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Ankur Capital's Ritu Verma on Investing in India's Deep Science Revolution
99 Plays2 days ago
Dr. Ritu Verma, Co-Founder and Managing Partner of Ankur Capital, breaks down her decade-long journey from experimental physics at the University of Pennsylvania to building one of India's most respected deep tech VC funds.
With portfolio companies like Captain Fresh heading toward a billion-dollar IPO, Offgrid Energy Labs pioneering zinc battery technology, and String Bio revolutionizing precision fermentation, Ritu shares the contrarian strategies that generated 30% IRR returns. From raising Fund I with a random Colorado angel investor to securing commitments from British International Investment and the US DFC for Fund III, this conversation covers the scrappy realities of VC fundraising in India, the multiplication formula most founders miss during term sheet negotiations, and why mediocrity in early hires destroys startups.
Ritu also unpacks India's transformation from IP-averse to filing 100,000 patents annually with 50% domestic share, the codification thesis powering B2B marketplace unicorns, and how Indian defense is becoming the guinea pig customer for deep tech. She shared these hard-won insights in this candid conversation with host Akshay Datt, offering a masterclass in patient capital, portfolio construction, and ecosystem building through initiatives like ThinkAg and the Deep Science Forum.
What You'll Learn:
👉The multiplication formula for VC returns that most founders negotiate wrong during fundraising (Returns = Valuation × Ownership %)
👉Why Ankur Capital's ₹50 crore Fund I failed structurally and what emerging fund managers must avoid
👉How codification strategy turned fragmented fish and fruit supply chains into billion-dollar B2B marketplaces
👉The mediocrity trap: Why hiring safe corporate executives in early stages kills startups faster than product failures
👉India's deep tech moment: From getting kicked out of IITs for asking about IP in 2008 to 50% domestic patent share in 2025
👉Captain Fresh's 5-year seed-to-IPO journey and what it signals for real economy tech companies versus consumer apps
If you found value in this deep dive into deep science VC and early-stage investing in India, subscribe to The Founder Thesis Podcast for more unfiltered conversations with founders and investors shaping India's startup ecosystem. Follow host Akshay Datt on LinkedIn and X for episode highlights, startup insights, and exclusive content.
#RituVerma #AnkurCapital #DeepTechVC #DeepScienceIndia #CaptainFreshIPO #IndiaStartups #VCFundraising #EarlyStageInvesting #AgritechIndia #BatteryTechnology #ZincBatteries #OffgridEnergyLabs #StringBio #B2BMarketplaces #SupplyChainTech #IndiaPatents #IPRevolution #StartupFundingIndia #VentureCapitalIndia #TheFounderThesis #AkshayDatt #SyntheticBiology #PrecisionFermentation #DefenseTechIndia #SemiconductorIndia #ThinkAg #DeepScienceForum #IndiaUnicorns #StartupIPO #PortfolioConstruction #VCReturns #FounderAdvice #HiringStrategy #TechnoCommercialRisk #PatientCapital #ImpactInvesting #CleanTechIndia #EnergyStorageIndia #RDIFund #BritishInternationalInvestment #AngelInvesting #FundManagement #StartupEcosystem #IndiaInnovation #globalexpansion
Disclaimer: The views expressed are those of the speaker, not necessarily the channel
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Transcript
The Risk and Reward of Startup Investments
00:00:00
Speaker
So your first check is the riskiest check. Because it's the highest risk part of the journey, it's also the highest reward part of the journey if you do well. 95% of investors in India are averse to touch something like this because these kind of businesses don't make revenue. You are an early stage firm. You would invest in companies at the VC, seed, maybe maximum series level. Dr. Ritim Varma is the founder of Ankur Capital, an early-stage venture capital fund backing deep science startups. Ankur Capital manages more than $200 million, dollars helping India build IP-led global companies. The biggest change, Akshay, is entrepreneurs and talent. That is the absolute critical ingredient without which capital doesn't flow. If you hire somebody who's mediocre, you know, you are sunk. We had 100,000 patent filings last year in India, but 50% of this was...
Ritu's Journey from Physics to Venture Capital
00:01:02
Speaker
Ritu, welcome to the Founder Thesis podcast. I want to learn from you how easy or how hard it is to launch a venture capital fund in India.
00:01:13
Speaker
And let me first understand a little bit about your background. You've had a fascinating journey yourself. Just just take me through your journey a bit before we come to the launch of Angkor Capital.
00:01:27
Speaker
So I started Leipout as a physicist. I have a PhD in physics from the University of Pennsylvania. So I think I was always interested… made you go outside India?
00:01:39
Speaker
You know, I don't remember friends who were going outside India. Sort of, that's what people were doing. So I don't think it was a, in my case, it wasn't a very concerted thing that you were going outside in there. was just easier than, you know, and friends were doing it, so why not? in So that's really how it worked for me.
00:02:04
Speaker
But yes, I did my undergrad outside India, and then I obviously stayed on to do a PhD post that, essentially. But I started LIP out as a physicist. So in reflection, obviously, some somewhere I was interested in science, I was interested in innovation.
00:02:19
Speaker
um But I did realize throughout this PhD that, you know, an academic career was not what I was interested in. I was just interested in, you know, sort of, I was what they call an experimental physicist. So my father once said, you know, you I was a plumber and an electrician combined because I was only fixing things every day in the lab is what I was doing.
00:02:37
Speaker
but So I wanted the more practical. I wanted to sort of have things actually come out in the real world versus you know being taken up by writing papers. So that's really, get know on reflection, I realized all of this. Maybe I didn't at that point in time. But that led me to a couple of jobs,
00:02:54
Speaker
um you know um all of which were in product innovation. Actually, they were with larger companies, so people like Unilever, people like Philips. And I was always on the product innovation of bringing product to market, you know, from R&D to product innovation to market is what I did globally. um And with a stint in India as well. And of course, there was the second realization here that, look, the risk appetite for innovation in such a mega company is limited. And I really should be, you know, in this more risky startup world is what was sort of interesting to me.
00:03:32
Speaker
Now, barring the lack of having a very specific idea that I wanted to build a company on, the next best thing was to be on the capital side and sort of actually enable a lot of such innovations to kind of happen.
00:03:44
Speaker
I got a chance to do this um alongside a CBC a long, long time back that was, you know,
00:03:54
Speaker
And gave me a flavor for what, you know, some very, very fundamental technologies. And this was lithium. Lithium was coming online across the globe, looked like. And, you know, I was sold. This is really where I should be.
00:04:08
Speaker
So moved back to India and, you know... That's really when, you know, sort of Rama and I met and, you know, we started talking
The Evolution of Ankur Capital
00:04:17
Speaker
and had some similar ah sort of approaches, a similar kind of things. We started dabbling. That's really how it all started.
00:04:27
Speaker
So did you have ah some sort of role model in place that, okay, i want to start something like this? ah And was it clear to you that what you'll start is a fund? ah or how How did that journey happen from quitting a job to starting Ankur Capital?
00:04:47
Speaker
So I think, um you know, the fund in its current concept in India as an AIF was not necessarily the the the North Star here, right? I think Ram and I dabbled in a bunch of other kind of ah constructs of how to do it. I think giving equity to a startup and watching that equity grow while supporting that startup was at the crux of it, right? And I think that's coming from You know, both of us having come from operating backgrounds, you know, I spoke about the fact about innovation, risk, you know, and the capital side of, you know, what that kind of enables, right? So whether this was in a fund or whether this was out of a balance sheet, et cetera, was not necessarily, you know, the underlying piece.
00:05:35
Speaker
ah Of course, you realize there are limitations for the structural innovations that you can do. So just, you should just shut up and just do a fund and just look with that. scenario.
00:05:47
Speaker
So if you look at our journey, the first part, there was a bit of warehousing, there was a bit of proprietary capital, there was our capital, so it was a blend of stuff, as you kind of did. But at one point, we did come to the realization, look, if you have to grow and scale this, and India was growing, you know, and the opportunity set was growing, you really needed to formalize it, because that's how capital actually moves through formal structures, as opposed to, you know.
00:06:12
Speaker
s SPVs and all of that stuff right the Naja Capital was not really done what do these terms mean you said there was warehousing what does that mean you know you're managing an investment for someone else right so you have an investment you convince somebody it's you know it's actually on their books you're managing their pay to sort of manage this you know some of those kind of things basically okay okay yeah okay and you said proprietary funds what does that mean You know, just just people, some angels, friends, families, who was willing to give us some capital to play with kind of pieces here, right?
00:06:48
Speaker
Okay, okay. As opposed to, say, a family office or an institution. No, so, you know, all of these things are brand new terms, you know, fairly recent, right? We have forgotten what this where we were in India, let's say, 2014, 2015, right? Where we were, right? So, you know, I have been in people's offices in which... ah Literally, it's a family you'd call it a family office today.
00:07:13
Speaker
and in those days, you just talked to the family or the proprietor, I should say, right? There was no family office person. It wasn't even called a family office. It was just called, I'm a rich man, basically. And here's what I like to think about doing with the money. So ah you come to me with an idea. And, you know, I mean, we had all sorts of absolutely fascinating conversations. I think we should write a book. at some point, about some of these conversations because the concept of giving somebody else the money to manage was very alien, right?
