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Anand Prasanna (Iron Pillar) on Why Growth-Stage VC is India's Biggest Opportunity
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In this episode, we unpack the $4M-$10M funding gap that's stranded hundreds of Indian startups, why Anand raised $45M during COVID when everyone else froze, and the brutal truth about unicorn valuations in India's tech ecosystem. Anand Prasanna is the Managing Partner of Iron Pillar, a $400M+ venture growth fund that's cracked the code on taking Indian companies from $10M to $100M in revenue and shepherding them to IPO. With exits like Bluestone's NSE listing and Vyome's historic Nasdaq debut, Iron Pillar proves that the "India for the World" thesis isn't just talk, it's delivering real returns. From his days at McKinsey and Sequoia to running Morgan Creek's Asia office in Shanghai, Anand brings a rare global lens to Indian venture capital. He shared his contrarian playbook, investment discipline, and why he's passing on the AI hype cycle in this candid, no-holds-barred conversation with host Akshay Datt.
Whether you're a founder navigating Series B, an LP evaluating fund managers, or an operator curious about what metrics actually matter at scale, this episode breaks down growth-stage VC like never before. You'll learn the 444 process for picking winners, why CAC payback matters more than growth rate, the dual exit strategy for Indian startups, and Anand's brutally honest takes on Zepto, Cred, Physics Wallah, and why 30% of India's unicorns are overvalued.
#VentureCapital #GrowthStageVC #IndiaStartups #SeriesBFunding #StartupFunding #IndianUnicorns #VCInvesting #StartupIPO #BluestoneIPO #FounderThesisPod #StartupMetrics #CACPayback #UnitEconomics #InvestmentStrategy #PrivateEquity #IndiaVC #StartupEcosystem #FundingGap #ScalingStartups #IndiaForTheWorld #GlobalExpansion #VCReturns #LPCapital #StartupValuation
Disclaimer: The views expressed are those of the speaker, not necessarily the channel
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Transcript
India's Economic Surge and Unicorn Valuations
00:00:00
Speaker
India has returned $135 billion dollars of cash. This has never happened in India. India has some hundred plus unicorns. How many of them are fairly evaluated and how many are yet to grow into that valuation?
00:00:13
Speaker
would more like say 70, 30. I'm having a lot of hate mails afterwards. You got to be where the fuck is going to be, not where the fuck is. Anand Prasanna is the managing partner at Iron Pillar, a $400 million dollars VC fund backing growth stage Indian startups like Bluestone and Cure Foods. AI team in our view, honestly, is overhyped at this point of time. A lot of money is going to get destroyed in the current AI hype cycle.
The Investment Landscape in India: Early vs. Growth Stages
00:00:40
Speaker
I've always seen people underestimating India on the long term and overestimating India on the short term. I want to give you some names and give your take on whether you would have invested in them or not.
00:01:00
Speaker
So Anand, you run a growth stage VC fund and I have interviewed a lot of VC funds who are more on the early stage. so So based on my limited understanding, it seems like there are a lot more early stage funds than growth stage funds. Help me understand the difference between a growth stage fund and early stage fund. how What does that pyramid look like? Like like for every hundred early stage funds, how many growth stage funds are there? Just as an example.
00:01:30
Speaker
Yeah, it's very good, actually. In fact, last week I was in a conference and somebody told me about the same issue. Like, and there's a lot of early east stage funds, very few growth stage funds. And actually then there is a lot of late stage investors. So how do you guys operate?
00:01:48
Speaker
So look if you look at across the world, that is the case. It's not really very abnormal to see that because early stage, first of all, the capital you require to work is smaller and the number of opportunities are very, very large.
00:02:04
Speaker
but only small percentage. Can you also define early stage with some names as well? Like say these would be early stage funds. So if you look at India, for example, funds like Bloom is an early stage fund.
00:02:17
Speaker
India Quotient is an early stage fund. Arkham is an early stage fund. Stellar is an early stage fund. So folks like that are early stage funds. And then there are obviously global names.
00:02:29
Speaker
who primarily invest in early stage, whether it is an Axon an example, right? you know So like Lightspeed as an example, they primarily invest in early stage, but then they double down the late growth stage or late stage also.
00:02:43
Speaker
Now, ah when we come from there to say the company, typically these early stage funds, again, if you had to kind of get into the details of it,
00:02:54
Speaker
They could be angel checks, which typically, and a again, people need not follow exactly the same way, but an angel check typically means that you just have an idea and do you have a check.
00:03:06
Speaker
That's actually what an angel provides. A seed stage is when there is a little bit more of movement towards the product, maybe the first MVP of the product is made, etc. that's when a seed stage is supposed to be. But sometimes I see seed investments,
Challenges in Growth Stage Investments
00:03:21
Speaker
which are even like some some million dollars of revenue also started coming in or even a few hundred thousand dollars revenue started coming in. What are check sizes also? Like ranges, I'm sure. So again, these things very, very significantly globally, but in India, the angel checks tend to be half a million dollar to a million dollar kind of thing. The seed stage checks,
00:03:45
Speaker
tend to be, I would say, a million dollar to $3 million dollar kind of checks. And then C to Z, where you definitely have a couple of million pieces of revenue in the business and you're really kind of giving that capital to kind of really prove out the product market fit, as we say.
00:04:02
Speaker
So at series A, the chicks can be up to $20 million from that $3 million, right? So that's a range. And then comes the growth stage. So at growth stage, typically the expectation is that the company is at $10 million dollars plus revenue.
00:04:17
Speaker
And this could go all the way to probably $50 million dollars revenue because beyond $50 million, it would be like late stage revenue. In India, sometimes you even see $50 million dollar companies going IPO, so it could be even pre-IPO rounds. So $10 to $50 million is actually the growth stage in terms of, I'm not i'm again talking about revenue.
00:04:34
Speaker
Valuations can differ very differently. That depends on industries and philosophies of firms and all this kind of stuff. $10 to $50 million dollars revenue growth stage. And in that space, there is like the fact that very few of that angel companies get to a seed check. And then very few of that seed checks get to a series A check. And then a few of that series A checks come to a series B check. And again, there is some data historically.
00:05:04
Speaker
So the earlier stage, the graduation rate, so to speak, is historically around 30%. That means 30% of the angels get a seed, 30% of the seeds get an A. Which is not bad. I was expecting it to go over. Yeah, which not bad. Yeah. Yeah.
00:05:21
Speaker
Which is actually what, you know, again, funding had not been that difficult. And then obviously there are times if you take the same data for a year like 2008, which is like terrible, ah you'd probably see even not even like 5% making it to the next level, right? you know So vintages matter quite a lot. I'm talking about recent history.
00:05:40
Speaker
Okay. ah And then, so that is actually the reason why when it by the time you get to a growth stage, like you know maybe or only a small percentage, maybe 20% of the people who got an angel check actually are in a position to even fight for a growth check.
00:05:58
Speaker
Now, when it comes to growth, unfortunately, and again, this is again this is not unnatural, just because all countries, et cetera, or all venture ecosystems go through this process, where typically the people who have done well in growth have historically become late-stage investors.
00:06:18
Speaker
So they would have made their track record doing, say, $10 to $50 million dollar revenue companies. But then investors have given them way more capital. And then they went into the business of investing in the $75 million companies.
00:06:31
Speaker
Okay. Tiger Global would be an example. Yeah. Tiger is an example. Tiger is an example where they started as a pure growth firm. And then, like know obviously, they had their public market business, which is separate.
00:06:42
Speaker
So they made a reason that, look, you know we understand public markets, we are better off investing later, but we'll also invest across the spectrum. There is also another thing which happened where you take a Sequoia, Axel, Lightspeed, etc., or or General Capitalist, all those firms.
00:07:01
Speaker
They used to do early stage trading. Then they start to do in growth stages also with their growth stage funds to first to back their own companies and then do new investments. But again, sometimes these things ebb and flow. What I really mean is that the market is actually putting a lot of capital to work, especially LPs are very happy in opening their first checks.
Private Equity vs. Growth Stage Funds: Key Differences
00:07:22
Speaker
then there is a lot of capital which comes into the growth stage but then when the market becomes tighter they all tend to hey we want to be that first check in a company which is basically their bread and butter their super core part of their business and growth is actually an extension of their business from that perspective for many of them i'm not saying again there are people for whom who have completely moved from early to ha growth is my core, etc. But that's actually the entire landscape.
00:07:55
Speaker
Very specifically coming to India, look, we had we had a lot of hedge funds who used to write growth state checks. Almost all of them, if not all of them, are actually out of the market. Maybe one or two of them still write a check once in a while.
00:08:10
Speaker
Would we like Motila Loswal? No, are like, I'm talking about Tiger, I'm talking about Tiger Cubs, like know a few of them were active in India. There's front con state view who's still active in India. They still write a few checks, but less number of checks than what it used to be.
00:08:29
Speaker
ah So folks like that is actually what I'm talking about. So these are, they came from hedge fund world. Mutlaluswala and all our private equity funds. Now we do see recently more and more private equity stepping into the growth stage venture. In fact, today morning I was having a conversation with a private equity veteran um who congratulated us for a recent investment. And he said, Hey, look at it. We saw this company. You really like the founder of and what they're building.
00:08:58
Speaker
But they're at that stage where they're not like steady state EBITDA, where I can value them on a multiple of EBITDA. And that's actually the reality. So because many people think, oh, I can go to private equity for a real tech growth company, like in a growth stage tech company.
00:09:14
Speaker
Unfortunately, the answer is only very few growth stage tech companies actually fit the, I would say, sandbox of a private equity fund, where they want to see a particular... I was asking you, what's the mandate of a PE firm?
