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A Founder & VC's Roadmap to Scaling | Rohit M A (PeerCapital & Cloudnine)
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"The sooner you can get to a level where you can actually make yourself redundant, I think that's when you start building an institution."
This powerful insight from Rohit M A encapsulates a core theme of our conversation: sustainable growth isn't just about a visionary founder, but about building systems and teams that can thrive independently. It’s about transitioning from being the indispensable force to the architect of an enduring enterprise.
Rohit M A is the Managing Partner at PeerCapital, an early-stage tech-native venture capital fund. Before co-founding PeerCapital, he was instrumental in scaling Cloudnine Group of Hospitals from a single unit to a national leader with 42 locations and revenues exceeding ₹1200 crores. With over 23 years of entrepreneurial and management experience, and having angel invested in 70-75 companies, Rohit brings a deep operator's perspective to venture investing. PeerCapital's first fund is close to $40 million, focusing on "consumption enablers" and providing "valuable capital" to founders.
Key Insights from the Conversation:
👉The Operator-to-VC Journey: Understanding the mindset shift and challenges when transitioning from building a company to funding many.
👉Scaling with Process & Data: How establishing robust processes and leveraging data were critical to massive growth, moving beyond founder-led decisions.
👉"Valuable Capital": PeerCapital's thesis on providing more than just money – offering strategic, operational, and intellectual support.
👉Fundraising Realities: The candid truth about how difficult fundraising is, both for founders seeking capital and VCs raising funds from LPs.
👉Institutionalizing a Business: The importance of professional management, board governance, and preparing a company for long-term success, including being public-listing ready.
👉Focus on the Problem: Why VCs (and founders) should obsess over the problem being solved rather than getting fixated on a single solution.
Chapters:
00:00:00 - Introduction: Rohit M A's Entrepreneurial Path
00:02:13 - The Genesis & Early Vision of Cloudnine Hospitals
00:10:03 - Scaling Cloudnine: From 1 to 42 Hospitals & Key Metrics
00:17:00 - Transitioning to Professional Management & Making Yourself Redundant
00:52:46 - Leveraging Data & Technology for Operational Excellence
01:10:45 - The Cloudnine Fundraising Journey: From VCs to Private Equity
01:24:23 - The Shift to Venture Capital: Founding PeerCapital
01:26:34 - PeerCapital's Investment Thesis: "Valuable Capital" & Founder Fit
01:33:04 - The Surprising Realities & Challenges of Running a VC Firm
01:49:17 - How PeerCapital Evaluates Startups for Investment
02:00:47 - What Kind of Founders Should Approach PeerCapital?
#FounderThesis #VentureCapital #StartupIndia #Entrepreneurship #ScalingBusiness #HealthcareInnovation #TechInvestment #OperatorVC #StartupFunding #BuildingInstitutions #LeadershipLessons #IndianStartups #VCInsights #FounderJourney
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Transcript
Building Cloud9 - Founder's Journey
00:00:00
Speaker
Make yourself redundant, I think that's when you start building an institution. Three out of five babies in our TG are actually born under the Cloud9 banner, right? It's also a tremendous responsibility on us to continue to do good, right?
00:00:13
Speaker
Good entrepreneurs should not going through this much struggle to raise capital.
Transition from Tech to Healthcare
00:00:17
Speaker
Which part of the sales is harder, like selling to founders or selling to the LPs who invest in the fund?
00:00:25
Speaker
If you're a parent, then you would have surely heard of Cloud9. It is one of India's largest chain maternity hospitals. And the man who built up Cloud9 from a single center to a pan-India chain is Rohit.
00:00:37
Speaker
Rohit is now running Tier Capital, a venture fund which is funding businesses that enable the India consumption story. And in this episode, he talks all about building for India.
Influence of Bangalore on Career Path
00:00:48
Speaker
I'm your host, Akshay Dutt, and this is the Founder Thesis Podcast.
00:01:01
Speaker
Rohit, welcome to the Founder Thesis Podcast. ah Where did you grow up, Rohit? What's your origin story? yeah I grew up in and not just Bangalore, but south of Bangalore.
Family Influence on Entrepreneurship
00:01:13
Speaker
So much so, Akshay, that Everything that has been influencing over my life from all forms of education to first work to ah first entrepreneurial gig to Cloud9 to everything was all in South of Bangalore. mean, I don't know if it is privileged. i don't know if it is stupidity, but it just happened to be so that I never ventured out of this realm of South Bangalore. So yeah, all my life in Jayanagar in Bangalore.
00:01:41
Speaker
Okay, got it. Okay, okay. And what like what did you do in terms of education? What what led up to you becoming a part of Cloud9? Well, honestly, I think it's a little bit of right place, right time, if you ask me, Akshay.
00:01:57
Speaker
ah One, ah you know building up to Cloud9... i was just I graduated as a computer science engineer, worked with tech majors like Intel and then SAP.
00:02:11
Speaker
SAP was a far longer gig where you know I got to understand the implementation aspects of a large ERP like SAP, which only a very you know large companies could actually afford to implement SAP.
Vision Behind Cloud9 - Mother and Child Care
00:02:24
Speaker
uh was just lucky enough to be on part of a lot of implementation projects and was getting very excited looking at how users are thinking about their decision making and you know especially being part of an erp implementation you can not just look closely at what the user is doing but you can also zoom back up to understand the ripple effort effects across the you know the nuts and bolts of the company right so um i didn't know i was just getting excited with a lot of these things Way back in 99 when I was 18, my dad had pushed me and my brother to actually start taking up the first attempt of running a business. This was in consumer electronics v retail. um So, you know, the nothing fancy, but it just grounded us very differently in terms of understanding the nuances of business. So,
00:03:11
Speaker
The reason I'm telling you about that is even during professional sort of engagements, the aspiration and the ambition was to always kind of do more, understand more. And somewhere that itch was always kind of, you know, there to be scratched, right? and Soon had to give into it, um came back out, started i started my own entrepreneurship bandwagon again, came back onto it.
00:03:34
Speaker
I was scaling a very popular large F&B brand in Bangalore to multiple locations, was having a lot of fun. ah But a large part of my family is filled with doctors on my mom's side especially.
00:03:47
Speaker
and A maternal uncle of mine, basically his wife and my mom are sisters. They were coming back from Australia and Dr. Kishore, our founder and chairman,
00:04:00
Speaker
He's someone who's very obsessed with intricacies of outcome, especially in the healthcare context of ah what is happening. And his his main focus was he's a neonatologist, so everything to do with mother and child.
00:04:12
Speaker
um And, you know, he he was always someone who would be very fussed about the data. And, you know, one of those realizations was in terms of, you know, how far back India is in terms of infant mortality rate, maternal mortality rate, and If there was something that could be done towards, you know, at least making an attempt to change that
Initial Challenges and Growth Strategy
00:04:31
Speaker
narrative, right? So it started with his vision to kind of be able to bring something in which is world class, single minded focus of just going into mother and child as a sector, doing something that no one has done before.
00:04:42
Speaker
um And, you know, I just, I was just there. around and you know I think they they just took pity on me and said that hey do you want to come and help us out um and you know for me it was it was a challenge because I you one to not have a playbook of any of these sorts really not knowing what to do um trying to find the first of everything was ah was a very very unique opportunity and a challenge i got excited by joined hands started trying to think
00:05:14
Speaker
beyond you know the clinical realm of what Dr. Kishore wanted to try and bring in. It was a very family affair, sort of, actually, because my aunt was involved, my mom was involved, my dad was in involved. Everyone had a little bit of role to play.
00:05:28
Speaker
um Only after a certain period in time Did the actual realization happen that there is a scalability in the sense of model that was there, right? Honestly, at the beginning, there was no such intent, nor appetite, nor even understanding of what is possible, right? So that's that's how the journey started, honestly.
00:05:52
Speaker
And... ah like You were part of the first a hospital being set up. or the cleaning What is the difference between clinic, hospital? but what What would Cloud9 be classified as?
00:06:03
Speaker
We would be a full-fledged hospital, like ah anything that a mother would require throughout her journey of pregnancy from the time that they've realized that they're going on the family way to, you know, managing them for the nine months of the pregnancy, helping them deliver the baby.
00:06:22
Speaker
And up to two years of the baby's age is what Cloud9 really thrives upon. In the recent past, we've also added fertility to the forte, wherein you know couples who kind of find it hard to conceive naturally can reach out to our experts and also try and look at techniques which are then available to help them conceive, right? So it starts from fertility, pregnancy management, um the actual delivery, and zero to two years of the baby's age, right?
00:06:50
Speaker
We are also dabbling into a little bit of pediatrics as well, but that's, you know, we'll will get there over a period of time.
Wellness Focused Healthcare Experience
00:06:56
Speaker
But it is this, the thousand day program, as we call it, is what our entire focus is are upon. So we're a full-fledged hospital.
00:07:03
Speaker
We don't like to call it as that, but, you know, for technicality purposes, yes, we are a full-fledged hospital. What do you like to call it then? Oh, we just like to call it as cloud nine, right? So this is just a place where people need to be less anxious about everything. And, you know,
00:07:20
Speaker
not be ah burdened by what they actually know about healthcare in general, right? That this is not sick care, right? This is not illness. This is wellness. And it took us a lot of years, a lot of time, a lot of goodwill, um a lot of sort of encouragement from the parents themselves to be able to kind of give this the dimension that it really needed, that you don't really need to be part of another hospital to actually go through a pregnancy journey, right? So for us, it was just single-minded focus, call it obsession to kind of, you know, say that this is how it needs to be. But over a period of time, this kind of set itself into a different sector where we were able to kind of do what we're doing and then be able to establish that anywhere across the country today, if anyone's looking to have their, um you know, pregnancy journey managed,
00:08:17
Speaker
Even if it's not with cloud nine, they would still seek out a single speciality like us ah to get the best of, you know, that that life's journey. Right. So i think we are hugely proud of the fact that we created this sort of a revolution that, you know, everyone now looks forward to this really good lifestyle, you know, life stage um that they can celebrate.
00:08:40
Speaker
So, you know, a lot of doctors are ah also like, in a way, entrepreneurs in the sense that they have their own practice, which ranges from either a small clinic or single speciality hospital.
00:08:54
Speaker
And in fact, I grew up in South Delhi. We had a like ah very premium kind of a single specialty, similar to Cloud9 kind of a hospital, very near my home. But ah what makes it go beyond that one single hospital into a pan-India chain, which Cloud9 is today? What are those ingredients which go into it? Is it about ambition of the founding team? Is it about process orient orientation?
00:09:21
Speaker
What are those things which really...
Scaling Cloud9 - Challenges and Strategies
00:09:23
Speaker
make it go beyond just one single family run kind of a chain which i assume is how you also started so you know yeah we were like i said we were never a chain actually and yeah we were just a single sort of solitary unit uh we started in 2006 the second one happened only in like 2012 right between 11 and 12 so like five six years good five six years even before we could think of anything and i and honestly you know this is like what 12 13 years back and if you had asked me then also i wouldn't have
00:09:54
Speaker
imagine that you know we could, I mean, yes, if you ask me what's the ambition, you know I'll give you the number of centers, but today we're like 42 locations across 16 cities and continuing to grow. we have line of sight for 50 centers within the grasp of next couple of years.
00:10:10
Speaker
It's just crazy in terms of the spread that has been ah possible. um i think, look, the the clear clear sort of difference was, I think, the ambition of the founders. You're right. I think one of the things was to kind of came back to us to say that, you know, do we really want to do this, right? Because look, the first unit that we had was wildly successful, Akshay. And that's what a lot of doctor entrepreneurs, like you mentioned, take a lot of pride in that it's their center and, you know, it's bustling at its seams and
00:10:41
Speaker
That is what success means for a lot of them. I think it was just opportunity. Like I said, right place, right time. I think we had a significant first more advantage in terms of, like I said, goodwill, capital being available ah for us to kind of just not lose focus and only do this.
00:11:01
Speaker
ah Despite not being one of the looked up, you know, sought after healthcare specialties, right? So I think it was a combination of some of these things, which kind of got us onto the treadmill.
00:11:13
Speaker
But once you got onto the treadmill, I think it was about just being able to go deeper and unlock more value, right? Today, we would have the most number of insights in terms of anything that has to do with pregnancy across the world. In fact, simply because of the volumes we manage, ah be it intervention of clinical outcomes, be it intervention of prognosis, be it use of technology, ah be it being able to attract global talent to come back and practice in the country, to the number of complicated cases that we've actually kind of
00:11:43
Speaker
um seen and managed right it's just overwhelming but the beauty is that we stuck to this as a speciality and just went on deeper and deeper and we just feel that we're still on the tip of the iceberg right i think there is so much to be done but the beauty was to say that we did not lose our focus and suddenly said that you know what this worked well why don't we go to orthopedics or a nephrology or a neurology and such right Believe me, those digressions did happen in terms of at least conversations to say that, can we do more?
