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Pranav Pai (3one4 Capital) on Backing Licious, Darwinbox & India's Next Decade of Unicorns
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Pranav Pai, Founding Partner and CIO of 3one4 Capital, has spent a decade betting on Indian founders at the earliest possible stage, often when they are just two people on a laptop.
From backing Licious when 50 investors said no, to spotting Darwinbox before enterprise HR software was considered a credible category in India, Pranav has built a track record that speaks for itself, including a 6x Fund I return, a single-digit loss ratio in a market where 30 to 45 percent of VC capital typically goes to zero, and five unicorns across a $570M portfolio.
In a candid, wide-ranging conversation with host Akshay Datt, Pranav shares why he deliberately caps fund size, how he fires people for persistent poor judgment, and why AI can now write your investment thesis but can never replace genuine market instinct. He also delivers one of the sharpest takes on India's foundational AI debate, the myth of the vegetarian Indian consumer, and what it actually takes to build a performance culture inside a VC firm.
What you will learn in this episode:
👉How Pranav Pai and 3one4 Capital built India's highest-performing early-stage VC fund without an investment banking or IIT pedigree, by betting on operators over financiers
👉Why 3one4 turned down capital to stay sub-$250M, and the precise mathematical logic that makes fund size a performance variable, not a vanity metric
👉The real story behind the Licious and Darwinbox investments, two of India's most celebrated startup bets, both rejected by 50-plus investors before 3one4 said yes
👉How Pranav evaluates founders using three non-negotiable criteria, including one he rarely admits publicly, and why pain and anger are features, not red flags
👉Why AI can write a 90 percent accurate investment thesis today, what that means for the future of VC as a profession, and where the actual edge now lives
👉Pranav's unfiltered view on India's AI sovereignty debate, the $10 trillion GDP trajectory, and the third path India must take between the US and China models
If you found this conversation valuable, subscribe to the Founder Thesis Podcast so you never miss an episode. Follow host Akshay Datt on LinkedIn and X for sharp takes on Indian startups, venture capital, and the founders building India's next decade.
Chapters
00:00 - Pranav Pai's Journey Into Indian VC
05:10 - Why 3one4 Capital Stays Sub $250M
13:00 - The Math Behind Fund Size and Returns
20:30 - How 3one4 Backed Licious Against All Odds
31:00 - Prepared Minds: Luck vs Decision Quality
37:00 - Darwinbox, Decision Logs and Firing for Bad Judgment
47:00 - How to Judge Founders at the Seed Stage
01:03:00 - Two Unicorns in Fund One: The Inside Story
01:09:00 - What VCs Actually Need to Be Great At
01:17:00 - Pain, Anger and the Fuel Behind Great Founders
01:25:00 - Market Truth, AI and the New VC Edge
01:39:00 - 3one4's Four Big Investment Themes for the Next Decade
#PranavPai #3one4Capital #FounderThesisPodcast #IndianVentureCapital #VCIndia #IndiaStartups #EarlyStageVC #StartupFunding #Licious #Darwinbox #UnicornIndia #IndiaVC2025 #VentureCapitalIndia #StartupIndia #IndianFounders #FundingIndia #AIStartupsIndia #IndiaStartupEcosystem #VCFundStrategy #AkshayDatt #HomegrownVC #IndiaGDPGrowth #DecisionQuality #FounderEvaluation #SeedFundingIndia
Disclaimer: The views expressed are those of the speaker, not necessarily the channel
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Transcript
The Sport of Venture Capital
00:00:00
Speaker
VC is also like that. It's a performance sport. But everyone on Twitter feels like they can comment without having put anything at stake. I can't think of five high-quality growth funds that purely Indian, homegrown, or that exists today. So you're saying it's luck, like you got lucky? It's not luck. I really think it's prepared minds ready to grab an opportunity when the probability hits you. I get gut punched more than I get medals and accolades. The only thing i like about that is I can survive.
00:00:23
Speaker
Pranav Pai is the founding partner of 314 Capital, a homegrown Indian PC firm that bet on India before anyone else did, backing unicorns like Vicious and Darwin Box. You can't assume that just because you're a VC with a certain brand, you have this supernatural ability to just catch winners by default. How do you minimize the cost of the failure? There is no amount of pieces after a point that will save a company. It has to be exclusive. Do you think that pain and anger is like one of the key ingredients to really grow and get that outsized success? In India, there's no choice.
314 Capital: A Decade of Indian VC Innovation
00:01:02
Speaker
Pranapai, welcome to the Founder Thesis podcast. You are the founder and GP at 314 Capital. ah Give me like an overview of 314 Capital.
00:01:15
Speaker
Yeah, of course. Good to be here, Akshay. Thanks for your time. At 314, we're just finishing our 10 years this month. We started as an early stage VC firm. We're called what is called a homegrown VC firm in India. So they keep classifying you in different ways. So our best investments are all two guys in a laptop when they come to us.
00:01:33
Speaker
ah So that's how early we go. And of course, we hope we can stay invested with our best companies as they go IPO. We finished our first, we have a few more underway. ah So it's been a good 10 years. Traction, small IPO relative to all the other big ones. But you know we we like our companies to be IPO ready across different valuation ranges. So that's a good outcome for us.
00:01:54
Speaker
And of course, many more to go this year, I think. So it's been a good interesting 10 years. When we started, there were few things that we assumed about India that turned out to be true. When we started, if you remember 2016, of your audience would remember ah UPI is still very young, no GEO, GEO was just about to come out.
00:02:11
Speaker
This Tiger Global SoftBank had pulled out of India, a big crash. So India was very reliant on global capital, which you know is a default part of its equity history if you look at the last 50 years.
00:02:22
Speaker
India was largely reliant on themes that were implanted outside in. So if it worked in the US, worked in China, therefore it will work in India. So you have Flipkart and 160 clones, you have Swiggy, Zomato and 190 clones.
00:02:35
Speaker
Ola and 48 clones, whatever. So I think ah the thesis also about India was very outside in. And third, I think most importantly, ah technology has solved population scale problems in India. Today, it's a truism.
00:02:48
Speaker
In 2016, there were very few believers. So we were one of the believers that we can build technology that actually addresses India's needs. So think bottom up, think need first, think for the country, think India out.
00:03:01
Speaker
that's Those are some of the assumptions we made, turned out to be reasonably good assumptions. So that informed a lot of our investment thesis. And finally, people, I think largely the Indian VC, if if I generalize, it's hard to because it's such a large ecosystem now. but the The Indian VC um is ah not a builder, has not built tech companies before.
00:03:20
Speaker
All of us, when we started 3.14 and even today, ah come from operator backgrounds. I myself worked at a startup right before 3.14, which was successfully acquired. we were based in the US. So who we are, how we design our organization, that's also something we spend a lot of time on.
00:03:35
Speaker
So put all that together, we were able to build ah fairly robust
Navigating Capital Raising and Fund Management
00:03:39
Speaker
portfolios. We were able to raise capital from Indian LPs, many of many of whom, especially institutions, were first time Indian LPs to the VC segment.
00:03:50
Speaker
Of course, we went global with our LP base and that's been a great terrific experience. So it's been a good 10 years. and I think we tried to build a firm that we would have loved to raise from and we were operators. I think we've done a lot of that. We still have a long way to go in terms of being multi-stage, being a little bit more um you know globally oriented, helping our companies do global GTM early, which we're doing a lot more of.
00:04:13
Speaker
And of course, I think as we return funds, we just returned our first fund in seven years. We have many more funds returning DPI, as as we call it. So giving exits, giving capital back to our LPs, building that reliable exit engine in India now, thanks to the IPO market, thanks to a very large sport pre-IPO market,
00:04:30
Speaker
That's also something we've done quite well. So overall, I would say ah to explain 314, it's the kind of VC firm we hope we had. ah Thankfully, we we have built most of that now. I think the next 10 years are very different, very, very, very exciting. I think it'll be a lot of things that we'll build ah would not have been possible to have been built in India in 2016.
00:04:51
Speaker
So I think India surprises you on the upside and the downside, more on the upside for us. Lots more to do in the next 10 years. So what is the ah current fund, which what's the size of the current fund?
00:05:03
Speaker
Yeah, the the last fund we raised was 2023. It was 225 million. um We like to keep our early stage funds sub 250 because we think that impacts performance and so on. Fund sizing, if you've seen the general commentary about VC, it's gone ah tilted a little bit too much to the extreme right. All the funds are large now globally.
00:05:23
Speaker
We've tried to stay disciplined. So I think for our early stage strategy, even when we do our subsequent funds, we're going to stay in that range. ah You know, I had interviewed Sasha Murchandani of K Capital a while back. And in the conversation, he told me that early stage funds should not be beyond double digit. ah it puts Because in early stage, then it puts pressure on you to deploy that capital and invest in companies which may not necessarily be ah high conviction bets, but because you need to deploy money. So it forces you into
00:06:01
Speaker
lower conviction investments and so on and so forth. 225 million is, I think there are growth stage funds of that size, right? So even that sounds like a big number to me.
00:06:13
Speaker
oh Yeah, it's it's actually not And I'll explain why. So look, when when we launched in 2016, no one could raise the first fund. It was impossible. Like all the managers who survived till today and very few survived.
00:06:26
Speaker
I must give credit to Sasha. he's He's one of them. He's one of the good guys. um They all really had to struggle to race. So the Indian GP story is that you took what you got and then you made do.
00:06:38
Speaker
ah So you made do, right? and And the problem with making do is when you have companies that have made it, when they hit product market fit, they go on to series A, series B, series C, one day hopefully IPO, it usually takes 8 to 10 years to do that.
00:06:52
Speaker
um It's important that you have enough capital in your fund to defend your ownership in that company. So say I started with 10% ownership in a company like Licious. In 2016, two guys on laptop, we funded them, we let the seed run.
00:07:04
Speaker
Today, there were some you know X billion dollars and unfortunately, we don't own 10%. It would have been fantastic to own 10%. You'd be worth $150, $200 million, dollars whatever for that 10% stake. You would have maybe invested 10 million. So you made 15, on your money, which is in all in all sense of the word, an excellent investment.
00:07:22
Speaker
um You can't defend that 10% without having a large reasonably large fund. So what we call reserves in the fund. So if you raise 100 rupees, actually, say the simple math is you invest, say, 50 rupees in the first check you write to these companies. So you invest in 20 companies.
00:07:39
Speaker
So you give them roughly, you know, say, two a half rupees each. And remaining 50 rupees in the 100, you invest in the best companies of that 20 that are raising series A, series B, the follow on. So that's called
Strategies for Success in the Indian Market
00:07:50
Speaker
a reserve.
00:07:51
Speaker
The only way to preserve 10% in a company like Glicious is to invest, hopefully keep investing enough of that remaining 50 to protect the 10%. And for our first fund, which was 50 crores, it thankfully we became 100. So we were able to raise more money and invest in that prorata, some kind of reserve.
00:08:08
Speaker
if you If you look back seven, eight years later and you ask those LPs, ah what are your regrets? they They will not tell you that that's a five six ah that's a six success fund now almost. So 100 rupees invested is worth 600 rupees Their universal complaint is that these guys didn't raise enough. They should have taken more money. They should have put more money in Darwin Box, in Lycius, in X, in Y, in Z. ah So the perennial problem of a small fund is that when you have hits, right so this is all contingent on the if, but if and when you have hits, you need to be able to defend your proritas.
00:08:37
Speaker
So given our our view of the market, I'll explain how we size. We think the Indian market now supports a certain velocity of winners, meaning winners are built in a certain amount of time.
00:08:48
Speaker
ah Second, the size of the winners. We don't underwrite all our companies to a 10 billion, 20 billion type IPO. We think that's an outlier. We think IPO sub 5 billion are now going to be par for the course in India. And that's a reasonable ah valuation between two and five billion dollars. You're saying? Yeah, five billion dollars. All of this in dollars. Even that is an outlier, right? how many No, it's not. It's actually not because ah the companies that qualify to go IPO now from the startup pool,
00:09:13
Speaker
have to have a certain profit, have to have a certain revenue level, have to have a certain capacity to absorb capital because small cap IPOs from tech are not very but well received.
00:09:23
Speaker
There's not much interest. Small cap IPOs, the investors prefer manufacturing and FMCG and maybe NBFCs, slightly more familiar business models. Tech is not yet there. And I'm saying this as someone who's done a small cap IPO,
00:09:42
Speaker
It wasn't very straightforward, it wasn't very easy for sure. So mid to large cap, mid to large cap, you're talking of, when you say small cap IPO, you're talking of the IPO.