00:07:48
Speaker
So they we were we were at a very early stage of all of that, um you know, My money is my money. You can come and I might pay you a sliver or something like that, right?
00:08:01
Speaker
ah People would say, kitnita camemiing a you know, ah it was it was just a very different mindset, right? They were used to maybe giving out a loan to somebody and sort of getting some interest, right?
00:08:13
Speaker
But the fact that I could give you money for the long term, you know, people said, what, you want this money? And, you know, our first fun life has a very weird fun life, like seven years. You now have trouble explaining it to everybody. But if we said eight years or 10 years, people would say, I'll be dead.
00:08:29
Speaker
What is the point? You know, so you you would you would hear some of these things, right? So you had to kind of navigate some of those. words those pieces so i i think the india ecosystem has come you know so far that you know the words you're using were just not there okay ah you know most uh vcs that i have interviewed uh come from one of the following backgrounds ah so say someone like sasha mitch and danny from k so there was family money which uh was kind of used to bootstrap and start the fund A lot of people are ah people who worked at other VC funds or were and investment bankers. So who are more from the wealth ah lens, but like like this is a wealth management business.
00:09:16
Speaker
ah How did you two, both of you are not from like a wealth management background, probably did not have rich friends who could give you money.
Impact Investing and India's Startup Ecosystem
00:09:27
Speaker
How did you actually put together fund one?
00:09:30
Speaker
I believe your first one was about 50% of... Yes. So hard journey. You started by asking the question, how easy is it to set up a fund?
00:09:41
Speaker
I think it's never easy, right? And I think if you're coming from wealth, it's a different scenario because you seed that all, right? So for us, it was, you know, absolutely scrappy journey, basically, right?
00:09:55
Speaker
You're talking about a market that doesn't really understand the asset class, right? Okay. You're talking about, you know, not being able to bankroll this, right? At some ah number, essentially, that you know if you come from wealth or whatever that you sort of have, right?
00:10:14
Speaker
You're talking of coming saying that you already have an investing track record. I mean, I had some investing track record, but not really a full track record, I would say. right yeah so um you know all of these things are hard things right so um but you know the actually there's something called an angel you know and i think when you set up something and you know a fund is a startup too it's not very different um you totally understand the meaning of that word i met a gentleman
00:10:45
Speaker
you know in Colorado who had never met me nor had I met him on the spot he said I'll give you $150,000 right so ah you know so it takes people like those to get things like this off the ground right and you know thanks to them ah you know We were able to get on ground.
00:11:09
Speaker
Got it. Got it. Okay. And ah what kind of thesis did you launch with? What kind of investments were you looking at How were you doing deal sourcing and deal diligence? And like, you know, help me understand that.
00:11:25
Speaker
Yeah, I think, ah ah you know, ah one of the things that we were saying, so we were working with startups. Rava and I were working with startups and that's how we met. Basically, you'd call that thing an accelerator to today or something didn't like that. But those days, don't know what it was, right? Their point it was a fuzzy thing here.
00:11:43
Speaker
But um so the thing that you saw, and, you know, I was coming, as I said, from this background of actually having looked at very fundamental innovations, right? If you're looking at lithium and, you know, if you're working with the CDC who's looking for very strong intellectual property, you know, they're looking for strategic interests of what are going to be mega markets, right? Right.
00:12:04
Speaker
And that's not what you were seeing in India. What you were seeing in India, and I tried doing that for them actually in India, and honestly, there was nothing really from their lens there. right But what there was was um you know sort of forays of technology, right? you know The mobile phone was coming online.
00:12:25
Speaker
There were entrepreneurs who were using that. And, you know, coming up with sort of fairly interesting models in areas that you might otherwise think are just absolutely, you know, not the natural place to invest.
00:12:38
Speaker
So as a thesis where we started, and this is probably also coming from what we understood from our backgrounds, um we were looking at the mass market. Akshay, right? And we were looking at what are the potential technology-led companies that can be there and play a role, right? Today, everybody's talking about tier two, tier three or whatever.
00:13:02
Speaker
We started with tier three, tier two India because you could see, you know, I had worked for Hindustan Unilever for some part of my career and Hindustan Unilever is very good of just throwing you into the mass markets and saying, go figure it out.
00:13:17
Speaker
And you see that there's a vibrant market it there if you get the product market fit right. And, you know, we were seeing technology led businesses that were trying to address these markets. So I think our focus was on like, how how could we be looking at some of these technology companies that were looking at these mass markets to create large businesses? So I think that's really where we started. And that was our thesis.
00:13:40
Speaker
Okay. Probably at that time, impact investing would not have been a thing. But is this what you would call impact investing? So, actually, that word impact load investing is fairly loaded.
00:13:54
Speaker
So, ah you know, ah ah for us, there was a particular thesis in mind. It was beneficial to people who perhaps were not, you know, they're not these are not the top 100 million people of consumers in India. We were not necessarily looking at a consumer story, right? We were looking at a more of a um sort of, ah you know, economy story where production, you know, supply, these were all kinds of things that were that you had here. it wasn't just about saying, hey, who's going to buy more toothpaste, right, or jeans or whatever, right? That was not really the only story that we were sort of looking at, right? But I think what you see is that, you know, people just have very specific views on what impact investing was. And this was around then, right? So the microfinance industry was around. So that was definitely impact investing, right?
00:14:40
Speaker
um But, you know, we see... And of the things that for us were fairly impactful don't necessarily cut lens for everybody. like So I think it's a complex thing to answer. right a you know It wasn't traditional impact investing, ah but there were parts of it that you could say, hey, fit the market.
00:15:04
Speaker
So, I mean, cut to today, ah you've had a second fund of, I think, 300 plus years. And now you're on Fund 3. I believe Fund 3 is 1200 crores? We're targeting 1000 crores, Okay. so what has changed from twenty fourteen to today Everything.
00:15:25
Speaker
i um her i mean I mean, to me, the biggest change, Akshay, is entrepreneurs, right? And talent. Those are the two things. Then those are the that is the absolute critical ingredient without which capital doesn't flow.
00:15:41
Speaker
but Nothing happens, right? So... um You know, 10 years back, you know, ah folks were absolutely, let's put it, you had to be crazy, as they say. You had to be very passionate. You had to build not just what you wanted to build, you had to build all sorts of adjacencies next to you to sort of build a business, right?
00:16:04
Speaker
And, you know, as an investor, God knows where exit was going to come from, right? I mean, that was the question that everybody asked. Yeah, you said something, right? Now you fast forward. And and and at the ah at the startup level, hiring was really, really difficult.
00:16:20
Speaker
We made an investment in the northeast of India. We couldn't find an accountant in the northeast of India that was willing to work at a startup, right? okay So you realize why you have mega centers, because people willing to take that risk appetite as a talent, you know you don't want to spend forever trying to find an accountant. I'm not even talking about enablers.
00:16:42
Speaker
This is a very basic hygiene job right at the end of it. So today there are entrepreneurs, there are people willing to take the risk. And what's interesting is that there are people willing to take the risk who had careers and potentially you know careers that they could continue to have, right, with stable jobs, right, willing to jump off that bandwagon and say, you know, just met an entrepreneur a couple of days back and he said, you know, i I, you know, I had a very fancy job, but said, look, guess what, you know, I think I should do a startup, right, essentially.
00:17:14
Speaker
Moreover, you have people who are willing to join. The value of ESOPs is something that got proven in the market. So people are like, hey, you know, on the heyday of 21, I think employees were collecting a portfolio of ESOPs.
00:17:26
Speaker
Right is what they were doing, switching from one company to the other. So ah to me, that's the biggest change, right, that there are people willing to actually undergo the journey and actually tap into the opportunities that India represents. And to me, that's the biggest change here.
00:17:42
Speaker
And then there's all those things, the associated system. And I think of the venture capital industry as the associated system around an entrepreneur. you know We now know the language of family affairs. We now know the language of venture capital versus private equity versus you know venture debt versus do all these things.
00:17:59
Speaker
You can walk around and people will say, oh, yeah, I know what that is. right We can talk about secondary funds. We can talk about the IPO market rate. We can talk about actual exits that have happened.
Venture Capital Strategies in India
00:18:10
Speaker
right Not one, many.
00:18:12
Speaker
can talk about the time frames that has taken. So, so much has developed over the last decade. Right. And ah so it's it's it's ah it's ah it's a new space, I think, for, you know, it's a great space for any art reform, if you ask me.
00:18:29
Speaker
ah What are the ah sources of capital for a VC fund? who Whom all... um like ah what's the universe of people that you can tap into for you're currently raising 1200 crores for fund three so what's the universe of providers that you're going to to raise this money
00:18:53
Speaker
I mean, it ranges from a lot of institutional capital to family office money. Give give me some examples also. like You know, so for example, we have ah we have like the, you know, BII, which is UK investment firm that's invested in us. You know, you have the government of India who's invested in us.
00:19:11
Speaker
You have large family offices that are investors. So it's a gamut. Family offices in India, family offices outside India. So, you know, ah the The gamut is quite large, actually. right And, ah you know, people have woken up to India, outside India.
00:19:30
Speaker
So that's a good thing. People in India have woken up to India, which is also a good thing. So, you know, um some of these things are, you know, the the base is much broader.