00:12:17
Speaker
But I think it was the actual dawning of the realization to say that there's value in verticalized healthcare, especially
Professionalizing Cloud9 - From Family Run to Process-Oriented
00:12:24
Speaker
in this, right? And that's what really helped. And I think, look, you cannot deny the fact, Akshay, and this is true for most brick and mortar businesses, that the network effect really works, right? So,
00:12:36
Speaker
If you are able to kind of go in with a very cluster based approach, go into a specific city, go into a specific region, and you're able to kind of build a network of assets across both clinical competency, infrastructure, customer goodwill, um you will continue to grow faster and you know stronger.
00:12:55
Speaker
And that's that's really what has worked for us as well. Okay, okay. I'll zoom in on some of these things. ah But ah tell me that ah story of you are running one single wildly profitable hospital. So what you know what happens which then makes you go on to second and then from second to 42?
00:13:19
Speaker
Like what was actually going on behind the scenes inside the boardroom discussions and the challenges that you faced and... Honestly, we need to have a separate one-day session for that, Takshar, to see what all happened. But let me try and sum it all up.
00:13:36
Speaker
I think, look, two things happened, right? I think one is it is the combination of founders, right? I don't know if each one of us in isolation could have really even attempted to achieve what we did.
00:13:48
Speaker
think... i think For me, at least, the the realization happened when I went to B-school, I am Bangalore, where, you know, you're just exposed to so much more larger thinking, right?
00:14:01
Speaker
You see a lot of numbers, you you do a lot of stargazing. ah You kind of hear from others who are your peers in the journey to also kind of understand what their vision and dreams are also, right? And I specialize in entrepreneurship, diploma in entrepreneurship, and you kind of meet a lot of people who have already done some of these things, trying to do certain things. And, you know, you kind of see that hey, a lot of the metrics that we are also vying for or you see it from a theoretical point of view, we already have it.
00:14:29
Speaker
What does it mean to kind of scale up, right? So I think it it required one of us to become uncomfortable with what we had already and try and do something more, right? It also meant taking everybody else along to also say that, hey, what does this journey mean, right?
00:14:45
Speaker
And it's not like any one of us had seen what it means right like none of us understood and this was ira's first capital in 2011 and if you can think back to 2011 actually this you know flipkart had an announced his first institutional round around that time so i'm talking of nascency of venture as a as a sector in india right forget venture investing and so on venture as a sector was still finding its foot in the country So, you know, forget about what does it mean from a shareholding point of view, inviting professionals onto the board.
00:15:20
Speaker
What does it mean to raise capital? All of this was new, right? Today, you will find 40 odd founders talking about this every single day because there's so much that has happened in the country. But at that time,
00:15:33
Speaker
you have to kind of figure out a lot of these things on your own, right? So I think it was a little bit of rub of the green going our way as well that we found the right partners, the right partners found us, and we were able to kind of deliver on the vision that we all had. And we had our fair share of mistakes, we learned through it.
00:15:50
Speaker
The version of Cloud9 that you see today is far different to what we started with. ah There's a lot of things which have changed during this, whatever, 17, 18 year journey, right? So What it kind of undertakes is how founders evolve, right? How all of us evolve.
00:16:08
Speaker
How today, for example, when you and I are having this chat, I introduced myself as managing partner at PR Capital. Cloud9 continues to grow and thrive, but it's being helmed by an amazing leadership of professional ah managers, folks, right? Like from my CEO to the entire CXO team.
00:16:26
Speaker
It's no longer family run. it's it's no longer family run, right? So how do you even transition this? And more than just paper, it's a lot to do with
Building Lasting Institutions - Founder's Role
00:16:36
Speaker
mindset, Akshay. And this, believe me, is not as well done in our country as it is in most others, right? People don't understand it i understand it as well or appreciate it as well. I think This has to change.
00:16:51
Speaker
Right. And the sooner you can get to a level where you can actually make yourself redundant, I think that's when you start building an institution. Right. So that's what happens. So I think i'm I'm just, you know, super proud of the fact that we've actually been able to do a lot of these things.
00:17:06
Speaker
I'm 44 now and I transitioned my role from. managing director in 2020. So it's been about good four five years. So, you know, right around the time that I turned 40 is when, you know, there was already a team of professionals who were trying to do what they were doing.
00:17:21
Speaker
We were aiming to take the company public. um So, you know, it's just been a grand journey for me over the last decade and a half to actually bring in this entire multiple facets of experience from raising capital, building a strong team, creating the sector, putting that proposition out, making the company public ready. So it's just been tremendous for me individually. exactly So the idea now is to try and see how to transition a lot of this learning into other founders so they don't have to go through a decade and a half as a journey to get there. right So
00:17:53
Speaker
That's what it's been. I know it's a long answer to your question, but I think the important aspect was the, you know, the the the resilience and the adaptability of the founding team to actually grow with good times, right? I think that's that's what was important.
00:18:10
Speaker
You said that someone in the founding team had to get uncomfortable with what seemed like a good situation. Who who was that who got uncomfortable? It was largely me. It was me who first got uncomfortable and made everyone else uncomfortable. How did you do that?
00:18:27
Speaker
Well, ah I think... It was also about realization. i think once we kind of figured out that, you know, the the external capital is essential for trying to get onto to a growth path of any nature, right? So even when we raised the first round of capital, ah this was from Matrix, so now called z forty seven and Again, you know, it is it is for that period in time, right? So that came as a catalyst to say that, okay, listen, you guys have one center, why don't you try and take this to four or five different centers, right? So
00:18:59
Speaker
it actually started with something like that. But, you know, the the actual nuance of what it means, like, you know, having a board meeting, um you know, there is someone who occupies a significant trench on the cap table.
00:19:13
Speaker
What does it mean from a decision-making point of view? These are things you don't really know or understand. it And this you have to go through as a journey. And like I said, again, today there are enough anecdotal evidences, but For me, it was also to one, realize that, hey, these are the changes which will happen.
00:19:32
Speaker
And second was to try and take as many people along also on this, right? And some were up for the game and some weren't. And, you know, it had its own own sort of outcome in the end.
00:19:43
Speaker
But the fact is, I think there was alignment to say that, you know, we need to do this together. Right. And that's that's what it took. So for me, I think one, you know, just how do you kind of, you know, turn decision making into a process oriented decision making rather than i like versus he likes or versus she likes. Right.
00:20:02
Speaker
How do you kind of translate that? to a proper process making so that it's there even without you individually being there. right and this And this particular thing actually took the longest time in my mind, right? To be able to kind of give this sort of decision making. And, you know, there were several fallouts, honestly, ah on on you know, some of the decisions not being taken well enough or the execution not being up to the mark.
00:20:30
Speaker
But you live with some of these, right? And that's where you grow. right if it is all to do on your own i don't think you really grow as much you need to surround yourself with people who are much smarter than you and that's when you'll actually start growing if you are surrounding yourself with people who are just you know yes sir yes sir three bags full then you know nothing but a nursery rhyme right so uh that's that's what you become what were some of those fallouts like you how did you navigate that change management from family run to professionally run like um So it's a, I mean, it's a touchy topic, actually. But, you know, one was, i you know, I think it it it was also about, one is time, you know, people kind of take their own time. i don't think, um I don't think it comes with a certain,
00:21:18
Speaker
you know threshold of understanding to say that, you know, if these three things happen, then I'm good. Or if some of these happen over a period of time, I'm good, right? each Each person has their own sort of avenue to understanding and appreciating. It's also equally, it's it's an equal responsibility on the professional who's also coming on board to kind of do this, right? To kind of navigate with the promoter, the founder group to actually help ah go through this journey, right? So I think,
00:21:46
Speaker
It was this transitionary time, which was different for different people. um You know, so there was, you know, there there was a fair amount of...
00:21:59
Speaker
don't know what's the right word that, you know, there there was a fair amount of misunderstanding, I would say. I don't know if misunderstandings are really the word, but, you know, to say that, you know, now that there's a professional in the middle, how do you kind of navigate decision making, right? Like a lot of those things took time.
00:22:17
Speaker
ah For me, given that I was the instigator for a lot of these things, I think I had to become suddenly, um you know, okay with a lot of these things, right? I had i had no time to learn, unlearn or, you know, try and go with the flow. I had to immediately kind of jump and do some of these things right away, right? But look, ultimately, Akshay, we are in a healthcare, um you know, we're in ah we're in healthcare, care right? it It is not as cut and dry as most other businesses where you can do certain things
00:22:50
Speaker
without thinking what's the health outcome of something like this, right?
Management and Financial Strategies in Healthcare
00:22:54
Speaker
So it's, again, you can't do fail fast. You can't, right? You can't do exactly. So you can't, at least not in all the things that you can't do that. So This again was a little bit of realization that it happens over a period of time, right?
00:23:08
Speaker
Amount of professionalizing, amount of things that are happening. And look, let's be honest, this is also a field which I think has drastically changed. But at the time that we were growing was severely starved of good talent, right? There were ones who had grown their companies, doctor entrepreneurs who, you know, the household names that we know already,
00:23:28
Speaker
But between them and the rest of it, there was huge gap, right? On people, like you actually asked about, you know, why aren't people scaling like how you guys have scaled, right? So I think there was a huge talent gap also in terms of being able to...
00:23:41
Speaker
come in and nourish that ambition and be able to kind of provide that sort of blitzscaling, right? So I think the onus was on us to also be then be able to go and look at other industries and bring people from there, which meant more amount of time and energy gone into kind of getting them comfortable with what is the vision here, right? It worked out. it I mean, we we had...
00:24:03
Speaker
Some who didn't work out, but the ones who worked out, they've all been here for a great part of their lives and, you know, continue to do well. um Right. So it's it's it's been ah it's been a journey of sorts for sure, man.
00:24:15
Speaker
Okay. um I want to understand the ah business of a hospital better. um What are typically the revenue heads? Right. for a hospital, what what are the kind of metrics which you track? You know, so say, for example, if it's a SaaS business, you will say, what is the ACV? What is the ARR?
00:24:34
Speaker
Stuff like that. In a hospital business, what are those key metrics which hospital founders, investors typically track and that matter? So, ah look, it's it's again different. If it's multi-specialty, then, you know, there are a lot of metrics which are from a public point of view, looked at what is good.
00:24:53
Speaker
I can tell you about how some of our things work and what are critical for us, right? So, One is I think we are, whatever said and done, are still a capital intensive business. We like to call ourselves asset light, but in the sense we don't own any of our assets directly. It's all leasehold.
00:25:13
Speaker
um So it is that much more capital efficient. But I think the reason I talk about CapEx is because there is one metric again, which is very important is Rossi, right? Return on capital employed.
00:25:26
Speaker
It has to be a very, very, it this is something most people don't even understand and appreciate as to why this is important. It's about the turnover of capital in terms of how much revenue, um what is the recovery of the cap capital that you've invested in, how fast can you recover, right? And that is in itself a very big parameter. this is Rossi is something which is very pertinent to brick and mortar businesses.
00:25:52
Speaker
also true for hospitals. And in our case, I think the metrics that we look for is, look, we are a very customer obsessed sort of organization, right?
00:26:02
Speaker
The health part comes after, but we exist simply because our obsession is with the customer. So anything that you would do From what is customer obsession, we will have those metrics. Like if it is NPS, right? NPS on a promoter detractor score, we would track this diligently. We would, you know, it's part of our reviews. It's part of everything that we do.
00:26:25
Speaker
All our decision making is on the basis of this. ah we do have wallet share on what is our wallet share because we operate in a finite window of one's lifetime journey.
00:26:38
Speaker
We actually know what are all the various touch points which happens during this journey. What is our wallet share of that, right? Like how much of an influence do we have? How much of it do we ah fulfill ourselves? How much do we do a surrogate fulfillment?
00:26:51
Speaker
What do we do during this period? It's very important again. The yield, which is also a similar sort of metric in terms of saying that if someone's been with us for nine months or, you know, um we break it down into weeks and days, ah we then kind of understand what's the realization for someone who goes through the entire nine month journey with us to the ones who actually end up delivering with us to the ones who actually end up with the two years of the baby's care.
00:27:19
Speaker
So we kind of do a lot of this to say, what's the yield that we actually kind of manage, right? And we go deeper on this. ah Yield means like the LTV, the long term value of the customer? Yeah, yeah. okay yeah Yeah. Lifetime value.
