Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Sasha Mirchandani(Kae Capital) Explains How Small VC Funds Beat Big Ones
0 Plays2 seconds ago
What if the secret to building a $8.5 billion VC portfolio isn't chasing billion-dollar markets, but backing the right founders who can pivot their way to success?
In this episode, Sasha Mirchandani, Founder of Kae Capital and Co-Founder of Mumbai Angels, reveals why 90% of venture capital funds underperform and how his contrarian approach has created 4 unicorns including Porter, Fractal Analytics, Zetwerk, and Tata 1mg.
From traveling second-class trains as the son of Onida's Founder to becoming India's pioneer seed-stage investor, Sasha shares brutally honest insights on what it really takes to succeed in venture capital. He opens up about the 20-30 unicorns he passed on (including Ola and Nium), why Kae Capital avoided the crypto bubble, and how investment #29 from recycled capital became Porter's $1.2 billion unicorn story. Sasha explains why he deliberately keeps his funds small despite the ability to raise $300 million+, the recycling capital strategy that created hidden winners, and his founder-first investment philosophy that prioritizes grit and conscientiousness over market size. He shared this remarkable 25-year journey in this candid conversation with host Akshay Datt, revealing practical advice on pitch decks, portfolio construction, and surviving India's funding cycles while navigating Trump tariffs and startup ecosystem challenges.
What You'll Learn:
👉Why 90% of VC funds fail and how Kae Capital's small fund strategy generated 4 unicorns worth billions
👉The recycling capital playbook that turned investment #29 into Porter's $1.2B unicorn exit
👉How InMobi pivoted 4 times and Fractal transformed from Woodle.com to a pre-IPO AI unicorn
👉Sasha's "founder over TAM" philosophy and why he'd rather get market size wrong than entrepreneur quality wrong
👉Inside Kae Capital's LP strategy balancing 50% Indian capital with global investors expecting different returns
👉Surviving the crypto mania, edtech bubble, and Trump tariffs while maintaining investment discipline
CHAPTERS:
00:00 - What Is a Venture Capitalist? Sasha's Definition
03:52 - Wealth Manager vs Builder: Kae Capital's Investment Philosophy
08:19 - Why Venture Capital Is a Crappy Asset Class
12:13 - Fund Strategy: 25 Investments, Recycling Capital, Portfolio Construction
18:04 - Why Smaller VC Funds Outperform Larger Funds
23:40 - India's Startup Funding: 50% Indian LPs Now
28:11 - Investment Thesis: Founder Quality Over Market Size
34:38 - Avoiding Hype Cycles: Crypto Bubble, EdTech Mania
40:13 - The Unicorns Sasha Passed On: Ola, Nium, Mint
46:56 - Onida's Legacy: 550 Competitors Dead, One Survived
56:36 - Second Class Train to VC Success Story
1:00:50 - Starting Kae Capital: From BPO to Fractal's First Investment
1:06:08 - TAM Lessons From Father's Electronics Business
#VentureCapitalIndia #SeedFundingIndia #IndianStartupEcosystem #StartupFundingIndia #EarlyStageVC #IndianVCEcosystem #FounderFirstInvesting #VCStrategy #SmallFundAdvantage #RecyclingCapital #UnicornStartups #IndiaUnicorns #VCPortfolioStrategy #PitchDeckAdvice #StartupInvestor #VentureCapitalFunding #IndianEntrepreneurs #AngelInvestingIndia #PreSeedFunding #SeriesAFunding #StartupEcosystemIndia #FundingWinterSurvival #AIStartupsIndia #ConsumerTechIndia #SaaSFundingIndia #QuickCommerceIndia #LogisticsTechIndia #ManufacturingTechIndia #FinTechInvestments #VCPodcast #StartupPodcastIndia #EntrepreneurshipIndia #BusinessPodcastIndia
Recommended
Transcript
Introduction to Sacha Michindani and Venture Capital
00:00:00
Speaker
Hi, everyone. I'm Sacha Michindani, co-founder of K Capital.
00:00:17
Speaker
ah Sasha, welcome to the Founder Thesis podcast. um ah My first question to you, and you are one of the pioneers of this industry. So that's why I want to get your definition of what exactly is a VC or a venture capitalist. And you've been a VC for two decades plus now. So just help me understand what is a venture capitalist?
00:00:39
Speaker
You know, that's
Role and Intent of Venture Capital
00:00:40
Speaker
a good question. No one's really asked me that question before. And I think when I started my career, even I didn't know what a VC was. The intent was to just, you know, help entrepreneurs do what they have to do without capital. My father had been an entrepreneur, is an entrepreneur and he didn't have access to capital.
00:00:57
Speaker
So when I started actually, and I'll go into that little later in the show, I'm sure. we The intent was so different, but it actually turned out to be venture capital. But basically, we're just capital allocators to awesome people who build great things and stay on the sidelines, but take a lot of credit, which is not deserved.
VCs: Wealth Managers or Co-Builders?
00:01:19
Speaker
You know, I've interviewed a bunch of VCs in the past and I generally see a pattern that either VC sees himself as a wealth manager or a VC sees himself as a a builder, co-builder of startups.
00:01:36
Speaker
ah What do you see yourself as? see neither. now We, of course, in a way, are best managers because in the past I did with my money, now I have other people's money. So technically that fits.
00:01:47
Speaker
But our goal is to be in the in the latter block and see how we can help and not try to be the people who say that we are going to be the ones who decide for you. But what help does entrepreneur need?
00:01:57
Speaker
It could be as simple as just emotional support over a conversation, over a coffee. where there is no help given that one hour conversation. But even that is priceless for the entrepreneur at that point, when he or she going through a downtime.
00:02:09
Speaker
And it could be opening up a very, very important door for a fortune-fired company, like I was doing this morning for a one entrepreneur, which is already a very large business. So, it really depends. But we want to get into the trenches ah to help when we can, especially when times are tough.
00:02:26
Speaker
ah I want to understand a bit more on the wealth management side, then I will come to the… co-building startup
Investing in Startups: Opportunities and Risks
00:02:33
Speaker
side. um As an asset class, you know why should a wealthy individual put money into this asset class of investing in startups? so How does it compare as compared to, say, ah equity investment or whatever other investment options are there? ah In general, like like what's your pitch to somebody from whom you are raising money for the fund?
00:03:01
Speaker
That's a very fair question. it it has lots of cons, right? Long, especially Fonzik arts, long duration, 10 years plus, sometimes 12, sometimes 15 years. And illiquid, of course, because of that reason.
00:03:14
Speaker
and opaque because they we take the money and say, trust us and trust us for 15 years or at least 10 years. So most people, no matter how rich they may be, like, hold on, what's going on here? yeah There's no NAV.
00:03:26
Speaker
There's no NAV, there's nothing. There's NAV, but it's on paper NAV. There's small distributions here and there coming out. So from all angles, it looks like a very uninteresting asset class, even though on one side it's very sexy.
00:03:39
Speaker
So the pitch is, look, This is the only asset class where you can actually one one you can actually have an exit which is so huge that it moves the needle to such an extent that there's no returns you can get better than this asset class.
00:03:54
Speaker
Now whether it be in fund after fund that we do, whether it be one fund we do, even we don't know the answer to that. Well that's the idea saying, hey hold on, the next Google can come out of K Capital Forward Fund and you have a look and you can have a 12x fund suddenly.
00:04:08
Speaker
And some of our funds actually have done that well, where we like, wow, this is way better than the market, substantially better.
Transparency and Relationships with Limited Partners
00:04:13
Speaker
fact, most of our funds have. But it's ah also a lot of luck, of course. We take credit at the end of the journey and say, we're great.
00:04:19
Speaker
But the reality is that it is an asset class that can make you the best returns you can imagine. But 90%, there's a huge big but, 90% of venture capital funds are underperformed.
00:04:32
Speaker
So you're really betting on those 10% of VC firms that actually make the returns I'm talking about. And we were telling them that, look, trust us that we are trying our best to be in that 10% globally. So it's a really crappy asset class, 90% underperforming, long gestation, opaque information, et cetera.
00:04:48
Speaker
So what we have done is we have really been transparent with the LPs. We have the best reporting. ah We have the most frequent reporting. I had an LP recently tell us that he's invested in 14 funds.
00:05:00
Speaker
Now our 14K was the only fund which gave him quarterly or if not every four months we do a zoom call with our LPs across all our funds. We said that's amazing that you just update us. Good bad ugly because every four months you can't keep having good news, right?
00:05:13
Speaker
There could be many quarters or whatever periods when we have updated. It's not that great but we speak about it and people appreciate it So we are transparency is very good. We believe there's nothing to hide.
