Sixth Sense Ventures was launched as India’s first domestic, consumer-focused venture fund that is investing in the Consumer of Tomorrow…Today! Sixth Sense invests in first-generation entrepreneurs who are disrupting large, sticky consumer categories and carving a niche for themselves. Within a short span of 6 years, the fund has grown to an AUM of $150M+, 23 investments and ~40% IRR. Most importantly, Sixth Sense has become the preferred partner for consumer-focused businesses in India.
In a talk with Sixth Sense Ventures’ founder and CEO Mr. Nikhil Vora, let’s discover more about the company and his thoughts about the current market scenario.
- What were the initial challenges you faced?
When we started Sixth Sense, we had no experience in fund management, which also meant no baggage of the past. Though the Rs.118Cr. fundraise for our first fund, Sixth Sense India Opportunities I (SSIO I), took some time, SSIO II, our second fund closed at Rs.515Cr., more than double our target corpus of Rs.250Cr. Furthermore, while all other funds struggled to raise capital, Sixth Sense achieved this feat in a record 9 months, despite the volatility in the markets. This demonstrates the pressing need in the market for an alternative investment product with a unique approach. Sixth Sense was awarded Fundraiser of the Year 2018 – Venture Capital at the Annual VCCircle Awards.
- Which was that point that triggered the growth of the company?
Sixth Sense completed its first exit within 1.5 years of investing and realised ~7X returns from its exit from, oral-care contract manufacturer, JHS Svengaard. Following, Sixth Sense completed 4 exits (from 10 investments in SSIO I) within ~2.3 years of investing and returned 100% of the capital back to investors, a first in India for any fund.
Sixth Sense scored a blockbuster ~9.4X return on capital invested, from selling a majority of its stake in India’s leading contract manufacturer, Hindustan Foods to WestBridge Capital. Sixth Sense sold its stake in a hyperlocal logistics company, Grab to Reliance Jio at a ~2X return in a strategic acquisition. Sixth Sense exited its investment in the wedding marketplace, Weddingz.in through OYO’s strategic acquisition, registering a ~1.7X return.
Entrepreneurship is living a few years of your life like most people won’t, so that you can spend the rest of your life like most people can’t
While the returns as of date, are extremely satisfying, we feel completely vindicated with the fact that two of our portfolio companies found their way into some of the largest unicorns in India – Reliance Jio (Grab) and OYO Rooms (Weddingz.in). While the business environment will always be challenging, we do believe that our portfolio companies are only getting stronger by the day.
- How have the company graphs changed since the foundation? Can you share a few statistics?
|SSIO-I||2016||INR 118 cr.||100%||10||5||2.6X|
|SSIO-II||2018||INR 515 cr.||70%||13||0||N.A.|
- What is the reason behind your company’s long-standing success?
Sixth Sense Ventures was founded on the back of a single core belief – to create the most credible consumer fund in the country. Credibility has to percolate in everything that we do – be it our investment philosophy, our business model or our investments. Anywhere in the world, if a business doesn’t deliver, it doesn’t make money – but fund management is the only business where you make money even if you do a mediocre job. To break this norm, we launched, for the first time in India, a 0% management fee fund, in an industry where the 2-20 structure has been a norm for decades. You only pay for performance – hopefully, that’s how the next-generation of funds will operate.
The reason for our limited success, and we’re still very early in our journey, is that we knew our final goal post – to ensure that we think like founders and not act like investors. Business lifecycles are turning shorter – successful business cycles have reduced from 30 years to 15 years. Hence, we want to invest in businesses that have a longer lifecycle of their own. What we invest in today, will not be the same 3-5 years down the line. Hence, it is extremely important to invest in the right founders, who are just 6-12 months ahead of the curve. If we get that line of sight, we’re on the right track.
- What are the services the company focuses on? How are your services different from those in the market?