00:19:41
Speaker
So you are an early stage fund, right? You you would invest in companies at the seed, pre-seed, maybe maximum series a level. So we invest in what we call pre-series, eh?
00:19:55
Speaker
Yeah. And I know these definitions move around the quantum of money moves around. The way I think we like to define it is that, you know, there is something you have done, right? So I can take a look at it and say, okay, get some kind of ah assessment of what you're talking about.
00:20:17
Speaker
right? So ah you may have small revenues, maybe you may just have a product, but you've done something. So it's not like a drawing on a napkin, typically, right? ah Once in a while, we have done those, but those people are just kind of rinsing and repeating things that they have done versus starting something completely different. So there's some track record or at piece, but that's really where we come in.
00:20:41
Speaker
Okay. So for growth stage funds, like, uh, Do, for example, retirement fund these large institutional investors like, say, a retirement fund or a sovereign wealth fund, do they invest in the ah the early stage fund, the kind of fund that you are?
00:21:00
Speaker
Absolutely. I mean, that's the risk-reward spectrum. Obviously, you don't put all your money into it, right? But there's very sophisticated asset allocation strategies depending on what your target rate of returns are, right? to get this compounding.
00:21:17
Speaker
in the public markets over 10 years, you know, in India, you'll often hear, oh, the public market's doing better than what BC returns are or things like that, right? But the question is the power of compounding over 10 years, right? So can you get that public market to perform at 25% year on year for the next 10 years?
00:21:32
Speaker
I don't know, maybe. But, you know, so so ah that falls into the risk bucket. It's, you know, depending on the type of institution you are, it actually can be a significant allocation to private markets. Of course, you'll blend there between early and late, but You know, um absolutely. they are They are the typical venture capital funders, actually.
00:21:53
Speaker
And what is the return profile that investors expect when putting money into an early stage fund? You said 25%. That's like a hypothetical number. No, no. that's ah No, no. I'm just still tossing a number out there. i think people would like you to get, you know. i so So I'm talking about early stage VC.
00:22:12
Speaker
So I think it's, you know, between 4 to 6x of what they have given you. Okay. Over ah what? Eight years? Eight to ten years. Eight to ten years. Yeah. So typically around you're talking about, you know, a net of 25 to 30 percent IRR here at least.
00:22:31
Speaker
Okay. Okay. And ah how many early stage funds actually meet this kind of return profile?
00:22:41
Speaker
It's a power law. No, not everybody needs this kind of and return, right? I think there's lots of factors here, right? And you can say there's obviously manager selection, that's part of it, but there's also, and that's why, you know, a lot of these investors you will see will diversify. right, over vintage, right? Because market conditions also matter, right? At the end of the day as to where are you and which part of the cycle are you, right? So that's some of that. If the IPA market's closed, it's closed, right? That's not really in your hands. So so they they they were typically, um you know,
00:23:13
Speaker
manage this with vintage diversification, manager diversification, geography diversification. you know So if you have the tools, that's how you kind of manage the fact that not everybody is going to give you this return. right It can't be that everybody is going to give you a return.
00:23:29
Speaker
Okay. Okay. I understand. So we've discussed about the capital providers. Now, I want to understand how you ah think about you have this ah pressure of meeting this 25% rate of return for investors who are giving you money. um our bar is higher, Akshay. 25 was not our bar, you know, 30% plus is our 30% plus. Okay. So how do you, ah how does it influence the way in which you look at companies when a company comes to you or when you are ah building a portfolio of companies, what is the strategy that you follow, ah you know, how much to give in a company, for how many rounds to stay invested, when to exit. ah what What are those things? you You've spent more than a decade. So you must have got a lot of learnings around this.
00:24:23
Speaker
Yeah. Can I tell you my biggest learning, Akshay? It's multiplication. So how much money we make in a company is multiplied not just by the valuation, but how many shares we hold too.
00:24:33
Speaker
right So it sounds very silly, but it's a reality here. right So I think that drives a lot of our strategy. We're expecting every company we go into to sort of to be able to you know hit it out of the park, which means at least to return our fund. At least that's the assessment up front.
00:24:51
Speaker
And that's partially because there is a failure rate here, right? And that doesn't necessarily mean there's a failure rate for the company to shut down. There's a failure rate for capital to be realized or the returns to be realized, right? Because maybe slow growth companies may not happen in the timeframe we have.
00:25:10
Speaker
You know, ah maybe the market wasn't ready. Maybe there are other factors, you know, multiple things can come to play. Team members left, whatever, right? It's a long race, right? It's not like six months, which is much more determinant than what it is for five, seven, eight years, right?
00:25:25
Speaker
So um that's really our calculation. We like to come in early. We like to, know, be the first institutional check in the company. We follow our convictions. So we are more than happy to lead. We are not following someone else's conviction.
00:25:40
Speaker
um And then we will double down up to about a series B and then, you know, Our LPs want cash back. So we have to start pulling out of those companies, though there are some mechanisms today that now allow them to hold it or, you know, whatever for the longer, if it's a longer gestation turn from basically.
00:26:01
Speaker
So you're saying multiplication, which is the valuation and also the number of shares that you hold. um So the the reason you want to be a first tech is because as a first tech, you're likely to have a bigger equity share with the lesser money going out for that.
00:26:22
Speaker
So your first check is the riskiest check, right, at the end of the day. And but there's lots of other things that are going on with later checks, too. Don't get me wrong. right but But, you know, it is at the earliest part of the company. It's the earliest part of a team coming together.
00:26:38
Speaker
ah You know, a market being assessed, the product market fit being established. that So ah there are two, you know, reasons for that. ah for you know that This is a particular part. So if you were to think of this as a child, it's a particular part of the child's journey here. So I think it requires a set of skills, it requires a hustle, it requires a bunch of things for you to work in this space.
00:27:07
Speaker
Versus if you come in at the growth stage and, you know, you're doing an analysis of numbers and you think whether, you know, the EBITDA margin can go up by two basis points or whatever else, you know, and figuring some of those things out.
00:27:17
Speaker
You know, I mean, there are different elements that come in later. Right. So I think that's one part of it. Right. Because it's the highest risk part of the journey, it's also the highest reward part of the journey if you do well. Right.
00:27:29
Speaker
right at the end of it because obviously you're not going to come in at the valuation of the cvc investor is going to come in right so you're coming in with that early check and that early check you know uh if you it drives a lot of your returns if the company were to make it okay and ah how do you think about uh the overall portfolio the the you know, the fund allocation, how much to allocate in one company and so on and so forth.
00:28:02
Speaker
So we all typically have risk limits, right, as to that we set up because you want a diversification. So there is a percentage of companies that will make it and there's a percentage of companies that won't make it.
00:28:16
Speaker
So you better have enough statistically a broad enough portfolio to be able to demonstrate that if you have two, That's not big enough, right? At the end of the day, right? You have 100, then you better to figure out the machinery to manage 100 because it's not so simple, right? So you come up with some kind of balance of what that portfolio is. You limit how much capital goes into one of those. So should it go belly up?
00:28:41
Speaker
what percentage of the fund just gets written off right because if you get 50 percent of the fund written off that's just you know a different thing to be able to make up right it's also you you you you figure out a risk allocation here of i mean a per capita allocation as to what is the exposure you want to take and how many assets that you want yeah typically uh actually uh do you know uh but Some of this is driven by how much you can manage also, right? It's ah it's it's a lot of work. So, you know, I mean, 15, 20, sometimes you'll go to 30, 50, but, you know, ah ah it's a very different strategy if I want to do 100, right? soul and So that's what it means.
00:29:28
Speaker
And what is the average check size and what is the ballpark valuation that you are comfortable with when you are investing in a company? Look, our first checks range between like three quarters of a million to two million dollars roughly.
00:29:42
Speaker
okay But we do want significant holding for that. right So definitely double digits higher, double digits is roughly what we want to target with that check.
00:29:55
Speaker
Okay. And you also want to leave some money for follow-on rounds, like you'd like to stay invested if it's doing well? Yeah. Yeah. I mean, it's good to continue to protect your cost checks. You continue to remain retain your holding here.
00:30:14
Speaker
So in a, like a 12-month-crow fund, which you're currently raising, um what is the... ah Like the number of companies, do they increase or does the check size per company increase and you look for bigger bets? Or like how how how does it scale from a 50 crore fund to a 200 crore fund?
00:30:34
Speaker
So the 50 crore fund, Akshay, has learnings. okay The 50 crore fund is not a real fund in many. I mean, sorry, I shouldn't say it's not a real fund. It is a real fund.
00:30:45
Speaker
right But there are certain aspects of the strategy that you learn you can't play out. So, for example, you can't follow on into a company that's doing well because you don't have the dry powder. right So what are you going to do, right essentially?
00:30:58
Speaker
So I think there ah the 50-gore fund has a lot of corrections. There is a correction in the India market. Our first check was like $100,000, $150,000. Like, you know, you today $150,000 goes nowhere in a startup. we Not just because of a valuation ask, but just because of what you can do with it. So I i don't consider the 50 crore template necessarily for this fund. I think there are two things that ah a larger fund does. It gives you access to more opportunities. You can expand the size of the fund to be more 20-25 kind of companies. And it allows you to participate in your pro rate up to a certain depth more meaningfully.