00:05:25
Speaker
People are giving us their hard-earned money, whether it be institutions, individuals, whoever. And they need to know what's going on. And of course, the learnings, right? but so As an LP into a fund, you get access to the basement to some of some the most interesting companies that hopefully come out of that particular fund.
00:05:41
Speaker
So if you want to learn something about the new age, about tech, about consumer, anything, that LP has access to some of the most, like last time we a big event with Google. some of our lp showed up to the event in mumbai they had access to these amazing entrepreneurs who have built companies like foxdale trias snap with gobble cube they were on the panel last night some of our portfolio funds companies across funds and they were all waiting to line o'clock at night last night just spending five or ten minutes with these entrepreneurs and these guys themselves have built huge companies here they had access that is self-priced for each of them
00:06:14
Speaker
Okay, interesting.
Investment Strategies and Return Expectations
00:06:15
Speaker
it's It's not just a wealth management pitch. It has these perks attached to it because of which people are more tolerant of the risk profile. Essentially, it's a high risk profile asset because you said only 10% Yeah, people, you have to put a very small amount of your net worth in asset classic venture cap, right? Very, very small amount.
00:06:36
Speaker
So, it logically, you have to be very wealthy individual or obviously an institution which is geared towards… you know, investing in venture capital funds. We don't want people who are putting a large chunk of their disposable savings or networks in this because that's when stress starts building for that individual because they suddenly realize we need the money back and we can't give it back in year five or six.
00:06:59
Speaker
So it's not fair to take money from such people. In equity, they say the average return is over a long term 14%. Is there a similar number in the venture capital? We try to do 20% net at the end of our funds. That's the goal.
00:07:16
Speaker
Because that's what Indian investors want. They want net at least 20% of the same IPO. Sorry, public market, Amil Rai or gold or whatever asset class they want to do. So, our goal is B20. It's very interesting. If we look at our global investors, they look at TVPI, Moik.
00:07:32
Speaker
They of course you look at net IRR as well. They look at DPI, of course. But they're more focused towards the X. In India, the X is great, but they'd rather have the net IRR. So, to balance global investors and Indian investors in one fund is quite interesting and challenging.
00:07:47
Speaker
ah Can you break down some of these terms you used? I'm sure most of my listeners wouldn't understand. Moic, DPP. I don't boil. It's very easy. These are terms that anyone can research. Basically,
00:08:00
Speaker
It's the X on the fund. So you do X dollars and how much how many dollars you make. And the IRR, of course, everyone understands what an IRR is, over a 10-year period. So the goal is, can we marry both? And obviously, want to have high MOICs or DBPIs.
00:08:16
Speaker
But you also want to… What is MOIC? No. So basically, what you want to really do is marry the two together that everyone is happy out here. Now, and in my initial funds, we had lot of global investors.
00:08:31
Speaker
So we were focused on IRR but not so much. as you got more Indian investors, we realized that we have to be in Indian markets. So now what we do is, we have even shown one investor where they are large asset management company in India. They have their own mutual funds.
00:08:46
Speaker
So we showed them that our funds are outperforming their mutual funds on that day. So that really helped. they're like, okay, is your fund is done. I don't know the answer. Okay, bad. I said, sir, you guys have mutual funds started around the same period.
00:09:00
Speaker
This is we did. Your same dollar could have gone to yourself or you give it to us. Say give us a million dollars. Now you tell us. And they're like oh, wow, this is actually outperformed.
Challenges in Raising and Deploying VC Funds
00:09:08
Speaker
We'll give you money next one too. okay Okay. All these numbers are great. They all depend on the founders.
00:09:17
Speaker
ah What's the ah hardest thing about raising money as a venture capitalist when you have to go and raise money? I know you started with your own capital, but today, what is the percentage of outside capital versus your own capital? Yeah, I started my own capital with just initial checks between 2001 and 2010.
00:09:35
Speaker
But after that, every every dollar was raised from outside, except for obviously my own contribution the fund. The hardest thing is that this asset class when we started was very new. It was very hard to convince anyone, especially in India.
00:09:47
Speaker
And therefore all our money came from the abroad and I can talk about that time committing on the show. And therefore, just just selling them on the asset class. But even now, there's the same concern that I've talked about few minutes back about being long destination.
00:10:01
Speaker
Venture by its tenure is not going to be a three-year journey, right? And therefore, that's where people think in their heads, God, we really have trust this fund manager and his partners or her partners.
00:10:13
Speaker
It gives them money for a long period of time. And that's the hardest part, in my opinion. Okay. and Is it harder to raise funds or to deploy funds, which is like to invest in startups? Raise for sure.
00:10:25
Speaker
Deploy is the easiest in the world. We could deploy it by this afternoon 50% of the fund. Because there's such things coming to us all the time. At least we think they are. So, it's very tempting. So, we are actually very... We are very prudent and slow as a seed fund in the sense we do 5 to 70 at best versus some of our peers doing far more. And they have their own strategy. For us, we're in no rush.
00:10:52
Speaker
Our funds, we take minimum four years to deploy versus the industry averages two years. ah You know, there there are some of these strategies. So there is a fund strategy or ah portfolio strategy and there is an investment thesis. What's the difference between these and how have you structured K, if you can just help me understand that.
00:11:13
Speaker
You mean from themes and port decanage stuff? Yeah, also in terms of ah you know the construction of the portfolio, what stage you invest in, how much you invest in every startup, what percentage goes in a single deal,
K Capital's Investment Approach and Fund Management
00:11:27
Speaker
stuff like that. like So we like to model for, I'll say, 25 investments per fund.
00:11:33
Speaker
In the first fund, we hadn't really thought it through as much as we should have. So we don't really balance the first check and the second check, which is a very important element of our business. Because nobody knows where the winner is going to come from, or at least a path to a company looking like a winner.
00:11:49
Speaker
So earlier we do maybe 55% of the original money was going into those 25 investments and the rest would be for follow-on. But as we've grown as a fund and reached now four soon,
00:12:00
Speaker
We do, we like to move 40 or 45% of the overall capital into the first check and the remaining capital for winners. With us, we know that, okay, this company now is series B, it's getting to PMF, it's getting to be a real business. Now we can double down on the winners because capital allocation is what the LPs are looking for is are they putting disproportionate money into the winners and not just spending it across 25 companies.
00:12:23
Speaker
the The second thing we did was we learned this about something called recycle and which is very very important in our business some surprising some funds still don't do it which is in a particular period of time you're if you make some existence let's say in the first five years or a certain percentage of the fund can you return that the principal amount you keep and the profit you give back to lps when you when i say i keep the principal amount we have we use that to make fresh investments in the fund so let's say we either say 25 investments but we can then suddenly say you have five more exits that five-year period
00:12:59
Speaker
So we can use five more bets, as we say, shots in gold. So like all our funds so far have ended up, we'll end up with 30 investments, 30, 31, because 25 from the core, 40%, or originally 50.
00:13:13
Speaker
And the rest comes from this recycle, which critical. And let's say and the the criticality recycle is so important. Our 29 investment in K1 was Porter.
00:13:24
Speaker
which has become our most valuable business in K1 right now. So we didn't have the recycle clause. There would be no portal. And that small exit that we made in some company XYZ would have been meaningless because we divided that over, let's say, 30 LPs.
00:13:38
Speaker
They won't have even known they got the money in the account versus now a $1.2 billion business. Okay. ah So recycle is a way of increasing the surface area, like how many bets you can take. Correct. Because you've got You've a hundred million dollars and you're going say spend 80 and 20 goes to fees or you've got 19, 10 goes to fees.
00:14:00
Speaker
As much as the hundred that you raised, if you can put back in the system, you have a chance of even more success in the in the venture capital. in the in the venture Okay. Okay. How does ah the the company, the the VC fund make money? Like there would be multiple elements like you would...
00:14:20
Speaker
ah Possibly there would be a profit share, which would be a bigger element. But also your regular running costs, like how you meet the salary costs and rents? No, it's the same 220 model. We've had, in the original fund, we were once small, so we had 3 and 30. The fund was very small. So if you have a small fund, you need to have more percentage.
00:14:39
Speaker
As the funds became bigger, because we moved to 2. We still have 20% profits, but if we have a certain threshold of profitability, if we hit, let's say we hit Forex returns, then we go to 30% profit.
00:14:50
Speaker
So, LPZ will be kind enough to give more, but we have to hit those thresholds. So the 2% pays our bills, which is small. And our goal, Akshay, is we keep our funds small because of a variety of reasons.
00:15:03
Speaker
And I can go into detail why. ah but when you have a small fund, you're never going to become wealthy with the fees. Unlike in a bigger fund or let's say in private equity, you can actually make millions of dollars of salary.