00:27:33
Speaker
So yes, it is it is it is that to say that, you know, given that you will only be able to influence over this period of time, what are all those different sort of things that which is I said, it's in correlation with wallet share.
00:27:45
Speaker
So this is something we actively look upon. There's combination of insurance versus cash paying versus someone coming to you the minute they realize they're pregnant to someone coming to you only at the time of delivery.
00:27:57
Speaker
All of this goes into the case mix of, you know, how do we kind of improve from where we are? right So wallet share and yield is LTV all goes together. ah We're very fussed about our conversion metrics in terms of you know someone coming and saying hello to us, um understanding what is our services, what is our service offering, do do they really come into the journey with us and how much of it is managed completely by us? How many of them, like I said, if they're coming in from the first trimester, do they go on and continue and deliver with us or for various reasons that drop off during different periods of time?
00:28:36
Speaker
what is our conversion metric? How good are we on this? right So we do this fairly diligently and there's an active group who will always sit and you know figure out some of these things. Of course, help with a lot of invisible tech, which is kind of doing this time and time again for us repeatedly, which kind of helps us stay on top of data.
00:28:53
Speaker
um But you know these these are some of the metrics on top of my mind, Akshay. Of course, look, the usual unit level economics has to be sacrosanct from you know your revenue to your gross margin to your ah fixed cost and your EBITDA both at the unit level and the consolidated at a group level how are things changing if there is a significant line item which is coming in or fixed cost what do you kind of do to then ah deactivate it or how do you kind of do something to kind of mitigate that growing faster right like one thing in our sort of uh
00:29:29
Speaker
line of share would be you know most people don't realize that in a center there is a fixed outcome prospect right like if we have the throughput to deliver let's say 120 babies a month you cannot suddenly say i will deliver 200 a month it will only be 120 at max right without letting any of these other customer obsessed metrics to fail right so we have these as our limitation so for 120 you know Year on year, if you're, let's say, at 100, right, year on year, you cannot keep increasing the cost of service because there is, you know, there is some amount of restriction like insurance pricing, what are customers willing to pay?
00:30:14
Speaker
but you will know that the cost will continue to rise, right? So, rise. So, what it means is while your revenues can actually grow like this, your cost will actually grow like this.
00:30:25
Speaker
So, how do you keep this gap consistent and active in terms of your EBITDA intact is the most critical aspect, right? A lot of people, again, don't understand this with brick and mortar. So, again, this requires a lot of activation, a lot of sort of ah vigilance in terms of being able to look at what those metrics are, how do you unlock value every time, right? And that is what is important. So even to realize, for example, we have now 13 centers in Bangalore.
00:30:51
Speaker
There was a time when we had set up three and I said, we are done with Bangalore. covered everything. And we have 13 today, right? Which meant some of them actually, you know, cannibalized the existing units.
00:31:04
Speaker
And why was that important? What is the overlap? How much of new business will you acquire as against, you know, cannibalizing some of the existing business? So these are things that we continue to kind of simulate and understand and look at, you know, where um where the units need to continue to, you know, thrive and survive, right? So these are, again, as brick and mortar, a lot of these things become very complex.
00:31:31
Speaker
restrictive but if you understand how these things work i think it it can be it can be a great business to run okay um can you break down at one unit what is the various revenue heads uh if let's say a hospital earns 100 crores in a month or i don't know what would be a good number as an example what would be the sources of revenue and what would be the cost heads what would be the margin profile Again, look, it's different for different specialities, Akshay. I think it's different for multi-specialities where lot of multi-specialities, you know, the the single fixed cost item in this is the cost of land and asset where the land in itself would be subsidized given that, you know, they would have got something from the government and to so on and all of that. So the cost the fixed cost, the single biggest fixed cost item for most of these large hospitals will actually be toned down.
00:32:18
Speaker
Today, you know, a lot of them are also happy paying um you know, good rentals for good assets where people are happy to kind of put them up long term leaseholds and, you know, they're able to kind of not have to spend lot of capex in terms of acquiring land and then building from there. Right. so That is one major fixed cost item.
00:32:39
Speaker
ah Second biggest item is the is the manpower. We'll finish cost first and then get to revenue. Second biggest line item is the manpower, right? not Not taking the doctor cost into play.
00:32:52
Speaker
A lot of us also like to keep it above gross margin in terms of cost of goods sold um in a manufacturing parlance to say cost of service provided, to say that some of the doctor cost actually comes up there.
00:33:04
Speaker
But ah there is still a ah strong support group from all your teams on the floor, right? From the parameters to, ah you know, the the customer relation folks to your maintenance, to your security, to your um even your ah duty doctors to all of them who kind of keep the clock ticking, right? So,
00:33:25
Speaker
This is the single largest, again, a cost item which comes into the P&L of a specific hospital unit. um Third is obviously the utilities, ah huge power costs, huge sort of maintenance costs, which again, even if the hospital is not fully functioning or is just half ah utilized at capacity, you still have a very high fixed cost of utilities and such because a lot of these things need to run even if the occupancy is low.
00:33:56
Speaker
For example, the OTs and the ICUs need to kind of have a certain threshold in terms of what's the infection control, um what's the sort of you know, micron factor in terms of the air quality.
00:34:09
Speaker
All of these need to be there, whether it's fully occupied or, you know, if there's just one ah one bed occupied, right? So a lot of these items, again, in terms of utilities are fairly high. um In terms of revenues, look, there at there are two ways to split it.
00:34:24
Speaker
One is obviously the OPD, which is your foot in the door. i If purely for OPD, if you look at it, it's not ah it's it's not a great margin contributor because a lot of the margin here on the OPD fees goes into the doctor's share of fees.
00:34:43
Speaker
And there's a very little percentage. So it's a 80-20 split in most cases. The 80% goes to the professional. The 20% goes to the enabler or the provider in this case. And this 20%, you have to treat it more as a foot in the door, right? And why is it foot in the door? Because there is then the whole function of diagnostics, imaging, pharma, and all the other ancillary services which come in.
00:35:06
Speaker
which is typically like a, ah you know, largely the provider's sort of wallet share. So in most cases, it's 100%. In some cases, it's like an 80-20 in the reverse sort of metric that the 80 goes to the hospital and 20 goes to the doctor. So it's different for different cases, right? But OPD is a fairly simpler construct to kind of understand. IPD is, of course, very different.
00:35:30
Speaker
It depends on the sort of speciality that you're uh going deeper into if it's group practice with a number of doctors who kind of cover 24 hours across all of these things for example at anesthesia which is required as a cover across 24 hours does it come as group practice or you're hiring your own set of doctors to doctors being on retainers versus doctor being on fee-for-service where they come in, actively manage a case, and for that particular case, they actually get ah you know their share of what is the procedure fees, right? So it's a combination of some of these things, but IPD is where you typically have larger revenue pools, right? So a hospital in general only makes money when there is a procedure ah being performed, right? It is not for...
00:36:17
Speaker
getting someone to stay in the hospital for longer. In fact, the longer someone stays, the more, um you know, the more, the less money they make off that individual.
00:36:28
Speaker
um Unlike most people who say that, you know, they want to keep us in the hospital for long. No one really wants to keep anyone for long. They want to be able to enable more procedures and then be able to do a very quick turnaround for them to recover and go back home. right So procedures is where the the real revenue kicker is. right And again, like I said, for different hospitals, of different different contexts, um if it is fee for service, then you
Doctor Compensation Models
00:36:54
Speaker
know there is a certain percentage share agreed with thelin with the physician, with the doctor or the set of doctors and what the hospital kind of makes.
00:37:03
Speaker
Two, when doctors are on retainers or basically employed, um then obviously everything goes to the hospital and then, you know, the the doctor cost then comes down the line item where you're able to then use it as part of the, you know, manpower cost, right?
00:37:20
Speaker
It's a little bit of this. In a nutshell, this is how it would be, Akshay. I don't know if you had anything specific to ask, but this is largely. Why is ah doctor compensation so complicated? is it that doctors have more negotiating power? Like if I was hiring engineers, I would know, okay, someone with five years experience is this cost, 10 years experience is this cost.
00:37:41
Speaker
um But with doctors, that doesn't seem to be the case. It seems like there multiple models You can either have revenue share or pay for every procedure that they perform are or a retainer, which is then like a salary model.
00:37:54
Speaker
So why is why does it work like that? why does it No, i just not it so it's it's not complicated, actually. It's actually with years of experience, you actually lean a lot more towards fee-for-service.
00:38:05
Speaker
where it is ah it is the single doctor practitioner who's actually backing themselves to say that, listen, listen this is my caseload and I'm good for it, right? So ah typically you will see that the more experienced ones are more in tune with the fee-for-service.
00:38:22
Speaker
It's as you keep growing from being a resident doctor to be able to have your own practice and grow through the ranks on some of these things where the retainer kind of starts and then weans off towards fee-for-service.
00:38:34
Speaker
It's actually not very complicated. um It gets complicated where doctors bring their entire support teams. If they bring their junior doctors, if they bring their nursing teams, if they bring their recovery teams, it kind of gets a bit complicated in terms of managing.
00:38:51
Speaker
um I can tell you, i haven't seen too many hospitals being able to grow with that sort of a mentality or a mindset. But you would see single sort of centers being...
00:39:01
Speaker
you know, thriving on that sort of a practice, right? But it's very difficult to scale. ah Also, there aren't too many of such ah physicians who can actually kind of, you know, bring that sort of, um you know, group practice, as I say, right? But it's actually not that complicated, actually. I think it's just perceived to be complicated.
00:39:21
Speaker
um And if you want to make it complicated, you can. i think people have, like I said, come up with very different incentive structures and for everything you do you know here's what i would get here's what you would get uh those are not scalable actually these are again very far and few in between you would hear of some uh you know corner case stories of you know you know this doctor having a cut in everything that they say and everything that they do and all of that right Look, those are not scalable.
00:39:50
Speaker
um Do they happen? Yes, they happen. But do they happen in organizations where you scale and become ah yeah largely more process oriented? You cannot sustain some of those practices. So the good ones keep this very clean, simple.
00:40:06
Speaker
it is just caseload. If you are able to manage your caseload well, you're free for service that's really what you kind of get right and I think for most hospitals to also think big I think the transparency and the visibility of some of these line items is the most crucial this is not something you discover over a period of time to say how will I manage because this is they You can't like get a physician to a certain level and then say, why don't we taper off from here? It's not going to happen. It's about how do you take them through this journey and sustain at this journey together.
00:40:38
Speaker
and I think that is what is important. So it's not something you discover later. So this is something someone has to actively kind of track. And look, in our case, it's far more simpler because there are only so many specialties that we manage. But in the case of multi-specialty, becomes a lot more complicated.
00:40:54
Speaker
It goes into a different dimension of politics actually where OT time on the criticality of who gets the best OT time slots to, you know, the recovery to, you know, the best the best recovery wards to all of that, right? There's there's a lot of that managing also which happens. So I am not envious of people who have run multi-specialty hospitals or who run multi-specialty hospitals because it's it's it's really, really complicated.
00:41:22
Speaker
What is a hospital's edge? Is it people, processes, infrastructure, machinery, marketing,
00:41:30
Speaker
um I don't think marketing has anything to do with it. Marketing can just be for just the initial set where you are able to kind of ah you know get people acquainted with it, but I don't think it's marketing. And even if it's marketing, I'd be surprised a lot of people don't even market themselves well.
00:41:50
Speaker
ah But it's actually, i think in today's day and age, it's it's actually infra. it is ah It is actually a lot to do with people management.
00:42:00
Speaker
um I think clinicians and healthcare care providers together who kind of again do a lot of customer obsession will always continue to do well than the ones who just have this, you know huge gap between the credence of what the clinician has to say to what the patient in this case has to follow, right? ah And look, it's again, it's it's different for different people. I wouldn't say that it works across every sort of customer persona.
00:42:29
Speaker
People have to figure out who is the right customer. Like you cannot have a very fancy infra and say that I will also do like, and you know, any social schemes that are available as well. right You have to be very clear what is it that you're building for.
00:42:45
Speaker
And there is great avenue to actually build something for social welfare schemes. Right. But you have to be very clear that's what you're building for. Right. Your cost structures have to be like that. Your care protocols have to be like that. Your entire service offering has to revolve around that.
Customer Experience Innovations
00:43:01
Speaker
You cannot say I will do a mixed bag of some of some of these things. And that's where I think people falter.