00:09:53
Speaker
Main boss, I'm only talking main boss, I'm not talking about the SME exchange and so on, that's a separate conversation. kind But main boss are small, mid, large cap, three types of IPOs broadly. ah we We prefer mid to large. We actually prefer on the border to mid and large because then the index, what index they get added to first, how they graduate to the large cap, then how they get added hopefully to our next 50 or the top 200 or whatever.
00:10:16
Speaker
ah There's a steady evolution of a company, even in the public markets. know It's not like series ABC ends after you IPO. There are qualification criteria also as you scale as a public company.
00:10:27
Speaker
So we studied all this and the conclusion therefore is ah given our, um you know, likelihood of a winner in a fund. And we've done quite well. We've been consistently performing for 10 years.
00:10:38
Speaker
And given how much capital there is and what issues there are on the private capital side, because sometimes there isn't enough Indian capital in series B, series C especially. The stages will dry.
00:10:49
Speaker
ah So therefore we have to have enough dry powder for that. And then of course, when it works, you want to protect your pro data. And when it's going IPO, we normally can't invest after it goes public. that That's not part of our strategy, but what level it will go IPO at and therefore how long we have to hold and so on.
00:11:04
Speaker
So all that goes into sizing a fund. It's not a linear equation. It's not intuition. It's not, you know, I know when I know it's not one person deciding. It's a lot of signals that feed into that calculation. So for us,
00:11:15
Speaker
ah given our history, our track record, we think sub 250 million is where we need to be. So the variables are most importantly, quality of input. right How many good deals you actually source? What's your track record of sourcing deals over 10 years? Now, every year we get close to a thousand companies pitching to us, actually more now.
00:11:32
Speaker
So we have a wildly large firehose of input. I'm not saying all 8,000 we will fund, but in terms of coverage, we have amongst the best we've seen ah in the country. And that therefore gives us a wide enough firehose to source from. right So that's not a problem anymore.
00:11:49
Speaker
The problem is now of the 8,000, which ones are worth spending time, on e etc. So it's quality, the the the field for ah mining quality is pretty well fertilized, let's put that way.
00:11:59
Speaker
So India is giving you high quality deals now. That's um but that's most important. Second is, assume all the black works and the middle works and you're good at your job. What does the price look like? What does the winner look like? Like I said, we don't think we're building for 10 billion, 20 billion type IPOs. Those are outliers.
00:12:13
Speaker
We think between 1.52 to say 4 to 5. Those are reasonable expectations. And you have a probability distribution from 1.5 to 5. We don't think everything's 5.
00:12:24
Speaker
Just like we don't think everything is 1 or 1.5. We will you know be in that range and we'll have a certain ah you know profile of the winner distribution. um Third, ah how many of our companies lose everything? right So our loss ratios are also amongst the lowest we've seen.
00:12:40
Speaker
And loss ratio means if you raise a 100 rupee fund, how much of that money got went to zero. In global venture capital, between 30 and 45 rupees goes to zero.
00:12:52
Speaker
It's a spread. So that's very scary. If you invest 100, almost half goes to zero. You better pray and hope the remaining 55, 60, whatever. 60 has to become 500 for a great fund, like a milestone fund.
00:13:06
Speaker
At the very basic 60 has to become 300, 350. So the therefore, the what we call the return pressure on the but on the on the performing capital is abnormally high in venture capital if you look at the median and the the the averages.
00:13:22
Speaker
ah Thankfully, we've never been average. and In fact, we skew to the top decile. Amazing. In that sense, ah so I can keep going into layer by layer, but this is the math. I see some very good analysis of private equity funds published online, a lot of blogs and fairly complicated distribution probabilities.
00:13:42
Speaker
You see all of that and then you kind of figure out, okay, for the Indian venture profile, for the Indian return profile, for the Indian input profile, for the Indian follow on capital profile because again, well, I may say we've done a decent job of supplying more Indian capital to the early stage. We don't have enough Indian mid stage funds. I can't think of five high quality growth funds that are purely Indian homegrown like us yeah that exist today, right? It's less than five. So I think that's that's where the gap is. So we have to kind of have solutions for that gap. We can't just hope and pray they'll make it through. So we have to be able to provide capital. So all I put together is why the fund is what it is. so
00:14:19
Speaker
Again, all this sounds great and you know for a generalist, someone a general person on a podcast, I'm not trying to impress someone with jargon. I only have to convince our investors. And ah from what everyone has seen and and including us, because we're not just GPs, we also survey the market and we're constantly looking for is there something outlier in terms of a signal that should change our view of the market. like Are we lagging the market? And we should.
00:14:43
Speaker
I think all all um signals point towards if you want to perform the way we have five x plus funds, you have to have a very, very, very close handle on the sites.
00:14:54
Speaker
If that's not the criteria, then you can become 700 million, 800 million, you know much larger funds doing venture in India. So it's not like there's a hard and fast rule. These are all preferences that the GPs decide to pursue for their own strategy.
00:15:09
Speaker
So if I put it in a sports balance, the only sport I have time to watch now is football. You can be a controlled possession, can be a tiki-taka team, you can be a rock and roll, heavy metal team like Dortmund.
00:15:24
Speaker
You can have many different strategies to win a game. like But in the end, the goal is to win the game. After a point, no one cares how you won the game, what formation you used, how many passes, who cares? like the goal The goal was to win.
00:15:37
Speaker
So I think um we have seen winners of all strategies, all types of GPs in every part of the world. The Chinese GPs have done extraordinarily well right until the music stopped. The Japanese market did phenomenally well in the 80s and 90s. You see the they've got track record of IPOs, phenomenal.
00:15:54
Speaker
Until again, the music stopped. The US has been persistently the best performer for venture for the last 35, 40 years. So again, every market also has its nuances. But I think this is a fairly well established practice. now That's why we settled on where we are.
00:16:09
Speaker
What's wrong with a 500 million fund? Why wouldn't you? 500 million fund. Yeah. In venture? Yeah. so So the question is, yeah. So the question is, if own a million to be a great fund, I should return 2 billion, right? Minimum.
00:16:22
Speaker
And 2 billion means, say you want 10, 15% in that range. Let's be generous. Let's say you want 15% of your winners. when they decide to go IPO or when you decide to sell, um you you need to have out of a portfolio of say 30 companies, at least five to six companies that are going IPO between four and seven billion.
00:16:48
Speaker
Okay, now look at the last 15 years, around 200,000 startups are registered in India, 56 have IPO. but And in the 56, look at how many VCs have got multiple winners, very few.
00:17:04
Speaker
right right In fact, ah there's there's almost um there's almost no correlation um inside that 56 for who's got like a intuitive, this this hunter knows that seems to catch more winners. It's not there. right So it really looks like darts on a board and you know everyone's hoping for the best. So what we've done, because we like like I said, we have to keep updating ourselves if something's changed in the market.
00:17:30
Speaker
So if you look at the 125, no one's got, I mean, I think probably um maybe seven or eight funds that have been around for close to 20 years now. They've probably seen at least 100 of the 126. Definitely the ones, the five we had, I know for sure, all these VCs are, but not even one is on more than one.
00:17:53
Speaker
So there's there's a very interesting, unfortunate anti correlation between these firms and how long they've been around and how many winners they've got and just the volume of winners now.
00:18:04
Speaker
And therefore, you can't assume that just because you're a VC with a certain brand, you have this ah supernatural ability to just catch winners by default. It's not there. right So nothing is automatic is what I'm saying.
00:18:17
Speaker
Therefore, ah the conclusion is it's damn hard to catch a winner. It's damn hard to
The Role of Execution over Ideation
00:18:21
Speaker
build a winner. It's it's very hard to stay invested in a winner. It's very hard to be a ah ah ah a firm that breeds winners because it is in a company. right So your role also in making that company a winner is is disputed globally. So I think long story short, a lot of assumptions here that ah observers make like the media or bloggers make about VC, but until you're in it and until you've done it for like five, 10 years and you've seen your decisions from 10 years back, like challenge and now it's time for our winners to roost and into into to to give their returns to us. And we have thankfully reasonable job of that.
00:18:58
Speaker
But yeah, nothing was easy, none nothing was automatic. um A lot of the companies that we didn't think would become big have become enormously big today. They've just shattered the narrative about what a market can support and which is a large market to capture and so on. So this is for example, i don't want to keep coming back to that, but two guys on a laptop who are giving you best in class animal protein. Everyone, first of all, didn't know how much meat India consumes. Everyone thought India is like 80% vegetarian. right It's actually the opposite. India is almost 80% non-vegetarian. If you look at the diet diet consumption. So I think ah there's so many things that and know rock the boat in terms of your capability to consistently grow winners.
00:19:37
Speaker
like So I think that's why it's not easy. ah The larger the fund gets, The more assumptions you have to have and the sharper you need to be and and the more paranoid you need to be about, am I missing out on winners?
00:19:49
Speaker
And um you probably have to be multi-stage. So if you miss that seed, you better be able to do the Series A and pay up because winners do demand larger valuations very quickly at the end. Inevitably, there's going to be a class of B or C. You better have money to bridge them because you can't afford to lose your winners in the value. So this is fairly complicated.
00:20:09
Speaker
And just like founders, nothing is straightforward for founder. You've been a founder. i mean, it's it's absolute chaos. it's It's torture for the soul, if you will. um And you know I still argue, I don't know if it's worth it. a lot of founders have second thoughts about that, how much that peace of mind they have to sacrifice.
00:20:24
Speaker
It's not easy for the investor either. I think it's that's why it's difficult and that's why it's not straightforward. ah What's the learning from Licious? Like, is there a framework that it gave you because it surprised you, you didn't expect it to do as well as it has? No one did. I don't i don't think even the i mean the founders have conviction, but um no one makes assumptions that you're an outlier just because you're around. right um So first of all, I think there's very little signal in an outlier. This is my problem with VC blogs and podcasts in general. We spoke about this briefly.
00:20:53
Speaker
Everyone assumes that there's signal in an outlier and everyone can be like the outlier. You can't. i mean I can't do something like you got lucky. It's not luck. it's not luck i think it's okay I think it's I really think it's prepared minds ready to grab an opportunity when the probability hits you.
00:21:09
Speaker
Right. So I'll give you a simple example. In 2016, no one's talking about hygienic food. Good for you. I don't know if you eat meat, but plenty of households that consume meat. My household doesn't. But you know we've been around houses that have.
00:21:24
Speaker
um The best experience I remember was sending someone to the to the market, black packet, birds being cut in front of you, blood everywhere, blood on your shoes, unbelievably terrible smell, flies everywhere.
00:21:39
Speaker
You're walking back like this with a black packet. Everyone knows what's in a black packet. Only two things sold in India and a black packet, condoms and meat. ah So it's a terrible experience. right that's And for 80% or 78% population that consumes meat this way, um and we we get the worst meat in our markets. Our best produce is still exported, right it's frozen, it's semi frozen, whatever.
00:21:59
Speaker
The Middle East is a big consumer of our poultry and mutton and of course our beef exports, you've probably seen the news amongst the largest in the world because we have so much bovine and our seafood now goes all the way to the East Asia. all like So India produces stellar animal protein, but we don't consume the best quality ah locally. So you're not surprised, therefore, that, you know, Today in 2025, there was a controversy recently about some antibiotics for an ex-startup, whatever.
00:22:27
Speaker
yeah um It was worse in 2016, if you can imagine that. So when two guys come and say, look, we're going to professionalize the in entire supply chain and we're going to sell curry cut chicken at a premium, a 20% premium because it's hygienic and we've done traceability and we don't put these additives in, we package it and we won't freeze it and we won't thaw it and we won't do all these terrible torture to the produce before it gets to your house.
00:22:49
Speaker
And it's not embarrassing, right? Like it will give you a great experience. um No smell, etc. So that is a very weird proposition for most VCs that they maybe they haven't faced this problem themselves. They have help and whatever.
00:23:02
Speaker
So they don't understand how difficult it is to cook meat at home or maybe they're vegetarian. So they don't have any kind of intuition for it. So there's so many reasons why something like that is not a very um I'd say understand of intuitive pitch. right ah You have to go out there. You can't sit in an AC office and pretend you know how a meat market works. You have to go out there. And we've we've been out there so much now that you know it's a little scary.
00:23:24
Speaker
um Sometimes we find too many things that are a problem and we don't want to enter this category. right So we spent a lot of time with the different grocery baskets of India before we started investing in consumer. And that's why for us, this market we knew and we knew there's a big problem here that can be solved.