00:15:14
Speaker
So God forbid the funds don't do well. It doesn't matter. You still make more money than any normal salary job, even at the CEO level. uh as a even a mid-level fund manager but in our case we could have spent 10 years and had very average and small salaries so therefore we have to make sure that the fund hits carry so that obviously the lps make money first but then we get our 20 or maybe even 30 percent to make it worth our time to have spent 10-12 of our lives per fund to make hopefully then we become wealthy as we fall conventionally everything is different
00:15:47
Speaker
Okay, understood. ah That 2% every year is like management fees for managing the assets, the AUM, which helps you run. But you want to be aligned with your LPs. so the bigger portion of the pie needs to be the carry or the profit share.
00:16:04
Speaker
That's right. And we keep our funds small. So, LPs know that are not really making damage money in our lives with the 2%. And therefore, they know are hungry. It's like an entrepreneur, right? in most entrepreneurs,
00:16:16
Speaker
would only make money when they sell their businesses. Maybe they'll small exits here and there, but that's meaningless. So even if they have 200 million of stock in company XYZ, it's meaningless until they do that IPO and let alone IPO sell.
00:16:27
Speaker
By which time no one's going to grudge the entrepreneur because he or she has made a lot of money from many shareholders from funds to public market investors and saying, okay, why can't he or she sell some stock now?
Dynamics and Performance of VC Funds
00:16:38
Speaker
So, do smaller VCs outperform bigger VCs? Because there is that skin in the game.
00:16:43
Speaker
ah For a smaller VC fund, there is more skin in the game. Whereas, as you said, with a big fund… Yeah, I think the answer is yes. For a variety, surprisingly, they do. Right? And that's a simple insight I learned from my previous job when I worked in, you know, K Corp slash Blue Run Ventures.
00:17:01
Speaker
And I took that to when we started K Capital. And that's why we, you notice, we've been small, 25, 50, 100, even k four which we will launch at the end of this year, early next year, our goal is not more than 90 or 100 million dollars.
00:17:14
Speaker
So people just keep getting bigger. But like I said, there's clear data that 90% of funds are underperform. And then 90% of funds over a certain size underperform. So you're just... mathematically going deeper and deeper into a hole.
00:17:26
Speaker
And therefore we're like, hold on. If we just keep our funds small, as you already said, keep ourselves hungry. And on ah on top of that, there's a correlation to success when the fund is smaller. Because if you see you want to do a $400 million dollar fund and you want to do maybe three times net after freeze, you have to generate more than $1.2 billion. dollars That means you need X holding in some of your best companies, which is easier said than done.
00:17:51
Speaker
And you do the math. And therefore we're like, hold on, if we know that the chance of success at that stage is so much harder, would we waste 12 years of our lives? Paradoxically, it's easier to raise 200 or $300 million dollar fund than a 100 million fund because institutional investors can give you 20, 30 million dollar check for a bigger of fund.
00:18:10
Speaker
So we've really been ah stuck there. We're like, we don't want to raise the bigger funds because the returns. But that's how it's interesting how paradoxically it is. So, ah what you're saying is that if you are raising big money, then you have institutional investors and they are easier. Or if you are doing a micro VC fund of say 100 crore, 50 crore, something like that is also easier. But the no the middle… No. Yeah.
00:18:36
Speaker
The middle is harder, correct. Because, you know, it is easier to raise 200 plus all the way to a billion dollar, of whatever size you want to go after. because If your returns good enough and story is good enough, there's enough money, institutional money around the world.
00:18:49
Speaker
But they don't waste their time and give 5 and 10 million dollar checks. Ideally they want give 15, 20, 30 million. So for that, mathematically they need from a safety point view, they don't want be too big of an investor in your fund.
00:19:00
Speaker
Neither do you want one investor to be putting so much capital. So from both sides it doesn't work. And therefore they're like, hold on, we like your returns, we like your background, we like the track record, do a bigger fund.
00:19:11
Speaker
And so it's very tempting. But then I know that the probability of our success goes down by X percentage. So I'm like, hold on. let's Is it worth doing a harder fundraise and getting a hopefully a better output at the end of those 10 years? Or let's do this quicker and hope we still do well enough.
00:19:29
Speaker
so So far we've been on the fence of, no, let's do harder fundraise because we'll get smaller ticket, 1 million, 2 million, 5 million, half a million. But that's okay because eventually we will hopefully do better than the bigger fund.
00:19:43
Speaker
ah How do you raise money? Does it happen through and networks or cold emails? I'm sure cold emails may not necessarily be working. No, cold never works. Like we tell entrepreneurs, don't do cold because that's never going to work because we don't know who you are.
00:19:58
Speaker
through a reference. So we definitely go through references in most cases. ah Most of the time we've done it through contacts that I've had around the world, relationships I've had, etc.
00:20:10
Speaker
And sporadically we've used good partners and we call them distributors in locations where we have no access. So that's what we've done. Our last one was maybe 10% was distributors and 90% was through our contacts.
00:20:22
Speaker
ah The next one, who knows? We'll see. If you want to go to new geography, for example, makes sense to tie up with a partner will take us to those markets. So, a partner would be like an investment banker who would have connection… it be like these distributors, these specialized distributors.
00:20:37
Speaker
Okay. In India, you go to a wealth management firm, globally you have… actually certified distributor, because they go through a whole test to make sure that they are certified to get, because you know money is exchanging hands, so it's taken seriously in the US markets.
00:20:51
Speaker
You have to through a lot of compliance and then they get the accreditation. And therefore, once you clear that, these are people who know, let's say, universities and Darwin's fund of funds, etc.
00:21:03
Speaker
Okay. And what is the ah country-wise split of the funds that you have raised? Like which countries contribute majorly? Well, actually, it's all over the world. Good question. Again, no one is this question.
00:21:15
Speaker
We are from the US, UK. We have money for Israel. we have money from the Middle East. Whereas Africa, obviously India a lot. the last five, ten years, India has really taken off as an asset class.
00:21:28
Speaker
People are worrying about money. Even though I explained there is, in some cases, brudgingly because of the tenure. The people have understood the value of this. So, it's a good mix across. India is now, I'd say, almost 50%.
00:21:41
Speaker
There's not much demand in India now. and Okay. Okay.
Trends and Themes in VC Investments
00:21:45
Speaker
Yeah, I think, you know, it's it's a more accepted asset class and like startups are not that much of a stigma now.
00:21:53
Speaker
And what's happening is families are getting richer and the younger generation wants to invest in this asset class. The older generation are like, maybe they don't understand this. Rightfully so, they've done their bit. The younger folks understand it. They want to be closer to the startup ecosystem and getting into a fund makes a lot of sense for many of them.
00:22:11
Speaker
Okay, okay, okay. ah Now, coming to the investment side of it, you know, how do you, ah do you have like a selection criteria, like a set of checkboxes or like, how do you decide which companies to back out of the, and what's the typical ratio? Like, how many deals do you see versus how many do you back?
00:22:32
Speaker
Well, we get thousands of deals. In fact, one of my partners in this call, they tell you exactly how many we get. We remind that very carefully. I don't remember those numbers, but there are thousands them that come.
00:22:44
Speaker
Most of them are rejected, maybe rejected, unfavored, but most of them we ah give a polite no to on by email itself. But we answer every single email, at least try our very best.
00:22:57
Speaker
Then a bunch of them come into a conversation with at least one person on our team whether it be an analyst, an associate, VP, a partner, whoever, it doesn't matter. And then there's something called D2. You know, where there's it's a D2 level of intelligence where maybe the call goes from one person to the second or it's killed in the first least there's something there to have that first conversation.
00:23:18
Speaker
Maybe it's a referral by someone like you, like a friend like you, Sasha, have a look. I'm like, okay. If I'm recommending it, definitely someone should speak to them. And then of course, something called B3, which deep-duty diligence, where the partner and team that he or she gets along, two, three people in K, senior people, get together and do a lot of diligence. They in an entire IC memo that gets presented to the entire partnership.
00:23:44
Speaker
That's ah obviously much smaller fraction of the deals that they eventually come. And then from there, like I said, we do about five or seven deals here. Okay. ah This… the third level of due diligence is… like what is Is it like financial due diligence or… No, this… See, like time I got dinner with these entrepreneurs that we funded, right? So, someone asked when did K invest. So, I was just asking them, when I didn't remember.
00:24:07
Speaker
So, I think one was three months into existence, one was literally four months, one was just a concept… just leaving his company.
00:24:18
Speaker
So you can good see the answer. There's no finance in business. More about a bunch of things we keep thinking of as to what we need to look at in an investment. oh Whether it be time, why now?
00:24:29
Speaker
The why now question is very important. Timing is critically important. as Obviously, the content of the team are critical. For us, we are very founder-focused fund. Obviously, like I said, we have some themes in mind that say partner XYZ.