00:09:27
Speaker
So P funds typically, and again, I'm saying typically because it's 80, 20 year old, there'll be always 20 percentage of that. P funds typically want to see a business model very settled with profit margins being settled. They don't want to kind of go in a company which says, if you're just breaking even, but we'll make 20 percentage of the five years down the line.
00:09:50
Speaker
That's a kind of risk they're typically not interested in taking. Nothing right or wrong in that. That's not their business. right Number two, many times when when they see a company with this $20 million dollars revenue in tech versus, say, $20 million dollars revenue in traditional manufacturing.
00:10:08
Speaker
In traditional manufacturing, you can say that, hey, this team is well set and it is like and know this is exactly the team that's going to take this company from $20 million to $200 million month.
00:10:20
Speaker
And it's all set. These people must have been industry veterans who came in 20, 25 years experience, et cetera. Versus the kind of tech growth businesses which we see, and these are typically back where we see firms before,
00:10:34
Speaker
These are typically still founder-led. They may have, say, for example, their first product already in the market and making profits, but they're plowing that profits back into maybe the second product or growing a new market. Like, you know, they want to come to Middle East or they are good in North India. They want to get into South India, like in all West India, things like that.
00:10:55
Speaker
So this becomes a very ah different mandate than private equity where I want established management teams and steady businesses with steady profits.
00:11:09
Speaker
where here there is still a lot of experimentation going on Yes, one part of the business would be stable, but we are still out there to take risk, to scale the business faster, better, higher. Okay, got it. So you were talking of why growth stage funds are much lesser than early stage and late stage. And from what I understand, late stage funds,
00:11:34
Speaker
Funds were at one point at time growth stage funds and as they started getting more investor funds, they had no choice but to become late stage funds and which is why ah funds that remain growth focused funds are few and far between. And a lot of growth stage funds are also more early stage focused. They also do growth, but the primary goal is early stage focus.
00:11:55
Speaker
Exactly. Like pure play growth is actually very difficult. Like there are very few people who do that because of the reasons which I mentioned. And by the way, there is an example in the early stage in US VC, I can explain, is benchmark. They have been well known for a firm who have stayed with the I got a five, $600 million fund size for a very long time when their peers have actually scaled up much large and they still remain the best in their game.
00:12:26
Speaker
Similarly is actually an approach because in growth, if you really want to become, would say the number one firm in growth, where you're consistently good at picking these companies that say 10 to 20 family in revenue and then scaling them to 100 to 200 million revenue,
00:12:41
Speaker
You only have so much of time in your hand. You cannot go and look at if you're and ah If you're in the early stage business, you're looking at probably 4,000 companies.
00:12:52
Speaker
Versus if you're in our business, you're looking at only 400 companies. right you know So if you do both, suddenly you know how the time will become an issue for you. If you are in late stage, youre like ah you are really going into, say, for example, you're investing, somebody like us, try to invest a 25 million check into a $750 million dollars company.
00:13:13
Speaker
Our ownership will be so small. We'll not be in the boat. We can't drive the outcomes of the companies. Then again, you're actually in the other end. You're literally what we call as you're buying a ticket in a bus for a ride.
00:13:27
Speaker
right And if the bus gets to the destination, you're good, but you're not really part of that team which is actually driving the bus. like know you're you're And I'm not again seeing that as an investor, you're not the driver, but you are actually part of the navigation team.
00:13:43
Speaker
And you got to be part of an animation team rather than just a ticket on the bus, sitting in the back and enjoying the ride. That is actually the reason why doing pure play is actually hard ah because it needs a lot of discipline in number of companies, the work you do, etc. What do you mean by discipline here? Like ah in terms of discipline of saying no to LPs, if if you're getting too much money or discipline of saying no to like, like what does this discipline typically mean saying no, right? So so what what are the things you say no to?
00:14:13
Speaker
Yeah, discipline typically means we have a saying, like, know you know, you sit around and you say, that's an absolutely great idea, but we are not going to do it. That is actually discipline, right?
Evaluating Investment Opportunities: Criteria and Metrics
00:14:25
Speaker
Because that is something for somebody else to do. It may sound crazy, ah but here's the thing. one is this One part of discipline is our business. Due to the reason, multiple reasons, there' a lot of capital available. So providers of capital always want to provide, if somebody's proven, want to provide them more capital.
00:14:47
Speaker
And many industry veterans would say, hey look, If you're getting a lot more capital, you are to figure out a way because your capital providers are your clients to deploy that capital rather than be pure play and say, hey this is the craft which you're best at.
00:15:03
Speaker
And we are not going to be in that craft of like, you know, putting that $25 million dollars check in a $750 million run value company and being in the the right. So that is one aspect, like literally saying no to money. That's number one.
00:15:16
Speaker
Number two ah is actually, when so we actually spent a ton of time, literally, i would say, agonizing sometimes about when you look at a company, can we really bring real value to the company than money?
00:15:33
Speaker
Because that is the only place where you really can build a partnership with the founders. right Where the founder comes and literally calls you at like 2 a.m. in the morning when they have a problem, they would be actually brainstorming and they're like, you are asleep and then they wake you up for, hey, we have a problem and you are the trusted partner we want to talk to.
00:15:56
Speaker
If you want to be in that position, you really are not just bringing money. Money is just a commodity. right And so you stay disciplined on, hey, here are of the 400 companies we do look in a year. We call it as a 444 process.
00:16:11
Speaker
40 companies where we go in and really understand the business to the next level. And how we pick the 40 is pretty simple. We look at founders who have got experience either building that business itself And they think about, we look at, like, how have they gone through a near-death experience? What have they learned? Have they just dropped the thing and gone? Or have they actually really fought the situation and really gotten over that, et cetera? These are all the things which you look for. Or maybe they have done that in a previous business or previous job, something of similar nature.
00:16:43
Speaker
And then we look at large markets because ultimately whatever you do, large markets are important. So when we look at large markets defined as 5 billion plus markets and experienced founders who have gone through the journey, we pick 40 of them every year and then go deep with these 40 companies, really understanding, hey,
00:17:03
Speaker
What are they really building? And ultimately, with the lens of what can we bring to table for these founders where they would probably five, six years down the line after working with us, think of us more in the side of a co-founder rather than the side of an investor.
00:17:20
Speaker
right And that's a very important thing for us to kind of. So that is a part of discipline that I'm talking about. Now we are really putting, like sometimes people say, like you know you're putting too much of pressure on yourself to kind of be, because it's very difficult to be of genuine value to a founder who is really best at their craft. right so But that is ah that's a thing. So there are many deals where we looked at a company and we said, hey, look,
00:17:47
Speaker
Great company, great founder, great market probably would become a great outcome, but there's nothing much we can bring to the table here. So let's just move on because we would be just, again, practically buying a ticket, which we don't want to be doing.
00:18:02
Speaker
The 400 to 40 process, besides TAM and founder, what ah and revenue, you told me you're looking at 10 billion plus ARR.
00:18:13
Speaker
Besides these three, are there other numbers that you look at? Yeah, yeah. There are definitely other numbers. So the way in which I'll take you through that process, right? And it's quite interesting.
00:18:25
Speaker
For everybody, you have their own unique soup for this. right and know So it's not like our way is right and somebody else's way wrong. What works for you, right? What works for us is this. What we call us, first we start with founders or founding teams, which bring unique perspective to a large market.
00:18:44
Speaker
and And are they really ambitious? right and know These are three things. so and know So unique perspective, large market, and ambition of the founders. Now, why each of these things are important?
00:18:56
Speaker
Unique perspective is important because many of the markets we are looking at, I'll just take an example. One of the areas which you go after is consumption, especially driven by women in India.
00:19:08
Speaker
Now, there's a large market like jewelry, which you went after. and when we met Gaurav, who's a founder of Bluestone, previously backed by Axel, Gaurav had a view that, look, it's already a $60 billion dollars market. So the market size is not a problem. But here is the issue.
00:19:29
Speaker
The new generation want more designs than the traditional designs which are available in the large owners. Now, there's a problem in this because the traditional jewelers always outsource manufacturing, which basically means that there are minimum order quantities.
00:19:44
Speaker
And you can't like you know you can't do, so to speak, the fast fashion equivalent in jewelry by having like 5,000 designs and build a model to kind of manufacture these things literally at single piece of time.
00:20:02
Speaker
So for that, you have to really figure out manufacturing and you have to figure out just-in-time manufacturing and jewel gold jewelry where you can get an order and make it within 24 hours and deliver it within 36 hours.
00:20:15
Speaker
That's a very tough problem to solve. But when he got that initial part of manufacturing, right, that's when we funded him. to then say, okay, fine. He had that insight that with this, I can actually give a very different customer experience which customer wants. That is unique to science, which is the end customer's world.
00:20:35
Speaker
And then when we did our work, we said, hey look, by the way, you're doing it only in e-commerce. You should do it offline also and make it omnichannel because then you can build customer trust also and all that.
00:20:48
Speaker
So there is a something which we bought a table also in that in that context, right? and know So what we try to look for is unique perspective, which comes from the founders. And then there is something more which we can actually add. that's a starting point when we go in.
00:21:05
Speaker
And then we look at, okay, fine. If that is the case, have the founder gone through that journey? Are they experienced? Yeah, they had those things get through. We go in and look at the market size. And by the way, market size is again an interesting question.
00:21:20
Speaker
Because many times, again, it's a famous ice hockey player. I don't know who who said that, but I'm not an ice hockey fan. But this quote said to me, you got to be where the puck is going to be, not where the puck is.
00:21:34
Speaker
h Right? So that is very, very important. One of the key mistakes where i would say rookies in our industry makes is that when they look at time, they look at time of today.
