It’s no longer news that venture capital firms are still launching funds and pouring capital into emerging Web3 startups despite the crypto winter. Many prominent venture capitalists have said that this is the best time to invest at a discount.
For Kabir Kochhar, the founder and managing partner of VC firm Audacity, his reasons to invest are no different. Audacity recently launched a $60 million fund to invest in early-stage media tech companies bridging the gap from Web2 to Web3.
As a former media practitioner, Kabir Kochhar has a well-trained eye for scoping out emerging media companies on Web3. So far, Audacity’s portfolio companies are Rusk Media and VideoVerse. The former recently completed a $9.5 million funding round to extend monetisation layers of intellectual property (IP) into web3 while the latter secured $46.8 million to provide an ecosystem of innovative video editing technologies.
Following the launch of Audacity’s $60 million fund, we pick Kabir’s brain on what it’s like to invest during the crypto winter and how the firm ensures a return on investment.
Please tell us about yourself and the story behind Audacity.
I’ve always been fascinated with the media and its impact on the human consciousness. After college, I started working as a digital media planner in New York City where I witnessed marketing dollars flow into the digital world. I got a wealth of experience quickly and was one of the first people to buy an ad on Facebook in 2006.
From there, I did a few entrepreneurial stints and eventually became a founding partner at The Glitch, which quickly grew to become one of India’s largest digital agencies. I later joined Anthill Ventures as General Partner where I headed investments for the India fund that was focused on media and consumers. These experiences gave me the confidence to identify and seize opportunities in the media landscape. That’s why I started Audacity – to seize an opportunity by funding visionary media and ad-tech companies capitalizing on Web3.
What piqued your interest in the Web3 space and where did you first hear about it?
Honestly, it started out with me going down the wormhole of YouTube way back and I just stumbled upon it. I then read Blockchain Revolution by Don Tapscott and was hooked. I was fascinated and immediately saw exciting possibilities in an online landscape driven by AI.
At Audacity, we know what we’re good at and we know where we can drive value for our founders, startups and the ecosystem – and that’s in media. And it just so happens that’s the exact vehicle which will bring users into the Web3 ecosystem.
The idea is to time our investments to align with the growth trajectory of our startups. If we can do that, we can drive value. When we invest, we like to see a 10X (return multiple) and we work hard to help the company and founders achieve that. This ensures higher returns and expedited growth for the startup.
Why is Audacity focusing on media tech companies and what gaps do you see in the Web3 market?
There’s a lot of media consumption happening right now, which can be better monetized, better built and better leveraged through the Web3 ecosystem. The Metaverse is a great example. It’s a new, three-dimensional way to consume media. So, we definitely want to have a presence there. We also see opportunities in the infrastructure layer of media. We see a lot of value in things like ad-fraud prevention, better video optimization, better cloud video computing and better ways of utilizing NFP’s to store value in the digital ecosystem.
In terms of gaps to fill, when we look at the Web3 ecosystem right now we see a lot of generalist funds with specific Web3 play. We don’t see anyone looking at how they’ll actually grow the size of the market. We’re the guys who will do that because we’re the media experts and we’ll bring the right kind of media partners into the Web3 ecosystem, either to our portfolio companies or to the overall network. This ensures the whole ecosystem grows multiple times over.
Why is Audacity investing in companies from India and APAC?
Audacity already has a presence across India and APAC with offices in both areas. We have venture partners in India, Singapore, Los Angeles and New York. We want to deepen our presence in the U.S. because we see a very clear gap between the adoption curve of media technologies and Web3 in Asia and how that can be leveraged to grow and scale up U.S. companies. The U.S. obviously has a massive consumption market but is a little behind the Asian region in terms of the adoption of media technologies.
What do you think about VCs raising funds amid the crypto winter?
I think the smartest VC’s would be wise to do more of that right now, given there are some historically low-valued but high-quality companies out there that can’t get the kind of capital they deserve. We will see the continuation of the crypto winter for another 6 to 12 months but the best and strongest companies will survive. In the end, the people who’ve backed the right companies at the right time will benefit significantly from that.
The Web3 market is going through a bit of a lull but I always believe that when things are slow, that’s when the best companies come out. Historically, the best successes of any VC have happened in economic downturns and we’re in a bit of a slowdown in the Web3 ecosystem. There was a time last year when a lot of companies were raising capital with an idea but no business plan. They hadn’t really thought about how they would monetize or bring users to the Web3 space. That’s going away. So, the right capital should definitely go to the right companies.
What’s in the pipeline for Audacity this year?
We’ll be looking to invest across another three or four companies but, of course, we’re always looking for opportunities. We’re not going to stop ourselves from investing in the best deals out there. We’re excited. It’s always good to sit on cash in a market where there are fewer companies to invest in but the companies out there are higher quality. We’ve seen a lot of interesting companies at good prices. So, we’re excited about deploying capital across them.
What’s the most challenging aspect of your role and how do you overcome those challenges?
I think the most challenging aspect of our role is to ensure that we constantly stay relevant and ahead of the curve in terms of media technologies. We’re people from the media industry. We’re investors and past entrepreneurs. So, we want to make sure what we offer our portfolio companies is always relevant.
How do you ensure you get a return on investment?
It’s all about the time value of money. A 10X (return multiple) in 15 months is better than 50x over 10 years. That time value of money is extremely important to us in terms of identifying the right opportunities at the right time. I think it’s also important to position yourself well enough to think for scale but be able to operate in a lean environment like this. The key is to focus on strong fundamentals that never change in a good or bad market. You can’t keep your head in the sand if you want to constantly drive value because the one thing that ends up happening in a relative economic downturn is that incumbents benefit the most. They usually have the capital to weather it out but if you can survive and find a niche for yourself, you can be successful.
Where do you think we could see Web3 in the near future?
From an infrastructure perspective, I think things are going along quite well. The strong, well-funded companies are building the background. From a usage perspective, we have to reduce the friction to adoption and we have to find a way to weed out the bad actors to ensure Web3 isn’t seen as the “Wild West” – where getting held up at gunpoint is analogous to getting your wallet drained. It’s about maintaining the fundamental ethos of what Web3 brings us, which is a decentralized ecosystem and a blockchain-based, trustless economy.
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