00:24:43
Speaker
So if they can marry that theme and say, okay, we believe that this theme for this reason is taking off and we like Akshay. Let's say podcasting. And we like Akshay his team for this reason. So there are many such things and we're constantly upgrading that document. Literally for the last 20 years, we have think of new things and say, okay, I had this point.
00:25:01
Speaker
Let's say simple thing like conscientious. A conscientious person is a person who is very successful. So we put that in and we ask questions around people, why is he or she conscientious or not conscientious? And this is what we define it as.
00:25:13
Speaker
So these small things make a much much more of a difference for us than the financials where there is no financials. We talk about grit. Why is he or she so... determined what gives him or her the right to say that someone references Akshay has all this amazing grit that even when are going to be very hard, she is going to be at it.
00:25:32
Speaker
So, that comes from your past. And that's what we are checking on. Okay. Fascinating. but What are the themes that you are currently bullish on? You know, that why now? So, what is it that is now relevant?
00:25:47
Speaker
Well, we have looked at multiple themes. For example, in 2012 we spotted mobile and we did cloud native companies. In 2006 we did Inmobi, which was mobile first, right?
00:25:59
Speaker
And it came, first premise was mobile in India. realized it was too early and then Naveen and his partners moved fast enough and moved to global. Mobile themed global, that's what become India's largest ad network, in fact global business.
00:26:13
Speaker
Then in 2011, we saw that the enterprise saas was taking off from India. So we did a couple of investments like Serta, etc. It's done really well for us. Then the Indian customer is like a digital first. We're looking at that right now.
00:26:27
Speaker
AI now has become an infrastructure layer. So that's become very interesting. And when we stay focused on themes, sectors, we don't care who it is. So if the team is matching and then the founder is, again, like I said, we founder focused in the sector, who cares?
00:26:41
Speaker
If the team matches the entrepreneur, then we marry the food together. We let the founder lead the way. That's why we are, let's say, a sector agnostic fund. Okay.
00:26:52
Speaker
ah How do you ah evaluate founders? And maybe you can do some case studies. Give me examples of founders you backed. what you really What got you excited about those founders?
Evaluating Founders and Teams
00:27:05
Speaker
Well, like was saying earlier, there's a whole variety of things we look at. But it's it's more about the personality of the founder. Sometimes we like to see, oh is the team really complementing each other?
00:27:18
Speaker
So like, okay, Akshay brings to the Vinit brings Y to the table and John brings X to the table. And so if they can actually compliment each other instead of kind of duplicating what they're doing, that's wonderful.
00:27:30
Speaker
Have they worked together in the past? What happens otherwise life, you you and me are like, we're bullshitting each other right now. But if we had worked together, then we know, okay, Sasha's good at this, that don't let him waste time on XYZ and Akshay's good at this, hit the ground running.
00:27:43
Speaker
Right. If they have worked, for example, in let's say a multinational firm and in startup which has grown they've seen both sides processes then they've seen the startups and said okay this is what worked in the startup where it took off and the entrepreneur did this right but he also did this wrong or she did this wrong uh just married them together and we know each other and we've seen entrepreneurs between the age of 32 to 35 if they can have two three found the co-founders together it becomes very very interesting but obviously we funded entrepreneurs who are 55 and we funded entrepreneurs who are 21 or 19.
00:28:14
Speaker
And it hasn't really mattered ah because sometimes the founder is naive. He or she doesn't realize how hard it is. Those actually work out because you just jump in and don't realize how tough it is. Then you realize, oh my God, but because they were already end, listen, let me just figure this out.
00:28:29
Speaker
Versus a more seasoned person may not even jump in. So we like to marry all these things. The nice, well-baked team, touch wood. Then you've got the 20-year-old crazy entrepreneur who built something out of the blue and everyone's done as to how he or she did it.
00:28:44
Speaker
So, different strokes with different folks. ah Do you typically also back single founders? like like you've spoken around about We keep insisting on single well-baked teams.
00:28:59
Speaker
But eventually, actually what happens is that there will be a founder who breaks that logjam where or she clearly comes out as someone who is a rock star. And then it doesn't matter.
00:29:10
Speaker
So again, last night when we had the event, we were chatting with one of the founders we backed. which is Ramita, which is company called Foxtail. Right. And she's a solo founder. And I remember my partner Gaurav calling me up and saying, Sasha, Ramita has reached out. And we would we were actually debating whether it to even slow down on consumers at that point because we were so busy with you so many other sectors.
00:29:30
Speaker
And I said, so what's your point? He said, Sasha, I really, she really would love to partner with Kay and I find her to be awesome. So I started laughing and I said, okay, I'll be happy to the call then.
00:29:42
Speaker
And she said, and she had liked Gora from day one and followed what he does and so on and so forth. And by then, ah another partner of ours, Sunita, was joining. So I said, Sunita, you better take the decision here.
00:29:54
Speaker
Me and Gaurav like the founder, you decide. So she did the call and she liked it too. And we broke the rules, right? we were not going to go to the consumer. We did a consumer talk. but now We're not going to do single founder. And you can see how well the company is done.
00:30:05
Speaker
So all this bullshit that I'm spouting right now is for out the window if the right person walks in the door. And it's fresh my mind from last night. yeah Okay, very interesting.
00:30:17
Speaker
ah I guess you must have developed a very keen sense of judging people by now because that's what you're putting your money on that sense of judgment only. Yeah, i hope so. I mean, we still make many mistakes, but our business is about getting a few right.
00:30:33
Speaker
That's what we think we are reasonably good at. And that's what we really focus on. But being an institutional fund, we like to do everything properly. The diligence, the theme, the timing, all that. So we take it very seriously. But eventually it comes down to after doing all that, it's judging the person.
00:30:51
Speaker
And the minute as we see our egos take over and we can fall in love with the theme and we say, oh, this has to take off. And and actually that's probably right. All roads are leading to this particular, let's say, theme moving the right direction to take off.
00:31:06
Speaker
But if the entrepreneur cannot execute, what is the point? And like I said in the beginning, we're not going to do it. We're not capable of doing it. That's why we're giving the money to somebody else. So, we have to be very careful that, okay, this is all making sense. But can Kapil really go out and execute this or can really execute this? And if not, best let me back off and and not let me be too smart here.
00:31:26
Speaker
And when we've not backed off, we've lost our shirts. Okay. ah
00:31:33
Speaker
You know, ah ah for a lot of VCs, I've heard them say that the biggest thing that they that matters to them is the time. Okay. Like, you know, if the TAM is not big, then it doesn't matter how good the founder is, e etc., etc. So, what is your take on
Navigating Trends and Opportunities in VC
00:31:49
Speaker
this?
00:31:49
Speaker
You know, we've made many mistakes here, unfortunately, and we're trying to correct that. is On paper, that makes a lot sense, right? Because we go after very large businesses and even when we do our internal memos, TAM is a very big part of our discussion.
00:32:02
Speaker
But what we've learnt is, if the TAM is already very big, then you already have lots of incubants there. On the other hand, if you fast-growing niche area, which is going really fast, but we know that this founder is capable of jumping one to the other to the other, there's a new trend that he or she has caught.
00:32:17
Speaker
It's better to go after that founder because there's less competition. He or she has gone to a new idea and cracked it, and it's growing like a weed because suddenly everyone's like, wow, this is what we really need. Go here. And so we'd rather go to that kind of category where it's a small niche at that point. looks small, but actually is ready to take off and they're actually growing faster than the incubator market.
00:32:37
Speaker
When we do that, it works out very well. Okay. ah is In general, I'm not ah specifically asking for you, but in general, is the VC world very trend driven?
00:32:49
Speaker
like Yeah, it is. Are there like hype cycles? Like maybe there's an AI hype cycle right now. and Yes. Throughout my career for 20 years, 25 years, I've lost track of the hype cycles, the waves as we call it, right? The constant waves.
00:33:03
Speaker
And we have to answer these questions like you asked me, what are your themes? And we have because we can't be sleeping in a cave. But it actually very dangerous because what happens that you fall into those trends.
00:33:15
Speaker
Then you all of us are in the same bucket together and competing in the rare ocean because these 10 entrepreneurs come and 5-10 puns all competing to get a slice of the pie. So sometimes you can do a little bit of soul searching and say, know, how can I be really contradict all this and step away and see what else is going on in the rest of the world.
00:33:33
Speaker
And that's how when, if and when we've done that, we've found amazing companies that no one is looking at and really partnered with amazing success stories over there. But they're just completely away from the trend.
00:33:46
Speaker
What are trends which you felt were worth ignoring? ah Trends which you saw in the past? I thought… the one I can remember the earliest is that 21, 22 when crypto had gone ne mad.