00:21:46
Speaker
But when we sit down with a founder and really unpack their ambition, and that's where the ambition is coming to, what we really look at is not what the term is today, but what can, if this founder do a bunch of the things which they want to do right with their unique point of view, which they bring to a large industry.
00:22:08
Speaker
What can the TAM become? So that is the leap of faith, you can say, but we do take that after looking, sitting down. like So we for example, i I'll tell you the case.
00:22:21
Speaker
Today I'm analyzing a company. i won I won't specifically talk about that because otherwise I may out the industry, etc. But it's a $35 billion dollars TAM market as a larger market today. But this company is building something which is in the $2 billion sub of that.
00:22:38
Speaker
And the founder, when they talk to many people, they say, hey, look, many people have turned us down saying that our time is only two billion. But the way in which they are going after this particular thing by product formulation to manufacturing to owning the supply chain to owning the distribution, they're like, look, I want to go for the 35. Today, it's impossible for somebody to see that. But here is my experience. Here is my co-founder's experience.
00:23:04
Speaker
We can go for the 35. and And that 35, by the way, in the next 10 years will will become probably 60. right know So for us, we are actually playing for a 60 billion time. We are not playing for the 2 billion time.
00:23:17
Speaker
And we are playing on it with the founder. So that's the second piece which comes in. And then we do use that to filter the 400 to 40. And then we go into the next layer of numbers.
00:23:30
Speaker
So the next layer of numbers is actually this, right? And number one which we focus quite a lot, is actually customer acquisition cost. And this, again, has numbers and non-numerical parts to it.
00:23:43
Speaker
Because there's a lot of businesses which actually can be built on CAC. And they will last till the point of time that CAC overtake the LTV. And we have seen that happening so many times, especially on online-only models in India.
00:24:00
Speaker
So we really like to see how the construction of CAC is actually done. Is it actually just only online or are you actually building beyond online, et cetera? I'm talking about consumer businesses.
00:24:14
Speaker
Whether it is enterprise businesses, then the CAC actually, the CAC LTV map is much more better, easier for us to kind of look and do and analyze and everything because they tend to actually follow certain rules in consumer. It's much more difficult.
00:24:29
Speaker
So we look at CAC, specific CAC itself, CAC payback period. And payback period is super important for us. We love companies which have less than six-month payback period.
00:24:41
Speaker
ah Versus this many times, ah you know we see people investing in something with a three-year payback period, et cetera. Again, in their scheme of things and their models, it will work. But why we like a faster three- to six-month payback period, if possible,
00:24:57
Speaker
Because that means that the company is way more capital efficient. They can literally, like it's like the the old, and I'll use an Indian word, Baniya, who's like a traditional businessman who's who's running an operating business.
00:25:12
Speaker
They think about how fast I can cycle my money. And it is very, very important for new age founders also to understand that concept. Because if you can cycle your money once in two years, versus you can,
00:25:27
Speaker
cycle your money once in five months or six months for acquiring and like you know getting your money back from a particular customer, it makes a 4x difference yeah or sometimes even 5x difference in the amount of capital you raise, the amount of dilution you take, the ownership of that business. And this is without compromising on your growth.
00:25:49
Speaker
I'm not saying compromise on your growth, right? So ah we always look for businesses which has got a faster payback period. We always also index on good growth rates and it could be anything from 50 to 100%.
00:26:03
Speaker
hundred percentage stage There are some businesses of ours which are growing 100% plus at that stage also, which is great. But we're not looking for like, hey, look, a you want i want to see like 10x per year. like That's not...
00:26:15
Speaker
the hockey stick that we are looking at. Again, there are people who are very good at focusing only on that. That's not our space. So we are actually okay to talk to founders who are growing 50, 60 percentage, but want to build a profitable business. That's not a problem for us.
00:26:30
Speaker
ah Then another thing is ah gross margins. We focus quite a lot on that because they, in businesses like ours, so the stages where we enter, gross margins tend to be the the best forward indicator of long-term profit margins.
00:26:47
Speaker
I'm not saying that all good gross margin business become all good profit after tax businesses. Obviously, ought to do the next level of work in stripping down everything and understanding other costs which come after that.
00:26:59
Speaker
But that gross margin is a great starting point for us to see. So if something is like if you're a consumer business which is making 25% gross margin versus if you're a consumer business which is making 50% gross margin, we'd be very interested the 50, the 25 will be very hot.
00:27:16
Speaker
So that is the difference that we're talking about. And the last thing, and these are some of the major things that you can again go unpack into the next level.
Valuation Concerns: Are Indian Unicorns Overvalued?
00:27:25
Speaker
But the last major thing we should look at is, are we investing in leaky buckets?
00:27:30
Speaker
So I'll give an example. So we recently invested in a company called Flip Spaces. Because we really like this entire space of India is having, people are building houses, companies are building offices, so much of construction is actually happening, right? And these guys are a player, they're actually a company which do the interiors for offices. But why we did not go into that space for like, you know, individual real estate, like people like you and me building a house versus a Tata building an office.
00:28:03
Speaker
You and me will do a house only probably once in 10 or 15 or 20 years, right? And and our renewals are also like, and even if you renew the house, it's not going to be that often.
00:28:14
Speaker
Plus our asks are almost always very bespoke. right? So versus enterprises, you do a good job for them. They are always making an office. They're always making changes in office every three years. You have a consistent business. So we don't want to be one time in one-time businesses. We want to be in repeat businesses.
00:28:35
Speaker
And if we look we look at businesses quite a lot to see whether, hey, is this a customer which you can acquire and repeat over and over and not lose them? Do you have a history of not losing these customers?
00:28:48
Speaker
You may know us like two, three percentage probably, but preferably we prefer what we call us like net negative churn. That means your existing customers actually have provided you more than like, know, one X of last year's revenue from that cohort.
00:29:04
Speaker
Okay. So you would have never invested in a live space like that. Interesting. Listen, we have evaluated, uh, look, they are again building a great business, but due to some of these things, like they have a lot of respect for the founders.
00:29:17
Speaker
We looked at that entire space of live spaces, home lane, et cetera, but decided to go into the the enterprise side of that business rather than the consumer side. Okay. ah I'm just curious. ah it What do you think, like India has some hundred plus unicorns. How many of them are fairly evaluated? Like they...
00:29:41
Speaker
ah actually deserve that valuation and how many are yet to grow into that valuation just like you know rough estimate i would more like say 70 30 so 30 percent i than i do yeah 30 percent is i get to is what i may not be may get a lot of hate nails after this but but that's what i actually feel and and let me actually explain why i gave that answer and uh Because obviously the founders would think they are worth that much. The investors also may think they're worth that much. But the reality is you would see the public markets. And look, know we have taken a company public. There are companies public recently. We're taking another public
00:30:25
Speaker
Which months? So we have taken Biome and Bluestone public in July and August of this year. We'll be taking one more other company, which is filed for IPO, is Cure Foods. and So once we get approvals, obviously it'll go public.
00:30:42
Speaker
And we have other companies in our portfolio which will be looking to go public next year, etc. So when we talk to the public markets, they actually have... a different view of how much these companies are worth. Again, I'm not saying their view is right or somebody else, but the reality is like, look, the largest mutual funds believe that many of these companies are going to be worth for their listing a small to meaningful discount to their last private valuations.
00:31:14
Speaker
The reality is that they are the anchor investors for that public market route. That is what they're willing to pay. Your valuation is that, right? Or you can spend another two or three years more growing to what they think is that valuation.
00:31:30
Speaker
So it is my my comment is coming directly from where the public markets are willing to value it from. Part of this thing about the public markets opinion is also from, because in the first generation of Indian tech companies which went public,
00:31:44
Speaker
They said, oh okay, fine, I'm trusting all these things. These companies are going to immediately hit profitability. They're going to throw a lot of cash out for us. Unfortunately, that has not happened. Again, from the founder's point of view, it may be the right thing because they want to reinvest in growth, which is what they will do with people like us. right you know We would say, like hey, look, we understand we are focused on the eventual outcome. We are okay. You're not making back this year.
00:32:09
Speaker
But public markets don't operate like that. They want to see if theyre if you're going to them and said, hey, look, we will make profits in two quarters. You better do that. Otherwise, they won't trust you.
00:32:22
Speaker
And that's a problem. So there is a little bit of a trust deficit which needs to be bridged today. ah And but on the same time, public markets say like the way to bridge it is come with a good valuation and let's just all build together so that I'm not paying you a high valuation upset.
00:32:39
Speaker
How do you decide when a company is ready for public market, like say Bluestone? Did Bluestone also go for late stage funding or did they straight away go to public markets? They did some late stage funding. So they raised a couple of hundred million dollar rounds before they went public in the 18 months in the run up to go public.
00:32:59
Speaker
Okay. And that's always useful, right? know Because there are some times in which some reasons why this happens is to clean up the cap table, consolidate the cap table, etc. before going in public to award selling for shows and things like that in the public markets. But to answer your question, how do we decide? ah It depends on the companies very specifically. Ultimately, that decision lies to the board and the founders.
00:33:24
Speaker
ah Some founders will decide, like, and look, we have a founder who is deciding to go take the company public within five years of its existence because he's like, look, I've already become profitable, one thing. And he said, look, I am better off building this as a public company because I want to build a very large business in my space and the cheapest capital available. If I am kind of like, if I'm very confident of delivering what I will say, will deliver with profitability.
00:33:54
Speaker
The cheapest capital then is available in the public markets, which is actually the truth. Because if you do well, if you say what do you do, the public market actually rewards you for that, right? And somebody is confident of that.
00:34:05
Speaker
They would want to go public early. So some of the profitable companies, actually, I believe in India, would go public earlier and create a lot of wealth in the public markets. Versus some others would say, hey, look, I want to reinvest my capital.