00:23:40
Speaker
But these guys look when they pitched, they were pitching an entire supply chain problem with a brand like Basically, you are pitching full stack solution and a brand, which which is crazy.
00:23:51
Speaker
like Even Unilever today in 2025 or 2026 is not manufacturing everything sells you. They are contract manufacturers whatever. It's a big machine. listen These guys are going straight from farm. These guys are trans going to farm, buying the birds, going to the abattoir, getting it cut.
00:24:04
Speaker
ah can't freeze it because you know frozen meat in India has a different GST, above zero degrees, different GST. But you can't let the meat go to four degrees because then it'll spoil and smell and bacterial load, etc.
00:24:16
Speaker
So they to build a chill chain, not a cold chain. chil chain doesn't exist a Cold chain doesn't exist, for forget chill chain, so that's expensive. And then you have to from farm to your processing center, then processing center to the whole house. You have to maintain inventory, it's perishable.
00:24:30
Speaker
i mean, this is a hilariously difficult difficult problem to solve. And the seed round is like three or four cores, right? You can't build all this in three or four cores. So these guys got started and they got started in very small scale in one neighborhood.
00:24:41
Speaker
But just that neighborhood, their retention was like 93-94%. Meaning if they acquired 100 customers in Jan, 93-94 customers came back and fell. That's insane, that kind of retention no brand I can think of has. And this is a weekly basket. So you're eating meat at least once a week if if you're that kind of household.
00:25:00
Speaker
ah So the LTV, the lifetime value if you will, is huge and therefore it's one of the most valuable baskets to capture. But no one's built a brand in India, no startups attending this.
00:25:12
Speaker
So total white space, obvious problem, obvious yeah business model, but deeply difficult. And of course, I won't go into the political nature of farms and meat and laws and all this stuff. So you have to be crazy to enter the space and you have to be even crazier to fund it. But you know this is the kind of venture risk you take. right And You take a bet that India is eating $20 billion dollars of meat in 2016. Today it's eating over 50, I think closer to 55. It's only going to go up, which which it has. So I think this is, i can keep on analyzing this, but all of this looked obvious to us, not to many others. But that execution is what made the company great, not just the thesis. right
00:25:53
Speaker
So the execution, i don't think there's any pattern for this. i i Honestly, I know many other white spaces where we can do this. We've done this in Ayurveda, done this in a few other things that sound weird.
00:26:04
Speaker
But so many of us have built what we call category creators, where that kind of business didn't exist before, but you know there's ah there's a logic behind why it should be started today in this way. right So this is a category creator in many ways. this This didn't exist before.
00:26:18
Speaker
But i mean the execution is where the truth is there is. There is no amount of thesis after a point that will save a company. It has to be execution. So if I understand correctly,
00:26:30
Speaker
You're saying that the first thing which you did was you said you spent time understanding the grocery basket and we understanding what are the white spaces, because of which you had a few broad theses that, okay, this is a space, this is a space, or like Ayurveda was possibly one of them.
00:26:47
Speaker
yeah So this allowed you to take the licious pitch seriously, and the rest is luck. No, the rest is not luck, the rest execution. Okay, but but you said there are no patterns. and like So how do you decide if these founders can execute or not? we You can't. How how can you?
00:27:05
Speaker
ah Neither of them are... Why are you saying it's not luck? It's not luck because, so look, I'm not a finance guy. yeah ah do do i Do I look lucky? Look at my eyes. Do you think I look lucky? Do I look like someone who takes his luck for granted?
00:27:17
Speaker
No, absolutely not. I absolutely refuse this ah there very easy odds. He just got lucky after point. No, you didn't get lucky. You grab opportunity when it came to you.
00:27:28
Speaker
a There's this notion called prepared mind. It's been blocked about to death, but there really isn't true to that. What is this notion? just yeah so It's very simple. you You do a lot of work every day to know a lot of things, to be good at a lot of things, to refine your skills, to push yourself in directions where there's no yield today.
00:27:47
Speaker
right With the assumption that one day when an opportunity comes that requires me to have XYZ knowledge, XYZ skills, XYZ network, XYZ ability to answer XYZ logic thought through whatever it is, right um I am ready to grab that opportunity.
00:28:03
Speaker
So for example, for us, for 314, the opportunity was to build the category creator of India's meat market. right That's the opportunity. Now, what are what all has to happen? We have to know the meat market. We have to be confident about how the economics work. We have to know the problems. We have to be able to help a company through those problems if they can't do it.
00:28:23
Speaker
Which again, you don't assume they are going to be rock stars. You don't assume they're going to be idiots. you You can't make any assumptions. So you have to know how to solve problems. You have to know that market enough. You have to have capital to bridge them when they need it. There's so many things you do as an investor to be prepared to enter a market.
00:28:38
Speaker
And then you have to wait. You can't just jump at the first team that comes and says, oh I read your blog about it or read your tweet about or read someone else's tweet about ah this is happening in China this is happening Japan or wherever. You have to wait be patient not to waste your thesis, quote unquote, on the wrong people. right Because again, the people are going to build a business, not you.
00:28:56
Speaker
And then on the founder side, they would take the risk of giving up their jobs and starting a company and attempting a category creator. And by the Vivek is from another VC fund before he became co-founder of Licious.
00:29:07
Speaker
He knew all the VCs and he still got a no. So like network or whatever helped him out. No is no. No money can So even though they were prepared, it's not luck. I mean, actually the antithesis of luck.
00:29:18
Speaker
Everyone's telling him, boss, anything else you do, you do wallet, I'll fund you don't do what do you. So he has had the conviction to not, is it luck that he said, no, you're wrong, i'm going to show you. No, it's not luck.
00:29:29
Speaker
He's prepared for that. He's prepared to say, no, boss, you're wrong. I want to start this thing and i think it's going to work. right And I know I can do it. And neither of them is, Abhay and Vivekan, not meat guys. It's not like they work as butchers before or whatever, or they worked at a FFCT company.
00:29:42
Speaker
They're They came from other sectors and did this sector very well. They had a prepared mind to learn. So it's it's prepared minds meeting opportunity and and not giving up. In the end, it's conviction. I mean, Rishus has been through a hilarious number of problems.
00:29:55
Speaker
It's not funny how difficult it is to build any company in India. Forget this category of all things. So I might sound like I'm romanticizing the lottery and face on a box and all that. But let's be very clear, people show their processing center, there are haltas, their employees are threatened.
00:30:10
Speaker
During COVID, everything shuts down. Suddenly, where's the money coming from to do all this? Who's going to buy the inventory? Chicken flu happens every end of quarters. Yeah, it's it's it's a nightmare. And if you call that luck, I mean, I would hate to be hearing the story of someone unlucky. Holy shit.
00:30:27
Speaker
so That's why i say, I think like we we have to stop assuming after a point, just black box luck. There are things that happen, there are consequences of decisions that were actively taken. There's negligence also, which has consequences, good and bad.
00:30:41
Speaker
And then it's not just two guys, right? It's an entire team. And if you look at any startup, ah very few people make it from the start to the end, right? Say the end is like four five years after the IPO when they've proven everything out.
00:30:53
Speaker
um If take Zomato, very few people have stuck around with Dipinder. And not because there was a problem with anyone in terms of inter-human relationships. The job burns you out. You're all human in the end and even the best performance athletes can't keep playing forever. I mean, Ronaldo and Messi are totally outliers in that sense.
00:31:11
Speaker
So I think all of it is therefore finite time, capacity to execute, capacity to not give up. a little bit of being able to deal with macro because um I think we heard a lot of stories and this I think there's a lot of that luck comes from that the market turned or something outside of control happened and it became like boom to your company. right You last it till that happens. you monetize It happens to everyone. It's like a fairly even distribution if you will.
00:31:35
Speaker
That event didn't happen just to you, if you took advantage of it. That event happened, 7 billion people on the planet, assuming what the event is, face that event, right but you took advantage. Is that luck? No. i mean, that's again, you are prepared to take advantage. So I think there's a lot that goes unsaid for agency, which unfortunately, you can't factor in.
00:31:53
Speaker
I can't write a thesis for that. Would I be right in saying that one of the key things you look for in founders is the prepared mind? How do you judge? right um I think that's clear. Tell me how you
Judging Founders: Instincts and Processes
00:32:08
Speaker
judge. You said I don't not going to tell you how I judge because i now we're entering a realm where it's like so personal. I don't even let other people in my team know how I judge.
00:32:18
Speaker
I form a judgment and then we actually write everything down and we see who you know how we were right. There's an institutional view, there's a there a lead view. So all of us are called leads, investment leads, individuals.
00:32:28
Speaker
The investment, sorry, the institutional view was formed by the consensus of the lead view. But we also note the the votes against to see if they were right. Maybe they made a point that we ignored. but that turned out to be true.
00:32:40
Speaker
So there's a lot of um you know back analysis that we do in terms of how we arrived at a decision and did that decision pay off or not. I don't think many people do this, but we really had to do this because we're sticklers for decision quality.
00:32:54
Speaker
and i think This is like a set process, like every year you will do decisions. Everything is locked. And we even fire people for this, by the way. so Fire for what? Yeah, for decisions that were wrong later.
00:33:08
Speaker
and Give me an example of wrong decision. Yeah, ah if you were wrong about this team being the right team in a very competitive space, right? And you were wrong multiple times about different companies.
00:33:20
Speaker
and all of them turn out to not make it, then you are not a good investor. And why do you belong in a performance team that is doing this? like why is ah if There are 10 people on investment Why are nine other people carrying you?
00:33:32
Speaker
ah So you i mean we have we have to fire the bottom performers every year, not just us, it's any performance team on the planet. So that there's a lot of different things that you take into account to make that kind of decision. And one of that is decision quality and accountability of decisions.
00:33:49
Speaker
and And you need courage for that, by the way. if By the way, in an alternate universe where we we totally messed up fund one, we totally messed up fund two, we have no right to exist. right and We didn't make it to 10 years.
00:34:03
Speaker
um All of us were fired. Our LPs decided to fire us saying, we're not doing our next fund. You don't know you guys don't know what you're doing. yeah my money back So I think that's that's why this is, everyone assumes VC and investing and whatever is is ah the great job and um You know, you can just write blogs and be a journalist. No. um No, no. This is real money at stake and your job and livelihood, yeah, yeah. can Why don't you want to share how you judge founders?
00:34:33
Speaker
Because it's proprietary, man. I've i've been reasonably accurate with how I do it. And we shouldn't take it that personally. But see, there's pride in the work. There's there's rejection of that work.
00:34:45
Speaker
There's a competitor coming selling inferior product for a better price because they knew that guy inside that enterprise company from His previous job. So see, this is how you learn how stacked the world is unfairly against everyone. right like It's not stacked in favor of any one person.
00:35:00
Speaker
So it truly reality is hard to negotiate with and it's unfair uniformly. So um when you learn all this, suddenly when you enter a field where, say, the old boys collusion is a little stronger.
00:35:13
Speaker
Maybe my assumption is wrong, but that's what I saw. You fight harder to prove yourself and you you learn to, use your decisions and say they have positive consequences to market that I am also worthy of qualifying without having old boy collusion.
00:35:32
Speaker
right So therefore the qualification criteria is earned. Not just I so i was investment banking for 20 years, I know everyone so I should be a VC now. So um to do that in your late 20s, if anyone's done that and everyone's been through their late 20s. First, I need to be qualified to judge. There's something, there's a concept called adikhar or arhate in my language, where you're not just default qualified to judge everything. I'm not a movie critic. I don't know anything about acting and movie. I know I enjoy a movie, but I'm not qualified to judge acting quality, whatever. right
00:36:04
Speaker
But most of us, everyone on Twitter, if you see, everyone has an opinion on the latest Charukan movie or whatever. So just like I'm not qualified to judge what it's like to score 15,000 runs like Sachin then recorded.
00:36:15
Speaker
So I know I'm not qualified. I'm just here for the enjoyment. ah VC is also like that, it's a performance sport, but everyone on Twitter feels like they can comment on this guy and that guy and that fund and this fund without having put anything at stake themselves. So given you realize this about, okay, this industry is like this and it works a certain way and therefore i have to have the authority and the qualification and and the adhikar, there's no better word for that.
00:36:41
Speaker
um You have to start out building that on the fly and then earn it very fast. So what how I can judge a good pitch today is not how I judge a good pitch in 2016.
00:36:53
Speaker
right My authority on the board in 2026 is very different from have no authority on a board in 2016, except I built something and I can solve the product questions. um I'm not qualified to interview a CFO in 2016. And we did. We didn't bother.
