterback and say that TPC should have used its $40M war chest to hunker down and weather the storm, but that’s not why the VCs invested. Many other companies in our space made the same decisions and got caught in the same inventory squeeze. Ultimately, founders that are raising money need to be comfortable with the growth they are signing up for. One of my start-up founders was having a very receptive VC pitch until it came to her financial projections of “only” $100M in revenue in 4 years. The VC rapidly lost interest, as they “only invest in $1B ideas.” My advice? > Boot strap and seed strap as long as you can. > Get to profitability as soon as possible. > Don't get forced into unattainable growth goals. > Find investors that share your vision for the company. #OutdoorIndustry

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I'm a big fan of "value retail". Time and again, a new platform with value based positioning has been able to carve out space in a competitive market with very large incumbents. Their offering has been simple - significantly (30-40% at least) lower prices than incumbents. They have squirmed their way to a large outcome. This has happened across categories, without a doubt.    Meesho came eight years after Flipkart/ Amazon with their average order value being <INR 350 vs INR 1k for market. They're at $5B GMV RR.   Zudio rose from <INR 150 cr in 2017 to INR 6000 cr currently with ASP of <INR 500.   Lab grown diamonds are 60% cheaper than mined diamonds while being physically/ optically/ chemically the same. From 2016 to 2023, they expanded market share from <5% to 50% (by volume).   Janaushadi stores (Govt operated pharmacies selling "generics") rose < INR 150 cr revenue in 2017 to INR 2400 revenue RR in 2024. They sell 50-70% lower priced medicines.   Physicswallah rose to $200m revenue in 4 years with ~20% of incumbent's pricing.   Globally, late entrant Temu rose to $40B GMV RR within 2 years on the back of low pricing. Imagine threatening Amazon's territory   But low pricing as a strategy is an outcome. It looks simple but behind it lies extremely complex inputs that make it possible. It involves opening up exclusive low priced supply and creating the most optimized and lean operations to squeeze out every penny. - Temu/ Shein had access to China's low cost manufacturing capabilities, longtail China suppliers who weren't able to monetize well in China's competitive domestic market, regulation of De minimis in US where they don't pay import duty taxes via air drop shipping - Zudio did end to end manufacturing in-house at low TAT at reasonably low MOQ that enabled entire inventory refresh in < 2 months, leading to limited inventory losses. They made a strong call of spending zero on marketing/ branding - Physicswallah spent 8 years to conquer YT led distribution (45m subscribers) leading to limited CACs vs incumbents who spend 30-40% of their revenue on sales / marketing (via feet of street) - Meesho opened up "direct from manufacturers" supply with their low (zero) commission model - LGD/ Janaushadi are both product innovations (same quality at exceptionally low prices)   Because of this, it's nearly impossible for incumbents to replicate the low pricing strategy almost instantly. As they are not just mimicking the prices but also tightly run operations, new supplier partnerships, marketing advantage.   If you want to disrupt pricing for a market, an ideal question to ponder on is how will your supply chain enable that..

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Traditional advice given to founders as they scale is “hire good people and give them room to do their jobs”. That is disastrous advice. Everyone is talking about it and it’s true: every leader and founder needs to operate in Founder-mode. Brian Chesky recently spoke of this and it’s great nomenclature on how businesses should be run. For years, founders and leaders have been told to hire great people and leave them to run the business. A ‘set-it-and-forget-it’ mentality. The reality is, that doesn’t work. Every single founder and leader NEEDS to be in the details. Founders and leaders have unique insights, an understanding of the business, and an outsized level of care toward the business. They are the superpower of a business; pulling up too high out of weeds removes that superpower. I think this expands beyond just founders but applies to all leaders. Leaders can act in Founder-mode. If you’re a leader or a founder, stay in the details. Have high trust with who you hire, but don’t work at such a high level you leave it to everyone else to run all the details of the business.

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