Driven by an ambitious talent pool, geopolitical tailwinds, operating model innovation & domestic risk capital, Indian vertical AI startups could be the breakout tech story of the decade.
A potential scenario running in my head on how 🇮🇳 startups get a significant share in global AI over the next decade:
AI “infra” winners get built in 🇺🇸 (OpenAI, Alphabet etc.) ➡️
AI “platform” winners too, emerge in 🇺🇸 (Salesforce & HubSpot equivalents; a bunch get built/ led by the Indian diaspora) ➡️
As 1st-gen “Application” winners emerge in 🇺🇸, 🇮🇳 startups fast-follow in specific enterprise verticals & grab market share.
The time lag to fast-follow is significantly lower than, say, what Zoho did to Salesforce, or Freshdesk did to Zendesk.
This time, they play an asymmetric game. Instead of only competing with US startups on their home turf, Indian enterprise AI startups also look to dominate the Global South (SEA, MENA, LatAm, etc.).
Moving beyond binary operating models of India or US-based, Indian enterprise AI startups innovate & develop new, globally fungible, cross-geo operating models, similar to Infosys in the 90s, BPOs/ KPOs in the 2000s, and Chennai SaaS in the 2010s.
Compared to the SaaS wave, Indian enterprise AI startups get 10-100x more market share in each vertical, driven by a more ambitious & courageous founder pool, a talent base with skillsets & knowledge from previous tech waves, democratized knowledge & tools access courtesy of AI, as well as more availability of domestic risk capital at each stage.
Rather than IPO or M&A in the US, verticalized Indian enterprise AI startups either go public domestically, or get domestic Private Equity & conglomerates on the cap table who help them scale way beyond the last gen of software companies.
All these games play out on top of a favorable geo-political alignment between India & rest of the democratic world, driven by a China counter-balance narrative.
Verticalized Indian enterprise AI startups could be the contrarian venture bet of this decade!
During my recent India trip, a question I got asked repeatedly by both founders & investors was, “What are you seeing as the main differences between the AI ecosystem in the Valley vs India?”.
I currently see 2 main differences:
1/ Exposure (& therefore, Ambition)
AI founders in the Valley seem to have significantly more direct exposure to the work happening at the frontier. And not just in terms of the foundational technology, but also what battles the incumbents are taking on, how workflows are being iterated on, what lean, full-stack startup teams are doing to be able to generate significant product velocity & revenue, and how customers are thinking & allocating resources.
Essentially, they have the advantage of directly drinking from the Bay Area fountain of knowledge & information, spread primarily via networks.
A direct consequence of more exposure is that it uplevels the ambition of Valley AI founders and organically pushes them to raise the bar for execution within the company. Thus leading to sharper thinking, more courageous bets, and faster execution that all put together, improves the odds of a large outcome.
2/ Story-telling
I see that while AI founders in both the Valley and India are picking very similar problem statements to work on, the storytelling around the same use cases in the Valley is significantly superior.
I guess one reason is that operating directly in the target market (vs being a few degrees of freedom away from it) makes it much easier to get higher-quality early validation signals, making the story much more believable.
Also, AI founders in the Valley tend to emerge from the leading-edge companies of the last mobile/ cloud/ SaaS cycles. So they have a much better intuitive understanding of how to position & message the company in the early days to customers, investors & key hires.
Story-telling becomes even more important as how the AI landscape will evolve in specific market segments & verticals remains highly fuzzy.
So, what can India-based AI founders do to bridge these 2 gaps? Here are a few actionable things:
1/ Do extended sprints in the Bay Area regularly to drink from the same fountain.
2/ Surround yourself with Bay Area-based operators, angels & advisors (even remote is ok to begin with) who can regularly feed this knowledge & intel and, more importantly, help uplevel your thinking & ambition.
3/ Follow a conscious 0-to-1 strategy of only building for US design partners, so your product is held to the same bar as those from Valley startups.
4/ Specific suggestion for VCs – mine your network of LPs, Advisors & Portcos to hold regular AI knowledge sharing sessions with leaders of marquee AI-native companies that are building on the frontier in the Bay Area.