00:37:08
Speaker
But 2026, IPOs, late-stage, the IPO, etc. Yeah, whereas we're appointing CFOs with the founder and the committee and so on and so forth. So there's a lot of things that you know you should not be doing and therefore you focus on other things.
00:37:19
Speaker
So one of the starting criteria I had personally was, will I work for this guy? Turns out everyone who's pitching to us is older than us because we're in our late 20s. Founders are usually between 35 and 45. So there's a lot of ways that you build an instinct to judge people.
00:37:32
Speaker
And it's obvious that all there are social species. So we've been doing this for tens of thousands of years. But we sometimes seem to forget that when it comes to investment. um Also, you deal with a lot of psychopaths. um I think it's very important um that you have an instinct for, do I want to work for 10 years alongside this person?
00:37:53
Speaker
right Because in many words in many in simple words, people say it's a marriage, whatever. It's in a very inconvenient relationship. When you don't like this guy, you're forced to be with him. When like this guy, one day you have to sell. So there's very little control of the emotional component of the relationship over the financial component of the relationship.
00:38:10
Speaker
um you have to sell you or you you have to bridge them or you have to whatever, not invest or whatever. So I think there's therefore a separation that's required, but that emotional component is what is going to judge the person and many other things, including organization building.
00:38:23
Speaker
So you have use every layer of your being to make the and not the the judgment, right? And that's why i think judgment, even in our investment team, is um ah one of the most important things we take time to write down and demonstrate.
00:38:41
Speaker
And that's very difficult, very difficult. It's amongst the hardest things in this job. yeah I mean, his loyalists around him, and tib cook Tim Cook built that whole supply chain for Apple, a legendary supply chain. now you ceo so And they still have jobs as a mythological, yeah.
00:38:58
Speaker
And he deserves it. um So I don't think that's a disqualification criteria. So like I said, it's a superposition of many different things. um and One of the things you can do as a young person is, well, I work for this guy because you can you compress a lot of things in that in answering that question.
00:39:12
Speaker
About you, about group, about him, about future, of a lot of things because it's opportunity cost as well. If I choose to work for this founder in this company, I'm not working for Facebook or Google or Apple or whatever other things, big companies, small companies, other startups, whatever. So that's how you can condense and force function a lot of different signals into making one decision. right and So will we work with this person is a good question. It's one of those forcing functions.
00:39:37
Speaker
yeah The second one is, you know you're not always a customer, but ah do I know what the customers want? right And ah now we funded companies like Darwin Box and Agnet and semiconductor chips and whatever.
00:39:51
Speaker
Sometimes we're just not the customer. And sometimes we don't even know how to build what the founder is building. So example, we funded an AI company in Drug Discovery, but they're building a protein model. So you you know large language models, they just predict what the next letter is going to be, the next synonym word, whatever.
00:40:08
Speaker
in In the protein version of that, you predict what the next protein is going to be and how it's going to fold and the all of physics interactions so on. So it's similar, but not the same. Do I know how to build ah an LNM? No. I mean, I know theoretically what they do, but can I build one today? No. Can I build a protein model? Absolutely not.
00:40:24
Speaker
I'm not even closely remotely qualified for that. But how do I judge the founder's ability to do it? And here you spend hours. You spend hours figuring out how this person draws the competence to do something deeply complex, right whether it's scientifically complex, whether it's technologically complex, whether it's complicated as a sale, or whether it's complicated in terms of marketing, if it's a consumer product, without necessarily being a customer.
00:40:50
Speaker
So how to judge that competence? I'm not going to say what I do, but this is something we have to do explicitly. And a lot of my conversations with founders, especially before we invest and even after we invest, because you can tweak that, is to make sure that we are you know with full full mental participation, with full authority, questioning how will we give the customer what they want? How will we convince the customer this is what they want?
00:41:19
Speaker
Give me a little bit of your journey, like what made you want to be a VC?
Pranav Pai's Personal and Professional Journey
00:41:23
Speaker
ah um So I did my undergrad, my schooling in Bangalore. I was reasonably good at it. but Unfortunately, the year I was in school, they announced a reservation 2005, a lot of suicide, very unfortunate experience with the volume of damage those policies did to our generation, the shit generation, 2000 to 2010.
00:41:47
Speaker
Financial crisis, global crisis, India crisis, 2611. Yeah, so a lot of trauma in that millennial decade. um ah The people I competed with, the best people, the best students, the people you looked up to, your seniors, you know the people who kept you in check, the peer pressure the right direction of peer pressure cohort, right whether it's in school, whether it's in sport, whether it's in college, whatever.
00:42:10
Speaker
Universally, the combination was to leave because you couldn't get into an IIT most of the time um because of how the rules were stacked. And then you couldn't, they were doing private, all the private universities were also changing their syllabus and they were becoming deemed universities. And there was a lot of churn in the admission process.
00:42:25
Speaker
Every other rules change, every other policy shift, there complete mayhem. There's no respect for young people in that system. So um everyone's everyone's decision at the top know performing bracket was how fast can I get out of here?
00:42:41
Speaker
That's a very disappointing ah conclusion for young people to reach about your country. I'm not talking about me. Everyone up in that decade will remember this. um I got good advice not to leave for my undergrad. I won't tell you what that advice was because i it's too much personal stuff. But I decided to stay and I decided I'm not going to leave Bangalore. I'm going stay at home. And I want to be around my family for these four years. And we were losing family and people were dying. And a lot of things are unfortunate things and in on the personal side.
00:43:10
Speaker
um But those four you always changed my view about where I want to spend my life. Because if I follow the the circle around me, right the student circle, they still not come back, by the way.
00:43:22
Speaker
Most them, the best guys I still remember competing with and who got 98, who got 99 or whatever. Like it matters now. But um that that whole segment is gone. andre They're doing very well.
00:43:33
Speaker
I wish they were doing that job here, but they won't. um I decided to stay. wasn't very happy in my undergrad. I got into whatever I could get in with the general quota or whatever. The best college in Karnataka back then, which was outside of Bangor.
00:43:47
Speaker
And immediately realized first, yeah, I should leave. So, I mean, there's only that much you can do to force yourself. But I decided I'm not getting the education I wanted. so I spent three years just preparing to get into the best university I could.
00:44:00
Speaker
There was only one country that had the best universities in the US. And I was particularly know drawn to the Valley culture and semiconductor systems and control systems and so on. That's where I spent my time.
00:44:13
Speaker
So maxed all the entrance tests I could, gone to Stanford, was damn good. When I was there for the two and a half years where 2011, 2013, Facebook IPO, Steve Jobs died.
00:44:25
Speaker
Peter Thiel took that course, 0 to 1, became the book 0 to 1. Balji Srinivasan worked at Andy Sonorovitz after that. Andy Sonorovitz launched became this huge phenomenon.
00:44:35
Speaker
So I saw a lot of the money part of tech, which I didn't see at all. right in In Bangalore back then, IT was still 4.5 lakhs, still the go-to job. And then you hoped for core, which is Snyder, Siemens, a little bit of Ericsson, whatever.
00:44:51
Speaker
um you know You had Tejas Instruments, you had a lot of these things, but they weren't hiring too many students back then. And you had one or two startups like Flipkart. I still remember removing my shoes, waiting in line at the computer lab, going in seven minutes to boot up, I have 15 minutes to start.
00:45:06
Speaker
Yeah, yeah so stupid shit like this. but you know And then you go to google.com and okay, Flipkart, what the hell is Flipkart? You don't have a phone, you don't have a smartphone, you can't afford the internet. There's only like the big people in companies have all this stuff. So yeah, and then Flipkart,
00:45:22
Speaker
all of us like, dude, flip startup, like what what the hell, like they even be around next year to pay our salary, right? But they're paying 10 lakhs, which is, oh, wow. Okay, so everyone's writing the exam. So the whole incentive system was how much you're getting paid, right? And the placement.
00:45:35
Speaker
It still is, I think it's, I go still go to university and talk to students and you know, that's important. It still is that way. But I think the lack of opportunity was very clear. And therefore, this whole system was designed to just send the, know, whoever could get out, get out.
00:45:50
Speaker
um So Stanford ah graduated, interviewed a lot of places, but then you know because you know I saw that that side of the business, I said, okay, no you know what it's I will never get to work in a new company like this. I thought anywhere else I should work in a startup here.
00:46:06
Speaker
So I also i so try to find founders and use network little bit for the first time. And thankfully found a founder who said, okay, look, I think you're great. I want to hire you.
00:46:18
Speaker
Like, dude, where's the interview? Like, I want to hire you. Like, we spoke, to your professor, whatever. I know enough about you. That's when I first heard prepared minds. Like, I'm prepared to come here and make an offer. And he me made me negotiate my offer even without it. Like, he he had, I didn't have paper and all that. So it's not like I just got lucky.
00:46:34
Speaker
So I'm going to dispute this luck point also. Yeah. wrote a paper I did to work. My professor sent my paper to him. That's how he found me. What was your process at Stanford? political is okay Electrical engineering. okay do yeah up so So long story short, I was employee number three, employee number one who is now a partner at 314. That's where we met for the first time, Anurag.
00:46:56
Speaker
um So it's a I would say it's a very interesting maze. You can't design your life for this kind of maze but you're prepared all the time. like doing the work, you're not sleeping. You make a lot of sacrifice. I still think There's lot of things I've not done to enjoy my teens and twenties.
00:47:14
Speaker
But that's fine. It's worth it because am doing work that challenges me every day. right today. So was the plan to be VC? otherwise I would have done an I would have done consulting, would have gone to investment banking like everyone else.
00:47:27
Speaker
But the I wanted to build stuff, I wanted to solve problems, I wanted see how money exchanged hands. For me that was like the thrill. like I want to build something and then I'm going to pay for it. like That's cool. that that's That's like magic. out doess and this don of magic How does work become money?
00:47:43
Speaker
What did it do, the startup you joined? We were a SaaS company, Vertigo SaaS. We were in a category that was very, very small, but growing very fast.
00:47:53
Speaker
There was no software for it back then. We were in the HR segment, but in a very narrow, what you call and len learning and development. And then we built for the first time like all these machine learning algorithms to recommend and whatever.
00:48:09
Speaker
Far before AI became what it is today. very early in that stuff. And turns out you can do a lot of things inside a big company that solves their budget problems in learning and development and do it through software, which is obvious today, obvious to anyone, but no one is building that back then.
00:48:26
Speaker
so we built it, we got the company to like multi that tens of millions of revenues, revenue fast, got acquired in six, seven years, like 10x revenue multiple. wow So I i had ESOPs obviously invested in them. So I saw that that whole translation happening for real with me. and I became a believer obviously that okay everything they're preaching all this stuff It's hard to believe. um i'm I'm a universal institutional skeptic.
00:48:52
Speaker
I hope we get to that in our conversation. But um for that to be real after my skepticism is is obviously going to make me a true believer. So my part to VC is coming up the operator way, knowing it works. knowing my unrit Once you got the exit, why didn't you want to start something on your own?
00:49:13
Speaker
um I decided after that experience, I never want to be a founder. of A founder does anything but build. like it just From HR to admin to investors to board to in India regulation government, all this tax, all this like, it's just a naturally stacked against you.
00:49:33
Speaker
And I was already feeling like I'm going further and further away from what I like doing if I become a founder. Because I have to manage people's emotions and hierarchies and reporting structures and all that. I don't care for any of that.
00:49:45
Speaker
so when i get and And I wanted to come back. I i really thought, okay, i'm up my time in the US is done. i actually came back the month Trump got elected. So very early 2016. You could feel a tilt, like the whole place is tilting, something's happening.
00:50:02
Speaker
All your underground stuff is coming up. It became a very difficult difficult decade after that for for the US. s The tech has obviously had one of its best decades ever, but the surrounding environment is is difficult.
00:50:19
Speaker
You could see a lot of that H1B conversation and all. So I didn't want to be in any of that. I said, look, I've learned what i wanted to and I'm very grateful. But I have to go back. Those four years in underground already set my mind to look, I don't want to be a founder.
00:50:32
Speaker
I don't like the system around us that screws us out of our right to prosperity. but I want to come back and i i want if I build things, I want to build to build it at home. And thankfully, Bangalore is steeped enough in tech where it's the San Francisco of India. right it's There's no argument about any other ecosystem being better than Bangalore in India.
00:50:51
Speaker
ah So I had that advantage. Do you want to call it luck that I was born in Bangalore? Sure. I will take that with hands up saying I have no ca control over that. No prepared mind argument for where I was born, where I came out. But yeah, so I took the best advantage of being in Bangalore.
