How growth stage startups can create a thesis for M&A and strategic investments

Hey, everyone. Welcome back to investream. I'm Pankaj and today I'm going to answer a question that came in on Twitter from Deepit, who is one of the co founders of a startup in India called Inshorts, coming up next. So the question that Deepak asked was how can series B growth stage companies create a thesis around strategic investments, acquisitions, and other opportunities for inorganic growth? So one of the things that a startup that is much later stage than typically what we talk about on investoring is one of the things that you probably want to do is identify what your key objectives are and build a thesis around that. So, for example, if you're trying to expand your tech team and bring in some skill sets that you don't currently have in your team, and it's hard to find people with the appropriate level of skills that you need, or for whatever reason, it may not be a bad idea to start thinking about acquiring or acqui. Hiring a company and bringing in that talent. So in that example, the who in your thesis is might be a computer vision startup that hasn't yet raised a series A. The how may be cash to investors and cash plus stock to the team to incentivize them to stick around for three to five years. Now, if your primary objective is growth, it's important to clearly identify what is core to your business and what isn't. You may choose to invest or acquire startups or talent that are only core or core and ancillary to the business. The difference in approach is it's directly result of your company's strategic plan and it's going to vary company to company. There's no one answer for that, but I think it's important to identify what is your key objective. And now start breaking that down and saying, okay, you we want growth in the core product, or we want growth through ancillary products that complement the core product. So it's important to kind of sit down and map out that strategy first and then start building out your thesis around that. It's also incredibly important to identify how much money is available for ma, how much money is available for investments, and kind of like take a portfolio approach to deciding how that money's going to be allocated. Right? Rather than just saying, all right, we're gonna take a certain amount of money and use it for all of these activities. I think it's good to kind of, it doesn't have to be a hard or rigid rule, but at least identify and say, all right, this money, 80% of it is gonna go to MA and 20% of it is gonna go to opportunistic investment. I think it's important to build out a team that's going to focus on executing this thesis. They buy into the thesis and they have. They're going to focus on building the relationships with investors and founders that could bring the right type of deal flow to you so that you can start executing these strategies either through MA or through investments. The challenge on the investment side might be that your time horizon to get return on this investment might only be one or two years or three years. Whereas some of the startups that you're investing in might actually need five years or three to five years or more even to become useful to you from an economic perspective. They may become useful to you from a ancillary product growth perspective sooner, but I think it's important to be clear on that right at the beginning. So that time horizon is incredibly important. Let's focus on growth a little bit because that was kind of the focus of Deepak's question. For a content startup, growth can be achieved in a couple of ways. Ads, better growth, hacking, improving retention, increasing engagement, and of course producing or getting access to content that people want to share. So that viral aspect, right? Sort of like the videos we do here at investrin. Now you can acquire a startup that has built tools to improve effectiveness of ad spend and integrate the team and their product to focus only on your business. You can invest in a content creation business and work out some sort of deal where they'll produce content exclusively for you or maybe give you an exclusive for a certain amount of time. So yeah, these are some examples of how you could find growth through ancillary products, either through an M and A deal or through an investment. So Divit, I hope this answers your question. And of course if you've got follow up questions or if you've got comments on whether this is completely bogus and it doesn't work or yeah, you've tried some of this stuff and it has worked. I'd love to hear from you and from other folks as well who have tried later stage companies that have tried to figure out growth through either MA or through strategic investments. So I hope the video was helpful. 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