00:31:42
Speaker
Because so as I said earlier, you set a risk limit. Right? So ah if you hit your risk limit, you can't put in more money into the company. But the company may actually, you may actually have the ability to put in another few million, but you can't, right? So that's what it unlocks, right?
00:32:01
Speaker
For us, the first set of check sizes don't change, right? It's just the breadth of companies. We feel there's a lot of exciting opportunities in the India market going today and going forward and the ability to back that because the ven what you're seeing in the India market is that when companies are doing really well,
00:32:21
Speaker
I mean, they're comparable to a company anywhere, right? Essentially. So they are they are growing. They are, you know, they are at at a pace that is absorbing capital.
Technological Opportunities in India's Market
00:32:30
Speaker
So if you want to still stay there on a pro-rater basis, it's hard to, you know, it's hard to do that without the dry powder.
00:32:39
Speaker
Okay. Okay. Got it. Got it. What is the India opportunity? What's your ah broad thesis of, you know, what are next 10 years going to look like?
00:32:53
Speaker
Yeah, so I think we've seen some bits of things happen in the past in in the India economy. And I think those are just going to amplify. For us, our focus, and we've shifted our focus completely to be on the B2B side. Yeah, so we really, you know, very rarely will feed to a B2C company. I think, you know, there is a consumer opportunity, but I think that's not really for us.
00:33:17
Speaker
um I think our focus has been on, ah I would say, three buckets, right? um The first two buckets are all under the digitization in India and the public stacks that have got built, the AI models, et cetera, that are sort of you know becoming ubiquitous.
00:33:34
Speaker
What can you do with those, right? And one thing that's worked for us is that, you know, um is is like we call it this is the next you know fairly traditional industries but with this digital lens with the technology layers sort of coming in building a new age business ah that you know ah is is ah is a you know is one of the opportunities in India. We think of India as a very hyper-fragmented place.
00:34:04
Speaker
So even in a B2B business, there are Airbnb-style opportunities and Uber-style opportunities sitting here. So I think that's that's still an exciting space. We have played and dabbled in some buckets in that space in the past. They've done really well for us.
00:34:18
Speaker
you know We have Captain Fresh headed to an IPO, and really the thesis was exactly this. And and yeah also we think that there are more opportunities there. I think as more and more digitization comes in, I go back to my you know our initial thesis of the mass market where you know data, information, all of these were fairly, fairly expensive to get, to den deliver, to to create products around. right So no one did it.
00:34:45
Speaker
at the end, right? So, but now with a lot of the digital data, kind of if everybody being online, transactions being online, all of that, I think you just now start to have a data flow, which I think can drive, you know, that a different set of companies.
00:35:02
Speaker
right So, you know new products, new services. We just made an investment into a company called Saswat. you know They are playing on the historical digitization in the dairy industry, which is an absolutely massive industry, to be able to create lending products based on ah based on the underlying data of how you know the dairy supply chain is kind of working, which has a million people. No, what a billion there are. hundreds of millions of people kind of interacting with that whole thing, right? And they're all small people. They're not mega people, right? So, you know, HDFC bank's not going to go out there. Actually, they are doing some of it. They're not going really go out and sort of serve all of this, but a digital first kind of render can possibly, right?
00:35:44
Speaker
So that's the second bucket on the digital, I think, right? And, you know, I often get asked this question about AI, but I think AI just pervades all of this, right? So it's it it it it is about business efficiency. It is about, you know, ah so we're seeing this across companies. And so that's that's a segment, I think, in India.
00:36:04
Speaker
And I'll just add that the other thing that we've learned over the last decade that, in you know, while this all starts in India, It's relevant for a much larger part of the globe.
00:36:14
Speaker
So there are many parts in India, parts of the world that are fairly, the market structures are like India. So, you know, in a tough market, India is a very hard market, right? Like, you know, people aren't throwing, know, rupees left, right center to say, let's try okay try. All of that is very hard. So if you get it right here,
00:36:33
Speaker
There are a lot of other markets because ah which have similar market structures, in most Southeast Asia, even Europe, I would say. oh so This all works, right essentially. The third bucket that I spoke about is sort of, actually, for me going back to my roots in some senses, it was something that I just didn't think or rather had tried in India. I hadn't really found anything in India. But we're seeing a lot of um what I call high intellectual property companies.
00:37:02
Speaker
Right. So these are based on very foundational technologies. um They are world class, but built with an India competitive edge, essentially.
00:37:15
Speaker
ah And so I'm talking about things like, you know, new age batteries, bioinformatics, right? you know semiconductors, um all of these which have grown immensely.
00:37:29
Speaker
i think we put our first check in 2017, 2018, and we've just seen this bucket go dramatically and sort of actually, ah so that that continues to be something I'm very bullish on.
00:37:42
Speaker
Okay. So you are fairly sector agnostic, like you do SaaS also, you do deep tech, you do fintech, the Okay.
00:37:53
Speaker
and Understood. ah So how does it work? I think the last bucket requires underwriting skills that are a little different. And, you know, fortunately at Ankur, we sit at those underwriting skills. So that's your story.
00:38:10
Speaker
Okay, because of your own background as a physicist. I know when we have other team members, you know, we have a fire you know biotech person, we have another quantum, you know, sorry, a quantum, you know, yeah we have a bunch of other teams. We have engineers, et cetera, and our team, so all of that sort of that support that.
00:38:31
Speaker
Okay. So when you are evaluating an individual company, what are you looking at? Are you looking at ah the... ah How strong is the IP? Are you looking at distribution? Are you looking at the founding team? What what what matters when you're making an investment in the early stage?
00:38:51
Speaker
So it's a little different in each bucket, Akshay, as to what we're looking for. I think the thing that tro cuts across in early stage investing is, you know, the team slash entrepreneur is a very critical person, people here.
00:39:04
Speaker
So that I think cuts across. I think what cuts across is the market size and the opportunity. um in some of the digital companies the India market size is large enough in for us any of the deep science investments we make um we're looking at a global market size right so ah what defaults is the what you know in In the digital companies, we are looking to underwrite um the risk that whether you will get product market fit or not. right So this product could be a lending product. This product could be a you know marketplace. The product could be a bunch of these things.
00:39:48
Speaker
And as I said earlier, you know, we look for some little bit of early revenue traction. So what are you talking about? Right. like Because I can just understand what you're talking about. im not That doesn't mean that your product market fit.
00:40:00
Speaker
It's just that, you know, I can wrap my heads around something, basically. In the deep science companies, we are not underwriting R&D risk. right Typically, R&D is done with.
00:40:13
Speaker
We're underwriting the techno-commercial risk here. So can you scale that R&D up to actually get a product at the right price point out in the market?
00:40:24
Speaker
So that is really what we're So we're looking for that. So then the assessment switches. Right. So for that techno commercial scale up. Right. I need to understand how this scales up. There are experts globally that have scaled similar kind of technologies. Right.
00:40:41
Speaker
Like what is it there? Right. And in those companies, as you said, Akshay, IP is important. Right. We're looking at global plays. We're looking at frontier technologies. Right. We're looking as to why your technology will beat the technology coming out of MIT, coming out of, you know, um Korea, coming out of Japan. I don't care where, right? So it doesn't really matter.
00:41:03
Speaker
Technology doesn't care where you're coming out of. It's got to be able to beat the others. And that's, you know, and then if it can beat all the others, it's important that you can protect it, right?
00:41:14
Speaker
And so there I'd be. In the digital companies, we don't really care about the IP. That's not what we're looking at. It's more, you know, market and execution and, you know, how fast can you grow that?
00:41:27
Speaker
How do you judge the entrepreneur? Like you said, that across all categories, the entrepreneur is the most important thing. So what are you looking for?
00:41:40
Speaker
That's like a billion dollar question, Akshay.
00:41:45
Speaker
Look, ah this is a very hard journey, right? So it's a very, very difficult journey. And the journey requires pivots in your, you know, in yourself. Right?
00:42:01
Speaker
Right. So Ramanai running around scrappily making investments day one is not the same situation as it is day two, ah day whatever, ah you know, 10 years later. Right. That's not really it. It is. Right.
00:42:15
Speaker
So I think you have to be able to pivot yourself through this. Right. And that pivot requires you recognizing that you need other people.
00:42:27
Speaker
Right. To help scale this. So we're looking, you know, for give know some sensitivity in entrepreneurs to understand that, because one of the things that you find is people don't hire the best. Right. In a really, really hard journey, if you hire somebody who's mediocre,
00:42:46
Speaker
You know, you are sunk. So mediocrity attracts mediocrity. And that's not a good place to be. Better hire the absolute cheap person. That level is my view. right So you're looking for someone who understands that they have to complement themselves, that they will actually manage to sell a proposition to somebody, to join them, to do this, to build this company.
00:43:11
Speaker
You're looking for someone for who this is a dream, that to make it a big thing, not a small project, that, oh, I'm very excited. it's you know ah you So some of these characteristics become very important. And, you know, I always tell entrepreneurs, it's not actually me judging what it is. I think you should just ask yourself the question. There are different kinds of businesses that in the world, but you shouldn't raise the wrong capital for your business and what you want to do. So very often people don't ask themselves, what do they want to do?
