In the 100xentrepreneur Podcast Series, hosted by Siddharth Ahluwalia, the most successful venture capitalists, entrepreneurs and professionals share their habit and mindset that can help you become 100x of yourself. In the first of a five-part series, Karthik Reddy, co-founder and managing partner at Blume Ventures talks about Blume’s purpose and vision. Edited transcript below:
Siddharth Ahluwalia: What’s your purpose in life? And what’s your purpose in Blume?
Karthik Reddy: When we started, I felt it was more because we love the idea that we can work with founders on the ideation stage of a business. And we were naive enough to think that that excitement will carry us through, to be very honest. It has limitations – you can’t build a team, can’t build an institution with $20 million funds, $30 million funds. It’s tough. It’s a lifestyle business, as we tell other people who come and pitch to us, you can make it a lifestyle business, but you can’t institutionalize that behavior. And so we, we’ve been constantly asking ourselves that, and I know it will sound like any other VCs pitch. I think we’ve come to realize that, you know, it’s not very different from any other world-class VC, right? I’m not going to be unique on that front. Because I have to be motivated enough to come to work every day and drive myself and drive my team to go out of their way to help these young founders. So clearly, it’s around young, early businesses. So we want to sort of partner and nurture, you know, really passionate entrepreneurs, who are trying to solve really hard problems. I think that’s been the shift. We don’t want simple, you know, gimmicky tweaky problems, right? We want people who really want to solve some really hard problems, really transformative in nature. Who want to fundamentally change how local transportation works, or how financial services shifted for someone, or how you build a new asset class, like a smallcase. So thinking very, very, you know, blue sky and want to make whatever they do, even if you are building a b2b business, which relies heavily on technology, but it’s serving the globe, basically, putting India on the map. We are somehow uplifting India because we keep asking ourselves, why aren’t we doing the hot deal, which comes across the ocean from Singapore? Or Israel? We get referrals all the time. We keep saying, well, that is not us, we’re not here to do fundamentally just deploy capital for the sake of. We have very limited dollars and we want every dollar to be very impactful in the way India reaches its potential over the next decade or two, because that’s your peak primetime that you have as a team and as a firm. And so I think that’s our sense of purpose. Fundamentally work alongside these entrepreneurs at very early stages, so that you feel like you’re a part of something transformative.
SA: And how you see the vision for Blume evolve in the next five to 10 years?
KR: I think we see that we’ve had to grow to what the customer wants you to become, like any good business. You can’t say, “No, I will just be this cute guy cutting 1 crore cheques.” (that’s what we used to do) and not move to where your customer wants you to. So I think we’ve been listening to our entrepreneurs, I don’t think we’re driven by the fact, of course, it’s driven by the fact that we want to build a bigger team we want finally a nicer office, we want to be able to, you know, get , institutional investors. That doesn’t happen if you’re $20-30 or $40-50 million. So in a nutshell, we’ve been telling ourselves – a) what drives our partner vision and how do we translate that to our next level of leadership and get life time team members who will hopefully someday become partners? And then b) what kind of culture do we build to bring in more such people? So I want to be able to attract that passion and that talent as a team because that’s the fun of working together. Of course, you can check out and do that with the founders, but then you could have done that, as an angel investor, why bother doing it as an institution, so the passion is to build a world class, or rather best in class institutional investor in this at this scale. I am not making tall claims that we want to be the best in every asset class and size, we just want to be best in our class. I think the ambition is very simply to, you know, to dumb it down, we don’t want to be shooting for less than 5x funds. In India, things take time. So I have to adjust for a time factor that things will take two years now. So that hits the IRR. We are measured by IRR and so don’t want to take the easy way out and say 3X chalega. It won’t work. I think we have to shoot for 5X. We are raising a third fund of $100 million. $80m was the target, we might hopefully shoot over that and get to close with $100 million. The fifth fund, which is maybe five years away, by then, I want to be able to have $500m under management. That’s 2024. And so think about 2025 and in 2010, we were zero and we started with hundred crore rupees. And so that I think is a big enough leap for me as an entrepreneur, as with my partners to see that rise in Blume. We have never stated that figure outside. You are the first to hear it. But that’s the internal ambition and vision.
SA: And what have been the challenges from raising the first fund, deploying it, getting the money back to the LPs from the first and second fund.
KR: I think one realization is that cycles are very long in this business. And that’s not a Blume-specific problem but an India-specific problem. And it’s anyway a venture capital problem. So, it’s not like we are way off targets, because we have to benchmark ourselves. When we go overseas, we often hear, “Why the hell should I invest in India, leave alone you, when I can invest in China or I can invest in the US?” So you are benchmarked overnight with global investors, right? So it’s not even your peers in India. You suddenly have somebody saying I’d rather just not play a fund like you when I can invest in some Chinese fund. We are not way off benchmarks, by the way. We are eight years into our first fund, only three and a half years into our second fund. And our first fund is marked up above 3x. We have returned half the fund. And that’s not totally off track. When investors benchmark us to global funds they want to know if we can hit a 5X. That’s all they are asking. They’re not expecting more given that India was a tough market, right, it’s not been easy to see exits, per se. My disappointment would be that we didn’t build fast enough. So our Fund I companies are still predominantly subscale. I don’t have a single company other than Taxi For Sure and now GreyOrange which have crossed $100m in valuation. We still think three or four can from the first fund, if not five, six. The first few years from 2011 to 2014 were very slow. From 2014-15 we have a bunch of them, like Cashify, Belong and more. Things have started picking up, the entire market shape shifted with Series B money, more cross border money, more Chinese money, more co-investors, more peer investors. So when you take all of that cumulative effect, into play, you suddenly see that, you know, the market is moved, finally, in the direction you expected to move. So I think if we can accelerate what we did in Fund I by even two years and achieve the same milestones, we will be in good shape. Eventually, when you say 4x-5x and better be in cash, who cares about what it is on paper? So that’s the ambition can we shoot for that? In the first fund, it might take 12 years, hopefully in the second fund, it takes 10 years and we deliver that. So that’s the internal goal set.