In my first year as a VC Associate in 2011, I started supporting a GP who was native to Chennai, already had some portfolio companies there and was informally leading coverage for the region. Naturally, I started visiting the city regularly and was perhaps one of the few VCs at the time who was spending significant bandwidth in the ecosystem there. And mind you, this is way before the city became the SaaS powerhouse it is today. I spent the most time in events around IIT Chennai, especially in the Rural Technology & Business Incubator (RTBI) there. This is the time when Zoho wasn’t a household name yet, and a few interesting startups like Stayzilla and Ticketnew had just started to emerge.
Candidly, I used to feel a little foolish every time I boarded the flight to Chennai. Was I just wasting my time by not covering Bangalore & Delhi? Which venture-backable company could I realistically hope to find in an IIT’s incubator, that too one which had the word “rural” in it? While my colleagues were neck deep in sourcing hot eCommerce deals from Tier 1 hubs, was I missing the boat by spending time with boring enterprise software & niche consumer Internet companies started by these humble, grinding-type founder personas?
What I didn’t know at the time was that meeting founders in an under-covered but growing hub like Chennai was actually a competitive advantage, a potential “edge” that was there to be leveraged. It led to me meeting two of the best enterprise software founders from the last decade, at a time when both companies were fledgling – Girish Mathrubootham of Freshworks and Umesh Sachdev of Uniphore. My guess is I was also one of the first VCs to ever meet them.
I met Girish during a really nondescript startup event in Chennai. He wasn’t even pitching there, and the organizer randomly introduced us after the event. I still remember Freshdesk had 25 beta customers at the time. I took the deal back to the senior team; we had one call with him but didn’t end up investing for a variety of reasons. Talk about missing the deal-of-the-century!
While meeting Girish was more serendipity, I give myself more credit for spotting Umesh. I was the only godforsaken VC who had built a deep relationship with the RTBI team at IIT Chennai. As part of one of my visits, the lead there introduced me to Umesh & Ravi. They were building Uniphore out of the lab there, with the active support & guidance of Prof. Ashok Jhunjhunwala. I don’t remember the exact traction they had at the time, but it was really early. They were building voice technology keeping rural/ vernacular use cases for India hinterland in mind, which was nicely aligned with RTBI’s mission.
While I didn’t get to interact much with Girish, Umesh and I spent a bunch of time together. I brought him in 2 times to meet the Fund’s senior team, once just before I was about to leave VC and move to the Bay Area. Fortunately, Uniphore didn’t become an anti-portfolio like Freshworks. One year after I had left the Fund in early 2014, it ended up investing in Uniphore. Cut to Feb’22, Uniphore raised a $400Mn growth round at a $2.5Bn valuation, becoming a trail-blazing Indian startup story of grit & perseverance.
As I write this, another similar story comes to mind. Again, in my first year of VC, I had a chance to meet Baskar Subramanian, co-founder of Amagi. This was the most non-intuitive play ever. At the time, Amagi’s flagship offering was a platform to insert regional, localized ads in popular TV programming. For example, say during a national TV soap telecast on Sun TV, viewers in Chennai & Coimbatore would see different vernacular ads of local brands from their specific locations.
If one went by the classic VC playbook of pattern matching, Amagi wouldn’t make it beyond the first meeting (perhaps why most funds passed on it at the time). The company’s existing market didn’t seem like it would support a venture outcome. On top of it, Baskar came across as the polar opposite of a typical VC-backed founder archetype. He was a bit nerdy, a bit fidgety, a bit unpolished around the edges but really smart & always with a big smile.
As expected, while the Fund passed on investing, two things stood out to me even then:
- Amagi had signs of early product-market-fit in the use case it was going after.
- Baskar and team were gritty, grounds-up entrepreneurs with a humble vibe, strong belief in their overall market thesis & the energy to play the long game.
Candidly though, I was still in my 1st year of learning the craft of venture investing & even though I caught these signals from 1st principles, I didn’t have the experience & chops to convert these signals into conviction & fight for the deal internally.
Cut to Nov’22, Amagi raised a $100Mn Series F from General Atlantic at a $1.4Bn valuation, with the company hitting $100Mn ARR! From its origins of inserting local TV ads in the Southern states of India, it has now become a global software platform for cloud broadcast & targeted advertising.
These and many other stories that I have experienced over a decade of early-stage investing, have taught me a valuable lesson – given the inherent randomness in outcomes, a terrible way to do venture investing is to be dogmatic. While frameworks, heuristics & pattern-matching do help evaluate deals more efficiently, you can’t become a slave to them.
Outlier venture outcomes typically come from unintuitive & unpredictable places. If one studies the history of the biggest wins in both public & private markets, they mostly emerge from “non-consensus-and-right” situations. Spotting these, by definition, requires an independent & radically open mind.
When Tim Ferris asked legendary VC Bill Gurley of Benchmark about why he thinks he missed investing in Google, Bill had a tremendously self-reflective response:
Essentially, Bill is saying that at the time, Google was the exact opposite of a classic VC template deal. And that’s exactly what should have pushed him to evaluate it more deeply as a non-consensus bet. In the words of my friend Nakul Mandan of Audacious Ventures – “the pedigreed, buttoned-down, big logo’d, all-bases-covered teams often end up generating a 1.5-2x return while the maverick, underdog, underestimated, headstrong, quirky founder ends up creating the 100x bagger”.
Marc Andreessen has a great expression around the optimal mindset for venture investing (also applies to starting a company) – “Strong opinions, loosely held“. I like to call it having a radically open mind while evaluating any opportunity. In my head, this approach includes:
1/ Turning over every rock to find deals.
2/ Not discounting any vertical/ space upfront, irrespective of general ecosystem biases.
3/ Not underestimating any founder, irrespective of age, pedigree, or track record.
4/ Trying to probe further when the gut feeling is positive but misaligned with VC thumb rules.
5/ Listening to co-investor feedback but making up your mind independently.
6/ Trying to imagine “What if everything goes right?”.
7/ Finally, getting super-excited when a company seems non-consensus.
This is the behavioral North Star I am chasing & where, I believe, the real Alpha in venture investing lies.
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