00:43:46
Speaker
Right. So if you raise VC money and you really actually have like a 50 crore vision of a business or a 100 crore vision of a business that you kind of want to build, i mean, you're both going to be un unhappy.
00:43:58
Speaker
Right. It's the wrong capital. today So um I think we're looking for that match because this capital requires a journey that is different than building a business over 30 years.
00:44:14
Speaker
Okay. Okay. um is yeah Is there an alternate model possible where you're not necessarily looking for every company, like your qualifying filter is that ah every company should hit it out of the park and have like hockey stick growth, but like a more...
00:44:39
Speaker
you know I told you we experimented a lot. Part of it was experimenting in some of this stuff. Right? And um I think the challenge in the early stages that there is a failure risk.
00:44:54
Speaker
Right? So um there is a failure risk. That failure risk, there's multiple risks here that make up, that get added up to that failure risk piece here. Right?
00:45:08
Speaker
Right? um And oh even if you're running a fairly traditional business, some of that doesn't go away. Right.
00:45:19
Speaker
Let's take the two. Right. You know, unless you've been working for 10 years together or whatever else and you wind out all the issues between two co-founders or five co-founders, you know, very possible two years into the journey, especially a lot of entrepreneurs are fairly young. Right. So it's not like they figure out, you know, you deburge, naturally deburge. It's nothing wrong with that. right That's really what it is. So some of these risks don't go away.
00:45:45
Speaker
Right. Is the problem. So you've got to figure out how you make a return. Right. How the returns stack up with that risk. So if you're going to have like 60 percent of your money wiped out and i'm I'm being I'm being more generous. Right. Because it's obviously larger to be on receipt.
00:46:03
Speaker
It says 40 percent of your money is wiped out. Right. Right. And the thing you don't have to beat is how do you get that 40% of the money back? Right? You have to figure out how to make the return for the LP that's willing to sort of get that in. Right? And that's really where that math gets a bit hard.
00:46:20
Speaker
And then you figure out the exit scenario. Right? So let's say you invest in a company and maybe they do one crore of revenue. okay Maybe in eight years or seven years or five years or whatever, they do 20 quarters of revenue. okay I'm being pretty pretty generous also because the growth rate is not high.
00:46:40
Speaker
How are going to leave that company? right That's also all a bit of a challenge. right It's not like the company is going to be generating cash like you know ah crazy. They buy you out. Yeah.
00:46:51
Speaker
buy your hero and even buy your water, you're get brought out at, right? So, some of those things are, you know, you've got solve for some of those things, right? And so, which is why the problem is this capital requires. As soon as you get to later stage, more private equity, it changes, right? Because some of these risks have been taken out of the system.
00:47:12
Speaker
the The failure risk is not there. By then, you know, the the failure risk is not there. It's not that it's not there. It's dropped. It's dropped, right? I mean, you can still have a blow-up, governance blow-ups, all sorts of other things. You know, you can help everything and anything can go wrong. That's still true.
00:47:29
Speaker
But some of these sort of other risks have gone out. Like, you know, you may have a professional team in there at this point, at which point the replacements are possible. Like in an early stage, you can't really go hire a CEO, right? Like who are you going to hire right at the end? So yeah some of those risks are taken out. So that makes that more amenable to that.
00:47:51
Speaker
Okay. Interesting. Interesting. um Okay. So I'm wondering, like, you know, you you ah invest in the deep science space, would you have invested Log9?
00:48:03
Speaker
Or have you invested in Log9? No, we haven't invested in Moang. Okay. Would you have invested? That might have come across, because you also mentioned lithium as a personal area of interest for you and ah yeah We're invested in Zinc, a company called off-grid energy labs. They make ah you know ah batteries for long-duration storage. So think data centers, think renewable energy, grids, et cetera, basically. yeah um ah Yeah, potentially we would have invested in LogDang. I think we had looked at the technology. I think, you know, one of our evaluations in ah in ah in ah these deep science companies is you've got to figure out which horizon will this thing get commercialed in, right? Basically, for for some of it to make sense. Like, you know there are some very fancy technologies out there, but...
00:48:53
Speaker
It will take time. I mean, lithium didn't come online day two. The work on it started ages back. So yes, technically, yes. it make up to like You felt with log 9, the risk was the time to maturation. Yes.
00:49:08
Speaker
I don't recall fully, Akshad. I have to go back and take a look at the team as to why or whatever. But, you know, I think, oh you know, we were trying to form our thesis on where in the matrix ways or what we were interested in. We knew we were interested in storage. We still are interested in storage, right? So that was something. So, you know, I i think that there have been a thesis mismatch or something there.
00:49:28
Speaker
and Okay. What about something like, say, Resha Mandi? Would you have invested in Resha Mandi? Yeah, absolutely. Okay. Like, which of course now it has shut down and ah it, but what, ah like, ah was there some telltale sign about that this would shut down or like you would have also invested in it if it had come across?
00:49:56
Speaker
um I don't think there are telltale signs up front, Akshak, basically. right So I think the im unfortunate ah challenge with our ecosystem is, see, there's an opportunity and there are entrepreneurs, right? And, you know, you can run that journey many different ways. And unfortunately, when things go south, people write off the opportunity fully. And sometimes they're very dependent on that particular journey or the particular team on how they ran that journey.
00:50:28
Speaker
Right. So I think we need to be careful about that. Unfortunately, though, you know, it's very easy to blame people, blame sectors, all of that. But I think the devil lies in the details.
00:50:42
Speaker
We are bullish about particular supply chains. We think there is value creation to be had. There are very large businesses to be built. ah essentially and you it's a it's a it's a textile vanish name right so absolutely yeah what are Have you invested in other verticalized supply chain opportunities? Yeah, yeah. the Fish. We've invested in fruits. Captain Fresh.
00:51:08
Speaker
Yes, with fruits and we grow spices and big heart, ah you know, more spices and aggris. So we like these verticalized things as opposed to just, I will do anything and everything kind of piece because you know the value extraction gets harder. at some So then you start building specialized things for those chains, which are then are higher than It's too hard. So what's a verticalized supply chain thesis there? Like this would be farm to retail ah or is it that... ah
00:51:39
Speaker
We're not on retail, basically, so we're not B2C, as I said. So this is sort of the back end. Basically, there's it's ah it's a very messy back end in a lot of these supply chains, right? You could pick, um you know, obviously agri, you can pick textiles, you can pick manufacturing, you can pick, you know, a bunch of any of these pieces, right? And they're all very messy, lots of small guys trying to kind of adapt to connect to a lot of other small guys, essentially, right? Yeah.
00:52:06
Speaker
So I think our thesis basically is that, look, you come in with a two-sided marketplace here model, right? So it doesn't have to be 100% marketplace. That's not what these typically are, you know, the and in the where there are trust deficits. Taking on the risk is an important part. So, you know, it doesn't become 100% marketplace.
00:52:24
Speaker
But, you know, so it's like a shadi.com, right, is what you're doing. So think of it as like a shadi.com for engineers who only want to marry engineers, right? So you want to get into like, you know, how did your friends get into it? You know, whatever else you want to get into it. It's like, you know, if an apple, like, you know, there's 50 different types of apples and, you know, like, we all want 50 different types of apples. So, it becomes like a sort of a matchmaking. So, then you can start becoming much more finer about it, right?
00:52:59
Speaker
So, versus just saying, we eat apples and we eat rice and we eat whatever. So, let's just throw everything into the bucket. So, you know, that you you start getting much more precise, right? As opposed to throwing it out. So that's why we like some of these. And they're very big markets, right? And I think there's a codification that is required in these markets um that we like, ah you know, which can drive scale.
00:53:26
Speaker
So I think that's that. What does mean, codification? See, because, you know, when you have a lot of like unstructured products, right? This is not like this is your iPhone 12 over here and you know what an iPhone 12 is. Okay.
00:53:40
Speaker
This is, we're talking about a piece of fish. We're talking about an apple. We're talking about a fabricated, you know, screw or a steel sheet. You're talking, you know. So ah the but the quality assessment is is is not a coded. Like some grading, curation. Yeah.
00:53:57
Speaker
any Curation, ah you know, those things are quality checks, all of those, you know, two spec, you know, those things are not that simple. So, you know, here's where this middle intermediary comes in to actually create that system. And with technology, that system, you know, becomes more codified. It's codified. Today, it's not that it's not codified, but it's codified in the heads of like a proprietor sitting in...
00:54:20
Speaker
I don't know, Lattor over here, right? Or sitting in Ghandi Bazaar or whatever, right? So it's codified there, but hard to find, hard to scale, you know, some of those things.
00:54:35
Speaker
Markets may be wanting something else. it's just a friction process, yeah. Okay, okay, okay. Understood. What is your thesis on the energy transition space?
00:54:47
Speaker
So, um you know, I mean, two pieces to it, right?
Energy and Technology Innovations
00:54:52
Speaker
um I would say one is, one is you know, ah basically the way we think about it is that, look, um you know, ah how do you get 24-7 power basically is what you need.
00:55:05
Speaker
How do you get cleaner power is how what you need. How do you address the electrification needs, right? of a sort of country like India, right, which is, again, very distributed, but, you know, different issues in different places, some places of that, right?