00:51:07
Speaker
Turns out a lot of the networks I had built in my undergrad, knowingly and unknowingly, became very valuable. From some engineering manager that managed me in an internship somewhere, he left and you know he he had friends working, he eventually joined Musigma. Musigma by then was really hot.
00:51:22
Speaker
lot of good people were leaving Musigma, starting companies. So I got to meet hundreds of founders because of the networks I had built before, the few people who stayed back. So met a lot of people and figured out that founders had the same issues I started this conversation with, which is the market needs something, but these VCs are funding something else. You're not getting a meeting, not doing ride hailing or e-commerce or whatever.
00:51:41
Speaker
So we said, okay, I'm not going to be a founder, but I also met LPs, well, not LPs, I think this VC model doesn't work in India. These people are doing it wrong. So you saw, because I had had an experience with with the startup and managing a board and seeing all of that, how it worked. so okay That part is a bigger problem than creating founders, starting another company.
00:52:01
Speaker
The founders are there. The the native energy for entrepreneurship in India is only growing. And it's it's very, very, very important that it keeps going and it's there. The hunger is there. So being another founder is not going to fix what I wanted to do. and being I could have been an operator. That's what I was initially talking to people for. Who can I join next to build the next kind of company that I just exited, exited in seven, eight years, make money, build something good.
00:52:25
Speaker
But that's a wrong thought in India. You can't keep flipping companies. that M&A environment doesn't exist here. right So if you become an operator, you stick with one company and you take it all the way up to the IPO. That back then was not possible, but you take it to its largest possible conclusion.
00:52:39
Speaker
That's how you make that next big leap of wealth. So I said, look, I'm actually better at solving this other problem. And maybe being a non-finance guy, non-MBA actually may give me this interesting edge against this another big shrine of old boy clubbiness.
00:52:57
Speaker
Maybe I have what it takes to break that and do it
Overcoming Challenges in Fundraising and Execution
00:53:00
Speaker
in in a different way. So little bit arrogance also, yes. But the right kind ingredients to test it. How did you raise that 100 CR? Your first fund you said was... Painstakingly difficult. I never want to go through that again. I don't talk about it.
00:53:13
Speaker
anyone. Too many rejections, it still stabs your heart what was said to us. Like you were going to H&I's or institutions? Yeah, going to anyone man. I went to, we went to banks, we went to H&I's, we went to companies, we went to mutual funds, we went to insurance companies, we went to these syndicate groups, we went to these Marwadi investment clubs, I think they call it something in Bombay. We went everywhere.
00:53:37
Speaker
um We went to YPO, o we went to CII, we went to basically any any network where there is capital to be raised, that can be raised. But there's ah there was and correctly so there's a lot of either cynicism about VC this this, what is this 2% fee and what is this garbage like, what are they investing in? They're investing in companies that give away money faster than the other companies. So why should I invest in this stuff?
00:54:00
Speaker
And legitimate complaints, by the way. Those business models are fundamentally not tenable. um So, yeah, and and you have to answer for our whole industry, which like was like, I'm not from that industry. My point is I'm going to do it differently from them.
00:54:13
Speaker
But no one's hearing that. right How does anyone bet on you being the outlier? So first fund is hilariously difficult anywhere. um Yeah, i never want to go i never want to go through that again. I don't want to relive that trauma either. So next question, please. So I was you know asking you how somebody can increase the quality of decision making that they do. Yeah, let's get to that. Yeah, yeah. yeah yeah yeah and so but like one yeah what go And one more like related question. You got two unicorns in your first one itself, like Darwin Walkslicious. How did that happen?
00:54:48
Speaker
It didn't happen by luck. um so So, let's just see. Lishus is a category creator. okay yeah okay Assume you did all that work, assume you met the right team.
00:54:59
Speaker
Sure, you could call it luck. But again, you don't do that whether unless you're in the market. You did your preparation. Yeah, yeah. And they did that preparation. And by the way, there's no 314 brand and no one knows who I am. And isn't that I'm not written blogs about, oh, look at me. I'm so special. i've come back from the US, which a lot of people do today. Right. And they start podcasts and write blogs and whatever. We've not marketed anything. oh There's no right to be known. Right. But there's a right to There's a right to judge because you're doing work every day and you can ask questions. Not assuming you're better than the founder, but so I saw this, what do you think? How does this margin work? How does this shift? How does this bit behavior get monetized? how do you
00:55:35
Speaker
Cash and delivery was the biggest way to pay back then. So there's so many questions that you learn by being out there on the field, not in a conditioned office.
00:55:48
Speaker
um so Licious was therefore, I would say, a very very difficult, risky company to build. And it was, of course. But that prepared minds on both sides make the odds higher that they succeed.
00:56:01
Speaker
And of course, execution, which is the formulas founder's role completely. think Darwin Box was a very weird story as well. So we had just come out of HR. So HP, EMC, VMware, Dell, Salesforce, the UN, governments globally.
00:56:15
Speaker
We had all kinds of enterprise customers. They all use software for HR, but turns out they all hate their HR software. They're using Oracle, SAP, Workday, like four or five big providers. And those providers have built really legacy, ancient systems that haven't changed, not moved to the cloud, very expensive, takes six months to go live, takes six months to decommission if you're replacing them.
00:56:36
Speaker
So universally, the HR function inside all these large companies, and they hire tens to hundreds of thousands of people globally, including governments, is hilariously broken. So DavonBox, here comes DavonBox founders. Now Google, McKinsey, Deloitte, very well networked guys, very sharp, I'm the sharpest guys met.
00:56:54
Speaker
If you see the interviews, meet them if you can. Fantastic founders, one of one of the best teams I've worked with, outright. This is DavonBox for me, sets a standard for how good founding teams work. um I think they also had 50, 60 meetings because McKinsey Network, the network, they were well networked.
00:57:11
Speaker
Zero yeses. And then they meet us. And this is a chance meeting. Someone introduced saying, I met these guys. They were asking about HR in India. you are to Go meet them. And we clicked in 30 minutes. at We built HR software and HR. You're building software and HR.
00:57:26
Speaker
And the pitch was weird. I still haven't seen a pitch like this. But they had spent two almost two years building the platform fully before raising money for I still, in 2026, where Kursa will write your MVP for you, still don't meet many teams, as many teams as I should, who built everything, tested it,
00:57:43
Speaker
then they're raising money for it. right Because the odds are better when you have something real, not raising money to build it. So these guys have prepared mind again. And they take they'd bet their life on it. other They left their jobs, their wives were like angry with them because they married the McKinsey guy, the Deloitte guy, whatever. Now he's no one's funding. So like they had real problems, by the way. They're taking real risk. And when they met us, they're like, look, we built all of it. Now we just want money to hire a sales team because we have done sales, we've done consulting, whatever.
00:58:09
Speaker
We know that takes money, the kind sales team. And it turns out that this Davenbox thesis is so perfectly timed in hindsight that you couldn't have asked for a better team, better product, better, obviously better seed pitch.
00:58:23
Speaker
and They were raising again, crores, not much. So 20-25 crore valuation, absolutely nothing in terms of what they're evaluating. So these guys, the core thesis was, yeah, HI has broken terrible product.
00:58:37
Speaker
But India HR enterprise is particularly broken because it's global rates in India. Oracle is terrible. Everything's on on-prem and it's more expensive than they want, than they are are capable of tolerating.
00:58:50
Speaker
We will build a mobile first, cloud first, early, skinny, lightweight, in-browser, full stack, meaning all functions, HR workflow capturing product.
00:59:03
Speaker
So in essence essence, were building a new system of record, which is amongst the hardest things to do. but Even that in my previous company, we didn't claim to be a system of record. We fitted your system of record and enabled different workflows. So the it was not category creation, but it's shifting the category and you better be a 10x better product for people to move from Oracle to you, but which is a big ask.
00:59:23
Speaker
So not surprised, no VC bought that thesis. What three guys from Hyderabad will convince HDFC bank to move from Oracle to you? like Are you joking? But $100 million of revenue later, it turns out everyone in India was sick of um sick of this. And honestly, they would pay an Indian company or any company on the planet to get them off Oracle and SAP the right way.
00:59:44
Speaker
In less than 10 years, they've killed the SAP HR business in India. They've re replaced Oracle and SAP some 400, 500 times. They've gone global. They're in 120 countries now. or sorry hundred and twenty countries now thousand enterprise customers globally. So we couldn't have written a better script, but it's execution. And again, both sides prepared to say, we have everything it takes. Now we have to execute. Let's take that place.
01:00:06
Speaker
No guarantees, but likelihoods there. So I guess one of the ways in which you improve your quality of decision making is preparation.
01:00:19
Speaker
Like to do the hard work of understanding markets or In your case, you already understood the HR market, but for Leicice, you did the hard work of understanding consumer goods in India and ah studying the consumer basket. That is one of the ways to improve quality of... Yeah, so if you generalize, um generalize the first thing is you can't learn everything.
01:00:41
Speaker
So as an individual, do I invest in everything from semiconductors to meat to HR software to lending in India to something else in fraud detection, cybersecurity. No, I can't possibly.
01:00:54
Speaker
Then you'll accuse me of this throwing darts and getting lucky. But I know what I don't know. And I don't want to know. And therefore, I don't do all this stuff. So I don't invest in like personal care and and makeup and a long time baby care because I didn't get it. i don't I'm not a parent. I don't know what this baby care thing looks like.
01:01:12
Speaker
So there are some places where you quickly say not not not for me, not for enough for me. And then you focus on, okay, given my experiences, given my interests, given my ability to learn, right I can define this boundary where I'm going to be the go-to guy and I'm going to hold my decisions to a standard and be willing to face the consequences of my decision.
01:01:30
Speaker
That's very important. And I submit that to the rest of the team, which is also, by the way, while we're team and whatever, we're all performance artists or performance ah athletes.
01:01:42
Speaker
If I'm not scoring goals and I'm constantly losing the ball in the field, yeah, they're going to tell me like, oh, you don't days deserve to be on this team. So it's it's ah it's very... you know It's almost like facing a wall and just like is constantly hitting it. I'm getting better, getting better, getting better.
01:01:59
Speaker
And then going with a bloody forehead to go fight, which is necessary decision which is de decision which is yeah absurd, but that's the job. um So I think the the capacity to understand what you're submitting o yourself to.
01:02:15
Speaker
then saying, okay, I'm willing to go through this and be tested and no guarantees, no safety nets. This is the job. um I think that's the market at work. And rarely do any of us want to, want to I mean, even I don't want to, by the but that's the job.
01:02:32
Speaker
Rarely any of us want to follow the full arc of that decision and suffer the consequences. So the first thing is knowing knowing this this what decision this. This is the environment for the decision quality to be tested. And most people may say, screw that. I don't want to do this. I like a 9 to 5. I just want security. i want If I don't get my next paycheck, my my my house cannot eat, whatever.
01:02:51
Speaker
So then you say, okay, I'm willing to take less stress on the decision quality. yeah sorry One quick clarification. So when you say willingness to suffer the consequences... You're essentially saying skin in the game. Like if your decision is bad, you don't get to take home a salary, for example. Or like you, because you're on a profit share. so skin in the game is actually a smaller part of it. Skin in the game is, I think is defined as your your commitment to the fund.
01:03:17
Speaker
So when we raise 100 rupees, we're not just raising 100 rupees from outside. all Outside money is also just saying, you put up something. You show that you believe in your own thesis and you're investing in your own money. So in India, it's actually required, GP contribution is called, it's required by regulation. okay that You are required to put money in your own funds. so we have What percentage? It's not a of percent, it's a minimum amount. and then LPs have... As an industry now? It goes up to 5%.
01:03:48
Speaker
Okay, got it. It goes up to 5%. So it's in that it's in that range, 0.5 to 5%, depends upon what you can afford and what your LPs want. There's no set formula for the industry, but it's a regulatory minimum in India. So it's expensive. So not everyone can... That's why I said VC, I don't want to answer the VC question. It's more in general, the decision quality.
01:04:09
Speaker
So that's I can consider skin in the game as what you have at risk. I think the decision quality arc is more than that. It's not just losing money if you do badly. It's losing everything. right to come to work, your right to invest, the right to ask founder questions, founders questions.
01:04:25
Speaker
Your right for your team to vote in favor of your investment you're bringing to the investment committee. Your right for you to be considered seriously by your LPs when you go and pitch them for the next one. so The arc of the decision requires you to own all of that. Those are the consequences.