00:33:57
Speaker
You know, every second company was 50 million for a startup. The same entrepreneur was doing something else 10 days back. They realized, see, entrepreneurs are smart. That's why they are entrepreneurs. They're super smart. We have to respect. i I'm in this business because of every one of them.
00:34:11
Speaker
That, okay, these buddy VCs, they're going for a trend. Let's get into crypto. Now, that doesn't mean that good crypto companies have not come out. But very few have. But every second company, um like, hey, I remember seeing this guy just like a few weeks back. doing some sas company they've already come up with a new new crypto idea and it's now getting evaluated 40 million for pre money and they've got three thumb sheets from top tier vc firms and they say take it on leave it do it but tomorrow tell us don't waste our time we're making a 24-hour decision and i'm like boss something's not adding up here i think best that we're not smart enough which we honestly were not we just backed off and thank god we backed off
00:34:49
Speaker
What about EdTech? You know, post lockdown, there was that whole EdTech trend, everyone backing EdTech businesses. Was that overhyped or do you think that it was a like it it was a good opportunity?
00:35:04
Speaker
You mean in that 22-21 vintage, of when the market was very hot? Yes, yes, yes. Yeah, so we we we got sucked into that. We did make one or two EdTech bets. I won't mention which companies. So we can't laugh at others. We made it ourselves.
00:35:17
Speaker
Luckily our businesses are in good shape financially. They have tons of money. There's no ethical issues. Founders have cut costs and are coming back. Because if you do edtech right, like you see physics, rather there's a lot of money to be made in that category.
00:35:31
Speaker
But if you do it wrong, like any business, you're not to go anywhere. So they got record crazy valuations in that 21, 22 vintages. No, every pretty much every company got crazy valuations. So we have two edtech companies.
00:35:43
Speaker
That's the only clue we've done. And they're back, they're moving on the right direction, but we also got sucked in and did EdTech at that time. So, we can't laugh at anyone else. and Okay.
00:35:53
Speaker
ah What do you regret more, saying yes or saying no? Like you said yes to a deal and then you realize it was a bad deal or you said no and you realize it was a great deal, you said no to.
00:36:04
Speaker
Which is a bigger pain for you?
Lessons from Past Investment Decisions
00:36:06
Speaker
I think it's a very good question. no Again, no one is asking this question. You sometimes we have as human beings, we have FOMO like, oh God, why did say no to that one?
00:36:15
Speaker
So earlier it used to be no, but now I've gotten over that. It's life. That's okay. We have to learn from why did I say no to XYZ company and next time have my antenna up for a similar type of company, similar type of founder and hopefully say yes.
00:36:29
Speaker
It's a cribbing. And the yes is where it becomes like, you know, why did I say yes actually? We have no regrets. We make mistakes and go on. But we just, that's why we want to be methodical, not rush.
00:36:41
Speaker
And when we rush is when we make the my mistakes, for sure. ah what What are some of those no's that you regret? I mean, not regret, but you wish you hadn't said no. You know, there's so many, are i I used to mention them all the time.
00:36:56
Speaker
and so in some cases, it wasn't even a no. We just moved slower and we have a pretty fast moving fund. We're not a slow moving, slow-moving sleeping. We're not private equity, right? But we didn't move fast enough and they closed. Let's say, Ola, for example, and I can go through so many more that we said no to. Mintify just randomly comes to my mind. But i can name maybe 20, 30 unicorns if I really put my mind to it.
00:37:22
Speaker
The company, I forgot the name, it I think it's called NIO. I'm sorry, i don't even remember the name right now, it's recently changed the name. It's a money transfer company. We saw that We saw that at whatever, like for a 10, 15-core valuation. The founder was amazing.
00:37:42
Speaker
Really liked it. We were about to say yes and for some reason, We said, all right, but India, Australia was what they were starting with. I remember it was 2012 or something. And we said, you know, India, Australia, how big can it really be? And now it's a $2 billion business.
00:37:54
Speaker
So, that was a no, that we should definitely be regretting was foolish. And there are many such. I can, if I put my mind to a few more examples. What do you do when valuations are out of whack? Like, you know, that 2021 period when everything was overvalued.
00:38:13
Speaker
Yeah, we go and as slow as possible and we try to wait for opportunities where some entrepreneurs will somehow come to something realistic, where it's not crazy. Now, sometimes, you know, the reality is that even in a crazy hype market, there will be outsized winners.
00:38:28
Speaker
So, we have to be very careful saying, okay, you know what, no matter how expensive this one is, for this one, we need to pay little bit more, we believe the founder is just special. So it's okay to overpay and get a little less holding. You can't see on the sidelines.
00:38:39
Speaker
But try to do as less as possible because there's moment of time when the market will come down again because we've seen this over 25 years. There's no period where only down or only out. You just have to hang on in those crazy periods. It's like a hurricane and relax. Don't get tempted.
00:38:53
Speaker
Tell the younger people on the team to just relax because they're not getting paid to do more deals. We definitely are not getting paid to do more deals. We're paid to do good deals, high quality deals return the fund. So we have had cycles in our own fund in the years earlier when we were more inexperienced.
00:39:10
Speaker
where we participated in the hype and also did as many deals as everybody else. That didn't turn out too good. So, we learned to slow down. We were lucky in those hype cycles that we still got winners. Big winners.
00:39:21
Speaker
And therefore, it didn't matter eventually. But it could have been a situation where nothing could have been a winner. And then that fund would have been in a particular massive soup. So, we don't want to be too complacently, especially when we got lucky.
00:39:35
Speaker
Okay. ah Yesterday, you were telling me about how you built up a team and eventually... you're stepping back from more and more functions and letting the team manage
Qualities and Roles in VC Teams
00:39:44
Speaker
things. So, ah you know, what do you look for when you're building a team? You know, who's a good ah was a good fit for VC?
00:39:52
Speaker
like Like what skills are a good fit for VCs? Yeah. See, it's not a question of stepping back. It's just doing different roles in the firm. Right? That's how you move. I'm not stepping back. It's just giving more responsibility to my partners who deserve it, have worked hard and and reached a level where they can definitely...
00:40:09
Speaker
oh do a better job than I am. Most definitely in fact. I the word most very emphatically. So it makes sense to let them put them in position of strength what they can do and to put me in position my strength what I can do.
00:40:21
Speaker
ah What we look for, i think it's a good mix of people. So my favorite has been people if you've already been an entrepreneur, Because what happens then is that you have seen the other side of the fence and you have been on the other side asking for the money, working from 0 to 1, 1 to 10, 10 to 100.
00:40:41
Speaker
ah You have now become more, and let's say you have more empathy because you've seen the hard side with super hard entrepreneurship. See, I come from a family entrepreneurs. We've been building business for 30 years, my father and, you know, brother and uncles and everybody. My whole family is only business.
00:40:58
Speaker
So I'm going of times if you're a code junkie, just an investment banker, i said but life doesn't work like that. right Even selling one widget is so hard.
00:41:09
Speaker
So for me, those are the favorite. The problem with some of those people are that even if they've built billion dollar businesses, they don't realize that they are now now not going to be executing. It's going to the other entrepreneur.
00:41:20
Speaker
But because they're used to execution, they feel, okay, ah yeah that that makes sense it's easy to go there Because he or she can go, but maybe this entrepreneur can't go, but I'm giving the wrong person the money.
00:41:31
Speaker
Right? So it's ah it's a mixed bag, but given a choice, I still prefer entrepreneurs for the reason. And in fact, entrepreneurs who not done that well, I prefer in fact even more because they've done well, they've done okay, but not that much ego is not too high, but they're competent enough that they started their business, raised outside capital, ah were risk takers, didn't take jobs. For me, that's the highest respect that they've done that.
00:41:52
Speaker
And now they want to move to venture or whatever, so like such people. Or you go to someone who's already been a VC for many years, so they already have a track record. So there's nothing to ask. Either like the record or I don't like the record. This person has been executing, making good investments.
00:42:06
Speaker
They just want to change the platform. So we'll be happy to welcome such people. So those are the we like. On the other hand, there's nothing wrong with being a McKinsey consultant and being a VC. We haven't really hired anyone with that background.
00:42:18
Speaker
But because they have first principles of thinking, they're very logical and they can help in many different ways. So, there different strokes, man. Who knows what's right and wrong.
00:42:30
Speaker
I love how ah how much humility you have. Everything that you say, you also tell me that this could be complete bullshit. So, I really enjoy that. ah what What about at the analyst level?
00:42:43
Speaker
So there also you're looking at some entrepreneurial experience or are you looking at like… No, no. I do want hungry and people who are hungry, who have first principles thinking, who really are willing to hustle like anything and really enjoy the job. So we very are lucky to have some great analysts and associates in our firm.