00:55:22
Speaker
So I think for us, storage and storage solutions from one key part of the energy transition needs. So hence our investment in off-grid energy labs. We just made an investment in a company called Pimano.
00:55:37
Speaker
ah They make membranes, which are both for storage as well as energy production. So, ah you know, but but we think unlocking, and and I think you need different kinds of energy storage, right, to unlock different durations, different, you know, ah discharge needs, all of those kinds of things. So we're bullish on that part of it.
00:55:58
Speaker
But we're also bullish on new energy production, basically. Right. So, um you know, whether it's hydrogen lead, whether it's, you know, nuclear.
00:56:10
Speaker
ah But I think we do need other newer sources of energy production. And like, you know, India has just been great about the renewal adoption, basically. And, you know, some of we're also seeing hydrogen come into it.
00:56:21
Speaker
some some areas over here right so i think those are unlocks you know we believe that you know for example some of this will also unlock industrial sectors um you know where you know fossil fuel dependencies are very high um so so two buckets i would say storage and generation both of those are something that we are is it generation going to be very capital intensive So what we're interested in, Akshay, are the technologies for generation, right? so not necessarily looking at somebody setting up a power plant, right? But I'm looking for the underlying technology that will enable that plant,
00:57:09
Speaker
So, for example, let's just take solar. We're not interested in the solar project plants, etc. that come in. But if you come in with a technology here that makes that solar cell much, much more efficient than what it is today, we're interested in that.
00:57:23
Speaker
Right. So, um for example, at Ofgrid, they make these batteries, right? At the end of the day, you know, yes, there's going to be a large manufacturing company that produces batteries, but they're going to sell in to the people who run the projects.
00:57:37
Speaker
They're not going the project person. Okay. Okay. ah After operations in Roor, did you also get bullish on defense tech?
00:57:50
Speaker
Look, i ah the I think defense, what I really like about the... data It is not about Operation Sindhu. Maybe Operation Sindhu unlocked the government of India to think about defense a bit differently. Defense globally has always been an enabler.
00:58:09
Speaker
of high tech, right, as a custom, right, because um they have the ability to take that risk because they have extreme conditions, so they're willing to try things out, right? So I think some of this IDEC stuff that is kind of happening is great because what it does is it allows there to be a customer, right?
00:58:31
Speaker
ah you know, whether that customer is going to be the your biggest customer or not, i that I still don't know, right? There are risks of a single customer and all of that. But what every kind of product company needs is someone to try your products out. And if they pay you for it, so much better, right? Essentially. So that's what I'm bullish about, that the fact that, you know, at the Government of India, we are actually moving the Department of Defense to be I'll call it guinea pig.
00:59:03
Speaker
If you look globally, defense has been a guinea pig for a lot of technologies because you know cost is not an issue there, right? It's performance is the issue, right? So if you can get that performance to work, you then start moving on the cost curves, cetera, like here, right? Essentially.
00:59:17
Speaker
So, you know, we have we have we are using a lot of technologies that first went into space, for example, right? But obviously at that point, exactly, right? so So it enables that. So that's why I'm, you know,
00:59:33
Speaker
thankful that that is kind of happening in the ecosystem. What's your space tech ah space tech thesis? like Are you investing in any companies on space, satellite?
00:59:44
Speaker
So, you know, I said we're invested in a membrane company. ah and so their membranes also go to space. Actually, the first customer is Isro. Isro, how they go to space, right? Because the membranes also have properties of heat, etc. So, yeah, we're interested in new materials in space.
00:59:59
Speaker
I think we're interested in communication-led stuff in space. um You know, maybe maintenance of, ah of ah you know, um sort of ah constellations, etc. So we are interested in in in some of those things in space.
01:00:14
Speaker
yeah as ah know as it gets more more privatized also, right, beyond just defenses of higher. So, you know, you you did mention about AI as at like more of an input, like everything is AI powered now, but do you have a thesis in the AI space?
01:00:35
Speaker
Yeah, semiconductors. Okay. Yeah. So we're we're we're very e bullish on, you know, and we just think that there's a lot of stuff in the AI, you know, there' the compute will happen and it's working differently.
01:00:48
Speaker
So I think you're going to have changes and, you know, how this works at the edge. or changes of how this works at the data center. Not everybody has to be an NVIDIA chip sitting and, you know, working like, you know, 10 million more parameter models here, yeah right? So I think we're bullish in the semiconductor space. I think we're seeing very, very interesting and exciting companies in India. You know, there's a large part of the semiconductor talent is Indian. So that is that is that is definitely something that we're interested in.
01:01:22
Speaker
I think on the, um you know, on the algorithm side, you know, model side, um i think we've seen some stuff we would really like to see more. But, you know, our likes where we're seeing more application.
01:01:39
Speaker
And that's what I was referring to earlier. um am not sure we're seeing, you know, too much on the application side. We would really like to see much more, sorry, of the model side, you know, smaller models being built, maybe, you know, on the physical space, maybe on the, you know, on different types of computes, et cetera, that might be necessary. So we'd like to see more of that. We would not sort of see...
01:02:06
Speaker
um more of those. And then I think like, you know, um on the agent side, right, I think we have some specific areas that we like, right? So, um you know,
01:02:21
Speaker
like different aspects of the market have to come together to make this a valuable business, right? So, you know, maybe like co-pilots or things like that. So, you know, where, where, where you're actually doing a very high value job, not a low value job through this piece and supplementing what might already be a scarce resource. So those, those are things that we're interested in, in the AI space.
01:02:46
Speaker
So these, uh, verticalized agents, like say, uh, AI agent for lawyers or a recruiter, like an AI agent who's a recruiter or AI agent who's doing customer service. and there are a lot of companies who are going after these areas. Does that interest you?
01:03:06
Speaker
The answer is depends, Akshay, on the specific type of agent. And that's what I was alluding to. I think, for example, i see our companies who never started out as an AI company implementing AI for customer support, for example, right? With just open source tools that are sitting there, right? And so, you know, I'm left wondering, like, you know, how much value does an external company capture?
01:03:33
Speaker
in this space you know it just think if you think about it you know it is the first time that this is accessible to people like you and me without being technical people because it's interfacing with writing it's interfacing with voice it's interfacing with images right so it's accessible to any entrepreneur in any business right so um i think you have to think a bit hard as to whether you will continue to create value capture or are you just the you know come do some You know, at some point, this all becomes very useful.
01:04:06
Speaker
Exactly. So I think there's a commoditization of these agents. You know, i was so in the U.S., if you were in the Silicon Valley, if you drive it, these agents are on billboards, right? People are advertising them, left, right, center.
01:04:22
Speaker
So at some level, I think there's going to be a commoditization there. So, you know, to think about I think we are much, much more interested in the ah in the back of all of this.
01:04:33
Speaker
Okay, so, um you know, how is the compute going to work for a million people who will provide agents or build their own agents, right? ah You know, are there different kinds of chips that can enable that, which doesn't, you know, can make this a much lower cost base here, right? Are there different kind of data centers here that can actually deal with that versus it all going to the mega guys here, right? So how am I going to service all these guys, right? And I feel there'll be lots of guys.
01:05:04
Speaker
I don't think it's sort of like on a way. So that's why it's a little bit of a nuanced answer on what it gets back side. So, you know, India has the talent, like you mentioned, that a lot of chip design talent is Indian talent, but ah India has not really...
01:05:24
Speaker
created IP, like say, compared to like say China, ah you know, probably the quality of talent is comparable, but China has so much more IP, so many more deep tech startups as compared to India. What's the reason for that?
01:05:40
Speaker
There's been a lot of investment, Akshay. Okay. So this didn't happen overnight in China. There's been a lot of investment, government investment in the market to enable that, right? And we're just starting, right? So we have our 1 lakh crore RDI fund, and I hope it goes into the right places to actually enable, a not just catch up, but leap from beyond, right? So I really do think that, you know, we used to talk about Roti Kaplamakaan,
01:06:10
Speaker
I think we need to talk about energy, compute, and you know innovation, right? Here, basically, that you know that if you want to be and you know at the global forefront, you're going to have to invest in these things, right? So I think the trickle has started.
01:06:27
Speaker
So when I first looked in India in 2008, 2009, I can tell you I was kicked out of one of the most premier institutes in India when I asked about IP and they said, keep yes abja beota highlight write essentially ok That's not the case today.
01:06:42
Speaker
right we have companies We have companies where ah their technology has gotten evaluated by a global expert. rights So, ah for example, at Off Grid, their technology got evaluated by a very large chemical player, a global chemical player, and were assessed against any competition.
01:07:06
Speaker
right And they came back to say, hey, I want to invest in you so ah you. know So I think the the tables are turning. right They're turning. They're not turned.
01:07:18
Speaker
That's not the right word. But but you are seeing the shoots for this. right And I think the playbook... for this is also something that the hasn't been there in India, right? So 95% of investors in India are averse to touch something like this because these kind of businesses don't make revenue to start with. There's a lot that has to happen before revenue generation can kind of have it.
01:07:48
Speaker
Mm-hmm. So I think you have to play an enabling role as ah as a government to kind of encourage that. and Once you start seeing a few of these churn out, you know, other engineers, other scientists will think, okay, hey, I can actually commercialize this. Today, what are you going to do? Right?