00:43:05
Speaker
So. identifying what is it that you are there and who's the customer persona that you're solving for i think is the most crucial and in two today's dna is actually again from the large demand and supply gap that we have in our country right like you would see huge oversupply of um hospitals clinicians specialties in urban context like banglore there is no way you can't find a good specialist ah at least you'll find three or four good specialists for every single sort of healthcare catch speciality that you need multiple times over, right? So, but you go even like 40-50 kilometers outside of Bangalore and you will find that to find a good physician itself is a problem, right? So, you have that sort of
00:43:47
Speaker
density where it's largely concentrated in urban sort of setting. So how does one differentiate, right? It's about being able to actually stand for something, right? And demonstrate that clearly. I've seen, so, you know, this, the same, the same sort of context applies to hotels, like,
00:44:05
Speaker
why is the Taj group different from an Oberoi to a Marriott to anyone else, right? Or a Ritz, right? It's about how they kind of train the people. I'll give you an example as well, right? And this this is something that stuck to our mind.
00:44:18
Speaker
And one of the things we did, Akshay, was because we were trying to do something very different, we always looked at very different parallel industries to say that is there learnings that we can do? So I actually did a lot of aping from what airlines used to do. At that time, Indigo used to be on the hot seat for everything. They used to do changes like this and it was so amazing to see, right? I mean, it's a far cry from who they are today, but you know, it was just amazing to see. it's the same with hotels, right? Like how they kind of go about this single-mindedly. So for example, i won't name the hotels, but in one hotel you go and ask for, can I use the washroom?
00:44:56
Speaker
and someone would say yes sir it's down the corridor and on the right right another host another hotel you would go to and say can i use the washroom they'll say why don't i take you there right so it's very different and you know this this is what happens and if if you've been to hotels of this nature you'll you'll actually know and you can't kind of start resonating to it so i think it's about identifying who's your persona right so If you know that the customer values some of these aspects, that is what you would do, right? Because end of the day, it is human cost.
00:45:26
Speaker
How do you kind of do the ah ROI on some of these things to say that can one person just be directing to one person actually accompanying? It's a very different you know time value of money, but right? So how do you kind of make some of these things work is very important. And I think we don't do enough of, you know,
00:45:43
Speaker
Especially in healthcare care in our country, I don't think we do enough of ah patient management, right? I think from expectation setting to even helping them understand, traverse through the journey.
00:45:56
Speaker
And this is what I was telling you about demand supply gap that even in urban settings, that there is so much of... demand for good services, good clinicians that sometimes they also kind of forget that, you know, they need to take someone through the journey, right? And I've seen this well within my family itself. And you and I discussed a while ago that some of these things, you just see it as being very absent, right?
Role of Technology in Healthcare
00:46:20
Speaker
But you see Western sort of systems for good or for bad,
00:46:23
Speaker
you know they kind of make you part of the journey and you don't have that here right so it is still improved from maybe a decade ago but i think it really requires that change where you kind of know that you're in good hands where you trust them blindfolded right today that is unfortunately not there right it's a combination of things it's from the provider it's from the physician it's from the customer themselves on having wrong sort of expectations but I think that is something we should really, really thrive for to be able to do something more, man. I don't know. i
00:46:54
Speaker
I have a feeling that technology will kind of aid some of that, you know, disruption that, you know, this opacity that we work with in healthcare, especially in our country, that needs to go away a little bit, right? Because the the system thrives on this opacity that I know more than you and hence you will be subservient to me, right? So that somehow needs to kind of go.
00:47:16
Speaker
I may be... alone thinking in this direction i've seen this first hand up close and personal it is something we you know we at least hope and we know that we are doing a lot at cloud nine to kind of change but even otherwise outside of cloud nine i just wish that we can be a lot better at this right so how how do you uh make doctors care I mean, you know, two hospitals with equally good infrastructure, you will receive a different vibe, ah you know.
00:47:49
Speaker
And so how do you actually build that into the organization DNA that people care? It's a very tough thing, Akshay. Again, I'm not trying to say that the physicians are the bad person in this context, right? I think there has to be a certain amount of ah you know understanding towards what goes on in the life of a physician right that if they are too open then customers take them I'm using the word customers but you know patients take them for granted and call them at will and that's also not right so in which is why I think there is a certain amount of guarding which happens in terms of how a clinician kind of interacts with the patient right so
00:48:35
Speaker
I think making everyone part of the larger vision, I think is very important, right? um Look, it's very different, like in in chronic conditions where you know that this individual either through a lifestyle disease or, you know, genetically inborn,
00:48:50
Speaker
has to live with this sort of disorder for the rest of their lives be it diabetes or anything else right so i think there the care protocol is very different in terms you know what do you do emergencies how do you kind of manage i think active communication itself is largely missing right and i think this is what most people need to kind of try and embellish upon i would kind of vote for hospitals who would say that listen If we are able to stereotype a lot of what we do into processes and policies outside of what the doctor has to say, can we support that with
00:49:25
Speaker
you know, excessive information and push that to the customer.
Data-Driven Decision Making
00:49:28
Speaker
I think that is what is important and not enough is done in this, right? I think somehow people are averse to technology in this. And I'm not talking of AI coming in and dictating notes on doctors. I'm not talking of all of that. I'm just saying simple WhatsApp push to say that, hey, you are prepping for a surgery.
00:49:45
Speaker
Here are 10 things you should know, right? And this is something which is repeated time and time again. what is What is medicine, right? The The doctor is not incentivized to think on their feet and suddenly innovate, right?
00:49:59
Speaker
In fact, a good doctor of ours told us that, listen, there's only one thing which is drained being drilled into your head ah when you're studying medicine is...
00:50:10
Speaker
this is what you need to do. This is the book. You play by the book. you are You cannot deviate from the book, right? Very few people deviate and do something about it. But the larger, 99% has to follow the book.
00:50:22
Speaker
And it's through that that you discover more things that are possible and capable of doing. But I think when you are working in this silo to say that this is exactly what I'm doing, this is a process I'm following, procedure I'm following, I just feel the technology can actually add a lot of value to it, right? So I think the hospital of tomorrow will actually be something which will actively communicate and to the question of what makes one hospital better than the other is when they look at this as a system.
00:50:49
Speaker
And not just look at saying that I'm providing this service. Do you have cardiac care? Yes, I have cardiac care. But, you know, do you have cardiac care for someone who's a nephro ah patient with, you know, let's say chronic diabetes to whatever else, right?
00:51:07
Speaker
How do you look at that individual holistically and say that what can one care program do across all the requirements of the patient? You don't have some of those. I think technology can solve for a lot of it, but...
00:51:19
Speaker
it's it's going to take time. Okay. oh so So, you know, a lot of ah things that you told me um in terms of the kind of metrics you track, ah how did you tool the organization to collect so much data?
00:51:35
Speaker
Because I don't think a lot of traditional hospitals are able to track metrics, like say NPS score even effectively, ah compared to the number of things you told me that you're tracking. So,
00:51:46
Speaker
Is it that your own background from the yeah ERP space kind of helped you to build an org like that? Yeah, no, absolutely. I think that the engineer in me, and you know, had to kind of be obsessed about being able to put some of this data into play from the very beginning. So we have, um you know, not not as much insights, but we have insights from the very first baby that was born in our system way back in 2006. know,
00:52:13
Speaker
ah so you know Over a period of time, that's only gotten better with different sort of tools and, um you know, ah products and services that you can use. um But this is something that we've very we've been very obsessed with. So we've actually created our own sort of tech stack in terms of what is our system of records where all the sort of core data sits and, you know, you kind of use that for all your mining.
00:52:38
Speaker
and you have a system of engagement or is you know which is like a more like a data lake where you are able to not just create new services new sort of avenues of engagement for the customer but also work with others if someone else is doing a great job of it can you actually get them to kind come and you know ah come in and actually use that entire interface that we've created at ah at a very fast switch rate, right? So as an example, i think about a year and a half back, the CRM we were using, and I can't name them, was a very good CRM, but a global major came in and, you know, showcased a lot of things for us. And I think we were maybe about 30 odd centers at that time. And, you know, the switchover happened overnight.
00:53:23
Speaker
You won't believe with zero disruption, right? So That's the sort of thing. And, you know, so we don't get valued for our technology because it's largely inward facing. It's largely for what we do. For example, the app that we employ, it's not just an app. It's it's a complete interface for what happens in the system. So if our app were to go down, which means our systems go down.
00:53:44
Speaker
But most hospitals, if you ask them, do you have an app? It's a tick in the box saying, yes, we have an app, but it means nothing for the system, right? So for us, it's a lot to do with how we've evolved over a period of time from collecting simple data, which is more um one way I would say where we would collect the data because that we would want to actually becoming a very two-way sort of system over a period of time because this interactiveness actually improved over a period of time, right? So, and, you know, we built at an age where internet was still a fad, man. And, you know, today we're talking of AI hype cycle.
00:54:18
Speaker
We've lived through the internet hype cycle, right? So, where internet was a fad. I had my first job when internet was considered a fad, right? So, you just know that some of these things as they kind of, you know, come in and you know, they they hit that productivity plateau. you you You know that some of these things are here to stay, right? And like i said, it's also understanding the customer persona, Akshay. think a lot of people don't value this enough.
00:54:44
Speaker
For us, the kind of customers that we are talking of at Cloud9, It is a high engagement period, the zero to nine months. There is equal willingness on the customer side to actually be able to ask for information, seek information, digest that information and reciprocate. right So for us, as much as we can kind of give in to some of those sort of you know high engagement ah interactions, we learn a lot.
00:55:10
Speaker
right but in most other cases you may not have some of these things and which is why this identifi identification becomes critical and which is why you go in and check for nps to say that have we done enough or not right so we're super vigilant on that by the our nps scores are like ridiculously high weve we've stopped telling people about it because you know on on par with even the best of everything from an apple to all that we do like global comparison We do the similar thing with Great Place to Work.
00:55:37
Speaker
um I was recently updated that, you know, now we actually stand a chance with the big boys who have like big budgets across all of the things that they do from free lunches to everything to why they're a great place to work. We're actually in that league today, right? To say, how can um the healthcare, a healthcare company with brick and mortar services actually compete with something like that, right? So it's about Just being able to align and run a very transparent organization, right? So um these these these things make us stick. So very obsessed with technology and we continue to kind of overdo on some of these things.
00:56:13
Speaker
ah Give me some examples of how data helps. Like, does it help you to... change patient outcomes? Like, are you able to decide a better course of treatment because you see one treatment? No, so on the clinical clinical side, look, it's it's largely more as a suppose more as a support sort of mechanism.
00:56:32
Speaker
It is not to kind of help you on clinical pathways. It is more in terms of support of being able to capture all the right information. It's more on the prognosis side, building up of the ah you know the the patient case in this particular aspect than finding new pathways. We are not that, right? But on the clinical context, it's about just being able to identify a lot of these things. And given that there is a nine-month window during which you actually look at the progression of pregnancy where between the mother and the child growing inside the womb, ah outcomes of that is something what you kind of relate into. So for example, in NICU, we actually do a lot of experimentation. We just put out our first paper on AI
00:57:14
Speaker
um and you know how we are using AI to better clinical outcomes. like We're the first ones in the country to do it. um We use a lot of our data. For example, ah there is ah there is a particular network called Vermont Oxford Network or WAN for short.
00:57:29
Speaker
Which basically is the certifying agency for everything that hospitals in the US and Europe kind of put out to say that, listen, this is our infection rate, this our mortality rate, this is our, you know, um outcome to this and all of that, right?
00:57:41
Speaker
They are like your auditor, an independent assessor who would come and validate. We are the only organization in the country who's part of one. No Apollo, no Fortis. I mean, please don't quote me on this, but you know, for whatever reason, they're not part of it. We're the only ones who is part of it, right? To say that, listen, whatever we put out there, there's someone who's validating a lot of these things and say, yes.
00:58:01
Speaker
they are better than what most others are even claiming to be, right? So this was just for us, right? It wasn't to say that, oh, you know what, we are on one. But it is just for us to say that we are doing some things different. So that is only possible when we are able to generate that sort of a data, right? So it's just,
00:58:16
Speaker
Today, it is on the clinical side, it's largely to support and, you know, try and tread towards, you know, better research, better sort of publishing of outcomes, um help find new pathways like neonatology, like I told you, which is Dr. Kishore's specialty and passion area.
00:58:32
Speaker
we would be like the number one in the world to actually be able to find new ways of doing certain things, right? So I think it's it's with that amount of pride that we actually kind of work with, which means we collect more information, we collect a lot of data, we look at what each intervention meant in terms of, you know, successful graduation for the baby in the NICU.