00:34:21
Speaker
and grow faster. I want to kind of really get bulky in private markets without that quarter by quarter public scrutiny. I'm not ready for that. My company is not ready for that. My management team is not ready for that.
00:34:34
Speaker
In which case, Like, you know, probably they could, even if early investors, et cetera, want an exit or something, there's always other mechanisms where late-stage investors can buy them and things like that.
00:34:46
Speaker
And they would stay private.
Sources of Capital in Indian Venture Capital
00:34:47
Speaker
Lenskot is an example. They have stayed private for a very long time, at a big to a very large scale, right before they go public. And I think they've been profitable for quite some time also as well. Yeah, that's correct. that's fine Okay, interesting. um Again, no no right or wrong answer. depends on the company's specific needs.
00:35:08
Speaker
yeah So ah what is the difference between late-stage investor and a PE investor? Is it that PEs want a bigger ah stake? Is that the difference? Yeah.
00:35:20
Speaker
ah Like, know, look, some some of these lines blur. have to kind of give that. But that being said, typically, if you think about a late-stage investor who's focused on tech and, like, you know, large outcomes, they could be, like, you know, obviously, SoftBank comes as an example. Tanya Global, when they were actively investing, comes as an example. mean, there are people like General Catalyst, who is very actively investing today, comes as an example.
00:35:47
Speaker
They are willing to actually still take risk. and say, hey, look, we are happy to reinvest on growth. A lot of the capital, right? You know, rather than, so they would be actually happy saying, hey, the company is today just broken even debita.
00:36:05
Speaker
I'm happy to kind of stay that just broken even stage. Versus when you talk about private equity, they come with two things. One is typically they want more profit visibility or profit already have happened.
00:36:20
Speaker
Or they are like, okay, fine, now the profit is coming through. I want that, you know, 2% of your return going to 20% of your return sooner rather than later. So that this becomes a very steady business, so to speak.
00:36:32
Speaker
Second is private equity tend to be very conscious, usually, about what percentage ownership they have. um They want to have meaningful ownership or ideally even controlling ownership of businesses, which is the second thing.
00:36:47
Speaker
Which... is very tough sometimes in India, especially the controlling ownership. Hmm. Because lot of businesses are family owned and... Yeah, like a traditional businesses, family owned, all that kind of stuff. But, you know, in the tech and growth stage, tech kind of scenarios...
00:37:05
Speaker
like buying 50% of a company unless like a large part of the existing investors are willing to sell to a private equity. And there are certain certain situations where that happens, but it is very difficult because many of them want to kind of get that large outcome.
00:37:21
Speaker
Because if you think about it, think about, say, for example, I'm just picking a name, um Axel have invested in their company at a series stage. And that company have done quite well. They're today at, say, 800 million value.
00:37:35
Speaker
Axel believed that this could eventually become a $2 billion dollars company in the next five years. Yes, they may have been in that company for last six, seven years, but they have the capital. The RLPs allow them to hold that time, right?
00:37:46
Speaker
And this could be a needle-moving outcome at $2 billion for Axel. Now, why would Axel sell to, say, KKR today at 800 million valuation, all their shares or majority of their shares?
00:38:00
Speaker
Unless the founder says like, hey, look, this is what we want. And like, you know, I have a ton of respect for the folks in that. So they would do what the what is best for the company.
00:38:11
Speaker
ah Unless any of those kind of scenarios, they would want to kind of play for the upside because actually the business is about also like, especially the early stage venture folks, it's about creating the big outcomes. It's not about just making a 5X in a deal and getting out or something like that.
00:38:29
Speaker
Okay. ah What is the ah source of capital ah for each of these stages? Like I believe a lot of growth stage, not growth stage, but a lot of early stage capital is domestic LPs today in India. a lot of family offices are going into the growth ah through the early stage investing. What about growth stage, late stage? How much comes from domestic? How much is like international global LPs? Like where do you raise your money from?
00:38:59
Speaker
So I'll answer so where do we reach some money last. But typically, look, early stage capital globally, and I'll come specifically to India, ah it comes from either in the institution set, it comes either from endowments and foundations who have the appetite for building programs around that and who have done it well, typically in the U.S., these endermaments and foundations, or it is family offices who have gained the risk appetite for doing this. right So that is the two buckets of capital who have historically funded the, I would say, angel seed series A funds.
00:39:36
Speaker
historical ah When it comes to growth stage and even late stage, you would still see endowments and foundations somehow or large families, larger families probably.
00:39:50
Speaker
And typically I would say larger institutionalized families who have a team running the program rather than the family individual running it or something like that. But we also have other institutions. Say for example, funder funds stepping into it.
00:40:05
Speaker
We have some small insurance companies sometimes stepping into it, small pensions stepping into it, and some other form of institutions like multifamily offices, etc., also stepping into that space.
00:40:18
Speaker
And when you come to late stage, obviously all big institutions like your sovereign bank funds, your large pensions, all of them are okay to the late stage. fund Now, coming specifically to India, there are...
00:40:33
Speaker
like, you know, say, for example, domestic Indian funds, I take an example of a Bloom or a Stellaris, etc. Most of their capital come from global institutions or global family offices.
00:40:44
Speaker
and that's So they have a good global LP base because they have multiple vintages. i think Bloom is now raising 1.4. So like they have multiple vintages. They have that track record.
00:40:55
Speaker
Stellaris team came with their track record from previous firms. So LPs were comfortable backing them. So that happens. So they would be more indexed towards global LPs, but with enough of domestic LPs also backing them. america So it's a mix of that.
00:41:10
Speaker
But if you are a newer firm, which is going to start off, right? You know, the Karthik equivalent who is coming out, like Karthik started DOOM in 2012 with Sanjay and Ashish.
00:41:21
Speaker
So if they are trying to start it today, probably they would find more of that money from domestic LPs for first fund or even second fund before the global LPs start investing in them because the global LPs have already picked like in a bloom or an India quotient or a, or Stellaris, et cetera. Right. No, it's not that first generation is already created. They have picked their bets. So the next generation will have to work more harder to get them to an extent.
00:41:50
Speaker
ah When it comes to growth stage funds like us, capital is primarily, while there is enough capital still available domestically also. Again, I think the same situation, like a blue man said, people like us, for example, 75, 80% of our capital come from global markets, actually, global institutions.
00:42:10
Speaker
Primarily it's US and Europe, even though latest fund, we have seen capital coming from Japanese institutions, Korean institutions, Singaporean institutions, et cetera. AsiaPak is also opening up significantly for people like us.
00:42:24
Speaker
um But generally, again, there is a lot of capital available in India, domestic market, institutions and large families to back growth stage funds.
00:42:37
Speaker
Late stage, unless you're a proper private equity fund where there is domestic institutional capital, most of the capital is actually global.
00:42:47
Speaker
I'd say you think about k Chris Capital, Kedara multiples, most of their LPs are actually global LPs. They also have domestic LPs, but i would I would take a guess, I hope it is right, that 90% of their LPs are global institutions.
00:43:00
Speaker
Okay. ah Who are the, ah like India doesn't have endowments or even pension funds putting money into ah private investments, right? so so who's, like who are the big check writers? Like you said, institutional money, yeah what kind of institutions?
00:43:20
Speaker
So there are two, three forms of institutions. I'll start at the government funder fund. So Sid B runs a program, Asana runs a program. So that is one. And government has done a great job of actually providing that capital, and I would say seed capital to fund managers. right and know So that's great.
00:43:38
Speaker
The second set of institutional capital in India is insurance and banks. Now, there was a RBI regulation which came in and now things are actually being cleared up for banks to invest in private equity funds with certain widers on board. But insurance and banks, those two buckets are actually open.
00:44:00
Speaker
And there is, i would say, it it won't be like, it probably will be a dozen to 15 names which are there, but that is actually still significant number to go around. And some of them have... Meaningful ability. and Like when i was with the CIO, he said, like look, a fund like yours, we can write a $25 million dollars check. That's not small.
00:44:18
Speaker
and and So these are significant check records. They could be what we call as an anchor LP for funds like us. Then there is, i would say, institutionalized family office. Premji is an example. Katamaran is an example.
00:44:33
Speaker
I think folks like that, i think the almost all of the Infosys founders have their own institutionalized family offices now. So that's one example. there are few other Indian families also who are institutionalizing their family offices, which we have seen.
00:44:48
Speaker
they again have the capacity to write anything from $5 $20 million dollar checks for fund managers and they really like. And many of them are also understanding that, look, we have to focus our relationship relationships rather than writing too many small checks.
00:45:04
Speaker
So that's the other institutional pool of capital. Like, say, for example, Azim Premji Foundations, we talked about, do India have foundations and endowments? Azim Premji Foundation is actually a proper foundation. which invests in funds.
00:45:17
Speaker
And Lan, who's the CIO, does a phenomenal job of running that firm. There is, i think, IIT Delhi or all the IITs together now have an endowment in place. It's not a large endowment, but still that's actually a good start.
00:45:34
Speaker
So we are seeing the first, like the green shoots of some of these endowments and foundations getting created in India and managing capital in a proper way. also happening in India.
00:45:46
Speaker
Then when you go to larger institutions, you go to the pensions, et cetera. Today, they're not really looking at many of these things due to regulatory bottlenecks. But I think those things will also, like if you think about government link, like LIC in that insurance bucket is already investing in private equity, right? know But can an EPF invest in private equity?
00:46:07
Speaker
These are things which I think government will have to look after. But at some point of time, these buckets will also open up. for fund managers i think in the us they're opening up more capital sources for private equity right i think that their retirement the 401k plan i believe there is now allowed to invest in private equity as well yeah so you are hoping for similar changes in india as well too yeah i want to kind of caveat this though um look
00:46:39
Speaker
What yours is specifically doing is actually telling that you're a retail investor and you can actually invest into private equity. It's a very sophisticated asset class by doing your own direct allocation. Like, you know, like you're picking a, you're buying an Apple stock. You can actually now tomorrow go and invest in XYZ private equity fund.