01:04:40
Speaker
but And constantly messing up means, yeah, I mean, after a point, there's no tolerance for this anywhere in the world. I'm not saying just in VC or just in India, but anywhere in the world. If you saw the articles about 2025, it's maybe the year with the highest churn in Indian VC firms.
01:04:55
Speaker
A lot of people are left, a lot of people got fired, a lot of firms shutting down, lot of firms are leaving or leaving vc or going to something else, rebranding, whatever, merging. So these are the consequences of decisions made 10 years earlier.
01:05:09
Speaker
You get enough winners or didn't you? Now after 56 IPOs, if you don't have enough winners, why do you exist? like Why are you a partner in this firm? If we the firm had winners, but you don't. um so yeah So I would say this is the market at work. It is brutally punishing. It it rewards only those who perform.
01:05:25
Speaker
And honestly, after a point doesn't care who you are what you are. it's you're only as good as the next game you play. It's like football, it's like cricket. It truly is terrifying.
01:05:37
Speaker
So, yeah, ah understanding the environment within which you make decisions, That you said is the first thing for improving. So that's that's that's that's the game. if you're If you call this a game, I don't calling a game, but in game theory, that's the that's the environment, right that's so that's a board setup.
01:05:52
Speaker
Then you understand your competencies, number two. like Like I said before, you cut out certain things and you restrict boundary condition, what are you going to be accountable for. ah Third, how do you improve the odds of you being able to make the best decisions inside that boundary?
01:06:09
Speaker
Fourth is what does grid look like? What is the price? What is my objective function? that's our That's how machine learning also started. Defend objective function, then you have all these parameters you optimize for and then you optimize.
01:06:21
Speaker
So it's a you can there's a certain amount of math that you can bring into it, there's a certain amount of what is about business strategy or whatever, decision chain analysis, at DCA, decision quality analysis. There's all these frameworks you can use, which I learned after graduated, unfortunately.
01:06:40
Speaker
No one taught me how to make decisions. I see no one gets taught how to make decisions in India in general. right yeah So I think you you find all these frameworks, you see what applies to you. And then, and by the way, all all of this is very easy to find in 2026.
01:06:52
Speaker
six There are blogs about this, there are books about this. Now you can make the AI summarize a book for you, give you 10 points. so Honestly, learning all this is the lowest friction I've ever seen. 2016, all of this is like esoteric knowledge and waiting for P. Marka to write a blog or and in others and sorry Mark Anderson.
01:07:11
Speaker
They're waiting for Sam Altman to write something or you know someone someone else. So it went from like esoteric, this guy courageously decides to blog about it 10 years back to now the AI bloody knows it. right and So like it's like the most democratized it can be.
01:07:25
Speaker
um So is there any insight there? Yes. But is there any differentiating insight there? No. Once you know it, everyone knows it. It's not tilting your odds in any other way because it's basic it's it's hygiene now. And then it's how do you set breakpoints and test your decision right before you're judged.
01:07:41
Speaker
like Say before the 90 minutes finishes, every minute, am I in the right position? am I running the right way? Am I going offside too much? So there's there's constantly things you have to be actively testing to be able to know that you're in the right trajectory or not.
01:07:55
Speaker
because you can't go back test. Once you start a path, you can only kill it. You can't like go back and adjust something because time doesn't move that much. So you can just start a new path. So there's so many things on on ah breakpoints and testing that you know you have to do depending upon where you are playing.
01:08:11
Speaker
And finally, you'll fail more than you succeed. That's that's how the likelihood is. How do you minimize the cost of the failure? How do you explain it in advance? How do you prepare the ground for failure being tolerated by stakeholders?
Cultural and Personal Motivations for Success
01:08:28
Speaker
And most importantly, how do you make sure that you don't get higher on your own supply when you do succeed? You don't attribute everything to yourself. Then you attribute it to okay, i just you know we went step by step and it worked this time.
01:08:39
Speaker
No guarantee on the next one. These are independent th throws, independent lots, statistically, vital signal you can translate, which again, we spoke about this before. But you you you have to be like absolutely neutral on the loss and the gain.
01:08:55
Speaker
There are people who want to be celebrated for the few gains they've had, and they wanted to excuse the losses because of that. It doesn't work that way. Just because you scored a few centuries doesn't mean we'll tolerate 10 ducks in a row. No, like you have to be dropped.
01:09:11
Speaker
so There's so many things that here you can't teach, you have to live through and just you know brute force it. What I will say for the Indian education system, because love coming back to this, is you are so brutally tested in your 15 years as an unfortunate victim of the Indian education complex.
01:09:31
Speaker
you are naturally inclined to know what it means to compete and be like this. So in simple words, I'll give you the math. The year I was born in Akshay, 25 million babies were born in India, 2.5 crores.
01:09:42
Speaker
okay All 25 million babies are competing for the same resources from food and whatever subsidy, whatever ration, whatever, you know depending on the situations to the number of seats in the IIT and the entrance exam and all these quotas. on What kind of family were you born to? Like well-to-do, middle class? general general General category but my father was the first one to earn any money and give some comfort to his family.
01:10:07
Speaker
My grandfather was an orphan and before that was absolutely, like just we lost everything. We're from Goa originally. If you look at the history of Goa with the Portuguese and then the Sultanate and all that, absolute help. We've been nomadic up and on the coast.
01:10:22
Speaker
for 150 years. So a lot of pain, it's in the genes, you can feel it. You've lost something that you can never get back.
01:10:32
Speaker
And so there's this sense of insecurity that can't take anything for granted. That's environment that you know my grandparents were trying to shelter us from but they couldn't. like they They told you the stories, they they told you what it was to wake up to, that people wanted to burn your entire neighborhood down because you know they they believe in some something else.
01:10:54
Speaker
So I think ah in the education system, and i mean, there's a lot of pain in a lot of people's past. but In India, one thing you're not lacking for is pain and suffering. um You can draw on that and you you know, therefore, what the cost of bad decisions and what the downside really looks like.
01:11:10
Speaker
um Yeah, so I was left with a sense of never again. mean, we've been through a while. don't know how my parents made it out of that. I'm never going back to that. I'm not letting my children go back to that. So there's also this sense of um urgency.
01:11:25
Speaker
in um I just don't sound smart in a podcast, whatever, but I can't fail. I'm going to work my ass going to make the sacrifices. Failures aren't an option. So I think you draw a lot of motivation from that.
01:11:37
Speaker
and to compete with 25 million kids every day every year 15 years through education exam this exam that exam this contest that debate everything's a hunger game Not a safe environment.
01:11:51
Speaker
So you can look at it and say, okay, you leave. but This is absolute trash. Like a lot of people, smart people do and did. Or you can say, you know what, I've been through all that. i think im I think I can now push myself a little bit more and win. And define my boundaries and set set myself up to win in the right thing.
01:12:09
Speaker
i'm not I'm a terrible Olympic swimmer, obviously. But can I be good at what I eventually became good at? Yeah, I can. and And here's how I'm going to do it. So it's a very personal thing. i don't think You can't learn from my journey. i can i can't learn exactly from yours. Like i said, there's no two things, two companies that also work the same way. right I'm not an outlier for sure. A lot of people like me in India, in Bangalore, I know.
01:12:33
Speaker
who stayed back and made it. And so much respect for them. And I look at people who made it in a harder way. like A good example I give is the Zerodha founders, the Kamar Pradesh.
01:12:44
Speaker
Phenomenal story. Holy crap. Yeah. The kind of old boy club that exists in brokerage and still does. And then what they took on, holy shit. And zero VC, they said, no, no, we don't want to raise anything. we don't want to be accountable to that kind of person. Because they met the VCs. It's not like they grew in isolation and no one went to talk to them. Every VC went to them saying, boss, take my money, whatever we want, right?
01:13:05
Speaker
But and they had overfunded competition at one point, like everything is just burning money and giving away things for free, which they shouldn't. And they're still making profits
Comparative Perspectives on Scarcity and Abundance
01:13:13
Speaker
every the year. nonprofit So I look at other examples and say these guys are setting a new bar entirely on what success looks like.
01:13:20
Speaker
So I think you also have to use motivation both sides, negative and positive. Do you think that ah pain and anger is like one of the key ingredients to really grow and outside success? Unfortunately, yes. in In India, there is no choice.
01:13:37
Speaker
I think in India, there's no choice. I think very few countries have a culture of surplus, true surplus. right um you know In the US, first thing you get struck with as an Indian is there's so much space, just expansive land, the density is lower, like this room, right? Like you can breathe.
01:13:59
Speaker
um I think it starts from there. It starts from just you can see the horizon. ah That's how someone like I had one, but I didn't have any family when I landed in California. So i had one person, the senior from college.
01:14:14
Speaker
Thankfully, she took me to a grocery store and said, boss, this is how you shop here. Because the onions are bigger because than my face. Our onions are like this. We don't do GM or something. The onions are like, yeah, it's like it's like a f***ing watermelon.
01:14:27
Speaker
um So like this the culture shock of like, holy shit, they eat like this? They they cook like this? like What? If you've been to Trader Joe's or whatever, it's like luxury five-star shopping. It's a regular grocery experience.
01:14:39
Speaker
So yeah I think that is a culture of surplus, of abundance, of, you know, they're correctly the richest country in the world so they can do all that. You don't grow up in India in that in environment, right? Certainly I don't. My environment was a black packet chicken. i mean, that's the best case. That's a Saturday celebration, black packet chicken.
01:14:56
Speaker
so um So, yeah, so you you have to learn to, okay, you know what, I had a rough knock on these things. In other ways, I'm lucky. it's always It can always be worse. Let's put it, it's comically true.
01:15:10
Speaker
So you accept and you you try to not get too negative also, because I think ah I know a lot of very smart people in my age, again peers, who never got out of that negative loop.
01:15:21
Speaker
um I think JNU particularly, i mean, I don't have friends from JNU, I don't know anyone there, but JNU from the outside, particularly thrives in making a victim complex around nothing. So that can go into other extremes also, and you become very, I'd say, useless to society, let's put it very plainly.
01:15:39
Speaker
um So it can go, the motivation, the pain and suffering, it takes you in all directions. I would say the strongest thing I've seen in a founder at least is to harness that for the right outcome and not forget the goal. The goal is to be successful, hopefully create abundance for your family, your community, whatever, which is a lot of what I do now.
01:15:56
Speaker
I managed
The Complexities of Venture Capital Investing
01:15:57
Speaker
to extract a third thing from you on how you judge founders. You consciously look for that pain and anger? Huge. Oh, yeah. I don't like to say it, but of course. of course Amazing. of course the The best founders I've worked with are people who have more motivation than me. but um like Even I am stunned with, holy shit, like everything is caving around this guy and he still doesn't want to give up.
01:16:20
Speaker
And that doesn't always lead to the biggest outcomes. I'm not saying the guys who, for example, the guys who have the highest valuation my portfolio, it's not like they face the most suffering. That's a terrible assumption to me. But definitely the guys who face the most suffering have done very well. And I would say the motivation has contributed to their ability not to give up.
01:16:40
Speaker
Amazing. Amazing. Okay. um I want to ask a few questions about VC as a whole, not as an individual investor. So, you know, for every type of business, there are some things you need to be good at, like say, SaaS companies need to be good at product management, go to market, or consumer companies need to be good at marketing distribution. What do VCs need to be good at?
01:17:03
Speaker
oh ah First thing is VCs need to know their markets well. um And you can't know all markets. So you have to be able to therefore learn markets fast, second, number two.
01:17:13
Speaker
So you're saying thesis, like this is what is called an investment thesis. yeah Yeah, market is part of the thesis. like So thesis has market, the opportunity, the damn Samsung, the addressable client set in your vicinity, in your boundary, what do you have access to right away.
01:17:30
Speaker
the cost of testing something, the cost of product market fit, the cost of scale after that, the competition environment. There's so many things that go into thesis now. AI can write a great thesis for now. It's like 90% accurate. So I think a the thesis, I would say, gets loosely a used everywhere. I think the truth of the market, the shape of the market, I think that's maybe where, in my opinion, the hardest ah insights that contribute to success come from.
01:17:59
Speaker
So if I didn't know HR very well, I'll be very blunt. If I didn't know HR, Anurag and I were here. If we hadn't had the experience and we didn't know HR from the inside, right, because we had sold to procurement, we had sold to HR, we had seen L&D from the inside, we had seen how these systems work, how long they take to integrate.
01:18:17
Speaker
Unless we knew that, there's no way the Aventworks pitch made sense to us or anyone. It didn't make sense to anyone, by the So I think it's it's there's certain coincidence there, which therefore you can't necessarily have in every market. I can't work in every market before invest in it.