00:58:55
Speaker
So all of that goes into play. But during pregnancy in itself, you know, there's really not much in terms of you know, what you need to do. There is, of course, the gestational diabetes, which has come in now. the incidences are only growing higher.
00:59:07
Speaker
But all of that is also management. It's a nine-month window. It's not a chronic sort of condition. It nine-month window on what you kind of do, right? And in most cases, it's typically a nice natural progression, right? So that way, it is it is pretty clear.
00:59:22
Speaker
But in terms of everything else that we do, um just in terms of The content we put out there. What do people want to hear more? What do people want to ask more about?
00:59:33
Speaker
um Where are we engaging a lot more about? Which which trimester is the most engaging? What do they want? Like I said, if we have to talk about wallet share or lifetime value,
00:59:44
Speaker
where is it that we should actually intervene, right? Because if you learn of a certain post facto that, you know, somebody wanted ABCD and they actually got it, there's no point you have to actually be preempting a lot of those things, right? So we use data for a lot of these things. We're very interactive that way.
01:00:00
Speaker
There's a lot of... sessions which happen, which are um very interactive in nature where people are able to kind of talk about what they want and we actually use that and put it into our data sets.
01:00:11
Speaker
um Anything we do from, you know, ops management is very, very data bound. on ah time utilized for certain things to revenue reconciliation to so many other things which happens that that makes our teams more efficient, right? It's just a crazy amount of tech that happens. And I think one thing is again,
01:00:32
Speaker
Something that, you know, i'm I'm particularly proud of is we work with a lot of good product companies, um startups, scale ups. We work with a lot of them because we just know that there are people are doing good things far, far faster than what we can kind of, you know, be able to think of. Right. So ah the good and bad is, you know, like I said, our switching costs is next to nothing in terms of time, ah which means if someone doesn't perform, we're happy to move on to the next one. And we have done that in few number but of cases because we're single like single-minded towards you know our outcome more than anything.
01:01:06
Speaker
But for the ones who are kind of able to provide what we want and able to kind of grow, then you know you don't need a better growth partner than us are at the speed at which we're growing. right so that's that's That's how we use tech. okay and so as in A large part of it is operational excellence and customer experience, like the yeahp the use of the data. Understood. yeah yeah You spoke of changing decision-making from an event to a process.
01:01:34
Speaker
ah What do you mean by that?
01:01:37
Speaker
When did I say that? In which context did I say When we were talking of the decision to go beyond being a family-run business, you spoke of how you try to make decision-making as a process instead of just you take a decision.
Importance of Establishing Processes
01:01:50
Speaker
Instead of that, there's a process to take a decision.
01:01:53
Speaker
So can you just zoom in on that of bit? Yeah, so look, I think as fundamental as just choosing a location for your next unit, right? Yeah.
01:02:07
Speaker
it starting from just anecdotal references to say that you know i know indranagar is a great place to uh actually being able to bring that decision from a data-bound kind of way in terms of looking at population density uh looking at per capita income looking at surrogate information in terms you know how many sort of carpets are there how many people are employed what's the sort of dual income population there, how many number of houses are coming up, what's the sort of persona that people are coming with and all of that, right? So to the the the end version of that is you know largely the next few locations of where CloudNine is actually going to be is very data-driven to that extent as a again saying that, you know I think Indranagar is a great area, right? So um something as fundamental as that
01:02:58
Speaker
two choices specifications in the infra in terms of why is a a good material versus why is b a great material to and looking at now unit you know economies of scale across to say that you know even if it's a great spec can i bring it because then i can amortize over number of units and you know bring bring that down to a scale i mean bring the price basis volume um to even hiring sort of decisions on clinicians and so on, right? How much of it is referenceability? How much of it can you verify to um personal interviews to all of those things rather than it being a single person deciding it now actually goes to a team.
01:03:42
Speaker
who actually then be able to certify, verify, um reference, and be able to say that, you know, why is he or she a good sort of partner to work with, right? So several of these things, Akshay, it's gone through a lot of process.
01:03:58
Speaker
We create a lot of playbooks, be it on infra, be it on custom process, be it on a lot of those things. And every playbook goes through its versions, right? So, and there's inputs welcome from the team on the ground to the managerial team, to the board.
01:04:14
Speaker
Everyone gets involved to say that, you know, how we need to be able to do kind of things, right? So that's how it's that's how it's progressively kind of kind of changed. We now have three independent directors on the board who actually have a very strong voice in terms, you know, how they want to get themselves acquainted with what we do at Cloud9 and, you know,
01:04:32
Speaker
um how we need to be looking at certain outcomes and so on, right? So it's it's a process altogether. So it's... um it's a good process, right? So for for everyone, you now are with the realization that there is no single person who will actually take a decision and then be able to just run with it right? You have to convince a bunch of others because even if the decision is yours, the execution goes to a bunch of people in the team, if they are not sold on that, then, you know, there's no point in being able to kind of take the decision, right? Because you're not going to be able to do it yourself. So I think that collective sort of
01:05:04
Speaker
engagement and moving up has taken its own sort of time. So like I said, even from and understanding why this wall needs to be pink to actually putting some science and thought behind it to see if it really needs to be pink or not, right? So um it's it's been a massive process, man.
01:05:24
Speaker
Fascinating. like So you're saying as a founder, it is more important to set the process of decision making rather than take decisions yourself. Yeah, you can be part of, you know, weighing in on the decision, but I think it has to be in a way that there is certain degree of transparency of how the decision is taken, right? Because you, I mean, look, it's it's great, right? Like if if if everything goes well, then obviously you take all the credit, but if it goes bad, you also need to know that one, you take the blame for it, but how do you correct it?
01:05:57
Speaker
it I think that is what is most important. And if there is a good playbook being established on every single process that is is being put out there, i think that's how companies grow. they Time and again, actually, we've seen this with fantastic companies who have been able to do this, pass on the mantle.
01:06:12
Speaker
Most recent one being Freshworks, for example, such a big founder persona. ah You know, first ones to list on Nasdaq to so many things and now handing over the reins to a professional CEO.
01:06:23
Speaker
um And, you know, how you kind of then manage the transition? So we've seen a lot of good companies, a lot of the ah public market benchmark companies. there aren't too many who are really the founder founder who's still running stuff right there you see a bunch of great amazing professionals who are running the show there right so how do kind of do these transitions and for me especially I think again benefited with time with sort of good counsel a lot of things were changing in our country ah was you know deeply influenced by how
01:06:57
Speaker
GMR Group did what they did. It's it's well documented, actually. PM Kumar um was the guy who actually helped them set up this entire thing from, you know, what will the family do? How will professionals come in?
01:07:10
Speaker
um Our investors helped us a lot in terms of, for example, Sequoia had a session where Om Manchanda, who recently stepped down as the CEO of LALPATH Labs, was amongst the very first professionals to join a promoter-run company in healthcare.
01:07:27
Speaker
And it was a fantastic session where Om would come and talk to us as a professional to say that, you know, how do you start working with promoters? What is it that you do?
01:07:37
Speaker
And we also had the likes of good organization like an Agon Zender to Spencer Stewart who would come and talk to you about saying, as promoters, how do you kind of then start working with professionals? Because it's not just tick in the box, right?
01:07:50
Speaker
You have to give them degrees of freedom to actually decide and take those sort of decisions on your behalf. It's a journey, but, you know, it's, it's it it kind of worked out well and I think it it's ah it's a framework of sorts right and it but most people who do this well you will see that you know they can scale well and idea should be to build an institution I think that's what most founders need to kind of realize and rationalize right that yes If you think you're indispensable, you know, it's it's good and bad, right? Like I wouldn't say that most founder and companies like people ask about innovation at Apple today, right? Yes, one of the most valuable companies. But, you know, when's the real innovation that we've seen? but When Steve Jobs was added, you would see innovation at a very different level, right? So, yeah.
01:08:34
Speaker
So I think it's also about saying find your mix, right? To find your mix in terms of saying how progressive of a company are you, right? So for example, the way Zepto is run today, right? Which is like, you know everyone has their eyes on it, but these guys run the shop because I think not just being the enablers of the idea, but having to, you know, be able to sustain this consistent growth and such, right? They have to be able to be there.
01:09:00
Speaker
And over a period of time, you will see that some of these things will ah kind of rationalize into others being able to manage that, right? But A lot of these other companies have been able to successfully successfully transition. And I think that's where good founders will actually be able to transition. right So again, it's not to say that everyone needs to transition, but I think working with a team of professionals actually be able to kind of take it to the next level.
01:09:23
Speaker
Okay.
Impact of VC Funding on Growth
01:09:24
Speaker
ah You raised about 200 odd million at Cloud9 till date as per traction.
01:09:32
Speaker
um Maybe more. ah Okay. Maybe more. Okay. Okay. So ah was it necessary to raise VC funds or could you have scaled without, like say, using debt or whatever, like, or was VC funds an important ingredient of your success?
01:09:50
Speaker
No. So for us, it was an absolute essential ingredient in the mix to be able to even think of scaling, Akshay. It wasn't, it wasn't, uh,
01:10:00
Speaker
and avenue where debt would come and help us. ah If you remember, I also mentioned that we have something called asset light. The bad of an asset light is that you have nothing to collateralize.
01:10:13
Speaker
And most of the debt providers will not be... But the machinery would be on your books, right? not much. It's not much, right? Compared to the land. In our case, the machinery is a very small component of what is our overall infra requirement.
01:10:26
Speaker
um you would still have your working capital sort of avenues coming through banks and different sort of NBFC mix. But for us, look, you could also have waited for the business to have enough throughput for you to be able to then go and invest that as margin money and put something in and all of that.
01:10:47
Speaker
That was a sense of direction also that I honestly was attempting but that will have its own sort of, um you know, let's say scaling prospect, right?
01:10:59
Speaker
um VC money gave us the avenue to be able to kind of scale faster, right? so um I also again think that this was again time and place where good businesses could attract that sort of capital.
01:11:13
Speaker
We are not something which kind of blitzkills like technology. ah But, you know, we have done very good by some of our early investors who've come in and exited as well.
01:11:25
Speaker
um so it's an absolute essential, was an absolute essential. We never had the capital ourselves. So everything that we had had already gone into the first unit. um So any...
01:11:36
Speaker
possibility of scale wouldn't have happened without VC. And once you get onto that VC treadmill, if you are continuing to do good by showing good growth and um consistent unit level economics, there is that certain amount of attraction towards more capital being able to come in there. right And I think once we hit the, um you know, hit the capacities with which private equity works in, which is the next level of VC, um that was another different dimension, right? So they have like very different timelines, very different sort of appetite towards what's the risk reward return.
01:12:11
Speaker
um They only come into scaled companies, scaled in the sense, you know, at least on processes and a lot of those things that there is no business risk, right? Yes, there is a scaling risk, there's an execution risk, but there is no inherent business risk, which is what VCs take.
01:12:26
Speaker
So once you get into the private equity part of things, you know, then it's it's larger pools of capital. You are able to kind of do very different decision making. You kind of grow in different directions from there on once you get a lot of stability. So for us, yeah, absolutely essential Akshay.
01:12:43
Speaker
Okay. Was it hard to raise funds? Was easy? Does the sector attract VC money easily? What what was your story to the funds? Oh, it's actually only gotten worse from then.
01:12:56
Speaker
okay you know holding myself guilty also in this to say that now that I'm an investor, brick and mortar doesn't cut it anymore. Simple brick and mortar won't cut it anymore. right so I was jokingly telling someone the other day to say that if I was starting Cloud9 or looking to raise capital for Cloud9 now, it would have been an even more difficult proposition to sell. right um so Look, I think it wasn't easy back then. I think it wasn't easy simply because the there wasn't much avenues of access Akshay. It's not like how you and I are talking today, right? Like as I told you, 2010 is when I was looking to raise capital and man,
01:13:36
Speaker
Forget capital as an outcome. How do you even say hello to Anaksha? How do you even do this? it's It was non-existent. I remember putting in my LinkedIn profile in campus at IIMB in 2010 simply because couple of my colleagues said that, you know, that's the next big thing.
01:13:52
Speaker
was like, okay, let's do it. That's how it was. So... You know, it was exceptionally hard to be able to even say hello to the right people. we didn't have the networks of today. There was no angel network. There was no counseling. There was no guidance.
01:14:08
Speaker
There was no sector specificity with what VC would come in and say, here are five healthcare care investment work. No, right? It was just a lot of Hail Mary. yeah How did you crack Matrix?
01:14:18
Speaker
Yeah, yeah it it took at least two years, twenty entire of and a good part of um And it it it it was, so there were other options also.