00:46:58
Speaker
I personally, and again, this could be something where I can get like, you know, bad karma from the industry, but I personally don't believe That is a good idea, right? think retail investors who would like have many, like they don't understand the liquidity constraint of our industry. You're pretty much locking away your capital for 10 years.
00:47:22
Speaker
There is significant risk that you're taking in many of this. Like if you invest in a fund like ours or like, you know, Bloom or anything, you're actually probably investing an extreme end of risk spectrum.
00:47:35
Speaker
Many people don't understand that at an individual investor level. You need sophisticated like you know allocators to do that. I would personally think, yes, if If like a professional team inside an EPF making an allocation on on behalf of millions of their contributors, yes, that's definitely something which can be done and which should be done because they deserve an allocation to the growth which is happening in India in the private space, which today they don't have any and exposure to. i dont know So that's the right thing to do.
00:48:10
Speaker
But giving that, like and literally asking school teacher to write a direct check to Ironpillar or something, like i will my mom was a school teacher and I know I will not sleep well if that happens and I will not take that money.
India's Growth Potential and Venture Capital Challenges
00:48:23
Speaker
it's It's dangerous for them because they may need a medical need tomorrow and they may need that money and how do they how do they access it?
00:48:33
Speaker
That's issue. one one other One other pool of capital, which is also happening in India, which I forgot about the institutional side, we also have private funder funds. So for example, Nippon have one.
00:48:45
Speaker
ah We have you know firms like Oyster Global who are actually starting a private funder funds. Quasi-private public, like NIF. So that is another pool of institutional capital, is again coming up in India, which is important to mention.
00:49:01
Speaker
okay This private fund of fund is essentially aggregating family offices, money. and No, many of them are actually institutional capital. Some of them could be like in a family offices. But if you look at Nippon, for example, all their capital, my understanding comes from institutions in Japan.
00:49:19
Speaker
And I have their capital come again from global institutions. Got it. In general, ah what's the pitch for investing in, the ah like like doing private investment or in that this whole venture as an asset class? What is the pitch for that?
00:49:38
Speaker
Look, if you look at India today, this is how we see India today, right? So we have around $2,900 per capita income, depending on where rupee is today, right? And it moves up at that.
00:49:51
Speaker
ah if you look at US as a developed market, it was at the same stage in 1959.
00:49:59
Speaker
And if you take 10 years before that, ah US grew per capita and income almost 60%. And this is post-war, boom, like all that positive thing, right?
00:50:14
Speaker
India almost doubled it in the last decade. So you can first of all see, like if we are coming off like very strong tailwinds already in our back, number one.
00:50:25
Speaker
Number two, we're the fastest growing economy in the world in this decade every single year and expected to be the same rest of every single year this year in this decade.
00:50:37
Speaker
Now you add that to the third part, which actually people talk very less about, Many countries like which when they went through, like when you take the the North Asian countries, Korea, China, etc.
00:50:52
Speaker
or like or even even Japan when they went through their growth, they all grew with exports and infrastructure as their key engines for growth.
00:51:04
Speaker
That was giving anything from 60 to 70 or even 75% of their growth. India's 60% of the growth is actually coming from domestic private consumption.
00:51:15
Speaker
right It could be companies. It could be B2C or B2B2C. I don't know that domestic private consumption. That's the lens which you took it. And that's why I mentioned U.S. because U.S. in 1959 and even today 60% domestic growth.
00:51:29
Speaker
these are sixty percent dollars good So to an extent, the golden ages of US was created by US building for US because they have a big domestic industry which actually supply for their own consumers.
00:51:46
Speaker
And that market is large enough so that they build economies of scale. And then once you build economies of scale, you actually can win beyond your country also, right? That is a simple playbook.
00:51:58
Speaker
And for for that playbook to happen, you need to have big domestic market to start with. US had that in 59, cetera, and continue to have it. India have that today, and India will continue to have it.
00:52:11
Speaker
So now if that is actually the premise that you're looking at after, And then again, I think the right thing that the government is focusing on on manufacturing domestically for domestic consumption, right?
00:52:24
Speaker
If we kick off that flywheel that we're making in India for India's own consumption, and we're building big scaled companies with world's largest population on our back.
00:52:34
Speaker
Obviously, like in a week we consider today's real consumption class in India is only 50 million people. Many people will say that's 250, etc. We think that probably their math is wrong. There's really 50 million people who are really spending, but that will become 150 in the next decade.
00:52:50
Speaker
That's one of the largest markets in the world. but So then you have a big market to cons cater to. Now, coming to your question, with this market and this tailwind of...
00:53:03
Speaker
we building for our songs and building scale why privates is because some of the best founders as you've seen you want to catch them early like if if the mcdonald's of india is getting created if the like if the next like you know biggest insurance company of india is getting created the next color cosmetics company the rablon of india or a steel order of india is getting created think all these things are going to be created in like, you know, we think that whatever is already there is going to be the next big companies. No, 10, 15 years down line, many of the the titans of today will be number two and some smart young entrepreneurs with that unique insight in a large industry is going to build large companies. People like Gowra and Unquith, et cetera, are building that.
00:53:51
Speaker
And it is a shame that a large part of investors don't get access to these great companies when they are private, when they are small, when they are practically valued at a much lower valuation, rather than picking that up only in public market when these companies are valued in billions.
00:54:13
Speaker
And the pricing is pretty much figured to the perfection because the problem with Indian public markets, and this continues to be the same problem, I don't think it's going to change. The valuations are very high and it always remain high. Like I've heard this for 20 years and probably I will hear this for next 20 years. So the question in private markets is end it early, grow with these founders, capture the early growth so that you can create alpha rather than you just create public market beta.
00:54:43
Speaker
So you're essentially saying that ah venture as an asset class will outperform um mutual fund or whatever. If you invest in an index fund compared to that, venture as an asset class will outperform it.
00:54:57
Speaker
ah But I believe 90% of VCs don't beat an index fund if you look at last 10 years. I'm saying this anecdotally. I've heard from other people I've interviewed. but ah So what's your take on this?
00:55:13
Speaker
No, great question, actually. In fact, i would recommend a ah paper to read. um we have found our enemy and it is ourselves. And this is actually, this is, you can go and search that. This is done by a famous institute which work with VC, et cetera. And literally they said, like, look at know what what we are preaching. we have a problem in this, right? and And what really means, the gist of that paper, which is actually the fundamental of what you just mentioned, is in venture capital and technology investing,
00:55:48
Speaker
a disproportionate amount of upside is actually captured by probably the top 20 players in any market. Right? So if you want to be creating alpha in that market, you better have allocation to that. like me You better should be able to identify who are that top 20.
00:56:10
Speaker
And you need to get also allocation to that top 20, which is also not always easy. Right? And if you're not doing that, then you're better off buying an index fund. And by the way, the same thing goes to public market funds also, I would actually say. like you know like If you you really have ability to kind of access a fund like Renaissance Technologies, for example, in the US, any day, like those guys blow every single year, blow the the index funds out of the water.
00:56:41
Speaker
And they're done it consistently for like 30 years or something, I'm telling you, right? so But then can you actually access a rent tech? right Probably you can't because even biggest institutions cannot. So ultimately, even in public markets and private markets like ours, what is not really said is like, if you are first of all, like even if you're if you're not in top quartile, it's not even worth playing the game.
00:57:06
Speaker
That's very, very clear. And ought define the top quartile in TVPI, in NetIRR, and DPI, all three metrics. You ought actually hit it in all three metrics.
00:57:18
Speaker
And then you need to be in the top 20 in that game. Then only you'd be able to, like, it it is worth. So if you're an investor, I would just say that. like and and and if you like And if you're an investor like us, our job is actually to be in that top 20 in our game.
00:57:34
Speaker
Whatever game, if you're at growth stage, you have be in that. If you're at early stage, you have to be in that. If you're at late stage, you to be in that. And if you're an investor who's looking to invest in our funds, the ask should be like, hey, look,
00:57:49
Speaker
How much have you actually outperformed the indexes? Probably the first question. But how much have you outperformed your peer set? And are you in that top 20, if not top 10? Can you just define those three metrics you said on which funds should be measured? the ira So three things, right? One is net IRR, which is the net money returned to investors after fee and carry, which is charged by the fund manager. So that this is the...
00:58:16
Speaker
actual money. Like if an investor invests a rupee with you, how many rupees you get back? Or a dollar with you, how many dollars you get back after tax? Number two is TVPI. That is total value to pay it in. So that means that You put that money, like the first one was IRR of it This is the money multiple of total ban.
00:58:38
Speaker
of Like when you put a dollar, you get $3 back, for example, which a good number, to actually on a net basis. An IRR, a good number would be like a 17, 18 percentage at least net for you to kind of take risk in market like India.
00:58:54
Speaker
And the third thing is DPI. it Because if you have your IRR and TVPI, but you're not still distributed the cache, it is still in paper. That is not good enough. and You have yoda actually have that consistent flow of returning the money back. Say, for example, we internally consider that in seven years, we should return our money back to our investors.
00:59:15
Speaker
And in 10 to 12 years, we should actually sell everything and like all our return up stock have to be returned back as cash back to our investors.
00:59:26
Speaker
That is a good outcome that we benchmark ourselves against. And what's the full form of DPI? Distributions to paid in. Paid in is like how much money has the investor paid to the fund.
