Indian VCs and talking about Blume also, you have preferred founders who are magnanimous storytellers.
I wish it was true. In fact, I would argue that the guys who haven’t played the stories out to potential investors in my portfolio are the guys who don’t do a good job of it. So I agree with you. I agree with the thesis. I hope I only back that. I don’t think it’s absolutely necessary, especially because we have a good blend of B2B. But I think to say that you can actually build a very large business without a capacity for storytelling is fooling yourself. It has nothing to do with VCs. How do you sell? How do you sell to your customers? How do you sell to your employees? How do you get your 400th employee to be as motivated or kicked about what you’re building without being a great storyteller? And I feel that the essence of a great startup is the ability to transmit the story, because their mission, vision, purpose, has to resonate with, even the last person you hire as of this morning. And that happens only if you’re a great storyteller. I don’t think if you just do a blase, say, “Hey, here’s your job, go do it, you can build a great startup.” So I’m convinced that it’s the right skill to have, I don’t expect five people in the team to have it. One or two is good enough. But it doesn’t necessarily, by the way, people who sell a great story to a customer, are not necessarily the ones who do it as well to investors, for example, but you need to have the skill in one way or the other is my take. I think by bracketing it as storytelling to VC, you’re doing it too narrowly. It’s about how do I get, as I said, in my third year, as I’m struggling towards raising a Series B, how do I get like a great CTO to join me? It’s not easy. You got to sell them a story. It’s interesting because it’s an example from this afternoon, I have to interview a CTO candidate for pre-Series B company over the weekend.
I’m part of the storytelling, I’m selling that guy a story. For one of my companies, you have to make people believe in the cause of whatever that company is building towards, as much as you believe. It’s the only way to propagate a great organization and eventually, therefore get great outcomes.
How do you think companies like Google, Facebook, Instagram, Whatsapp can be built in India, where the founders are deeply technical and can visualize scale, but not so good at storytelling?
Very tough. I haven’t met some of these guys, like ShareChat, for example, he’s done a good job. The passion comes through….with more and more VCs….If you look at them….we call them outliers, mavericks. So I think we’re beginning to recognize that you got to be able to not straightjacket these into a formula that the founder has to be this way, but almost learn to spot the exceptions. If he was going by a rule book, then everybody can spot them. So it goes back to how you build a founder detection framework in some sense. And whether the founder…and for me, at least, the yardstick is, as an investor do I relate, and deal with the problem in my head as passionately as the founder? And it’s very true that VCs find the founders they like and the founders find the VCs they like. It’s true that seven out of 10 times, wherever there are misfits, it’s not a happy marriage. And so therefore, I feel your ability to somehow weed them out from 2000 people to how many cheques you’re doing in a year, is basically the skill and gut you have to develop, which is why it’s an art of the gut. I think these kind of stories where it feels like an absolute virgin market, where you have no idea whether this thing will work in India, but becomes the next billion dollar story, which is very unique to India is waiting to happen. Whether that’s Railyatri in our portfolio, or whether that’s something else. We’re doing some exotic stuff in agri right now. I don’t think they’ll be global. We’ve made the bet, obviously, that’s why we are happy that we picked something which we think is an edge case. Now we have to convince the next round person and the next round person. But I feel more and more confident than eight years ago. I feel more people in the ecosystem sense that India’s time is coming. And we should back this crazy visions of visionary founders. And some of them will play out. The risky bets are the ones which are going to make the most money; like my LPs tell me: historically, you were shying away from that. It was basically you didn’t know what’s going to work, what’s going to take off. So you’re hedging, making more bets. Now they are saying it’s time to take more risk. And if we are doing that, I’m sure every other VC firm’s thinking in the same way, there’s no point taking averaged out risk anymore of what exists in another market, or what’s a copycat…you got to pick up edge cases is my take.
Which markets in 2019-2020, if you find a great team, you will invest on the first meeting?
We have changed our stripes from that first-meeting investor…a lot. We have never been that. The impression might have been that because we cut a lot of cheques. You wouldn’t believe it even in the first fund where there were 70 plus cheques, I don’t think we cut a cheque in more than 10 in less than six months. We are slow, we’re just actually, painfully slow. Which explains why we did 70 because we always used to get in, in the end. Because either we didn’t have money, or we were taking too much time. And it’s become a well thought out DNA today. So just to correct that perception. I wish it was first, but I will change that slightly, I will nuance it. The first meeting is when the thesis founder, philosophy problem, instinctively hit you and the light bulb goes off. And then for three, four months, you’re testing whether that light bulb was a fake signal. You ask that did I get too seduced by the founder, what does the rest of his team look like? Did I get seduced by the space? Is it at all large? Is the customer actually going to pay for it? Is there a revenue model in this? These historically in Fund I would have been, “Hey, we’re taking a 100K punt. Let’s do it, right.” Now, I’m testing that out more than I ever did before or at least forcing the team to do it. That’s how we’re training ourselves.
Specific to spaces, we think anything that touches 100-500 million category of mobile user is very, very interesting. So anything that empowers that user is fascinating to us. So we do a whole bunch of stuff in our work in financial services and agri as of late, out of the first 10 investments in FundIII, three will be agri. Out of those three, one or two are FinTech oriented. So there’s a lot of that flavor. And, surprisingly, another three or four of the 10 will be really deep tech. And I don’t think we are done. I think we’ll probably do two, three more, because you asked about the next year, year and a half. And that’s been the flavor for Fund III. We are just saying go where the deepest conviction is, and just double down in that space. Don’t hedge, don’t do commerce, because it’s the flavor of the day and you don’t have a deep connect with what’s getting built out there. If it’s truly differentiated, great. That’s the perils of being a small fund; if it’s not truly differentiated, and if there is a not a great enough moat, what’s the purpose of your million dollars? It is too small in this day and age to make any real difference. So you got to be able to back founders who are building something towards the edge that becomes mainstream tomorrow, that’s our biggest challenge.