01:14:32
Speaker
um it It was a good time, at least from, you know, capital being available that I think we were able to kind of show that descript that, you know, there is there is real hunger to scale and that there are scalable playbooks that we were trying to build, though we were just the one unit.
01:14:48
Speaker
and Somebody still had to take a huge leap of faith on us. more than that we were More than us being able to kind of take on ourselves, it needed an external person to be able to do that. um So the the the conversation with Matrix then was actually led by Ashish Mopatra, who's now the co-founder, I mean, who's the founder of Off Business and Oxizo, right? um He and Ruchi are ah the only husband and wife who have like two unicorns to themselves and, you know, running great businesses.
01:15:18
Speaker
Ashish was this great guy who actually saw what Cloud9 could be beyond honestly what me or Dr. Kishore could narrate, right?
01:15:29
Speaker
I think the ambition was there, but I think he was the only one who was able to kind of put that plan into perspective to say, what does it take to get there? Right. And obviously without the backing of Avnish, who's the, again, the founder of Matrix now, z forty seven ah that, you know, that, that catalyst sort of ah push, ah you know, was very essential.
01:15:52
Speaker
Right. And I think it was, you know, they're happy because, you know, they got a tremendous exit from us, but, I think it was a huge leap of faith that they took on us to be able to kind of get to where we are.
01:16:07
Speaker
So the first one was very tough, right? And lot of no's, a lot of rejections each time. And again, look, there was nobody to kind of talk to.
01:16:18
Speaker
Very, very lonely in this entire journey. um So almost with like a fuss to be able to raise more capital, to do this, you know, I just made this as a life goal to say that, you know, this needs to happen.
01:16:31
Speaker
But it was very lonely. um Again, if you know, the advent of internet also at that time, literally nothing to go by. and you know, find avenues or say that, you know, ask chat GPT like today to say that I got rejected for these reasons. What should I be doing better?
01:16:46
Speaker
You don't know. You only go through more conversations, right? But ah but post the matrix sort of, um you know, um collaboration, then opened up avenues for a lot more capital to kind of closely watch us. Our second investor was Sequoia in 2013.
01:17:06
Speaker
And they stayed engaged for at least two years from the time that Matrix invested in us to actively track, engage. They made me meet a lot of founders in their cohort to say, you know, how they are helping them scale in whatever their ambitions are.
01:17:23
Speaker
um A lot of those things happened and despite running a fairly strong process, I was pretty clear that you know these are the ones that I'd like to build with. right So 2013 was where This happened. And I think a lot of then you, you know, and today both of them are household names, right? Like Z47 and Sequoia. I think I was one of the very first companies to actually have ah the goodwill of both of such firms to actually be able to come in and help us scale.
Preparing for IPO
01:17:51
Speaker
And it was fantastic. I think both brought very different perspectives of, you know, how do you kind of look at the scaling journey? Avneesh Ashish was very founder first and you know more rationalizing towards backing founders and believing in what the founders can do helping them with process and stuff and Sequoia would Also value that, but they would value a lot more on more process orientation. kijo manmehe How do you put it on paper? Like we've had series of workshops where, like I said, again, for like lack of better examples, why is that wall pink? Right. So how do you put it into paper to say, why is that pink? Why is this, this big? Why is it not lesser? Why is it not bigger? Right.
01:18:30
Speaker
ah Where does each thing needs to be? Instead of saying Rohit likes it like this versus does it really make sense? Right. So they were able to kind of translate a lot of first principles thinking into actual realization of saying, hey, is this good enough?
01:18:44
Speaker
Then started the whole private equity journey. True North happened in 2016, late 2015, 2016. And, you know, they started talking about this term called EBITDA.
01:18:56
Speaker
um And, you know, that's that's when it dawned upon us to say that, okay, this is also happening. Thankfully, the business inherently had the capacity to generate EBITDA. But again, some of the things that you realize, Akshay, is, you know, when you start focusing on a certain aspect, right, it's not like you overnight it will change. your jagger right It takes time. It takes process.
01:19:17
Speaker
The decision you take today has a ripple effect over a period of time. So how do you kind of rationalize over all of those things? it's It's a lot of different perspectives that some of these guys brought in, right? So over a period of time to that, to then TPG Temasek, TPG NewQuest, which came into the cap table, how are they thinking about ah watch is what is the growth prospect to now Temasek on our cap table where Temasek is for, you know, go for glory, right? So do more, get more, because for them, the capital is abundant. So they want to be able to kind of
01:19:51
Speaker
push you towards, you know, doing a lot more of what is possible, right? um Not to say that, you know, you break everything that you have, but to say that, you know, think that if there is a way for capital to solve some of these growth pangs, we will solve for it, right? So how do you kind of then on at that position, how do you think of scaling, right? So it's just been a crazy, fantastic journey. And with all of this, like I said, even from going public, we are we're a public company, we have not gone public yet.
01:20:21
Speaker
But that entire journey of, you know, how do you make a company public ready? What does it mean to be able to live on a quarter on quarter sort of exercise? um How do you kind of build with that almost...
01:20:34
Speaker
uh near precision like predictability of how your next quarter would kind of fare and what do you do to get there right so all of these things i think you know it's just been very very different that you know now obviously capital just becomes again it's it's it's still ah very important catalyst but that's not what is defining the company right the company is defined by the outcome that we produce the quality that we stand for And all of these investors over a period of time have added lot of value towards thinking towards it. And one thing which was un uniform across all of these guys is to say, over-invest on professional sort of you know network for us to be able to do this, over-invest on technology, over-invest on building the culture of the company. right So I think for all of them, it was consistent throughout. And I've seen...
01:21:26
Speaker
i've seen heard a lot of horror stories of how, you know, a lot of investors, founder relation kind of breakdown. We've just been plain vanilla lucky to have like great guys, you know, believing each other. Right. So.
01:21:41
Speaker
Amazing. What was your revenue when Matrix came in 2012?
01:21:47
Speaker
2012, that year, ah this was, no, I know the number exactly. It was 28 crores that we would have. So it was a trailing. So FI 12, 11-12, we would have closed revenue at 28 crores.
01:22:04
Speaker
And EBITDA was about 34%. um I don't think we've seen that EBITDA any time after. but I can imagine.
01:22:15
Speaker
And yeah this year, what did you close? twenty four twenty five North of crores. Wow. Wow. Amazing. What a phenomenal journey. Yeah, it's just been crazy, man. It's just been crazy. I think more than anything, all of these things, it's just the sheer dawn of responsibility. Like the other day, we were looking in terms of what is our market share in Bangalore and three out of five babies in our TJ which are born are actually born under the cloud nine banner, right? Which is, you know, one that's huge goodwill, but it's also a tremendous responsibility on us to continue to do good, right? So um that's a very important metric that we look at on what's our market share.
01:22:55
Speaker
um So yeah, I mean, on on those counts, it's just been crazy, man, and continues to grow. So, you know you mentioned how Sequoia and Matrix had different approaches or investor thesis, if I can use
Transition from Founder to Investor
01:23:11
Speaker
that term. What is your investor thesis now that you are a VC yourself? and So, look, I think the the commonality is, and again, I think, look, it's also about the stage of investment.
01:23:25
Speaker
um Today, Akshay, like you would have also seen the stages of investment are a lot more defined if you're coming in at an idea stage or you're coming in at a seed stage to growth stage and all of that, right? so We would like to call ourselves as someone who comes in at the seed stage where there is little bit of product market fit.
01:23:43
Speaker
ah We're not fussed on um amplified revenues or something, but we need to know that there is avenues of being able to generate revenue. and were Very fussed about looking at, you know, what are the customer metrics? that How obsessed are they on the customer metric?
01:23:58
Speaker
With all of that, I think for me, the kind of... investor behavior that I like to bring on the table is to look at capital infusion as just a one-time thing right and you know in good cases maybe a couple of times three times in their journey but the capital infusion is one time but what is it that you can do beyond that is what is important and yes I built a healthcare business but I think I only bring the operator sentiment to this or you know um having been an entrepreneur sort of sentiment to this which means
01:24:31
Speaker
The problems of scaling are the same whether you are building a technology company or building a healthcare company or building a logistics company or building a SaaS company. It's all the same. How do you build culture? How do you hire the right people? um you know How do you kind of make sure processes are what they are?
01:24:45
Speaker
So for me, it's about being able to build that relatability with the founders, right? I am no one to kind of question what is the time that they're going after. Like if you had asked about time for Cloud9,
01:24:59
Speaker
TAM was as big or as inexistent as it was, right? Because it's not a patented way of saying here's how you deliver, right? So no. So I think it's it's left to the founder's imagination of how big the TAM can be.
01:25:13
Speaker
But we are just looking for certain validations to say that, you know, this is how it will work. And that's where we are there to kind of support them, right? But for me, listen, actually, I am still trying to fit in as an investor. am still trying to figure out ah institutional investing in terms of you know being able to do some of these things. right I was a very happy angel investor, close to 70, 75 companies that I'd invested in.
01:25:35
Speaker
tremendous run with all of them with literally me having to do nothing. Right. And that's the sort of spot that I'd enjoy. And now having to roll up your sleeves and actually work with founders, you know, in a one arm distance sort of, you know, restriction where you can see them doing something and you still can't kind of do something where, you know, as a founder, My prerogative was to find answers on everything. right But now as an investor, you have to kind of ask questions so that the answers kind of find itself. right It's a very different thing. and um
01:26:07
Speaker
I'm still learning the trade of it. have two amazing partners who are very very good at it. so you know I take the liberty of being able to just ride on what they are able to do on this. um But I think, again, people kind of, again, as founders, my, and the, the relatability I was telling you about founders is to say that, can we take the discussion away from pure capital as a commodity, right? Like, like I told you it's one, two, three times that in their lifetime journey that our stage of investing, we will be able to invest capital in, but,
01:26:37
Speaker
Can we help them focus on the problem and obsession about the problem rather than obsession of the solution? Right. And that's what I try to kind of talk to them about, because if you get obsessed on the solution, then you start telling everyone that my way is the best way of doing it without understanding if the problem has changed.
01:26:54
Speaker
But if you're solving for a particular problem, you will find that new solutions need to be kind of tweaked out every time right so for me i am more this and you know it's actually my partner's problem because i'm a yes man for everything i like everything we see the i say yes to everything which comes to the ic
01:27:14
Speaker
I think the fundamental DNA of an entrepreneur is optimism, right? So it's hard to bring in pessimism of an investor. yeah Yeah, yeah. No, that's where the balance helps though. Like I said, I'm still learning, man. I'm a noob here.
01:27:31
Speaker
Why transition into being a full-time investor? Why not just stay with Cloud9 till the IPO? Yeah. So, I mean, that was the plan, right? Like in 22, when I transitioned out, the objective was that, you know, we will transition into a public company and then I get focused on this.
01:27:50
Speaker
ah The markets weren't the most recipient i at that time in 22. And which is why though we're a public company, we didn't go through with the listing as a offering to, through the IPO.
01:28:03
Speaker
um But all of it, like at told you in terms of behaving as a public company was already there. So I had already planned my transition out. Why institutional investing was Akshay and you asked me that question, how difficult was fundraising? 2010, 2013, that entire period, i had actually kind of told myself that good entrepreneurs should not be going this going through this much struggle to raise capital, right? So In my naivety of thinking world won't change, I had said that I should do something about this and I just put it on the top you know back of my mind.
01:28:39
Speaker
ah Started with a small incubator post the Sequoia investment where a lot of product companies can come and build with me. ah Looked at some how some of them scaled really well and then realized that I'm missing out on the equity journey of those co-built sort of opportunities.
01:28:56
Speaker
2015, put together a small family fund, um started investing in a bunch of founders. It was largely orchestra orchestrated by the fact that Ashish, like I mentioned, was leaving my board to start off business.
01:29:11
Speaker
And, you know, we were we were so thick that, you know, I told him that even if we were selling cows, then, you know, that's a business I would want to be in with him, right? So, That's the sort of you know level of trust that I knew that he's going to do something without realizing what off-business does or what was even the business plan. But ah that required orchestration of pooling off some capital where you know we could then be a part of his journey.
01:29:37
Speaker
And that's opened up to be able to then build a good network of founders. ah for me honestly Akshay it was selfishly more than just being able to put that small capital because listen that capital would have made no difference to them in their journeys but It was just being able to take some time with them um and just learn of them. right I told you earlier in the conversation that there were a lot of parallel industries that we were looking at.
01:30:03
Speaker
For me, the parallel conversations I used to have with a lot of these founders were exceptionally useful for me. right So I continue to like that journey. 2017 started participating on a few ICs of investors at that time.