00:59:39
Speaker
And the distribution, obviously, is the money gotten back from the
Iron Pillar: Addressing Scaling Challenges in India
00:59:44
Speaker
fund. Okay, understood. How much have you raised so far? How many funds? What's been the size of each fund? Just take me through the Iron Pillars journey. Yeah, so we have historically raised almost like $450 million dollars of capital.
00:59:58
Speaker
ah This is in broadly three buckets of fund one, fund two, and then we have some co-investment buckets. So fund one is together it's around 138. This is a fund and a top of fund that we raised.
01:00:13
Speaker
And then have fund two 214, which is again, we have an offshore and onshore vehicle. uh specifically the onshore vehicle is 84 million and offshore weakness uh 129 million again onshore vehicle is not just indian rupees it's also have global outpiece inside that most of it is actually global piece there also and then the rest of the capital i would say uh is around 100 million ish or something is co-investment pools where some of our large rps
01:00:45
Speaker
They say, hey, look, some of these companies are great. we want to put our own money with you, but we will manage. We'll take your help in managing that capital. So that's what that's how we like now our fundraising.
01:00:59
Speaker
How did you ah start Ironpillar? Like what's the origin story of Ironpillar by itself? Yeah, it's quite interesting. right You know, so some of it is personal. um So I was investing in China before this. and So I started my venture capital history by Chris Biles, part of the Sequoia India team.
01:01:21
Speaker
When Sequoia came to India, 06 to 08, India was subscale at that point of time. I went to my and and partners in the firm and said, hey guys, where can I learn scale? Due to a set of events, I ended up actually moving to China because I figured that what is happening in China at that time Could be something. 2007 is when China was at that same, around $3,000 per capita income where India is today.
01:01:49
Speaker
So I was like, hey, look, next decade I can learn things here, which I can probably apply in India. And that's the entire thesis where I moved to Hong Kong, worked for a firm called Squadron, which had third-party money and also their own family office. This is a big family office, plus third-party capital.
01:02:06
Speaker
ah Invested in China, across Asia, even global tech. And then 2012, Squadron got sold and i joined a firm called Morgan Creek, which used to invest in tech growth.
01:02:18
Speaker
Like literally what we are doing in India today, Morgan Creek used to do that and not in China. And I moved to Shanghai. And at that point of time, so one of the things which happened is like, you know, 2011-ish is the time when it started actively investing in India in growth stage companies.
01:02:35
Speaker
And we started like, you know, 2014, we started um four g came in, data became cheaper. The market started really evolving to the next stage. We even started some SaaS companies in India getting the scale like Zoho. So we said, hey, look, this is probably the time, the right time to kind of start investing.
01:02:53
Speaker
a fund which is very specifically focused on just growth capital investments in India. Now, why did we pick growth capital? We could have done another early stage fund, we could have done a late stage vehicle.
01:03:05
Speaker
Why we did growth capital? One is because this is actually a craft because many times we saw Even managers, like, you we talked to some of the the best early stage firms.
01:03:16
Speaker
By the way, when I was in Morgan Creek, I was a first check in the Blooms Fund, first check in the K Capital Fund. So we have seen that ecosystem of early s stage growing. And many of them were getting into a war. When they come to a series B, series C stage, they're like, there's no one firm which do only lead this.
01:03:36
Speaker
And why you need a few firms which do only this is because the skill set needed a at that stage is very different than early stage. Early stage, you are actually taking a binary call on a founder and a marketer.
01:03:49
Speaker
right? Versus when it comes to our stage, yes, we will look at that, but then very soon we'll get into that 444 process of what do the company need for the next layer? Can we bring that network and relationships to the table?
01:04:03
Speaker
So we need somebody who actually thinks only of, hey, here are the $10 million dollar company. How do we make it a $100 million company? I'm only focusing on that and bringing global network and relationships because what is needed at that stage That is actually the stage where founders literally truly start looking beyond their teams. They're like, hey, look, i want to I want to do A, B, and C. I want to go from a Delhi-only company to Delhi plus Mumbai plus Bangkok.
01:04:32
Speaker
I want to probably grow my team. I want to probably position myself well with late-stage investors. So there is so many such questions coming.
01:04:44
Speaker
And if you're an early stage fund who's investing in 12 companies every year, they don't have the time to spend on it. That's the reason why that gap kind of existed. And we said, hey, we'll go and fill the gap. And then when we thought about filling the gap, then the question is like, how do we differentiate ourselves? Like, know, if we sit just in Bangalore and do the same thing that every early stage fund do in terms of our network, what we bring to table,
01:05:11
Speaker
We're like, hey, the early stage funds are doing already a great job of doing all that, right? You know, what is needed in that early stage? No point. Let's bring the UAE network, the Singapore network, the US s network, the London network to these companies so that they can get BDGTM capital to scale these businesses to the next level.
01:05:32
Speaker
That's why we started Iron Fundra. There is also a personal piece, which I said there is also a professional and personal, like, you know, the strategy. The personal piece is actually this, and this is something which i always found.
01:05:44
Speaker
So I was in Shanghai 2012 to 2015. All these global institutions come in, you know, almost everybody pass through our office, and, know, we talk about what we're seeing in the market, interesting things, like etc.
01:06:00
Speaker
95% of the conversation is actually about China. And if they feel charitable, and because I'm an Indian, there's a five percentage conversation on India. And it's like, and the conversation is like, when is India going to deliver?
01:06:16
Speaker
And you have that. And, and somebody said, look, you can do two things. One is you can actually join the complaining charade of people who would say, like things are not working, yada, yada.
01:06:32
Speaker
What we decided, what me, Mohanjit Ashok decided is like, hey, look, there is an interesting different approach here. Let's go to the early stage ones. Really see what are the challenges which are not building companies to scale.
01:06:47
Speaker
Can we figure out, let's build something which can help at least some of these companies. We are not saying saying that we can solve the buckets problem. We invest in only three or four companies. But at least, like, can we at least create a model where at least some of these companies can actually scale?
01:07:04
Speaker
And that will actually... hopefully give a playbook for five other people like us to come and start other, what I would say as competing funds to do something even better than us. That's actually what, so that the entrepreneurial ecosystem in India ultimately benefits and all of us will.
Skepticism and Misconceptions About India's Economic Potential
01:07:25
Speaker
um So we thought that we'll we'll rather do something about it rather than joining the group of people with who would say India won't work. So, and we're very thankful that we did it because now many of our companies are going public, our LPs are happy and the ecosystem is benefiting because of even our small contribution to that large ecosystem.
01:07:48
Speaker
Is that question answered, when will India deliver? Because as you told me, a lot of late stage global funds have backed off. They're not so active in India anymore.
01:07:59
Speaker
ah So is that like, what's the answer to that? ah Very interesting question. So my answer to people is this.
01:08:10
Speaker
um Be very careful about, are two, three things about India, like and if you think about a mental model, right? And from that perspective, one is What are you looking for from India? and That is very important and I'll come to what does that really mean. Because if you are coming today in India, which is a $3,000 grievous per capita income, and try to see many hockey sticks, which are consistently going to give you $10 billion dollar outcomes every year, you may be disappointed.
01:08:43
Speaker
Right? Because it's just a function of where the market is today versus where it can be. It could be there in five, seven years, but probably not today. like That's number one. Number two, India's already delivering. If you really think about um capital return, which is one of the biggest things which our piece think about. Last four and a half years, India's returned $135 billion dollars of cash.
01:09:07
Speaker
Hard cash back to our piece. This has never happened in India's history. And not even a single year out of this four and a half years is more than $40 billion dollars of capital. So it's not like one year skewing the numbers. I'm i'm not doing statistics jugglery here, right? You've consistently seen good enough a amount of money.
01:09:27
Speaker
And then again, another thing, almost every year of this, like another maximum, you would see public market contributing to this. So people think, oh, this is all public markets, right? No.
01:09:38
Speaker
Again, I'm happy to share data around this, but and around 60% of the money is actually coming from public market even in the best year. But the rest is actually coming from M&As and private equity also, which is playing a large part too. So it's actually a well-balanced ecosystem also for exits. So India is already delivering if your expectations are actually more compounded. So the biggest mistake which people, this comes to my third piece of that mental model,
01:10:08
Speaker
I've always seen people underestimating India on the long term and overestimating India on the short term. Very interesting. right This is a consistent problem. right ah If you're coming to India for miracles in three to five years, you are going you're you're going to be disappointed. I can give it to you in writing something which you can open and make cover after five years.
01:10:32
Speaker
But if you go so pessimistic on India on a 10-year time period, you're also going to be disappointed. Oh, my God, I missed great investment opportunity. So if you really build that into that thing, say, for example, like a good friend of mine who's a very good macro thinker and he writes some good opents, etc.
01:10:54
Speaker
He always talks about this, like, you know, when when India grows under 7% I always think, look, it is going to revert to the mean of 7%. But when India go to 9%, when the world is like, yay, now it's actually the big time, next five years is going to be good, I will actually temper my expectations. It is going to come down to that 7% or max 7.5%.
01:11:14
Speaker
You got to, and there are fundamental reasons, and economists may be a better person than me to kind of explain this to you, that our growth rate is going to be on a medium time, seven to seven and a half percentage.
01:11:28
Speaker
So every investment you do, you need to temper for that. Also, we don't have the best, like, you know, the most hockey stick AI models getting built in India today.
01:11:41
Speaker
Well, no, maybe people will do something else somewhere else. Maybe we'll have some other areas like, you space tech where we'll make some really big leaps. But if your investment thesis is just based on that, you could get that short term...
01:11:59
Speaker
fullback And that's actually the reason why people who thought about hockey sticks and came into India pulled back. But people who have consistently invested in India have actually re-promotes. Okay, fascinating. ah What's your investment thesis in terms of sectors? Like, are you bullish on AI, for example? i know you're doing consumer because Bluestone, we've already discussed. But what what all sectors do you actively look for opportunities in?