Presenting a compilation of my best ideas & observations from 2024, sorted across 7 Chapters.
Happy Holidays to all my readers out there. I have a habit of routinely posting pithy and concise ideas and observations on LinkedIn and X. Topics range from Startups, Venture Capital, and the Economy to Careers and Life.
I feel that many of these get lost over time amidst all the noise on social media. Hence, have put together this compilation of my best ideas from 2024, sorted across 7 Chapters.
Note: this is a compilation of my short-form social posts. My long-form posts for 2024 are available on An Operator’s Blog, accessible via homepage shortcuts by year/ category/ tags.
CONTENTS:
Chapter 1: Startups
Chapter 2: Venture Capital
Chapter 3: Economy
Chapter 4: Careers
Chapter 5: Life
Chapter 6: India
Chapter 7: Other People’s Ideas
Hope you enjoy reading it!
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Chapter 1: Startups
1/ “Closing” People
A simple tip to convert customers/ investors/ potential hires who are sitting on the fence:
Keep coming back to them with monthly/ quarterly updates, showing tangible progress and momentum.
Even the most hardened professionals can’t resist a curve that is trending up and to the right.
If you bug them long enough (ranging from a few quarters, to up to a few years) with positive momentum, you are almost guaranteed to “close” them eventually.
A very powerful technique with a high hit rate.
2/ Thinking Big
I would like to encourage Indian founders building software companies for the world to think significantly bigger and more aggressively both in terms of how large their business can become and how fast can they get there (y-o-y growth targets).
Why? Because software TAMs and market growth rates are much larger than what our brains can imagine. Look at the growth rates of these public companies:
(1) Shopify (Founded in Canada) is growing 21% at $8.2 Billion ARR.
(2) Canva (Founded in Australia) is growing 40%+ at $2.4 Billion ARR.
(3) Toast is growing 29% at $1.5 Billion ARR.
(4) Monday (Founded in Israel) is growing 34% at $940Mn ARR.
I am now encouraging my portfolio founders to think beyond the proverbial “Path to $100Mn ARR” slide and start strategizing a path to hit $1Bn ARR.
It’s time we reset our internal narratives and think bigger and more aggressively as an ecosystem.
3/ Time To Real PMF
In recent conversations with growth investors, a bunch of them asked about my experience on how much time a pre-seed company typically takes to achieve real PMF.
Based on my venture experience since 2011, here’s what I have observed on average for pre-seed companies:
(1) Typical enterprise software/ SaaS in existing markets:
without a major pivot: 3-5 years
with a major pivot: up to 7 years
(2) Category creation plays in software: as long as 5-7 years
(3) Deeptech/ hardware: minimum 4-5 years
I am, of course, generalizing a bit here and outliers could get there sooner. But I feel these numbers are directionally correct.
Moral of the story: it’s a marathon for founders and seed investors. So, buckle up to play the long game!
4/ Investor Updates
Both as a founder in my past life, as well as a venture investor now, I have discovered that writing updates (to investors or LPs, as the case may be) on a consistent cadence over the years is an easily accessible superpower.
What it needs is basic discipline and intellectual honesty, which in turn, come from self-awareness, keeping imposter syndrome at bay, being comfortable in one’s own skin, and equanimity about monthly/quarterly wins and losses.
5/ Speed
If you think about it, the only real advantage a new entrant has against incumbents in any field (be it a startup or even an emerging VC manager) is speed. Speed of decision-making, speed of shipping, speed of learning & iterating, speed of taking risks.
As an upstart, if you aren’t fast, the odds are against you.
6/ Boring Zoom Pitches
The majority of first-pitch meetings tend to happen on Zoom these days. I find remote pitching especially challenging for founders. A big part of venture investing is catching the vibes and personal energy of the founders. That’s super hard to communicate on Zoom.