01:30:20
Speaker
who were coming up and, you know, where I had a good network, I was able to kind of take some companies to the IC, was able to get myself invited to some of these IC, understand how little bit of institutional investing decision making is taken.
01:30:33
Speaker
um um And then in 2019, I became a scout for Sequoia. So I was amongst 20 odd people in the country at that time who could write a check on behalf of Sequoia and now peak 15.
01:30:45
Speaker
um So that was again a mad experience. Suddenly you have... institutional capital that you can represent. You also have the the power of the analyst and the associate layer.
01:30:57
Speaker
um You kind of go a bit deeper and understand the technology, the team, the TAM, and all of that, which previously I wouldn't even question. uh with all of this you know incrementally started thinking towards if i had more time on my hands what is it that i would do and that's how in 22 and i knew that ankur and karthik my partners at peer capital were willing to be a part of this journey uh it just made more sense to kind of you know do this a lot more right so um that's how the transition happened so for me it was at least a
01:31:30
Speaker
calibrated stepwise ah decision in terms of getting into institutional equity time will tell if this was a useful decision or not but at least now i have to live with the decision did you underestimate how hard it would be to run a vc firm grossly grossly understood it is ridiculously hard um what what are the things you've discovered that are super hard but Everything, man. It's just, you know, it's... One, it's not your capital. You are always in sell mode. I honestly thought...
01:32:06
Speaker
Not being a founder, I don't need to be in sell mode because it ah honestly takes a lot out of you. But man, this is like two weeks over again. one told me it's going to be as difficult.
01:32:18
Speaker
and Setting up a fund in India and working under the aegis of SEBI is again, um you know, yeah the compliance requirement and obviously for a very good cause is very, very high, right? So you are then...
01:32:33
Speaker
uh constantly digressing towards uh making sure you're on top of compliance on a lot of these aspects uh no one tells you about and this is where having great partners helps because you know that's that's something i don't even get into because karthik my partner is just super good at all of these things because he's done this for decades so um And, you know, ah constantly searching for the next set of founders to be able to invest in. And like I said, the sell mode is for good founders will always have access to great quality of capital.
01:33:08
Speaker
How do you kind of become top of mind recall, right? I think it's very essential. So at least in in in the entrepreneurship journey for building Cloud9 Akshay, you know it It used to be ah you know points in time where you are putting your mind towards raising capital, but then it's heads down, ba by by build, build, build, build. That is missing. yeah In a day, you are having a range of conversations from ah someone who's interested in investing in you or you are getting them interested in investing in us to...
01:33:41
Speaker
us investing in someone else to nurturing the team to you know building the brand and oh it's it's uh it's complicated man
Challenges in Running a VC Firm
01:33:52
Speaker
grossly underestimated like i told you which part of the sales is harder like selling to founders or selling to the lps who invest in the fund I think selling to LPs. Right now, at least it's it's it's actually a lot tougher. Again, simply because of the nuance that we are a first-time fund, it was a lot harder.
01:34:14
Speaker
There is only so much that our networks was capable of, you know, ah being able to bring on board. But the first one, like they say, is always the hardest.
01:34:24
Speaker
ah We're thankful that a couple of large institutional investors also joined the um you know the investor cap table, investor table for us. But going forward, you know, it is going to be largely more institutional investors. So um that for me is also a journey because institutional investors look for a lot more ah data orientation than just, again, like I said, that, you know, like some of us felt that this is a great opportunity. You can't just do that, right? So you have to have a lot of
01:34:56
Speaker
data and documentation towards it right so that's that's a large part of the learning for me and it's it's it's not one conversation actually it's a lot of conversations right and um in this ah sort of journey or version two of my life is you know Here you are not directly responsible for the outcome, right? In version one, you were to a large extent. Here you are like a conduit, right? And you are allowing or catalyzing someone else to deliver that outcome on your behalf. So it's a very different sort of
01:35:32
Speaker
perspective that you have to deal with. um And, you know, increasingly over time, you will also find that there will be a lot more people like me. And that's, it's actually a superb thing for the country to have as an ecosystem where a lot of founders also now come on this side to represent capital and build that relatability with founders, right?
01:35:52
Speaker
We still don't have enough. yeah I think we need a lot more of this to happen. And which is where again, so for investors, they'll obviously have choice of where do I deploy capital? So how do we put our hand up to be considered as top of mind for them is again, a harder sort of thing to do, right? So I'm not saying pitching to founders is easy.
01:36:13
Speaker
ah Relatively, this is a lot tougher, right? Because ultimately look for founders. Yes, we can sell ourselves, but you know, there is a draw of capital, which kind of also has its own sort of bearing in terms of decision decision making right that that capital is useful uh whether us as a partnership are useful or not um but for the lps i think it's a lot harder conversation so which is why for me at least you know relative index that's a lot tougher does india have enough domestic capital for vc funds to tap or are you going global
01:36:48
Speaker
a No, at least for our fund one, which we closed shy of 40 million, 98% was domestic. um ah There are some amazing institutions like CIDB who encourage a lot of these ah fund managers to actually be able to bring in good good avenues of capital.
01:37:15
Speaker
ah We were told that just by the number of government initiatives, there's anywhere between 25 to 30% of the capital you are looking to raise can actually come through government. Governments are a great institutions.
01:37:30
Speaker
um Purely from a planning perspective, it's another thing to be able to get it done. But there is avenue for that, right? And they are great gatekeepers to... allow for other institutions like banks and insurance companies to also be able to follow suit and then be able to invest in.
01:37:48
Speaker
It is still obviously a very, very new asset class. um Like we discussed, it's probably like a decade and a half old. At its best, people have only now started seeing exit cycles. It's a largely illiquid sort of asset class, right?
01:38:05
Speaker
People are not very familiar with it. um You would still find from an asset allocation of large family offices, you're competing with real estate to ah debt products to public markets, right? So in in terms of just asset allocation as a percentage, ah venture would still be like low single digit ah to maybe close to double digits in terms of allocation, which means there is limited capital, right?
01:38:34
Speaker
um Institutional investors. So a lot of us, as we grow into new tenors of funds of let's say fund two, fund three, ah there is a lot more access of international sort of capital, which comes in.
01:38:49
Speaker
Typically fund one, a lot of people are risk over section. So you don't really have a lot of them coming in. They'd love to do a wait and watch. They'll do a tracking. They'll engage with you.
01:39:00
Speaker
But typically, Funt2 onwards is where a lot of these guys would show interest.
VC Performance Metrics
01:39:07
Speaker
So hopefully, it's going to be a bit more different as as we kind of look to, you know, get this one under the belt and then look at Funt2.
01:39:18
Speaker
Okay. You know, i i have a very similar set of questions and you'll probably find them a bit repetitive. But what are the metrics that you would show when you're going out and pitching Funt2?
01:39:31
Speaker
What metrics of fund one matter to limited partners? um and These are all learning. So I'm sharing borrowed sort of learning that I'm picking up on thanks to my partners.
01:39:46
Speaker
ah One is look depending on the timing. So for example, we started in 2022, late early about two, two and a half years in our journey.
01:39:58
Speaker
Our investment journey itself is a period of 36 to 42 months. So which means three to four years is where we would actually invest, which means we're still investing from fund one. How much is deployed so far?
01:40:10
Speaker
About 57% is what we've deployed. um We have 13 companies in our portfolio. We're looking at two more to join pretty soon. Ideas to get to about 20, 21 odd companies that we can put in our first checks.
01:40:26
Speaker
few of them have already gone and you know demonstrated good growth, attracted follow-on capital. We've been you know able to pat participate in this follow-on rounds as well. um So as a mix, you know,
01:40:39
Speaker
Depending on when we look to launch our fund too, ah there are a few parameters. One is in terms of market coverage to say that if in a certain sort of size of investment, ah the sector that we are focused on, ah did we get to see that particular opportunity which got invested irrespective of outcome, right? So what is our coverage on the sectors that we're looking at becomes an important metric.
01:41:04
Speaker
Two, what is the amount of diligence that we do in terms of documenting a lot of these things, whether it's a yes or a no on these investments, right? um Three, if we are able to show great MOIC, which is multiple on invested capital, ah it's great to have as a metric.
01:41:23
Speaker
um Anything beyond one and half to two, which means if you've been deployed $10, if you're already looking at Moik on paper at 20, you're a fantastic firm within this small period.
01:41:35
Speaker
But it's important to show that you have invested in companies which have gone on to raise capital at higher sort of valuation from where you entered at, right? So that Moik is important.
01:41:46
Speaker
the The golden truth moment is obviously being able to return that money, um right? DPI as it's called. That is very early in our journey. What is the full form of DPI?
01:42:00
Speaker
DPI is distributed to paid-in capital. Basically, if you've deployed $10 and have you been able to realize $10 or more and you've been able to return that back to your investors, right? so Which add is what like a...
01:42:14
Speaker
Maybe a decade long journey or I mean. Yeah. So usually it is something which is looked at over the fund life between eight to 12 years is typically what the fund lives are. So DPI is something that changes over a period of time. And which is why, like I said, early on, you won't have DPI because the companies are scaling.
01:42:31
Speaker
Very few companies get acquired very early in their journey. um So that DPI is a hard metric to kind of fashion at least between fund one and fund two. But over a period of time, this becomes an important metric. MoIC and DPI becomes the very important metrics to say that one, you are able to invest in good companies. Two, you are also able to exit good companies. right So that's these two become the critical factor.
01:42:55
Speaker
And then, of course, there's all the nuance of being able to again say that, you know, what's the composition of us as GPs in the fund? What is our sort of shareholding? How are we nurturing a team?
01:43:08
Speaker
What is second level? um Are we again looking to grow like an institution or is this something that we will look to do till we are like 75 or 80 or become senile? ah What is it that we are actually kind of demonstrating? So some of the software aspects also go in.
01:43:22
Speaker
How much use of technology do we have? um Much like I shared before, even even here from the very first opportunity that we've seen, we've been able to document it really well. and There's a CRM which we use to be able to track everything that we do, even conversations over WhatsApp, email, in-person.
Developing VC Ecosystem in India
01:43:39
Speaker
Everything comes and sits into one place so that it's easier for someone to kind of go into understanding the decision-making or the rationale with which we are kind of investing. All of that comes into one place. So how do you keep everything institutional ready is what is important, right? So these are certain things that people kind of look for.
01:43:59
Speaker
um And look, again, like a like a public company, again, you have to close a lot of things quarterly. There's reporting which happens every quarter to SEBI, to your investors.
01:44:11
Speaker
ah with the utmost transparency in terms of every accounting to every single rupee and pausa that has come into the fund to where is it deployed or how is it being used all of those nuances to how the portfolios are performing um if there is bad news to give how do you call the bad news hour to if there's good news to share obviously you'll be thrilled to share it so a lot of these nuances and generally in terms of also what is your sort of market rep right like again between fund one and fund two it's it's it's bit early to earn a market rep but if there is referenceability like can someone uh call up a founder and say tell me about Rohit right so can you even do that or tell me about Ankara tell me about Karthek so
01:44:54
Speaker
um We have to live by that too, right? Because in today's connected world, it's pretty obvious that someone can actually do that. So it comes to some of these software aspects as well. But yes, there is the um there is the outcome metrics, there is the software aspects of culture and institutionalizing, and there is the referenceability.
01:45:14
Speaker
Okay. What are industry benchmarks for MoIC and DPI? But if you see global sort of context, you know you will see a lot of good parameters out there. And it's very different. I think the risk appetite there, the asset class, which is, it's a fairly accepted asset class because you know your ability to generate outsized returns in most other avenues are non-existent, right? here Real estate is still fairly accessible for most people.
01:45:39
Speaker
um Gold, for example, various other avenues, right? So public markets continue to kind of do well. So ah for most of them, like even for example, our bank's interests are like 7%, which is like great, right? So ah you don't have that in most developed countries. so this is established a a fairly good asset class to actually generate outsized returns. So The risk appetite is higher.
01:46:01
Speaker
um The ability to harness technology. So, for example, in the US, not that you can't do it here, but in the US, you you can actually go and list with zero revenue, right? Simply because you have a parent to your name.
01:46:12
Speaker
You have something which is highly protected. Yeah, and right? So, you can actually go and do a lot of dosing and encourage for it. ah Here, we don't have... that high of a risk appetite, right? Like you saw some of the startups which actually went and listed that if you weren't profitable very soon, you get beaten up for it, right? So we're not there yet as a country. So some of these things kind of shape the way you are able to drive outcomes, right? So ah we have to wait for an a lot more throughput out of Indian sort of investment context to be able to see that.