00:43:03
Speaker
Put people first of all, which is very important for us. Very hard working, very committed. Last night we had the event and was asking some of them, you know, so what's your plan now? They're going to the airport, some of them. So where are you going now at 9.30? They said no, 11.30 flying back to Bangalore, back to work.
00:43:19
Speaker
So, some of them stayed back to their other work in Bombay. My point is, this whole generation is just special. And I can guarantee you that even the 25-year-old analyst is much, much smarter than me in deciding what to do. It's just that because he or she is 25, we are deciding for them.
00:43:35
Speaker
But actually, if I had got out of the way, yeah would probably do better with just the 25-year-old with what we have to understand that venture a young man's business, a young woman's business in fact. And we can just control egos and step away and let these people redo their thing.
00:43:52
Speaker
Magic happens. Why did you say young woman specifically? What is the advantage that young has? Yeah, because I mean, is no advantage of women or men. That's why am mentioning both, right?
00:44:04
Speaker
Because somehow as human beings we tend to say men and am like no no. I agree with you. yeah yeah we When we hire, we don't look for women or men. We just look for good people. With the person's right attitude, right profile, we are happy to take him out. We ended up with many more women than we expected.
00:44:20
Speaker
But we're quite glad to that. And we want more. So it's very hard working, very committed, very, and no bullshit. you know they don't take bullshit, which is great. So you know when you're bringing on entrepreneurs as partners, most entrepreneurs suffer from an excess of optimism, right? And that's the only reason why one would become an entrepreneur, because you suffer from that excess of optimism.
Advice for Founders Pitching to VC
00:44:48
Speaker
Doesn't that work against you as a VC? I think VCs tend to need to be pessimistic. Yeah, I'm being an entrepreneur, I'm also optimistic. ah So I don't decide any of the investments my partners decide because I'm optimistic.
00:45:00
Speaker
And I'm always looking at the the good thing in the company. But my partners are more practical, pragmatic, sensible. And they're the ones who wear me away from most of the deals. OK, interesting.
00:45:12
Speaker
OK. So you know let's talk a little bit about your family background and ah you know ah The Mirchandani name, of course, is very familiar to me at my generation. where I don't know how many in the current generation would be that aware of what like your father has built up. Can you just tell me that whole story? In a way, I think he was like a OG startup founder of India. so just Yeah, he is definitely an OG startup founder. Because an incredible journey, when he graduated from Bits Pilani, only three people graduated from that class came back in India.
00:45:50
Speaker
Everyone else, because they were the smartest of smart. They all went to the US. All. So, one one of his colleagues went to, I think it was startup group. One went to the Birla group. And he became an entrepreneur on day one. Very partnered with… And which year is this?
00:46:04
Speaker
Must have been in the late 60s here. Okay. Early 70s or something. No, late 60s. but I was born in 72. So, it must have been 60s. So, you can imagine Pilani in those days.
00:46:15
Speaker
He was really middle of nowhere. Right? And he's very, very smart, very, very hardworking. All them moved in the 60s to the US. That's when the big immigration happened to the US. Visas were much easier. And he partnered with... ah very large conglomerate where they were starting a new company and they actually gave equity, unheard of.
00:46:32
Speaker
And that was his first business. And one day he just came over and said, you know, I want to exit the… And what was the business about? Like what was the product? It a packaging business. Okay. Okay. okay So, he was selling, you know, ah selling these packages to pharmaceutical companies.
00:46:49
Speaker
Very successful business. But one day he decided that this can't become very large. And I keep telling entrepreneurs to what you said about the TAM. So he said, look, what can be a new business that small town are growing fast. Exactly to what I said earlier.
00:47:04
Speaker
So he looked at many ideas. they They even launched him and his brother and then eventually my uncle, my dad's brother-in-law, the joint forces. And he looked at many ideas. They even launched watches.
00:47:15
Speaker
and so on and so forth. I think they will did some shoe business, very small shoe business, didn't scale. so youve got to fail fast is what I keep telling founders. That's what their success is. And take a risk, they were willing to leave such an amazing opportunity where your equity you equity. Because he realized that TAM is now going expand in that business that he was doing.
00:47:33
Speaker
And his aspirations were much bigger. And he was so far before his time because now people understand this in those days to build a 50-clock company was amazing. And they came up with the idea that TVs are going to take off in India with Asian Games.
00:47:48
Speaker
And that's when they got the license and went and got JBC and got into capital. But he didn't have any access to capital. They had to sell whatever small assets we have including the home we lived in, to use that money to start the company.
00:48:00
Speaker
So that's one of the... reasons why nudged him into getting into early stage venture to help entrepreneurs like him who were come from nowhere, middle class background, where will he get capital?
00:48:12
Speaker
And you can imagine in 1980 or 81, there was no venture capital industry, there was nothing even in 2000. And so he raised this small capital and from there, it's been an incredible journey. and They launched the Onida, like Merck is the company name. and That's right. They make TVs, Onida TVs.
00:48:28
Speaker
And now, of course, you know, 550 odd TV manufacturers were licensed in 1981 to make color TVs. So, the people who are your parents… This is when the switch was happening from black and white to color. That's right. Asian games was the big thing, inflection point.
00:48:42
Speaker
So, it was a small market and then it just took off. And Anirah became one of the most valuable business in India for decades, like all all across the 90s, 2000s. tell Where we are today is that out that 551 TV manufacturers that were licensed in 1981, 550 have shut up.
00:49:01
Speaker
I won't mention any names, it's not fair. or All of them were awesome entrepreneurs, they all tried. The only one which is still listed and going strong is Merkle Electronics, only the time where my dad is the founder. He's 82 years old.
00:49:11
Speaker
Great story of determination and hard work and just incredible. So the customer profile has changed. from let's say a person XYZ who was buying it to now person buy it.
00:49:24
Speaker
But the business still remains solvent. It's still there. There's some very interesting plans. My brother who's now running it has. And I think I'm quite confident that if those plans rectify, it will become substantially more valuable in the next year couple of years because electronics, let's take now they're in ACs, washing machines and televisions.
00:49:44
Speaker
And you can imagine that AC, you and me have ac I'm sure in our homes, but People want, only 5% of Indians have air conditioners. So we can project that one day our sofas, maids, helpers will all have air conditioners in the market of a billion people.
00:50:00
Speaker
So over the next 20 years, just making ACs itself is such a humongous opportunity. Let alone washing machines. People are going to work nowadays, no one would one can afford maids.
00:50:11
Speaker
Maids don't want to work for you. What are you going to do? So you use the washing machine. Microwave ovens, double income, heat the food. And there's so many more products that my brother has in mind along with his team. So actually, I'm very excited about the future of that company.
00:50:24
Speaker
And again, a great story of amazing perseverance and determination by my father have kept the business solvent till today. When did Unida go public?
00:50:35
Speaker
Like, meck when did Unida go? 1994. There definitely is like a little bit of a lost opportunity, right? Like ah how big the consumer electronic market is, uh, ah Like the market has grown much bigger than what Merck grew at. Yeah, i tell you the issue… What was the missed opportunity? It was a missed opportunity. I think the issue was with our country's financial situation.
00:50:59
Speaker
So, in 1991, Manmohan Singh called my… Manmohan Singh, our… I don't know, amazing ah Prime Minister, that time he finance minister. He called my father to Delhi and said, my father's name is Guru.
00:51:11
Speaker
said, Guru, please come and meet me. So he went and said, sir, do you want to discuss? He said, look, India has collapsed. We have no money. We all know what happened 91. So he said, have no choice but to open the doors and allow multinationals to come from next month.
00:51:24
Speaker
Now, if you go into the history of electronics across the world, markets like China, Korea, Europe, the US, Japan, they close the markets, let these companies get to a very, very large scale, multiple billions of dollars, if not if not tens of billions of dollars, like That's why you see electronics even today is dominated by that particular area, that particular country.
00:51:46
Speaker
So in Japan, you'll see a Toshiba or Hitachi or JV, not JV is now gone, but Sony are dominant. In China, you got the Chinese brands. In Europe, you got the Europeans, Philips, etc.
00:51:57
Speaker
And India was the only country where, Unidas turnover was only 150 crores that time. Not even a 20 million dollar company. So we had nowhere near reached even billions, let alone billions. So we were too small when the market opened.
00:52:10
Speaker
And you already become very large in your home country. Let's say Korea, LG, Samsung was 10 billion each by then. So you can now throw money to grow your business in India because you're saying it's a long time market. You look at LG is going public now, but they've been throwing money in India for 20 years because their balance sheet is so strong. It's like Mithra went into app some small African country and eventually becomes a very large market.