01:18:34
Speaker
But once you have a lock on one market, how to build that same intuition and pattern for other markets? It becomes a repeatable task. Mostly. And you also have to know where some of those patterns don't don't translate.
01:18:46
Speaker
I can't bring SaaS patterns into consumer. I can't bring Davenbox pattern into Licious. That makes no sense. So you have to do brand new ah know elementary examination of consumer and grocery and baskets.
01:19:00
Speaker
shopping experience and how people decide what they're going to buy, brand loyalty. We found a lot of ah and we form a lot of contradictions. right And you have to kind of resolve the contradictions and then test the founders way to resolve contradictions.
01:19:12
Speaker
Because we have contradictions on the grocery side. Nestle has universally let India down. continuously for 45, 40 years from how long they've been here. There's poison in your baby food, there's poison in your sauces and jams, there's trash in your Maggi, you know.
01:19:28
Speaker
And still, like India is a very forgiving place. I don't know why. I can't explain why. Right. It's not like Indian mothers don't care about the health of their children or their families. its other so I mean, i mean yeah we do have corruption in the government, but it's not that you can get away with that forever either. Many other companies have had to leave India because of whatever.
01:19:45
Speaker
But this one the this one brand and their family of products continues to thrive despite it. I can't explain it. I have some conspiracy theories, but I can't explain it. can't give an investment rationale.
01:19:56
Speaker
So do I want to build a Nestle? No, thank you. No, I don't see anything repeatable there. But you you also have to, how do I as an investor deal with contradict contradictions? I'm giving a very simple contradiction. It's not like you don't know this about Nestle either.
01:20:08
Speaker
But then should that translate to other companies we do or should be can we expect the same behavior we are? So there's a lot of of second, third order of consequence mapping that you have to do, basis your work in the market. And this is where your instinct to judge opportunity before the market has found it is built.
01:20:26
Speaker
In the early stage, this instinct can make or break a fund. You can fund category creators lose all your money. You can fund category creators and get delicious type outcomes. So I think that this is very hard to teach. I can't teach it. I don't know.
01:20:39
Speaker
I was not taught it. I can't teach it to anyone. Everyone that I know who has this it has found it a different way. Okay, so one of the things is know the market. What about say you... Yeah, people can need how where do you judge people.
01:20:54
Speaker
So it's market, team, product. It's three things in the early steps. um So how to judge people? You have to remember people fight, founding teams don't stay the same.
01:21:05
Speaker
Housing.com was like the poster boy of startup success in India when we launched. And very quickly became the opposite. um So you you also have to deal with like these other people who are doing pattern matching around you.
01:21:17
Speaker
And the pattern that time was all IIT, all foreign return, only like this, again, clubby, cartel-ish way of thinking. I'm on IIT and I'm not some clubby old guy, investor banking consultant, whatever.
01:21:29
Speaker
So um we also know that the guys who are in those clubs won't pitch to fans like us, right? Or we're lost in line, which is fine. We'll find other guys who also don't care about your silly clubs.
01:21:39
Speaker
And we'll show you. I mean, we'll show you, we'll try, but and mean that attitude, the motivation is there. So I think it's it's a lot of the people I mentioned is the fuzziest.
01:21:50
Speaker
And I think, like i said, all types of people have succeeded. um bad bosses, good bosses, not so great guys, people who don't have marriages, husband wife pairs, divorce pairs, all types of patterns exist. So you latch on to how you see patterns beneath that.
01:22:07
Speaker
I think there's some elemental truths there that in my opinion, you can't build companies without, other people disagree, but then that's where the thesis becomes more unique on people. um And third, I think ah product, thankfully we built product. Thankfully, what we built was tested by the market, rejected.
01:22:25
Speaker
We won competition against competition, we lost against competition. We didn't always lose on product, which we have to learn how to do. The market's not fair, decisions are not made for the best product always. So all these things about product and how to make the product a living thing, right?
01:22:41
Speaker
Because it keeps changing, the market keeps changing, the demands keep changing. Now with AI, literally it'll almost, it'll talk to you, it'll feel alive. So I think on product, as a VC, if you don't have the intuition on it's not what the seed stage pitch is going to be, it's going to be something that's every day, every month, every week.
01:22:57
Speaker
Every sprint is going to change. Unless you build that that understanding, you can't invest. I think a lot of people in India who have been VCs have lost because of this point. They have not understood the living nature of product.
01:23:10
Speaker
As in they have not invested in good opportunities because they didn't like the product at that stage or they invested one looking at the product and it turned out to be... I mean, there's so many fallacies here, right? Like the the fallacies that I'm your customer. So I'm up proud i'm the... and A lot of me exists. not of Anyone, yeah you may invest in public companies thinking, I love Paytm, I love the wallet, obviously 20 billion, blah, blah, blah, you know.
01:23:38
Speaker
bad buy at 20 billion. But you make a lot of assumptions saying, okay, I'm just gonna buy it and you would have been wrong. So I think there's there's there's lot of this assumption into the persona is is a big part of the product question.
01:23:50
Speaker
The fact that the product is frozen at seed stage. So this is what I would judge it now. And this is what it is going to be for 10 years. um The fact that you know some of our best companies are without product, two guys on a laptop, like I said, so have to find things that become ah alive one day with your money.
01:24:05
Speaker
There
Supporting Startups: Governance and Themes
01:24:06
Speaker
are some products that need money. You you can't build you can build software without some money. The Davenbox proved that. But they put their own money. So it's not like they just magically built software. But they didn't raise institutional capital for it. But there are other companies where like semiconductors and so on where manufacturing, whatever, you can't do anything without capital. So are you the right investor? Do you know to do that?
01:24:28
Speaker
So I think there's a lot of different, I would say, complexities about product, which therefore that's why one guy can't do everything.
01:24:37
Speaker
So the one thing a VC needs to do well is picking the product. What about other things like, say, ah deal flow? you know You said you got 8,000 inbound deals every year.
01:24:50
Speaker
Is that important? Or like you know what else is important for a VC? In our view, coverage is very important. How do you know your you're funding on the right team in a thesis? Say you prepared some thesis or whatever, you have something.
01:25:01
Speaker
How do know you're funding the right team without talking to like as many people as you can? right This is where we learn from the public market guys. So some of our heroes are public market investors in India. um So we met and met a lot of them, whoever we could. And over 10 years, as we became more known, we got more meetings, obviously.
01:25:18
Speaker
But the first thing they did was, look, we understand the market, we understand how IT works, then we do coverage. So there are like 49 listed IT companies in India. We go, we understand each one, what's working, what's not working, to customers, talk to the employees, talk to the promoters, if we can get a meeting, whatever. Because getting a meeting with the promoter, ah sorry, with the management or public stock also has be disclosed and all these things. So they go through so much on coverage before they decide, okay, okay I'm going to be Kinfi and say, you know, cognizant or whatever, right?
01:25:47
Speaker
um I don't think it's just like i like, I like this guy's face, so I'm buying it, which is a lot of how Indian investors seem to be here. Actually, that's what Srin Bhand tells us on CNBC.
01:26:01
Speaker
and so And all of them come with their cool sneakers and whatever. So I think we've we've made a circus show out of how you pick stock. right But that's how the good guys do it. And coverage without coverage, they don't know with without cal they don't know how to pick.
01:26:17
Speaker
That's what I was told. was like, oh, wow, that's so essential that we just won't enter into the market, whatever. And for them, timing of entry really matters because InfoSet 2000 may be priced perfectly, but InfoSet 1500 is such an obvious 25% gain. I mean, I'm just saying, that's how if you read the reports, whatever. so They also wait for the dip or wait for a price that they are underwriting. Buffett's famous for this. They say, I'll wait for five years before I pick up or whatever.
01:26:44
Speaker
So, I think ah we learn lot things there and then we realize we can't bring everything here. If I wait C to series A, the valuation may grow like 25x. And a small fund like me can't get the ownership I want and then I'm screwed and I'll never be able to invest.
01:26:58
Speaker
So, you don't have the luxury of waiting, which is why coverage becomes more important. Okay. Which is very counter-intuitive and no one was investing in coverage back then. But it's become a superb weapon for us.
01:27:09
Speaker
What about post-investment? Like a lot of friends have like this platform, ah you know, I believe by platform they refer to a set of services they provide after an investment is done. So do you also believe in that?
01:27:23
Speaker
Of course, um we learned very early ourselves that a founder can't do everything. And the best founders will tell you on day one boss, I can't do this X, Y, Z. Either recommend people to me or i go find them, whatever. So i think there's a lot of very obvious things that we had to build to support um good companies being built out.
01:27:40
Speaker
So for us, one of the biggest things, two biggest things we fixed early, and these are the first things we built outside the investment team, is governance and finance. Financial reporting inside Indian startups early stage was economically poor. It's poor everywhere in the world.
01:27:57
Speaker
But you'll fail diligence in the next round. You can't raise a series A if you're that bad, right? There's just truth of the market. And the bar for an Indian company raising an A is much higher. They are expected to be perfect. Now they're expected to be profitable also, which is absurd. But okay.
01:28:09
Speaker
So you can't go in there unprepared. You're only qualified to be diligent. So you start formalizing that whole part of the organization from day one. And most founders are not finance experts. They've not built companies before. they're not They don't know what a P&L looks like. They don't know how to assign margins and costs and so on. So we have a full team that does just that. We don't charge for any of this. We believe it's our duty as an equity investor to get the organization in a certain share.
01:28:38
Speaker
and Then second is governance. I think we're still the only VC team in India to have an in-house governance team. um How is governance different from finance or compliance? ah governance So governance is not finance. Governance is everything outside of finance that you need to build a company like.
01:28:55
Speaker
policies, ESOP management, board management, ah shareholder rights management, tax filings, regulatory compliance, license management. There's so many things in India because India is still unfortunately a little bit more Marxist and socialist in its fundamental design.
01:29:12
Speaker
You can go to jail and corporate law and company law, so many criminal provisions. it' says It's observed. So we can't wait for all that to change. so We said, okay, you know what, we have to help these founders make sure the company does not take the take on these kind of risks knowingly or unknowingly.
01:29:30
Speaker
We see a lot of fraud, obviously, and not just in India, globally. The biggest frauds are always global. um A lot of that can be and be, I'd say, found out earlier, not prevented because human nature, so how do you prevent anything?
01:29:45
Speaker
But most of the time, the founders are the victims, the biggest victims, because they didn't necessarily commission some VP of finance to go take money out of the balance sheet and go gamble it on some crypto thing. right That guy's abusing his access to the bank account.
01:30:01
Speaker
And there's no maker checker on taking money out of the company bank account, which is a failure of governance. So these are kind of things that we make sure we set up as policy and frameworks before the company but grows into scale.
01:30:15
Speaker
Okay. Let me kind of end with this discussion. What are what are you bullish about today? Like what are those theses in which you're actively looking for opportunities? What are spaces where people should build today?
01:30:29
Speaker
Yeah, so we have four big themes which we've kind of built over time and it's not like there's a one point in time that flipped from it can't be to it is, but there's constant evolution.
01:30:40
Speaker
We think obviously consumer, the evolution of consumption is a huge theme for us. We could build category creators in 2016, right? And we have. Today there are fewer white spaces left where category creation can happen.
01:30:52
Speaker
But we can still disrupt business models that people thought were not possible in that manner. So a good example here Cuckoo FM. streaming Paying for streaming content is not new.
01:31:04
Speaker
But India, that population of India paying like this for this type of content and the current subscriptions and so on. No one thought that was possible. right Even Spotify and Amazon Prime and all these Netflix and that fear.
01:31:18
Speaker
So how does Cuckoo FM become what it is? So that's an outlier insight. And obviously, my God, mind bogglingly go to execution. Terrific founders. So I think evolutional consumption and all these assumptions now being shattered, that's a big theme for us and we continue to do a lot of work there.
01:31:36
Speaker
Second is for us manufacturing. CapEx in India was like the devil's no-go area like you just... Yeah, asset light is the preferred way to. go Now when i come the US only says American dynamism and we'll build missiles weapons and drones and what I call kinetic warfare. whatever So suddenly now everyone in India wants to asset and fund IP and so on.
01:31:59
Speaker
So we are a follower ecosystem because the money is still coming in from outside, right, lastly. So we as we assume that they're all asset light, whatever, that that that language is going to change. we just start building assets that manufacture smartly. So it's foolish for the startup to build a chemicals manufacturing plant in Hosur or in Andhra Pradesh or wherever.
