As part of the Play to Potential podcast series hosted by Deepak Jayaraman, Blume co-founder Karthik Reddy shares some key pointers on Blume’s distinctive culture and what Blume looks for in a potential hire. This is part 1 of a 5-series blogpost on the podcast. The full version is here.
What are the two-three elements of your culture which make Blume distinctive?
So I think clearly it is to respect what an entrepreneur is trying to do. A lot of the times I think people who have capital, people who have made it, are sort of dismissive of a point of view which is not theirs, and you can be dismissive by saying a polite no but you don’t have to be dismissive of their effort to be an entrepreneur. It feels very basic when I am saying this but it is so difficult to actually not lose sight of the fact that it is some kids or it is some middle-aged guy who’s taking his life trying to make something out of themselves and you are just being dismissive of the effort because for some reason you think you are a cool VC and it is not a fundable idea and you are smarter than that other person and those are big big red flags. I have actually rapped colleagues on the knuckles if I even sense it in an email. It just feels like an anathema of why we exist. So that’s one.
Second is your own point of view and your ability to defend it. As an early stage investor if you are copying somebody’s point of view you might as well leave the job. It might be wrong and I am willing to pay for that learning which is why we are so picky on managing risk. Don’t ever lose too much money because it is all learning. Don’t ever say you knew this for sure, because you don’t. You are going to lose money so make sure you lose as little as possible; correct it, iterate and make it bigger. When things start working then you then you double down triple down, so driving those philosophies around risk management, I think are very important. Not everybody comes up with it in their head, but for me it’s a guiding force especially in venture because nothing is set, nothing is established; even 10-15 things can go wrong. We have just seen when we do 100+ companies there are patterns, but you can’t predict them in advance. It is like walking to a party and saying I know these three couples who will get divorced, how the hell do you know? You have social banter with them, but don’t they? In ten years three out of twenty-five get divorced, they do, why is it any different in a startup environment? So, there are so many things that can go wrong and you should not lose sight of the fact that you know what’s going to work for sure so you keep hedging against that so I think that philosophy of understanding what founder’s problems are and trying to solve for them is very very critical to us. It is not like board meeting to board meeting and for that you will have to gain an immense amount of trust from the entrepreneur. I will be honest, the disclosures that an entrepreneur on an average makes to Blume today in 2017 versus when we started in 2011 is been scale of 3:1, 4:1 and that’s just because, one is that brand building helps, but even then this is cynical; you walk in to a room, you are an investor at the end of the day, first instinct of the human being is to hide all the flaws and you actually have to have that kind of a relationship with the founders that they are exposing all the flaws, only then can you solve for them. We have had like co-founder splits announced after virtually one side has served the papers to the other. That is ridiculous when you put it in context, but yes because you are an investor you have been kept out of the conversation.
I don’t want to touch upon a lot of points but that’s the DNA of our investors, you should be able to incent that kind of behavior from a founder so it’s a long cycle. How much ever we blog about this or we talk about this, it takes six months, a year, two years, for them to eventually say I will come to you with everything as long as you have time and then you say no no I don’t have time. It is a tightrope. It is like you want to be a partner but like you have to draw lines.
Picking up on a couple of things; very nuanced points about having a point of view and having a humility if I may, I think it’s a gross simplification of the first point you have made but how does that translate into how you hire? How do you look for these traits which are quite hard and nuanced?
Very very challenging, so hiring is been like a little serendipitous in that sense, it is been self-selected … so if it is someone who is actually coming and literally putting a resume and saying, I think you an interesting firm, I want to work with you. That might be a good starting point, there is no harm, that’s the right way to write a mail but it is never going to be how or the reason why it eventually materialized into a potential hire. So all our hiring is actually been through networks, relationships built over anywhere between six months and eighteen months and the first if I have a second conversation with someone and I think they need to want it more than I want them to be honest, so they need to want to come and learn about what our motivations are? It is almost like a conversation that you are having with me right now. So if they haven’t had the curiosity to come and actually ask me why I do what I do, what’s the philosophy of this firm, what are we building towards? Then the thinking is it is another job, and these things hit me like a bag of bricks about a year and a half ago. We were trying to draw out a… in the first fund all our team members, employees whatever we want to call them; colleagues as I would call them that’s how we introduce each other in every mail, there were no designations per se, it is just a name card; they were underpaid like crazy, we just had a tiny fund, very little fees. So their motivations had to be that they were coming up for the learning literally and I was ok with that, I couldn’t afford the pay so I said, anyone who wants to learn, I will get a decent amount of work out of you and I am paying you a pittance anyway (with some carry and all of that) so there is no debate about that. But the equations were changing dramatically in Fund Two. So people were like we are tired of being underpaid we have done the learning, now you need to make a judgment call on whether we are the right people for the future and these are my demands: I want to be close to market comp, I want this kind of a carry. To me intuitively they felt like outrageous, and then I went back to the drawing board and for the first time assessed what am I building, who are these guys, are they aligned with me, how do you align incentives for a VC firm? I realized that you can’t fake it. It’s the same journey that I am on, is what they need to be on for them to be able to make a lot of money; otherwise they can take the learning and go, you can start a firm, I don’t know if you have noticed this – there is been a bit of a little trend in VC firms where a lot of analysts and associates have actually joined startups or are doing startups themselves.
So I actually advocate the other way around for joining the firm and I almost mandate that you must have done something entrepreneurial and if you haven’t, then go and join a firm which is doing something, sit there for a couple of years and then…you have placed a bet; I am not guaranteeing you a job. We did that with one of our guys, Rohan (who joined us after we poached him back from our portfolio company); so we told him no we don’t have (a role), and at that point it was truly not having the ability to hire one more person but he took on the challenge and it paid off for him, he went there and played the most generic role, biz dev/corp dev etc., and those were the kind of skills we wanted back in the firm so I think it is not a boilerplate set of skills and that’s the biggest challenge, so you are testing more for this soft/intrinsic skills. I think the other part can be trained and I think it is not about complex DCF analysis… even if it (complex DCF skills) (did matter), it is not that relevant for us and as we are growing we are learning so we can teach them as well. What makes a great IPO company? Learning it too. Because I have checked in it like at 10 crore valuation, so I am shooting something which has grown 100x in value so in that journey we are trying to chronicle our stories and teach them. So I think we are only looking for the basic ingredient.