The Great Indian Consumption Story is crystallising rapidly and in India, consumption has been outperforming all other sectors. While most of the other funds are either sector-agnostic or technology-focused, Sixth Sense has stayed true to its cause of being a consumer fund, not getting swayed by trends. Thus, giving us an advantage over trend investing.
There are large consumer categories that already exist and thus offer a strong opportunity. We believe challengers will shake the leaders in these spaces to carve out market share. Our intent is to identify and partner with such disruptors, operating in the largest and stickiest consumer categories in India.
Furthermore, there are two types of businesses – innovators and disruptors. Innovation in India is a challenging task as the environment is not very conducive. We like to invest in disruption – there is a market that has already been created and an opportunity that already exists – all one has to do is shake the leaders. We may not participate in businesses just because we might get a great value – values are very transient. We want to invest in founders with whom we can create great value with!
- How do you decide to take the company a step further in terms of your services?
The core of Sixth Sense lies in the belief that the next big wave of dysfunctional growth will be led by players who are going to be driven by completely different skill sets / capabilities and not necessarily capital. Three pillars defined the founding of Sixth Sense: (a) leverage our knowledge of the consumer centric spaces to help first generation entrepreneurs in disrupting traditional categories (b) bring our entire ecosystem onto an organized platform which in turn would help our investees (c) extend the validation achieved in the angel portfolio, to identify the right founders who are building products/services for the consumer of tomorrow.
- Can you please brief us about your professional experience?
Nikhil Vora is a consumer and finance industry veteran with over 27 years of experience. He is the Founder and CEO of Sixth Sense Ventures. Nikhil was earlier the Managing Director & Head of Research at IDFC Securities and has been regarded as one of the strongest analytical minds in the country. A post-graduate in Management, Nikhil was a member participant at the Future Leaders Program at the Saïd Business School, University of Oxford, London. He was also bestowed with the ‘Thought Leadership’ award by IDFC.
Nikhil has been invited by Nestle Global, Unilever, Aditya Birla Group, Marico, Godrej etc. to evolve a strategic roadmap for their businesses. He excels in identifying emerging consumer trends and his research has been accredited by some of the largest global funds like Capital, Fidelity, Alliance Bernstein, Putnam, Schroder’s etc. Some of his work includes differentiated presentations on Food Security, Changing DNA (of organisations) and “If I Were” (based on strategies consumer companies should adopt).
Nikhil was voted as India’s Best Analyst, in the Asiamoney’s Brokers Poll 2012. He also has the rare distinction of being voted Asia’s Best Analyst by the Wall Street Journal in the same year.
- What are the key achievements of your entrepreneurial journey?
“After almost 25 years of my professional journey, I decided to take the entrepreneurial route in 2014. The ‘exhilaration of uncertainty’ when I left IDFC to start off Sixth Sense, the change-over from being a professional to an entrepreneur must rank as my most fulfilling period. The incredible high of raising capital to drive the vision of investing in the Leaders of Tomorrow…the journey has been breath-taking!”
“Taking the entrepreneurial route, leaving behind an extremely successful professional career has been one of biggest challenges I have taken. Through all the ups and downs in the last 6 years, there’s been two constants in my life – my family and Sixth Sense. The team, investee companies and investors have become a part of my family. Being a first-time manager, I had a vision – to become the most “credible” partner for consumer businesses in the country – and I knew the goalpost – to think like founders and not act as investors. There was no baggage of the past “
I believe this has led Sixth Sense to score a rare hattrick:
- First domestic, consumer-focussed venture capital fund in India
- First fund in India with a 0% management fee option
- First fund to return capital back within 2.3 years of closing
- Constant vigilance- a need or a strategy? Please share your views.
Sixth Sense comes in at a stage where the product-market fit has already been established and there is absolute coherence among the founders and team. Having said that, an early warning sign in such businesses could be a significant increase in requirement of resources, including capital, or an unusual change in the competitive landscape. Constant vigilance is a need with every business so that one can identify early warning signs and act on to mitigate any adverse effects.