01:12:26
Speaker
So we invest actually in the consumer and enterprise, both. In fact, 70% of our investments are are in enterprise tech. But that is actually split also into what we call as B2B2C because many of those enterprise tech companies are an eventual plane to consumption story. Like I talked about flip spaces, right?
01:12:45
Speaker
Ultimately, it is like India getting more offices, more people working the economy grows and more offices getting built. Or like a company like Servify, which is...
01:12:56
Speaker
like know Ultimately, when people are buying mobile phones, you're selling to an Apple, but ultimately you get money when a customer buys an Apple phone, things like that. So coming back to the thesis, one big thing which we are underpinning, especially when you look the next three years going forward, is that India today is around $2.5 trillion dollar domestic consumption economy.
01:13:19
Speaker
This is going to almost double, like in 2.5, going to almost 4.4 trillion in the next decade. right So that is 80% kind of growth.
01:13:30
Speaker
And this is a huge opportunity, both in direct-to-consumer and also the B2B2C kind of enterprise tech companies, which eventually play into the consumption. Right?
01:13:44
Speaker
That is what we look into. Now, once we like once you have that piece cleared, what we really look into at the next layer is like which of these categories would be actually the biggest areas where we can go in. and we We cannot focus on everything in the market, right? So we look at one theme which we historically done and we'll continue to do is So discretionary consumption, because as people go from, say, $3,000 per capita income to $5,000, a lot of that delta of $2,000 actually go into discretionary. So it's not like, you know, probably discretionary consumption go by 4x or 5x in that
01:14:25
Speaker
So discretionary consumption, especially by women, is a category which we tend to like. Because these are categories where at this stage of countries' developments, big brands get created.
01:14:37
Speaker
Because women tend to actually be more experimental. They want to kind of, the young women of India today, want to do things which are different than what their moms do, et cetera. whether it is trying out a new jewelry, trying on makeup, like, you know, trying out new kind of clothes, two kinds of shoes, different things. That's number one.
01:14:56
Speaker
Number two is financial services. But I know there is a lot of focus on lending, which we have a problem with because they all end up being an NBFC. So you get a NBFC valuation in the end and you go in with a fintech valuation.
01:15:10
Speaker
But there is a multiple other things around savings, investments, insurance. There are many other categories of financial because India is actually financializing, so to speak, like people's balance sheets are financialized. That's a big area which we focus on.
01:15:28
Speaker
What's your fintech bet so far? Servify is one, which has actually worked out very, very well for us. but It's a B2B2C play, but they actually are a big insurer to play in the country. We invested in the ToneTag, which is another company, which is again, they built out a protocol on top of UTI payment systems, which can like you know reduce frauds and reduce drop-offs.
01:15:55
Speaker
And ultimately, we we kind of compare them more like a MasterCard kind of, if you think about the business model, eventually that's actually what they will play out to be. So again, you need to kind of think about very tangential plays, but ultimately yes you make your money when people are making payments, right? But you're not selling directly to individuals, you're selling to banks and other financial institutions which want to kind of put their technology in but retail spots.
01:16:23
Speaker
Another big area which we are really looking for is um innovation in retail. So retail in India is actually going through a lot of changes. So like, think about it, like who's going to build a Costco of India?
01:16:35
Speaker
That's the question which we ask ourselves. Or like what are interesting, very specific niche retail opportunities which can actually be built in the country, which can actually stand on their lights and not disrupted by, you know, quick commerce, things like that, etc or or probably even benefit from the quick commerce threat, things like that.
01:16:56
Speaker
So we look into that. We look at another big theme, which is actually happening in India and again, similar events. lifetime, like, you know, that $3,000 to $5,000, $6,000 per capita income growth in the world is like households upgrade.
01:17:12
Speaker
That's what, like, know, so they upgrade from a two-wheeler to a four-wheeler maybe. or they upgrade to a better two-week-one. They go from no air condition to one air condition.
01:17:24
Speaker
They upgrade from one air con to three air cons in the house. the ah They will have more gadgets inside the house. So stuff like that, that's actually a big area again, which we focus on.
01:17:37
Speaker
We actually focus on um pollution as a theme, or I would just say environment. No, the fancy term to use is climate tech. But like I think people kind of overuse it so much that I try not to use it.
01:17:53
Speaker
But we actually focus on environment because I actually have this view personally, and my partners also have the same view, that India is actually, India is 43 of the 50 most polluted cities in the world.
01:18:08
Speaker
a statistic which all of us would be ashamed of. Now, it also, if you say invert, always invert, like Charlie Munger, the other side of that is India have the opportunities to build because it is the largest market for cleaning up air, water, soil, you name it, whatever it is.
01:18:27
Speaker
It is the largest market for them.
The Role of AI in Business: Overhyped or Essential?
01:18:30
Speaker
And somebody had to kind of go and do zero to one innovation for India very specifically for that because most of the technologies available for cleaning air or water or soil or anything like that today globally are too expensive for Indian companies to adopt. So Chakra, which we just announced yesterday, today is a great example.
01:18:52
Speaker
It's an air purification solution for like large industries, which are huge pollutants. But the current technologies available from Japan or so Switzerland, etc., are extremely expensive, or German technologies.
01:19:06
Speaker
So now they have actually come out with a completely different material science solution, manufactured in India, like innovated in India, manufactured in India for the Indian market at an Indian cost structure, which can eventually become a global company.
01:19:23
Speaker
That's the kind of things which we look into. Many of these actually are B2B solutions. They're not B2C solutions. and in that And the B2B side, we also look into, when you think about financial services, I told about the direct-to-consumer things, but also we look at the entire infrastructure, say, for example, lending infrastructure. I don't know hey who is actually the software providers for all the lenders.
01:19:44
Speaker
You may not want to directly invest the lender and take balance sheet exposure, but somebody who provides software for that entire space is actually an interesting space to go after. So things like that. so But we have around seven, eight themes, which we kind of go after. there And these are like five, six of that, which I just mentioned.
01:20:03
Speaker
So do you think the the AI is a little bit overhyped currently? Like there's a hype cycle around that? Again, chance for hate mails. Yeah, AI theme in our view, honestly, is overhyped at this point of time. But again, it's not unusual, right? You know, there are hype cycles. Like, and in fact,
01:20:24
Speaker
The other day, I actually saw like a report which said Gartner Hype Cycle. like Literally, I'm like, wow, somebody have actually, Gartner have named it as a Hype Cycle. So there is stuff like this. so and there is a reason why And there are people who are very good at investing in Hype Cycle and making money for investors. So don't get me wrong in that also. Then you need to kind of literally invest in everything under the sun in that space. You know that Even if you're writing a hundred million check, there is a big chance of getting written off, but some hundred million check will actually deliver you a billion dollars.
01:21:01
Speaker
You're okay. okay But a lot of money is going to get destroyed in the current AI hype cycle. It is not something where somebody like us who are like, Hey, look, we are a fundamental investor basically. Who's like, there are a lot low hanging fruits where we can take companies from 10 to hundred a hundred, 150 million,
01:21:22
Speaker
work very closely with the founders like a co-founder, really bring our global network to them. And in fact, due to the AI hype, what we see is like many founders whom we talk to who are really building fundamental business, they are building color cosmetics in India, food businesses in India, consumer businesses in India, basic enterprise technologies like Chakra or Flip Spaces, etc. They're getting zero love from investors because they don't have AI.
01:21:48
Speaker
Or they they may use AI in some part, but they're like, they're not an AI company. They're not like AI software, which will yeah and show that. And they're like, they're like, Hey, what we're seeing on the other side is we have, we're getting better valuations ever in our entire life today. Right.
01:22:07
Speaker
In this relatively hot AI market, because non-AI companies are actually not getting the allow, those founders are seeing that, look, I need to build a profitable compounding business because even my next round is not coming because I'm not AI or AI first.
01:22:22
Speaker
That being said, look, you know, I'll i'll give an example of one of our companies in the consumer space. They literally took down their marketing team, which is around 10 people or something to two people because they are deploying AI at scale for...
01:22:36
Speaker
marketing related stuff. So there is a lot of application of AI in consumer and enterprise businesses, which we currently have, which we are seeing, but it is just like a tool in our toolkit rather than you know, these companies don't really go and pitch themselves as an AI company. In fact, some of those founders refuse to. They are like, like, look, could we have a company fresh to home.
01:22:58
Speaker
Uh, he had like ah He had an AI-based ah like a system to kind of bid for real-time prices for fish of all things. right you know so like Because India had around 1,400 coastal um and like harbors where fish comes in the morning and he had to bid at real-time.
01:23:18
Speaker
Human beings cannot do that. So he had done this in using an AI algorithm back in 2016. and they've got a patent, etc., back in 2019 itself.
01:23:29
Speaker
But they don't market themselves as an AI company. They're like, hey, look, we are a proteins company, right? you know So via we started on fish, we went from that to chicken, and now going into other things, and you're building a global business in that.
01:23:41
Speaker
Yes, AI is a tool for us in doing that. So AI growth will help a lot of work companies like that, but I don't think that is a theme where somebody like us find it interesting because ultimately if you're buying a bunch of things which can have binary risk at an extremely high valuation, it's a very different ballgame to play. That's not the ballgame we play.
01:24:04
Speaker
We're not in that game. Okay.
Case Studies: Investment Hits and Misses in India
01:24:06
Speaker
i've I want to end with something of a lightning round. Not necessarily like, I don't necessarily need five second answers, but ah I want to give you some names and I want to hear your take on whether you would have invested in them or not. And let's assume for every company, you are saying it's a great team, ah you know, goes without saying. Okay. So, yeah.