01:46:45
Speaker
We've already got some great outcomes. Like I mentioned, you know, Bloom has put out a lot of these things as Omega files to uh you know talk about our outcomes are reported um it's fantastic to see that on what's dpi what's mike and so on but they've all had history right they've all had that sort of history to be able to do that so yeah but generally the asset class in our country is a uh very very early sort of asset class So, you know, you like to convert decision making into a process. What is the process through which you decide whom to fund?
01:47:18
Speaker
Are there like some clear checkboxes, clear parameters? How much is intuitive? How much is ah science? Oh, so look, there is between art and science. I think it's it's a fine balance. Yeah.
01:47:34
Speaker
the The fact that I think there will be a ah significant emphasis on the founder quality itself at the stage of where we invest our first check is actually largely overbeying than everything else, right?
01:47:47
Speaker
Yes, we want to draw comfort on the fact that what is the market they're going after? Is it existent, non-existent? Is it a beachhead? Is it ah you know more more about being able to create efficient throughput?
01:47:59
Speaker
um Is it about... ah them being able to showcase what is their founder market fit so to say you know, why are they the best sort of people to be able to tackle this problem today and here and now, right? So some of these nuances are,
01:48:18
Speaker
We will actually over index a lot on the founder, um draw a lot more comfort on, like I said, market exitability, horizon of staying invested in an asset of that nature.
01:48:30
Speaker
ah There is a lot more science to it because if there are established avenues of what is the willingness to pay, established avenues of being able to charge someone new for a particular aspect versus you know being able to do something cheaper, faster.
01:48:49
Speaker
uh we have to kind of understand these things right because ultimately look someone is paying for the service so if that willingness is not there then what is he or she trying to build if it is india to india india to the world very different context so we kind of understand some of these things but look intuition gut feel is a very critical factor right and again it it needs to be balanced out with some of us on the investment committee to say where huge amount of optimism is not enough, right? It's so also being able to look at practicality of some of these things from a fitment point of view.
01:49:23
Speaker
Even if you're the fourth team to actually attempt the same problem, what makes you different? It's not to say that everything, first three gets it and, you know, that's it, right? It doesn't work like that. How do you kind of look at some of these things is very important. So largely to do with founders, everything we kind of do from referenceability.
01:49:42
Speaker
Yes, there is intuitiveness and gut feel, but you also back it with a lot of process. You go and talk to a lot of people. you have to kind of have a very high bar on referenceability for the founders. um And again, in two today's day and age, it's very easy to kind of do this.
01:49:55
Speaker
You would know someone in the alumni, someone in their um ex, you know, workplace and so on. Right. So. ah There is that veracity with which you kind of adapt processes into some of these things. But yeah, it's a combination of these actually.
01:50:10
Speaker
Okay, fascinating. You know, while you want capital to be something that your ah portfolio companies raise once or at max three times,
01:50:21
Speaker
But at the same time, you have a pressure to show Moik. And to show Moik, you need to have your portfolio companies raise, follow on rounds. Isn't there like a little bit of an inherent conflict in the... No, no. What I meant was... Yeah, no. What I meant was that we be able to participate in at least two to three times of their capital raising journeys.
01:50:41
Speaker
It is okay not to say that they only raise for so many. Yes, they need to raise sufficient amounts of capital to be able to prove their thesis out. um I just meant that our ability to partake in some of those rounds, right? Like if someone raises up to Series B, Series C, you know, we can only participate or hold our position from C to Series A, Series B. Series C onwards is where we actually look to exit, right? So,
01:51:06
Speaker
Someone who's on the anvil of being able to raise consistent capital periodically well and fast, it's the best thing that can happen. Right, right, right. Okay. Though a lot of people criticize the VC model for that. Like the fact that there is this inherent pressure of VC-funded businesses to continue to raise because the backers, which is the VCs, need to show Moik and Moik.
01:51:30
Speaker
So do you agree with that criticism? Yeah, I mean, look, everything has its fair sense of criticism also, right? like That way if you look at why do we invest in public markets, we just know that you know that money is actually going to get compounded.
01:51:45
Speaker
Now who are you selling to? You are selling to another shareholder who believes that there is ability to grow from here. So private markets are no different that way. and It's just that it is a far more secluded sort of capital or yeah you know asset of that nature which is not accessible to everyone.
01:52:02
Speaker
But by nature of what it is, yes, everyone is coming in with the financial prudence to say that I need to be better off at the time of exit than my entry. So it is that. ah But look, I think the good founders will obviously find a way to say that at every stage of them being able to raise capital, they will find avenues for it to be able to grow in value, right?
01:52:20
Speaker
Be it public or private market. And that's that's really what we have to believe in here. And look, sometimes the um Like I told you on the inherent business risk versus inherent scaling risk, right?
01:52:33
Speaker
This is different for different people, right? Like I said, PE likes to come in with just the scale risk, not business risk. But in VC, you have to go in for business risk, which means you will deploy that capital. And, you know, as he or she starts building towards achieving their thesis, you will find that there will be more people who will come and get attracted to the fact that, you know, what he or she is building is of value.
01:52:56
Speaker
So that's where the value gets created. So it's not just saying, you know, Moik is important. Moik is important in anything that we do. It's a house that we buy, the car that we but drive. Not true with a car. It depreciates for tax purposes. But, you know, we just know that anything we do, it has to have more value at
AI Investments - Cautious Optimism
01:53:14
Speaker
the time of exit.
01:53:14
Speaker
Right. So it's the same. Okay. Okay. Got it. Do you buy into the AI hype or do you think this is a bubble? in terms of how it's influencing your a decision on which companies to invest in?
01:53:30
Speaker
So, look, it's definitely not a bubble, Akshay. You know, I'm... ah ah the You know, there's there's this old... Gartner technology graph, which is I think more than a decade or maybe 2010 or 11 or something, I don't know, ah where if you have X and Y axis, X axis being and time, Y axis being um expectation.
01:53:58
Speaker
Over time, right, you will see a lot of these things. I spoke about internet. I grew up in the era where internet was a fad. All of these will go through a cycle and it goes through a very strong technology trigger. It goes up on huge hype expectation and probably where towards the weaning off of something like this is where AI is today.
01:54:17
Speaker
And why it's important is because it goes to a negative trough where you will find detractors. You will find a fair amount of criticism. You will find a fair amount of mortality of people who are trying to ride on this wave.
01:54:29
Speaker
to it becoming something which is, ah you know, very negative and then finding its plateau of productivity. So it will actually go like this and then go like here, right? So people who have been able to ride this curve and then get to plateau of productivity is where the real outcome is, right? And we've seen a lot of good businesses going through a lot of these to actually be able to so sustain or wither away.
01:54:53
Speaker
Yeah, I think it's going through the, you know, the peak of its AI hype cycle. And then actually becoming a way of life. So you will see a fair sense of negativity, which will bring this down. But then you will see that, you know, this becomes a way of life, right? So this over a period of time, given how technology itself is progressing, this time itself is shrinking.
01:55:12
Speaker
So this axis itself is shrinking. So today, is a hype? I think what a lot of people where it's very superficial and not owning up data and building true nuances.
01:55:25
Speaker
Yes, it's a hype. ah are there a lot of people riding the hype and saying here's what I can do? Yes, right? I mean, it's it is a way of life. But I think the for us, what we look at is to try and go a bit deeper. So for example, ah lot of, let's say, hardcore strong LLMs or hard infra AI like a Krutrim or a Sarvam and all of that requires tremendous amount of capital from the world go.
01:55:52
Speaker
That's not for us. And it's for us to also be able to realize to say that we can't possibly even have a play there. Right. Even if we have access, we can't play there.
01:56:03
Speaker
But we have to play on the application front of all of these things to say that, yes, there are great models which will come out. well How do I use that? And be very careful with the fact that the pace of technology that what is a great product today is just becoming a feature tomorrow.
01:56:16
Speaker
So how do you kind of do this? And we don't live in an isolated world, unlike our neighbors, where we say that, you know, great tech, you keep it, we'll build our own, right? We allow for everything to come in. So even if we haven't built something on our own, like, you know, a significant of significant significant number of users on ChatGPT are coming from India.
01:56:37
Speaker
GitHub, largest number of hits are from India. So, you know, there are so many things which are happening, which is very global in nature. So how do you even play to some of those things is very important. So you will still find that there are some founders who a great fit in this to use that sort of technology, their nuance of what they were trying to do, and then being able to build it, right? So just that hardcore AI cannot be something
Ideal Investment Strategies
01:57:02
Speaker
that should be there. And you will see this across everything that we do in terms of a lot of these things becoming real right so for example um it was recently announced that you know now it's not just google which will be the search engine like perplexity is now coming on to samsung and motorola phones as the primary sort of search instead of gemini which was there till date right so you will see a lot of these things changing because inherently different models which will come in and say there's a new way of life but over a period of time you will see that everything will have ai in it right like
01:57:32
Speaker
For example, this podcast we're recording, I'm pretty sure previously if you were using four people to kind of help you edit, today you'll use tools which you probably need two people to kind of help you edit, it right? So yeah these are things which, ah you know, we have to accept that these are these are there, right? So um it's about just being able to have meaningful conversation, unlock a couple of layers at least to be able to understand if what they're building has the veracity to stand the test of time. um Or if it is more, like I said, you know more a product which becomes a feature tomorrow. right So I think that's what we have to be a bit careful about. We are cautious, we are optimistic, but we are cautious.
01:58:13
Speaker
We have two companies which are AI native. We will probably have one more, which will be AI native. in what space ah One is in enterprise SAS. Another is, is in sports analytics.
01:58:30
Speaker
um And another one hopefully will be in gaming. So we'll see. Wow.
01:58:41
Speaker
Okay. ah Last question to you What, uh, what kind of founder and what stage of business should approach you for funding? Like if you'd like to receive pitches, then are there any suggestions you have that, you know, in terms of your ideal founder profile that you'd like to receive pitches from?
01:58:59
Speaker
oh we don't have a founder profile as such. I mean, we are not... Or even stage of business or sector. Yeah. So stages stage is more ah stage ah stages more easier to define.
01:59:12
Speaker
um So typically our ability to invest capital, Akshay, and this will give a, I'll tell you why I'm talking about this is, you know, we typically invest between 8 crores to 12 crores. So between but around about a million to million and a half.
01:59:28
Speaker
And with all of this, we usually want to have about 12 to 15% of the underlying company that we invest in, right? So, This kind of gives a sense in terms of, you know, the stage that we invest in. in some cases, strong founders, repeat founders who have access to good quality capital, maybe in their idea stage itself, you know, so get subscription of this nature, not just us, but someone else.
01:59:56
Speaker
to be able to kind of, you know, raise a sort of capital. For some others, you may have to prove some things out, like I said, to have a little bit of top market fit and so on then be able to, you know, attract attention from the likes of us, right? So it's a combination of both.
02:00:11
Speaker
But someone who scaled beyond this to say that if they're raising like a four five million round, Obviously, our million at 12 to 15% is not something that they can construct because then you're giving away like 50, 60% of the company, which is ridiculous.
02:00:24
Speaker
So that's not a fit for us, right? So it's early stage. um It's either idea or seed is what we typically kind of do. In terms of...
02:00:35
Speaker
Sector, the overarching theme that we have is we are in the consumption enable consumption enablers, right? We want to back consumption enablers. So it basically can split into everything across you know consumer tech.
02:00:49
Speaker
It can be enterprise solutions. It can be B2B business enablers. It can be gaming is a core subset of what we do because Karthik is very good at it. um Healthcare is something that we actively look at because I have access to it.
02:01:03
Speaker
um So some of these is what we largely look at, right? So what do you like know what we do consumption enablers, like, are you saying? Yeah, so anyone so, so, okay, let's, let's look at it. This for consumption enablers is basically, let's say, so there is huge amount of consumption appetite, which is growing in the country in terms of new brands being created, you know, new things, which is more aspirational and so on.
02:01:30
Speaker
So one is to invest in some of these new edge brands and such, right? We are not looking at that. We are not looking at D2C brands. We're not looking at new brands creation, but there's a whole... big layer which enables this sort of growth and consumption to happen so for example if it is through logistics if it is through financial sort of ah cadence if it is through ah better throughput on this if it is supply chain um you know all of these things we kind of because we feel that irrespective of one or two winners will come out of the actual category if there are enablers we actually kind of want to be in the meteor layer here
02:02:07
Speaker
right so that's that's what uh we mean by consumption enablers and this is that across like health and all of that too and this is not a winner take all market right like the consumption enablers not necessarily you will have at least uh yeah you will have good competition of at least some three to four in this right so you can still be late to the party and still find your uh good kick right so