00:52:30
Speaker
So how do you compare 150 and no access to capital? On cover that, the guy comes in. So, that was a loss of opportunity that if India was a little bit more strong as a country, they would have probably kept the gate closed for Indian entrepreneurs. Not trying to say we can't compete.
00:52:43
Speaker
Get us to scale, then open the door.
00:52:46
Speaker
So, considering that, the fact that someone buying 800 crores of ACs or washing machines being bought today by Oneida, it's a miracle.
00:52:54
Speaker
ah What's your take on Trump tariffs then? like Essentially, Trump wants India to open up its market. Is that something you are in favor of? like More free trade?
00:53:05
Speaker
I am above my pay grade to talk about politics. But Modi has to know what has to do. He has to appease not people like me, but appease the grassroots.
00:53:17
Speaker
And the farming situation where it's untenable for him to but let livestock come or whatever whatever, food stuff come. Because the farmers are not going to tolerate it and there's hundreds of millions them in a country as everyone knows.
00:53:30
Speaker
And that political heat is just too high. So for him, it was just a red line. And as you saw in today's papers, there's already some thaw happening. So hopefully, better sense prevails. and trump President Trump is after all a businessman and Modi is a genius.
00:53:48
Speaker
So sure he'll figure it out. Because it's it's not fair to our exporters. They've been stuck. And I've had many, many friends who built fabulous businesses. We have many portfolio companies that have built amazing companies. And at 50%, let's be realistic, it's not a joke.
00:54:03
Speaker
It's easy to say go to Europe, go to Timbuktu. Why don't you come and try, you know, do this. You can't switch on a dime. It's not a joke. So things am my my prediction, and it's foolish to be predicting some of this stuff is way above my pay grade, is it should calm down in the couple of weeks.
00:54:22
Speaker
Okay. ah So, did you join Merck once you finished your education or like what was your path? yes so Yeah. So, you know, was the eldest son in my family business.
00:54:34
Speaker
So, it was obvious that I joined. Those days in the it was like there was nothing else you can do. So, I joined and I thought maybe in six months i'd be a director in the company because I was the oldest son. Yeah. Okay. I became a director Merck Electronics just three months back.
00:54:50
Speaker
We need to do the maths. That was 1996 and now it's 2025. Right. So, literally I became last bottom. And my dad had a different plan for me. He said, dude, no way you're going to come be a director and let alone MD and run this.
00:55:03
Speaker
At that time, we were at at a peak. He said, I want you to really go deep. I didn't understand what he meant. But then I realized later, a simple thing, like I lived outside India for many years. He said, now from tomorrow… You were studying abroad.
00:55:15
Speaker
Yeah, studying abroad. I was in boarding school. So many years have passed. So he said, OK, you must take the train and go home from now on. And i'm like, what train? So we went to the station. couldn't believe it because it was like a medieval.
00:55:29
Speaker
people like on top of each other Dude, this is sounding insane. It's looking insane. And my brother had lived in India. he just jumped onto the train. And he jumped back out. And he said, dude.
00:55:42
Speaker
So, we went back with taxi. There was no sea link in those days. Took me two hours to home. Next day, my brother said, dude, this bloody, he told my dad, this bloody brother of mine, you better tell to either come or I'm going, I'm not coming back. So, my dad said, dude, you better fix this.
00:55:57
Speaker
So I remember life, one thing my parents taught me always jump in. The train going against traffic, but it was still super full, starting empty and empty by the time we did church gate. But what my brother didn't tell me purposely was in church gate, a million people run in.
00:56:10
Speaker
You got stand on the side, you get crushed. So starting right in the front, trying to jump out and suddenly hundreds of people running towards me. And I'll never forget getting dragged in the back and my back getting smashed.
00:56:22
Speaker
So when I left the train that day, I was like, geez, this is something else. But one thing I did was, i said, I won't give up. I'll keep going. week later, it was like nothing for me. And my dad said, you can't go first class. You have to second class.
00:56:34
Speaker
So I remember going for six years in a row second class between, it was Churchgate, not Churchgate station. Churchgate, sometimes I get off. Sometimes I get off at Grant Road when Andheri East was the station we take.
00:56:46
Speaker
and Until today, if I have to take a train, no problem. Then what he did was he made me like a the lowly sales manager in Bombay branch. Then I remember going to Mangalore and literally stayed there for two years, not for two weeks as the Mangalore branch manager.
00:57:01
Speaker
I'd never even seen lights go off more than 10 seconds because my apartment where we lived in Bombay, where we still live, is in Malabar Hills, right next to the Chief Minister's house. So unlike anywhere in India, we'd never seen power outages.
00:57:12
Speaker
Well, 99% of India is normal, right? So we're living on different planet. Here you go, every 30 seconds the light goes off. I'm like, dude, where am I coming? What the hell is going on? But you get used to it, right? You figure it out.
00:57:23
Speaker
I would travel in those buses where today my chauffeur travels and so on and so forth. So, have seen real life as to you know how people like that survive, going six hours in the forest.
00:57:34
Speaker
I have lived in one-star hotels. And that continued for years. Ran Bombay branch when I came back. So, that was my Oneida experience and then I finally left in 2002. That was another radical decision.
00:57:46
Speaker
So again, this is my personality because i just felt that I want to do my own thing and I want no one to decide for me. Now, there's no way I can do that in Renata because my father is the dominant chairman of the company. My uncle is the dominant vice chairman.
00:58:00
Speaker
There's a CEO and there's another uncle in Delhi. All very accomplished. So I said, if there's going to be four people and then me as the fifth wheel and then my brother will come, my cousins will come and never end. Like most family businesses. Now some families know how to divide this out or grow new businesses.
00:58:15
Speaker
But at least for me, it was not fitting. So we actually started, ah we got into the call center business and I was the founder and CEO of the business. And that's when I went deep into like being an entrepreneur myself.
00:58:26
Speaker
And we built that out ah over the next five or six years. Like an international, serving international plans. You know that irritating way we call you and torture you and sell you credit cards and all. So, it we were one of the first tenants of Mindspace in Malar.
00:58:39
Speaker
So, it was like 16-hour days because would literally… When I got married, actually, my wife thought an affair had to move to Malar. Because I had no choice. The commute was just too long. You finish at 4 a.m. You drive home, which is… US shift timings and all that. Correct. And then by 9 o'clock, my finance department would come. So, I had to go back to work.
00:58:58
Speaker
India time and US time. So, you know, it was 16 hours. I think more than even entrepreneurs do now, we used to in those days. But it was a great, great experience for me. It's the best experience of my life.
00:59:09
Speaker
And did you sell that or like?
00:59:13
Speaker
We exited that. We sold it to a Canadian company. We didn't make too much money there, but it was an exit. and the learnings were priceless. See, what happened, to we started with voice.
00:59:24
Speaker
But by the time we realized that voice, we need scale, we need 10,000 seats. So, we managed to pivot that into a healthcare BPO. That's why we got little bit more value for that. And that's how we managed to exit. Okay. Okay, okay.
00:59:35
Speaker
and When did you start investing? So, that's another story by itself. So, around 2000-2001, attended a talk by a very prominent Indian businessman in a YPO accommodation, where I am a member.
00:59:48
Speaker
And he had talked about how he had moved from… going from textiles to pharmaceuticals. And the reason was just a more lucrative industry where you get better multiples and more value is created.
00:59:59
Speaker
And Onita was at its peak. We were 2000 crores. We were really at the peak. But because was in sales, I realized that, hey, man, this industry really sucks. Margins are low. It's hard even sell one TV, even if you're number one market share, et cetera, et cetera. So was thinking, what else can I do?
01:00:15
Speaker
Parallelally, as I said earlier in the podcast, my dad being an entrepreneur, I was like, you know, it's so hard even for now for entrepreneurs. I'm... Gulum, it's not his son, so I have access to capital. But am I the best person to really be allocating the capital for myself or giving it to someone smarter than me? and hopefully my mom told me be humble and realize the whole damn world is smarter than me.
01:00:35
Speaker
So why can't i help? So I told my dad that why can't we support entrepreneurs like yourself? And let's get into a new category. So I started doing a lot of research. reading magazines like Forbes to understand what is the new trends, meeting a prominent industrialist. Mr. Mahindra is a good friend of my dad's. I met him, met him.
01:00:52
Speaker
He guided us guy did me saying, hey, why don't you do higher-end IT? Because already IT has taken off, reinforces Tech Mahindra, Wipro, etc. And so I said, okay.
01:01:04
Speaker
So there was a young colleague of mine in Oneida and his name was Kiran. And I said, Kiran, if you have any great smart friends who are interested in capital, let me let me know. Even you were surprised because nobody is giving you money.