01:24:30
Speaker
like And I hope I know all these companies. that's okay I'm only going to use big names. Okay, so Zepto. Okay. No. Why? You want me to tell the reason also? Yes. Because it's a again, yeah, ah we believe that Blinkit is better split positioned in that space.
01:24:47
Speaker
ah We may be wrong. You're bullish on the space, but you feel Blinkit is the horse to back. Exactly. And because retail anyways, like new formats of retail is one of your thesis. Okay. Yes. It's one of the pieces. We have looked at the business. That's the point.
01:25:02
Speaker
Okay. Misho? Misho, interesting, actually. They executed better than what we thought. And would actually consider that as a miss from our side. Why is it a good why was it a good opportunity? Like, what's the thesis there? So look, social commerce have actually picked up faster than what people thought in India. No, part of that is actually due to... Is Misho really social commerce today? Isn't it like It is actually you social commerce ask the beachhead to kind of scale beyond what they originally started. So ultimately when, so the piece which we could not really, because it's like, we said like, okay, fine with COVID, etc. Social commerce will become bigger.
01:25:43
Speaker
But that founder, so we made that mistake. right don' know And the again, we thought of a TAM or like what they're attacking, but their ability to be agile and scale beyond what they started off with.
01:25:56
Speaker
like you know It's like the question of looking at an Uber like a taxi company versus much larger. right and So we made that mistake. And this is not the only company. There are other companies also we have made that mistake and we have we have missed some things. Cred?
01:26:09
Speaker
ah No, because I'm still trying to figure out what is the eventual business model. Okay. Because I think they are con continuing to still pivot and that is not a great founder, obviously, as you said, but there's still like some changes which is going on. We want to kind of have a decent idea when we enter where the business is actually, like which direction. So we call it as there's ah It's a mountain climbing journey. We don't want to know exactly every nook and corner, but are you climbing Mount Everest through North Face, South Face, East Face, West Face?
01:26:45
Speaker
Because we know some faces you cannot climb, right? But if you don't know that, that's challenge. Zetwork. It's an interesting company. we have looked at that space quite a lot. We believe...
01:26:58
Speaker
that eventual winners in some of those spaces would be very vertically focused. And Zetwork is actually doing across multiple verticals. Plus, for us, the challenge is also valuation always.
01:27:11
Speaker
Vertically focused as in there would be, ah it's essentially like an asset light manufacturing place. Yeah, but like, you know, look, know would you go deep into pharma manufacturing versus would you go broad into five categories, right? So that's basically the the question because manufacturing is an area where once you get to scale, but you can build so decent scale with good working capital and if you get access to good amount of money, but beyond that point, you need to really specialize.
01:27:41
Speaker
right And and that is that is our house view. Again, we could be wrong. The founders are in the job of proving people like us wrong. But plus also like you know the valuation had been in our view for a business like that.
01:27:55
Speaker
like what What would be the right valuation to pay versus what we could have probably invested in was the challenge. Physicswalla, that's my last one. yeah ah Great company actually. Miss...
01:28:09
Speaker
Clearly, know we think that it's a great set of founders. West Virginia did a phenomenal job of investing in the company at the right time. and like Why did you invest it? So, it's again, it's one of those things where we just did not see the company. I'll be just very, very honest. And if we don't see 100% of the company, as I said, we look at only around 400 companies in a year. we We came to know about the business only after the initial investment.
01:28:39
Speaker
in the company happened. And to an extent, I think, um I don't even know whether if you have seen it because so, you know, kind of a time in which Westbridge invested and like EdTech was going through a lot of upside and then yeah came down.
01:28:56
Speaker
So they also had the advantages. They also had the capital to kind of see the company through the tough times also, right? You know, so Maybe in hindsight, it would have been better for Physics Wallahs to have like somebody like a West Virginia investor who could do that doubling down at scale in that company when they needed the money. A fund like ours won't have that capital.
01:29:16
Speaker
Physics Wallahs could have been an academy version too, right? But it Yeah, if they did not get the capital, so they had the right investor who could double down at the right time. yeah Which, by the way, I think is superbly and underappreciated because if you have the right kind of investor, like, know, that's one of the reasons why Samir and Sandeep are people whom I respect a ton. If they really have conviction on a company, and they actually back them and they have a capital structure which allows them to back them through thick and thin.
01:29:47
Speaker
And we are all in that journey earlier. and They have done that. I worked for them before when we were in Sequoia and they were part of the same team. But they have that, you know think, 15-year head start before us.
01:30:02
Speaker
Hopefully, in another 10-year, we'll be at that position where we have enough capital to double down, where we can come to a founder and say, hey, look, not only in the current round, or currently we can invest in one round or after,
01:30:14
Speaker
So we can bring up to, say, $50 million in the company. But we had to bring $150 million to a company to scale to the next level. And we see that kind of industries where that would be needed, where we say, hey, look, we're not the right partner.
01:30:27
Speaker
Right? Because you will probably go through that journey, and you don't want to be stuck with us for that. ah kind of And this, by the way, is an interesting conversation with somebody like a Zepto also.
01:30:39
Speaker
where we would not have partnered with them for that reason also, because we'd like, this is going to take billions of capital. We can't provide that. And then why are we even trying to partner with this founder? Because this is not going to work.
Corporate Governance in Founder-led Companies
01:30:54
Speaker
The ah risk with physicswalla kind of businesses, which are like one star founder, like say Unacademy, Baidu's, is corporate governance, right? Like how would you ah like ah how would you prevent corporate governance issues from cropping up when there is so much reliance on one single founder company?
01:31:16
Speaker
Yeah, no, it's a great question. And this is something which is um not only in India, many other markets also, this is actually played out. So two, three things which you do.
01:31:26
Speaker
So first of all, thank God till now, we don't have any similar issues in our portfolio. What we have done is like we focus quite a lot actually on companies having a proper CFO who reports to the board.
01:31:38
Speaker
Either they're already there in the company or when we go in, we try to get them in. right And the many of our companies, we actually have that done, which have helped the founders quite a lot.
01:31:50
Speaker
And there are many situations where we go and have a conversation that founder and founder completely disagree with this. And we say, then this doesn't work. We will walk away. which is fine. And again, there are founders are completely disagreed with us on this and still go and execute phenomenally. But we don't want to be in that. like no So we know what is our sandbox, which works, right? you know So we don't want to play outside that sandbox. So corporate guns, that is one. So finance being streamlined.
01:32:17
Speaker
In fact, as we speak, literally this month, we are giving offer letter to a veteran banker, somebody who had been around 20 years in the banking industry in India,
01:32:28
Speaker
who's going to come in and really help all our portfolio companies and finance to the next level. Like his only job is going to be this, right? Making sure that numbers are okay, audits are okay.
01:32:41
Speaker
and And also he will bring again, like in our typical case, it's not just checking on you. Like this is somebody who I've done debt underwriting for 20 years. He would actually help each of these companies. You want to make your balance sheet better. You want to kind of get all your banking relationships in order.
01:32:57
Speaker
We will help you. like You don't have to pay somebody else for that. right So that's what we do. So that's one aspect the end up finance function. Is what you're seeing, is it real? That's very important for us.
01:33:10
Speaker
Number two, which we do um often known, and nowadays we do more and more often, independent board members very early in the companies. And real independent board members. It's not like independent for the name of it, right?
01:33:24
Speaker
So we have done that in multiple companies. And that also really helps in getting it. but look the the The crossing point on that particular thing is like you really, the 40 companies, like 444 process, that 40 companies we engage, some of these companies we engage with these founders for six, seven years. I know it may sound crazy because we know them when they started the business, but they got to a scale only.
01:33:49
Speaker
And many times we really think about, hey, have the founder and founding team taken the right decision issue rather than have they optimized to themselves. in any point of time. And if we see the latter, we disengage because then we see that as a red flag.
01:34:08
Speaker
And that red flag, when you go to public markets, become an even more bigger red flag and the public markets are very good at finding these things out. And once you create a bad repet reputation, the stock tanks and never comes up. Versus if you create a good reputation,
01:34:22
Speaker
Think about why Tata always traded a premium, any business of them, right? Because of better corporate government. So we try to really, hey, he is this a founder and founding team who genuinely understand that really good corporate governance, even like sometimes, like i'm really thinking about ESG properly.
01:34:42
Speaker
These are all things that are important in the long term for a company. If you really want to build a big company, right? your customers care for it, your investors care for it, your employees care for it. All your stakeholders care for it.
01:34:54
Speaker
Are you really building a company the right way? Then putting a CFO, putting an independent board member, etc. should be a natural conversation which will say absolutely yes. We want founders who say absolutely yes to that genuinely but rather than saying, oh I may do that, this thing.
01:35:13
Speaker
I don't think I want a CFO. I'll hire a CFO before my IPO. I'm like, okay, fine. Then there is something which is not sitting right. Had you seen Unacademy and Baiju's? Unacademy, we have not really spent much more time on because honestly, like I met the founder once. ah It's backed by one of my, somebody whom I really trust quite a lot. And like you know, I really, really like Karthik who sits on the board of the company. But I realized that it is one of those businesses where they are going for the hockey stick.
01:35:45
Speaker
And it won't fit well with our investment pieces. So that's reason why did not even spend the founder's time much. Similar was the case of ByJuice. Again, we had the opportunity to invest in it three times.
01:35:58
Speaker
But again, and like no we said like, look, the way they want to build the company and the way we want to engage with our founders doesn't match. So probably not waste the founder's time. So let's not engage.
01:36:14
Speaker
Phenomenal. Amazing. Thank you so much for your time, Anand. It was high-opening conversation. Thank you, Akshay. Thank you very much for spending the time with me. And hopefully this can be useful for you listeners.