Tata chose startups more on ‘intuition’, less on numbers

In December 2019, within a month of joining Instagram, Ratan Tata created a pitch deck that entrepreneurs could use to tap investors. After retiring as the Tata Sons chair in 2012 at the age of 75, Tata had devoted most of his time to investing in startups through RNT Associates, his personal investment vehicle.

Many founders were reaching out to him for advice, he said in his Instagram post in 2019, when he had already built an enviable startup portfolio filled with unicorns. At the very least, the pitch deck would help them marshal their thoughts and get started, Tata had said then.

The 16-slide deck was fairly basic. It advised founders to include elements such as the core problem, a unique selling proposition, validation of every idea with data, competitive information, a revenue model, and details of the team. But towards the end, the deck cautioned: “Getting funded does not mean success."

For founders, however, getting funded by RNT Associates was a badge of credibility in the years between 2012 and 2016, when capital was still a constraint for many startups. “It was the stamp or the validation of the business and the team during those times," a founder who had raised capital from Tata at the time said.

For some others, it was the possibility of reaching out to one of India Inc.’s doyen for mentorship. A 2015 Mint analysis said Tata’s investment almost always helped raise the startups’ valuations.

Small cheques

For a business tycoon who had dealt in billions, Tata was writing very small cheques. In some cases, and especially as his portfolio grew, he also met founders just once before investing.

In October 2015, Mint reported that he had invested only around ₹20 crore across 10 startups over 18 months. Some investments were just in lakhs of rupees, others in crores —not hugely significant for someone like Tata. For instance, Tata had just picked up just six preference shares in Ola, while the investment in CarDekho was in lieu of 163 shares, and Snapdeal got him 237 shares, the Mint report said.

Other investments at the time included startups such as Zivame, Urban Ladder, and Paytm. Over time, he would invest in other unicorns such as Lenskart and Urban Company.

What was Tata looking for then by investing in startups? In an interview in 2016 with Snapdeal founder Kunal Bahl at a TieCON conference in Mumbai, Tata described his process, noting that he relied more on “intuition" and less on numbers. “A founder who is only in for the short term, has no passion for the sector that he is in or the business he is building, doesn’t give me a great deal of comfort," he said.

One of his earliest startup bets was in Snapdeal in 2014, where he put in around ₹10 crore. “Mr. Tata was always very supportive and gracious when giving his time when I requested it. His feedback was always very candid, and he always spoke his mind to me," Bahl told Mint earlier this week.

Also read | Ratan Tata obituary: The visionary who bridged tradition and innovation

Tata also invested in jewellery brand BlueStone in his personal capacity in 2014, much before Tata group company Titan’s acquisition of a majority stake in rival Caratlane in 2016. Like many other startups, BlueStone was introduced to Tata through an investment banking intermediary. Tata liked Bluestone’s full-stack approach to designing, manufacturing and extensive use of technology, especially in an industry that was a laggard in terms of tech, founder and chief executive Gaurav Singh Kushwaha said.

“In the early years of the investment, I was able to meet Mr. Tata several times. His advice was always to think long-term, think of the customer first, and offer generous policies that are favourable to the customer. His key advice was that in this category, lifetime relationships matter more than a single transaction," said Kushwaha.

Money from exits

Tata also appeared to have made money through his exits. He exited Bluestone in 2022. In September, RNT Associates sold back a part of its stake in Upstox to the founders, making decent gains.

He also acted as an adviser to VCs such as Chiratae Ventures, Jungle Ventures and Kalaari Capital.

A humble teacher, and a keen learner," said Sudhir Sethi, founder and chairman of Chiratae Ventures, when asked to describe Tata.

They met in 2015 when Tata agreed to become a senior advisor at Chiratae.

"I cannot ever forget the first one hour when he accepted to be Senior Advisor to Chiratae and me personally" Sethi said.

Thereafter over the next 6 years, Tata would spend a few hours every quarter with Sethi, Chiratae executives and the VC's entrepreneurs offering advise on strategy, scale, execution, team building amongst other things, Sethi said.

"When we rebranded from IDG to Chiratae, I had three meetings where he passionately advised me on building global brands from India. He listened to founders with a key instinct to learn and in some to invest. His advice to each was as if he was helping each founder build another Tata company. The world will miss Mr Tata, a humble teacher and student, a guide who never ever tired of meeting us and founders," Sethi told Mint late Wednesday as news broke of Tata's demise in Mumbai.

Besides investing in startups, Tata continued to encourage entrepreneurs outside his portfolio.

In an Instagram post on 11 May 2020, Tata addressed the challenges entrepreneurs faced in covid and offered words of encouragement.

“In the past difficult times, entrepreneurs have displayed far-sightedness and creativity that could not have been believed to exist. These became the flagpoles of innovation and new technology today. I hope that the ability to find another way to build a product, run a company, run operations a better way, will emerge as an outcome of the current crisis," he said. 

Tata didn’t downplay the challenges, but said he was confident entrepreneurs would find creative ways to overcome. “Entrepreneurs today who will find ways to enable new or modified enterprises that would be the benchmarks of tomorrow. It can all start on a clean sheet of paper that looks at ways of doing things that were never thought of before. This crisis will force entrepreneurs to adapt and create," he said.