01:01:15
Speaker
So every once in while you think we meet. There was no concept of VC in India at that time. So I remember one team came to meet me. They came for something else. you know, comparing televisions and they said, can you give us your TVs?
01:01:27
Speaker
So I said, but tell me really about the business and at the end of said, it looks very interesting. If you're interested, I could do more diligence, of course, but I may be interested in investing and they couldn't believe it. And then one thing I had to the other and they actually ended up investing that company, which eventually pivoted to becoming a data mining business.
01:01:45
Speaker
And that company became my first investment, which today is a company called Fact and Analytics, 25 years later. yeah Okay, yeah, unicorn, right. Yeah, that's right. And we should do an IPO later this year.
01:01:57
Speaker
But that's a 25-year journey. So the idea was, how do we marry helping entrepreneurs like my father? And how can I get out of electronics and go into tech? So today, if I see my family holdings,
01:02:11
Speaker
98 percent of our holdings are in tech even though we are still large shareholders in reader but 90 percent of our net worth holdings everything is tech that happened with one small talk that changed my life so uh you know what were some of the early lessons you learned like what did you learn from the fractal experience or you know those memorable investments which you would have done early on well one is uh Pivot.
01:02:35
Speaker
You know, it's all about the great teams. Fractal was actually Woodle.com, comparison website as i said. But to the credit of the founders, they realized that this is going nowhere. And they pivoted to what is what they were really good at, which is data and the finance.
01:02:50
Speaker
And that's how the original avatar was data mining, which now today, of course, is ai Or let's say, in Inmobi's case, we were a mobile search company. But again, the best founders like Naveen and... Yeah, they were called M-Coach. M-Coach. That's what but we funded. That was the first investment we made from Mumbai, which I was co-founder.
01:03:10
Speaker
And there again, within three months, I remember Naveen calling us in Sashoggi in nature, right? Let's meet up. And I was like, no, if you really believe not working, you tell me what you want to do next and we'll support you. And he did four such pivots till he reached mobile ads.
01:03:22
Speaker
That's when we came changed the brand Inmobi. So... really good founders know how move and really understand the market and hold on and say, okay, let's change this. oh And what else can we do here?
01:03:34
Speaker
And that's what they both did. And there's so many more examples that can go through. So many. I guess that's where you learnt about the irrelevance of the TAM number. Because both these did not have a TAM message, right? like Correct. See, a good founder like my father, he started with the packaging business.
01:03:53
Speaker
He realized that there there is no TAM here. Whichever angle it takes, roads all closed. So, then you get out of it. So, I remember a young entrepreneur came to meet my uncle in 1990 something, what will be in the years.
01:04:05
Speaker
And I was just sitting in the corner in the meeting. And he was talking about how he wants to get into mobile, wireless mobile. And he already had a business of making push button phones.
01:04:17
Speaker
So we asked him, so why you, what's up with the push buttons, doing really well, what's your problem? We said, look, at best, at peak, it'll be a 500 crore company, which at that time sounded astronomical. 500 crores looked like a big number.
01:04:29
Speaker
We were like, you're not happy? I said, no, don't want to find it. I want to build something huge. And so, foolishly we didn't partner with him. We decided to partner with ourselves and we didn't get the license for Bombay for the mobile license. And that entrepreneur but was Sunil Mittal, a creator. Oh, wow. So, my my point is, Sunil could have been very happy as chairman and CEO your bed of B-Next or whatever the phones were called, right?
01:04:52
Speaker
yeah But it was irrelevant today. Today, where is he? He's the king of our country. He is you know number two, a provider, unbelievable entrepreneur. What a great story. One of the top five entrepreneurs the history of our country.
01:05:06
Speaker
But if you are not taking that stance, same thing with my dad. right If you are just being stuck in some small packaging business, where you be today? While you did tell me that the opening up of the market was one of the reasons why the missed opportunity for Onida.
01:05:21
Speaker
But then, like, say, a Bajaj would have also faced the same thing, right? Like, Japanese brands coming in, e etc., etc. um So, were there other reasons also that for that missed opportunity of Onida?
01:05:35
Speaker
But if you see... Again, I don't want to pick on any one company because huge fan of Bajaj. Mr. Raul Bajaj, of course, was a legend. His sons are unbelievable. They are no-nonsense people and they done beyond phenomenally, right?
01:05:50
Speaker
And ethically. So, if you ask me one of the which which is one of the top families in our country which has really progressed, it is the Bajaj family. And you can see across all their businesses. So, think anyone knocking them would be mad.
01:06:01
Speaker
Extremely well-made. And the the big man who passed away was such a legend. He spoke his mind in a country like India. So, I can't have more regard for that family. And they could continue to execute and will continue going forward.
01:06:14
Speaker
Cleaning people with respect, everything was amazing about them. So the the difference is the scooter, you think about scooter business, which is their main business, there's not that much global competition if you really think about it. You tell me five large $50, $10 billion scooter companies, but I can name you $20 billion dollar companies in those days of electronics, which are now $100 billion companies.
01:06:35
Speaker
So there's huge difference. And by that already it's certain scale. We only won 50 crore. Industry had come much later. Scooters were because in the 60s people were driving scooters, right? That's my point. a Timing sucked. If we had been, let's say, a thousand crore company by then, some size, here at least get it to some size and then open the market. it would have been So Bajaj had already reached that size by then. On top of obviously being very competent people.
01:06:57
Speaker
So it wasn't an apples to apples comparison. Again, my dad never cribbed. But it is reality. i mean See, life, what are you going to who is going to listen you life? Crippers are just wasting their time because no one gives a shit, man.
01:07:08
Speaker
You don't cry but you are living. So today, we anyway moved to tech and our network has come gone up because of tech. So we moved on. But we have not given up on electronics. And we will come back.
01:07:20
Speaker
Okay, fascinating. ah So let me end with asking you, ah you know what's your advice to founders who may want to pitch to you? I feel like a lot of people might discover this episode when they're raising funds and they want to pitch to Kay.
01:07:36
Speaker
So you know would you like to share any advice to them? I said come come through a respectable reference because that's how we you come right on top of our Right on top of our schedules, right off the bat.
01:07:50
Speaker
oh Well, the rest is all standard stuff. So a good entrepreneur knows what they have to do when they pitch to us. We don't need lecture them as to what to do. We've seen that time and again.
01:08:01
Speaker
and And don't talk about crazy times and 1% of this market. Keep the presentation very simple. There's too much clutter in most of these decks. Nobody has time. if me see Like I said, just today, Thursday morning, there must be 25 emails in my desk just on pitches.
01:08:18
Speaker
Now I don't have time to go through each of them in detail. So if you keep it very simple, 10 pages, what is the problem? One line. What is the solution? One line. Team. We don't need any jargon. We don't need any goddamn pictures.
01:08:29
Speaker
Maybe a little demo and little bit about why you're different. little bit early traction you have it with a clear graph. Just dumb it down. Keep it simple. You know, you go after one use case. People go after 10 different things.
01:08:42
Speaker
You will have a B2B angle, you will have a B2C angle and all this is in the first two months of the business existence. So we know that the founder, we look for founders who have clarity of mind. Clarity, they have clear clarity. You know exactly where they are going.
01:08:54
Speaker
and You can tell in a single meeting in the first 10 minutes and am fully cloned into that conversation. So that's what it is. Just relax. and Eventually when it is 100 million, 500 million, will have...
01:09:05
Speaker
have spreadsheets that are going up the wazoo, which is rightfully so the person going to ask for. They'll have data, slides, fancy people making it for you. But for the early days, dumb it down.
01:09:15
Speaker
I feel like maybe the problem framing... is something which a lot of founders struggle with. Like how to frame that… They are hard. They just can't frame it. Very hard. Because you have to… that's very important. It actually… it shows the power of the entrepreneur's clarity of mind.
01:09:29
Speaker
When the problem and solution is one line, when I try to get simple founders say, okay, make the problem one line, it's amazing how hard is it is for them, for many of them. It's just but really struggle. Can you give some advice or some examples on like good problem framing?
01:09:44
Speaker
There's millions. have to the internet and check here. That's why keep telling people. There's so many examples, right? Including from our own portfolio. They're so simple, right? when When Facebook's of the world raised capital, LinkedIn's of the world raised capital, then go through Indian examples also.
01:09:58
Speaker
It's very simple. What was Foxtail's problem? Were you personally involved in Foxtail? Like what was their problem statement or how did they frame the problem? No, my partners Gaurav and Shalitham involved. I was just notified that this deal is happening.
01:10:11
Speaker
Awesome. Thank you so much for your time, Sasha. It was a real pleasure. Most welcome and we'll be in touch, Akshay. Thank you.