01:08:06
Speaker
Right. so so so So there's a there's a different areas of friction here that we'll get, will get and I'm 100% confident it will get. Did you know that um you know we had 100,000 patent filings last year in India?
01:08:22
Speaker
ah Typically, this has had much more of like you know global majors filing for patents in India, etc. But last year, 50% of this was domestically filed patents.
01:08:33
Speaker
right okay so you're seeing that increase sort of coming up right so slowly but surely you're seeing that and if we get the other pieces kind of right you know i think this will leap from i don't innately there are some absolutely amazing technologies sitting in india right you need the other stuff around it to actually get them out what kind of technologies are sitting in india like
01:08:58
Speaker
ah We've seen a range of these, actually, right? So, I mean, ah from from in bio to like some novel drugs, we've seen, ah you know, specialty chemicals.
01:09:08
Speaker
um So across the board, right? There are things. Things which are solving India-specific problems. There are global problems. That's what I'm talking about. I'm not talking about this being just about solving India's problems. These are global problems.
01:09:24
Speaker
These are not, you know, see, technology typically solves global problems. What happens in India is that, look, is a as a researcher or whatever, right, you know, I'm sitting in a context.
01:09:34
Speaker
So we have this company called String Bio, and they're a precision fermentation company. And what that means is they work with you know organisms that take in methane as a feedstock and produce proteins which go into multiple different industries, right? One of the use cases for the biostimulant that they produce out of this way goes into paddy fields and you know increases yields by 30%, decreases you know greenhouse gas emissions now If you look at a lot of the people working with this kind of technology in the West, they were focused on making proteins for people to eat because that's what people do there, right? Rice is not a local problem. Rice is an India problem, right? So you see a context that sort of comes in because you are here, right? So I think you will solve India's problems, but I think it will solve much more than India's problems as well, right? So I think that that's really, i'm i'm you know,
01:10:33
Speaker
yeah You can see it once you see these companies. And they're different, right? There are 500 protein companies sitting in the Bay Area, right? But there isn't a single person looking at, you know, they're all talking about decarbonization with whatever, livestock and all this good stuff, right?
01:10:49
Speaker
Rice is a large emitter. Where are the solutions for that, right? It's not in my backyard, so I'm not thinking about it. That's how it works. Right. Yeah. A lot of the meat replacement companies don't make sense in India. Absolutely. They don't make sense in India.
01:11:05
Speaker
Yeah. India is not meat crazy anyway. So it's not like you need to create the perfect hamburger steak or something like that. Forget that. I got a medu vada served to me calling this a lentil burger. Yeah.
01:11:20
Speaker
You know, and I'm just like, the year germany to like i had the day it not so ah you know, I like jackfruit as pulled pork, you know, all sorts of interesting things, right? You know, i think it's just discovery of new things, but perhaps those on work, right? At the end of the day. quickly Yeah. Okay. okay So, ah you know, besides ah giving money to companies, I How else do you, ah like, you you know, what else you do to hit your return? You want to hit a 30% return on invested capital. And you said it's pretty operationally intensive. Why is it operationally intensive to invest in startups? What all are you doing for them?
01:12:07
Speaker
Once we're invested, we have to do everything. That's how we look at it. Okay. So, ah you know, you call me up and say you want to connect with somebody. I don't know the person, but I need to hustle to go find someone who does to be able to make a connection for it.
01:12:20
Speaker
Right. We need to raise money. You know, i you had some nice fancy banker. At the end of three months, the banker says, cuchwani the problem hasn't gone. It's still our problem. Right. um You know,
01:12:33
Speaker
you You know, as I said, it's a very difficult journey. And one of the things that you realize about this journey is that... um You know, you're in the weeds, right?
01:12:45
Speaker
So entrepreneurs who do well always form sounding boards around them. They say, look, this is what I'm saying. Does it smell right? Does it sound right? Whatever. You end up playing that role. I think sometimes you end up playing like, you know, mean, it's it's a whole bag of things, right? So if you get a call at midnight, you get a call at midnight. That's what it is, right? mean, this you have invested in a nine-to-five business. So if the business is working at midnight, at some level, you have to get out. So it's a range of stuff, right? I think it does break down into buckets, Akshay. You know, I think there is strategic things. There sort of being able to help to get business, talent, recruitment, et cetera, at the company, which I think is more tactical and operational, right? And there is fundraising, I think. And the fourth bucket I would put, and not the beast in some ways, but you're at some way a support system for the entrepreneur if things work.
01:13:38
Speaker
work, right? And it's it's, you know, I don't think we, in the Indian ecosystem, we yet have a structured, what should I say, you know, leadership for entrepreneur kind of pieces happening. So you end up feeling some of that as well, basically.
01:13:57
Speaker
so i So that's why it's, ah and I think what's intensive about it is that it's not on a schedule.
01:14:06
Speaker
a so you know you could have issues going on or you could have things needed at five companies at one time right which is why you made the bandwidth to be able to sort of manage that ah you're also doing some ecosystem stuff right like tech sprouts deep science forum what what are these and how do they help ah you as a fund
01:14:31
Speaker
Yeah, I think our first initiative, this thing was called Think Ag. Yeah. So this was, we we we just found ourselves drawn into the agri space, a lot of interesting exciting opportunities, not something that most people wanted to look at. But, you know, a Absolutely massive market with very little technology, etc. it So what you find is that when you're looking at offbeat markets, right you have to sort of play this ecosystem support. I know we were running around doing PilsDev for one company. you know when I remember the entrepreneur telling us, you're the investor who does gets us business connects here, okay like basically on the phone. We're like, okay, but you know we can do this for one company or two companies, you know but you know startups need a village. So we have to help seed a village of some sorts. yeah And that really was the objective for us to start ThinkAg. We started with three other gentlemen with very deep experience in the Ag space. I think we are the odd one out in the scenario.
01:15:29
Speaker
But to be able to create that community and today all our entrepreneurs and other entrepreneurs also sort of go there. Right. So I think for us, it's good because, you know, it's a place for our entrepreneurs to go to get business. kind Like say you have this SaaS boomy ah for SaaS founders, something like that.
01:15:46
Speaker
So it's ah it's a, ah yeah, you could say it's something like that, right? But there it's got industries, the stakeholders to sort of has to follow the market structure of that industry, right? Basically, to some extent. So, you know, it's a place for folks to get together.
Supporting Startups and Ecosystem Development
01:16:00
Speaker
It's good for, let's say, and businesses or corporates in India. It's good for the government of India.
01:16:05
Speaker
You know, it shows what the innovations are kind of happening, right? So it's a place for people to kind of, you know, connect, learn. that kind of stuff. so put up Like a NASCOM in a way? Yeah. You know, we started with a NASCOM bag and it's what we started. like we said focus Okay. Okay. And love um so I think the learning for us was that, you know, if you seed some of these kinds of systems,
01:16:26
Speaker
They're good for our entrepreneurs, right? They're good for us. You know, we're trying to invest we're investing in the space. So, you know, you're about as deep in the space as you can potentially get, right? So for if I have to call somebody up with due diligence, that's a simple thing to do, right? Essentially.
01:16:42
Speaker
um And, you know, you're meeting other entrepreneurs, you're seeing what the innovations in the ecosystem are. right So, you know, and all in all it's a good thing. Right. And it's so it's a larger thing. It's not just Ankur's thing, it's a larger thing. But I think that larger ecosystem benefits everyone, but it benefits us as well.
01:16:58
Speaker
So that's really withri and that's really what we're doing with the Deep Science Forum. So if you're free, please do come. We're hosting one on January 12th, 13th in Bangalore. um But again, you know again it's ah it's an ecosystem which is very you know it's you know like needs different actors to sort of come together.
01:17:16
Speaker
And the space for people to actually come and talk about, you know, because the journeys from India are different, right? There, you know, there are other people who've done these journeys. So come share, right? So, for example, we have the ex-CTO of Hallibutton Labs coming to talk about, you know, his experiences. So, you know, it's it' it's a place for people to kind of learn, is how I would say.
01:17:40
Speaker
And for entrepreneurs, basically, I would say. and partnership So it's like an offline community event, people meet, build relationship, learn. Learn, you know, i mean, just just, you know, what are playbooks, you know, are potentially quite interested, you know, what are the challenges that, like, you know, the first deep tech entrepreneur in India faced, like, you know, what is different now? They were just just different conversations, you know, there are people trying to help with manufacturing for deep tech, right? Sort of building like kind of a...
01:18:11
Speaker
you know, timeshare, many fancy plans, right? So again, you know, useful for a startup to say, hey, you know, how do i work with these guys? So, um you know, those are the different aspects. IP, for example, right? It sounds very simple.
01:18:27
Speaker
But your IP is not filing one patent. IP is strategy of what you disclose and what you don't disclose, what you ring fence and what you don't ring fence. Right. We don't have these conversations happening anywhere. Right. So we have a lot of incubation happening.
01:18:41
Speaker
OK. And, you know, academic institutions, et cetera. But this is more focused on commercialization of these kind of ideas And, you know, you have to get into the nuts and bolts of manufacturing. So who the hell is going to help you set up a manufacturing plant? You are a researcher in a lab.