01:32:19
Speaker
But can we go to a plant and say, look, we have new IP, you're already great at manufacturing for Merck and Pfizer, whatever, you are globally compliant, give us a line and you know let's figure out a way for us to do something on RevShare or whatever. And we can become asset, not asset light, but lighter.
01:32:39
Speaker
Like an Nvidia model basically. like and Exactly. So fabulous semiconductor. What does a fabulous specialty chemicals company look like? yeah yeah One of our newest biggest winners is a Kambalagart. And we let the seat down and obviously we want to be first movers.
01:32:52
Speaker
So I think manufacturing in many areas, so medical devices to bio manufacturing, enzymes, pharmaceuticals, chemicals, anything that is upstream of the biggest industries in the world, right?
01:33:04
Speaker
Or downstream, both ways. um We think we can do new things on IP, especially because the global IP portfolio is also expiring this decade. A lot of the things
India's Path to Technological Sovereignty
01:33:14
Speaker
that extensions that were given in the ninety s and 2000s, they were all like these Monsantos and all these big scary faceless companies, all the extensions are over. So there's a lot of new IP to build and think manufacturing in a very smart way in India, given where India's strengths are, the right thing to um Third, I think it's a big deal for us, but the evolution of software. We didn't think we, as SaaS guys, we were getting tired that everything now features a company.
01:33:40
Speaker
We think AI has given ah brand new language now for what system of records workflow, what machine driven intelligence, what deployed decision making. There's a lot of new terminology that's possible today.
01:33:54
Speaker
We want to attack the biggest systems and say they are going to be slow to move. Can we move faster? I think the Darwin box 2.0 thinking is going to be very possible now.
01:34:05
Speaker
So, biggest systems means is like a Salesforce killer? No, I think Salesforce is very good at being the Salesforce killer today. They have been doing AI for 20. They've been doing AI for 15 years.
01:34:16
Speaker
Einstein AI and all this stuff. It wasn't good, but they were doing the research. But suddenly everyone's behind, right? so And they're not going to be behind for long. yeah So this fallacy that big companies can't move fast is is a fallacy. Google is now the best model.
01:34:27
Speaker
yeah You can laugh at Google for a year, but then it's a best performing stock the next year. So I think there's an inherent paranoia inside big companies now, which we don't, at least we have seen them crush entire portfolios in the US. So we're very, very, very scared and paranoid about that.
01:34:44
Speaker
Therefore, there are narrow wedges where you can start. Give me example, like what what kind of system of records? um
01:34:59
Speaker
think i not mean yeah okay so There are two interesting ones. One is there's a company that we built that is looking at the legal industry and saying document management and so on has been solved. DocuSign is that companies have gone public.
01:35:17
Speaker
um but Microsoft, Google, all of them have these Google Docs, whatever. But the legal industry is still doing a patchwork like in Excel, they're running everything in Excel, there you go. it When it comes to documents and intelligence on top of that.
01:35:32
Speaker
So they could either build software to sell to legal the legal industry and that's failed miserably globally. Or they can build a better legal firm right without being a legal firm.
01:35:45
Speaker
Weird. But the architecture of the company has to change. This is the receptivity of the industry to software. okay So there are companies like Spot Draft and so on that are hitting plateaus and whatever. Unfortunately, it's not their fault. It's just industry doesn't pay after a point.
01:36:01
Speaker
But then Harvey AI comes and if you look at Harvey AI in the US, today it's models to help lawyers do research and everything faster. But tomorrow, Harvey AI will be a better law firm than the biggest law firms.
01:36:12
Speaker
That's their core. So I think that's happening in India in its own way. we funded This is the service as a software thesis. Maybe, maybe, maybe. It's not not entirely, but maybe. right And therefore the workflow, it's not just workflow management, it's fundamentally business logic flow has changed.
01:36:29
Speaker
and What are you to the customer has fundamentally changed. So I think that's the evolution of software. um I don't think it's as simple as a service as software thesis. So I think it's very hard to replace an enforcers and a TCS and so on inside Wells Fargo or Boeing or whatever.
01:36:44
Speaker
But I think the cost structures are going to change the deployed workforce. All that is the truth and no. So I think the shift requires certain tools to be built, which I don't think would be big profit owners long term. They may make money today, but they may disappear in three years.
01:37:00
Speaker
So I think we'd rather build the things that end up being with the destination and therefore preempt the shift. So that it's really weird. And I think here everyone's going to be very wrong, more than right.
01:37:11
Speaker
But when you're right, it's like the Holy Grail of you hit it. right So I think that evolution of software is going to be very, very interesting. One more interesting company I can talk about is ah is an AI company me that attacked a very specific workflow inside semiconductor systems design.
01:37:26
Speaker
It takes a few million dollars to change one system module. say an HVAC controller from Havel's requirement to a Samsung requirement. right So the companies that supply those boards and those systems, they want an AI model that just translates the board to different customers' requirements and whatever, and then writes the documentation and the support documents and the API updates and the libraries. And there's so only many things to change when a system evolves.
01:37:55
Speaker
So can we reduce like $5 million dollars cost 500k? If you can with AI, then you can charge $2 million. dollars i So I think that that kind of company we're going to see a lot more of. Again, is it software?
01:38:08
Speaker
Is it a full services company? It's some weird thing in the middle. like So I think that's where I don't think there's a term for this yet. But I think that's where the future software is going to evolve. And we're doing a lot of this.
01:38:19
Speaker
I think the last thing is technological so sovereignty. um I think we we were terrible at doing import substitution and so on. The socialist model doesn't hasn't worked anywhere, failed, economically failed in India.
01:38:32
Speaker
But now we need stuff and we can't afford to rely on anyone. I think that's true for every country on the planet. And I think this government is finally understanding that it has to get out of the way more, not get involved more.
01:38:44
Speaker
That's how you solve this. So a future where PSUs are doing less, a future where regulation is more enabling, less disabling.
01:38:56
Speaker
um And therefore, all the core components of the Indian market that open up. So are we going to fund ports and tank builders and OEMs and so on, plain OEMs? No, that's not what venture capital can do.
01:39:11
Speaker
But there's a lot of sub-technology and vendors that have to be built out. And companies that translate existing vendors to the future. So in many ways, this is the old SaaS, old software pitch, which is take the old industry to the new industry, but for specific sectors which are very difficult.
01:39:29
Speaker
So I think if you answer the question of what does India's technological sovereignty depend upon, and you work backwards, a lot of opportunities there. Some are VC fundable today.
01:39:41
Speaker
We're looking a lot more there now. That is going to be big theme for the next 10 years. It's just getting started. This would include both like say a hardware option, like say drones as well as software, like say a foundational model. all And materials and radar and muon tomography and multi-spectral imaging and like all kinds of crazy stuff. It's not just defense. It's not just, ah we are buying tanks from somewhere else, make it here. Like that's, Marath Forge and are doing that. and They're doing a dang good job. can Congratulate Baba Kalyan, what an amazing guy.
01:40:15
Speaker
But startups can't do all that, not necessarily always. So there are many other things that you can do here. And I think a lot of this will be but lot of this will also be the applied IP type thing that old software companies used to do very well.
01:40:30
Speaker
So i think that's I think we get that kind of refresh in India. So it will seem familiar from that lens, it will be very open-ended from the other lens. And biggest assumption here is that government, because they're a large customer, government is a better customer, which today is a terrible customer.
01:40:44
Speaker
Doesn't pay on time, there's too much friction in collecting, tender process is broken, the TRL readiness level is broken, qualification is broken. So so many things broken in government. You're assuming that a lot of that changes.
01:40:55
Speaker
I think in general, VC in India don't make those assumptions easily. Neither do we. okay But that is a theme that is evolving, I can tell you. So the market is changing. How do VC's founders, everything respond to that?
01:41:07
Speaker
Open-ended question, changing everything. Interesting. Do you think India should have its own foundational model? Is it worth the billions of dollars of investment? Yeah, I think i think
Balancing Optimism with Practical Challenges
01:41:18
Speaker
India should build it.
01:41:19
Speaker
do i want to be the start Do I want to be funding the startup that builds it? No. Too capital intensive? or No, because the customer is not reliable. right oh Customer is like other startups here, right? Or whatever, like tech companies or... Yeah, so think about it, man. This is not an India problem.
01:41:39
Speaker
See, ah the US has done research for 50 years in algorithms, AI, cloud, all the foundational stuff. And they've burned hundreds of billions of dollars of grants every year to finally you know on the IP of the future, like which is from satellites to GPS to 5G to whatever.
01:41:58
Speaker
um they They have built the foundations for everything think in universities and the defense industrial complex and all these things. so The US has spent it spend the money, be being very blunt, and the best people go there still because the money is spent on the hardest stuff, right?
01:42:13
Speaker
Including at Stanford, I saw it myself, how the government comes and just gives grants and helps people do weird stuff. And then one day that's useful somehow. And that's how you create like exponential technological superiority.
01:42:24
Speaker
ah China has done something similar that no other country has that scale. It is borrowed creatively from the rest of the world, onshore all of it, not spent the money to create it, but taking the IP, let's put it that way, ah not always legitimately and made it their own.
01:42:40
Speaker
So even the the AI models, it's very clear they took the weights from the other companies, built for it and made their own models. It's not they innovated on their own and reached it. So they creatively borrow from the rest of the world better than any other country on the planet of our species history has done.
01:42:55
Speaker
right So BYD today is a better car than Tesla, but after ripping off Tesla for 10 years. Yeah, yeah. I wrote about it also in an article. i so So I think those the two models that have worked. 30 trillion economy, 25 trillion economy, 22 trillion economy, 35 trillion, whatever.
01:43:11
Speaker
They're 10 trillion apart now more or less. The only other 10 trillion economy is going to be India. We're at 4 today, we're going to be at 10 in 15 years. What is our path beyond 10? right Will we invest 100 billion a year and create all this IP? I don't think so.
01:43:25
Speaker
Will we steal from the rest of the world? I don't think so. So we have this weird thing in the middle where it will be a little bit of both. We will spend some money now, RDI, etc. our Great initiatives. I think will magic in India. Giving money to good people is always a good thing for a government to do and help them innovate.
01:43:41
Speaker
I think we will see IP expiring and a lot of the people who built Nvidia and Qualcomm and Prodcom and all these companies are being asked to leave these countries very rudely. So they will leave. They will come back.
01:43:52
Speaker
Maybe they do something here. right So we will won't have onshoring. We'll have talent onshoring. We won't have IP theft, but we'll have like talent, trained talent inbound that start something new.
01:44:04
Speaker
We won't invest 100 billion, but we'll make do with this India, Jugaad, whatever. Maybe that's the third path. i don't I don't know. But there's so many ifs and buts here. right And it's all it's all a very new experience. No one in India trusts their government to do something long term.
01:44:17
Speaker
So is this long term? or so this ah so again, we take it one day at a time. and You're hopeful, you're optimistic as a patriot if you're a patriot, but I am. But am I betting money on it today? That's a different lens I'm wearing. I'm wearing a hat.
01:44:30
Speaker
As a guy who has built all these companies that I've worked out, I hold my skepticism the same way. And the idea better qualify. I'm judging it on merit. Would you have, I'm going to give you a couple of names. I'm just curious, would you have invested in them or not? ah Would you have invested in Azepto?
01:44:49
Speaker
no, I don't to. This is a terrible game because it's all bias, backward bias. yeah Okay. okay i don't See, how do you judge me? and now This is how you should judge I've spoken a lot, right? And any audience, and I'm skeptical when I hear podcasts.
01:45:03
Speaker
I hope I sound skeptical enough when I'm talking. I don't think you can take anything for granted, definitely. And luck and all, I pray to God every day that I'm lucky. But it doesn't feel like luck. I wish it was, but it isn't.
01:45:17
Speaker
So, ah to judge me you look at has he made money at the end of the day has he scored the goals has he won the games yeah um enough and we have and i don't take credit for it it's not it's on my phone it's i'm a partner it's partnership ah one of four votes um i think we've done very well to put all this into action and demonstrate in a hard value that is in the end the only reality all the talking and the blogging and the other stuff is is all just substitute or is that is marketing after you've done it. It's only two things.
01:45:53
Speaker
So I'm not here to market anything. I definitely don't have anything to substitute. So you judge me based on that. Don't judge me on will I have funded Zaptu. I want to fund anything that works. yeah you yeah i I'm not bringing a moral science into this.
01:46:08
Speaker
Amazing. Thank you so much for your time Pranav. It was a pleasure.