01:19:01
Speaker
You didn't build plants to spec. You know, ah supply chains, not, you know, partnerships, very difficult. You're a young starter. Yeah. If you have an exciting technology and a big company is interested in it, you know navigating that is a nightmare from hell.
01:19:20
Speaker
what you know i We just recently spoke to an entrepreneur who signed away. The upside to a large company because she didn't have the advice to say, look, let's not put, let's don't agree. It was just very exciting that, okay, this big company is interested in what I have innovated. But should the product go anywhere? The upside's not hers. It's the company's.
01:19:46
Speaker
So these are things that, you know, we don't have a place that people go to. And so the the idea here is, how do I pull that piece in? How can we sort of create that village where more of these can thrive and we can invest in more?
01:19:59
Speaker
So...
IPO Market and Investment Trends
01:20:01
Speaker
What has been the way in which you have seen exits? I think there's yet to be an IPO, right? I mean, Captain Fresh has not IPO'd yet. Anyone else in your portfolio who's like nearing IPO? This is our first IPO, so we're very excited. It's five years, actually.
01:20:17
Speaker
Okay, so i you know it's against all logic, if you ask me. So hats off to Uttam. Or having the dream, but also having the execution ah to sort of push through that really.
01:20:32
Speaker
Right. So I think it's a very interesting time. um You know, we've just had a spate of IPOs. You can call them good, bad, ugly, market not happy with this, market not happy with it. But the reality is it's there.
01:20:45
Speaker
Right. Essentially, i i it's there and I hope it's there to stay and that we just now don't get into divorce or more because someone's gotten messed up over here. certainly The appetite is there.
01:20:57
Speaker
Right. And um I think that's really sort of the interesting piece of of the market here. In addition, I will say what else has sort of come about is that there's a lot of more activity on secondary funds, which also wasn't there in India. So I always think of this kind of investing, especially for longer duration staff, is a relay race. Right. So you come in for leg one, you come in for leg two, whatever. So the leg two, leg three, leg four have to happen.
01:21:28
Speaker
Right. Essentially. So secondary funds are one of those things. More growth investors are one more one of those things, you know, pre IPO investors. So the capital stack is filling out, which is a good thing. Right. So I think there are other exit modalities.
01:21:42
Speaker
And last but not least. Right. But the Indian um family office. Right. has all of a sudden broken up and said, hey, this is interesting. So whether it's pre-IPO subscriptions, whether it's series B or C, even A and Bs, I would say, all of a sudden, and we do have capital, we do have domestic capital, you know and you know them coming in to provide liquidity, actually, right is ah is a good thing. So I think these three things have opened up on the exit front.
01:22:14
Speaker
The one that hasn't is the M&A market. Yeah. And I think that's a little cultural. We're not used to buying, we're used to building. um So, you know, a lot of incumbents have grown up in an era where, you know, not really believing, trusting or adapting market changes, let's say.
01:22:36
Speaker
but you know not really ah believing trusting or adapting to market changes that's say ah But more mostly cultural, like I've been in control fully, right? Like an M&A, am I getting sold a lemon, you know, just concerns about all of those things.
01:22:55
Speaker
And then wanting to beat the price down to nothing. yeah Yeah, I think M&A in India only happens when there's a deal, you know, like we we are like bargain hunters by nature, it's in our DNA. Yeah.
01:23:09
Speaker
So we are bargain hunters. So the first question is discount is it? I mean, that's the first question. Right. And you're like, do you not care have done it, how much discount is it? So the first question is the first question. And you and you know you're wondering, the you know, if I tell you there's a discount, does it to make this attractive to you? Or what is the dealing? Right. So that is one part here. But I think but you know maybe the new age companies are examples of this. you know um
01:23:41
Speaker
There are obviously instances of companies that have rolled up smaller companies saying, hey, I want to sort of grow faster. These guys have figured out this part of it. Why build it? Let me buy it. Right.
01:23:52
Speaker
So you're seeing that change in the next generation
Wealth Generation and Strategic Growth in VC
01:23:54
Speaker
of companies. um ah But, you know, the older, larger incumbents, you know, again, still are. They are not in the market for this.
01:24:05
Speaker
All right. Understood. How does running a VC fund lead to wealth creation for you? What's the economics of it for you? Like how how do you as the managing partners, the two of you make wealth?
01:24:20
Speaker
You have a carry, right? So like any other VC fund. So carry is like a profit share. Like like if you achieve that 30% return on the wealth invested, then... yeah a certain yeah percentage of that upside ah you will keep yeah it's pretty standard sorry it's pretty standard
01:24:43
Speaker
and ah for the day-to-day running of the fund how does that happen You get paid a management fee. right But that is not wealth creation. That's just to pay the bills.
01:24:57
Speaker
Multi-billion dollar AUM or something. Maybe it's wealth creation. But these small firms, these are not wealth creation. Essentially. soon So what's your ambition? Do you want to remain ah in your niche of early stage investing?
01:25:15
Speaker
Or ah do you want to go beyond early stage and become like a Sequoia or something like that? or Like, you know, what what do you aspire? Yeah, no, I think we would like to ah grow, basically, grow the products, if I may say. So i think the core for us is underwriting innovation.
01:25:37
Speaker
One obvious place for us to actually grow is to go into sort of the growth stage, right? You already know the companies, you know, you can...
01:25:50
Speaker
you know sort of glu to sort of underwriting that essentially. So I think those are things that we are adding on essentially to what we do.
01:26:01
Speaker
So I think it will be in all different stages, you may say that, um that we would add on separate puns to sort of look at that space.
01:26:15
Speaker
so I mean, I think from an ambition price, I think we would like Ankur to be. So i i I would prefer to say a vision for Ankur is that we've actually created, the you know, 100 iconic companies out of India basically. Right. And whether we do this to one fund or five funds, I'm agnostic to that, but we will we will do that. Yeah.
01:26:39
Speaker
So let me end with this. What advice do you have for founders in India?
01:26:48
Speaker
Become a founder, build. The opportunity is is there. So if you think of the long term, if you think about the the you the value and the change that you can create, you have to keep that in mind, right? To drive this journey.
01:27:04
Speaker
Do it, essentially. Right? What are like the most common mistakes you see founders making which you'd like to advise them about?
01:27:16
Speaker
I think the common mistake, and it's ah i I hesitate to call it a mistake, right? I think we've all worked to it, right? So I'm not just a mistake, right? I think, you know, ah one I already said, like, what is it that you want to do, right? Because you'll only do what you want to do, right?
01:27:34
Speaker
That's the edge, right? If you, you know, just just retrospecting a bit about, like, what is it that you would sort of like to do with it, right? I think the other is, um you know, just understanding the journey, right?
01:27:52
Speaker
that to And that goes into you deciding whether this is something for you or not for you, right? oh that What does this journey of raising money and you know all of that involve?
01:28:05
Speaker
Because I think it sounds very fancy. It's a lot less fancier than you think. you know, it's not capital requires, um discipline capital requires, um you know, a journey for its red return. And that is something to think about, right?
01:28:27
Speaker
And the third I would say is that no, very few entrepreneurs would describe themselves as an investor. Okay.
01:28:38
Speaker
But they are the investor. right? They are the ultimate investor because you are putting these into projects, you are putting these into things, right? And your assessment of why you're putting these into things, you know, there has to be some discipline too to that piece, right? There's opportunity, but there has to be some discipline to it.
01:29:00
Speaker
But, you know, ah ultimately... It's you, you are vested in one company and that company, you know, has to, if it is to succeed, it has to drive returns. And so you really have to think about how you invest that money.
01:29:17
Speaker
We'll all get things wrong, but if you don't think of yourself as the investor, you know, and if you think of this as just, it's, you know, ah basically underwriting costs, then i think you lose the plot of what exactly you're doing, you know what's ah What's an example of this change of thinking, like to think like an investor?
01:29:42
Speaker
ah You have five things you could put behind, right? and A project, right? So, I mean, we have lots of entrepreneurs that are trying A, B, C, D. Like if I just take an early stage example, okay?
01:29:54
Speaker
Now, you really have to keep the eye on the ball to figure out whether a B, and C is, you know, you may have A and B doing well, C and D not doing well. Okay, simple decision. I don't know C and D. But with A and b the the growth rate, the return profile might be different.
01:30:12
Speaker
Right? so and And if you have to make a choice between the money and whether going to put it in A and B, you need to think about that. Now, if you split it into half and say, I'll put it in A and I will put it in B, it's like saying, here's a half a tank of petrol, go from Bombay to Delhi, on to Delhi.
01:30:30
Speaker
Right? So, you know, I mean, ah it just comes to thinking about like you, what is, you know, I am funding this. I have raised the money with my equity, right, to fund this project. So I should want to return out of that, essentially. So I i need to think about that.
01:30:53
Speaker
Hmm. And also most entrepreneurpu entrepreneurs realize this. They will not start there, but they realize this, right? And they become good investors, actually. And they shut down things that are not working. They'll put the money, you know, some maybe calls, whatever. They will take that take some of those calls and say, okay, here's what I think that would be good for the business. So let's put this in here.
01:31:17
Speaker
Fascinating. I love that insight. ah On that note, thank you so much for your time, Ritu. It was a real pleasure. Thank you, Akshayv. Good to chat.