Leaving the detailed nuances of Zoom pitching for another post, I want to leave founders with this one thought – at the minimum, avoid being “boring”! I have been through too many Zoom pitches where it seems like founders are just going through the motions, pitching in a monotone with an almost deadpan expression, and spending little time or care on breaking the ice and vibing with the other person.
Especially on days packed with back-to-back Zooms, you should assume that the investor is coming in with Zoom fatigue. If you don’t grab their attention and get them to lean in during the first five minutes of the meeting, even though they might appear to be listening and nodding through your monologue, they have mentally zoned out.
So, be interesting, and don’t be afraid of bringing your personality to Zoom. It will at least get the other side to actually hear you out and engage with you, without which, an eventual investment is not possible anyway.
7/ Cold-pitching Your Startup To VCs In 30 SecsAt An Event
For the first 30-sec pitch, I recommend having 3 parts to it:
[The Grandmother’s Explanation]
followed by…
[Social Proof of Team]
followed by…
[Proof of Business]
a) The Grandmother’s Explanation means explaining what your startup does in the way you would explain it to your grandmother. Yes, most investors aren’t domain experts in your field. They are likely investing across sectors and aren’t living and breathing your specific area/ problem statement. Assume they are as ignorant about your business as your grandmother.
I am literally shocked by how most founders can’t explain their startup in simple tech-layman’s terms. Barring a few, true deep-tech startups coming out of research labs and universities, most enterprise software, SaaS, and consumer Internet startups should be able to explain their business in simple words. This is the bare minimum signal of clarity in thinking.
b) Social Proof of Team means talking about your credentials in a straight-up manner, without beating around the bush. These could be:
Education-related – undergrad and grad schools, unique course work etc.
Work-related – past employers, roles, needle-moving projects, accelerators like YC or Techstars etc.
Execution-related – products shipped, content created, social following, word-of-mouth etc.
c) Proof of Business means talking about the business progress of your startup in tangible terms. Things like user base, retention, engagement, number of customers, revenue, customer acquisition etc.
It’s important to remember that while providing Proof of Business, both absolute numbers and growth rates are important. So, frame statements like “we have $Xk ARR, growing y% m-o-m”.
Most startups attending these events don’t have enough Proof of Business yet. For the ones who do, make sure you talk about it as traction trumps everything, and especially at the seed stage, any traction will help you stand out.
For startups who don’t have much Proof of Business, you can still talk about proxies of business progress like the velocity of shipping new features, people on the waitlist, early design partners, and how they are deeply engaging with your product etc.
PS: An important recommendation for the 30 sec pitch format:
If you have compelling traction, pitch [Proof of Business] first and then [Social Proof of Team].
If you are very early and don’t have compelling traction, pitch [Social Proof of Team] first and then [Proof of Business].
The idea is simple – always lead with your strongest suit.
8/ Pitch Decks
I see an overemphasis on creating sophisticated-looking pitch decks at the seed stage.
While an eye-catching deck is always nice to have, have seen terribly basic & verbose decks getting funded simply because the underlying business was super differentiated & therefore, interesting.
PS: this changes at the Series A & beyond stages, where the pitch materials areheld to a much higher bar by larger institutional investors.
9/ Over-capitalization
These lines from a post by Christina Farr on X resonated with me:
“One of the top reasons companies die in health tech is overcapitalization. I can’t tell you how many growth-stage founders I’ve talked to lately who told me they wished they’d raised less and at a lower valuation. Huge problem, rarely discussed.”
This is a smart observation. The underlying reason seems to be that most health tech companies either tap out at a certain revenue scale or tend to grow slower than what enterprise s/w VCs expect. Overcapitalization then artificially distorts execution velocity and/or makes it harder to exit.
This point actually applies to more verticals of enterprise software than folks realize. Many of them can’t support very large outcomes and yet, if they can be capital efficient, can still lead to meaningful outcomes both for founders and early investors.
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Chapter 2: Venture Capital
1/ Liquidity
As a GP, it helps to have gone through some personal experiences that teach you the value of liquidity, why cash is king, and how it’s not around when you need it the most.
This helps develop empathy for your LPs and how unrealized paper gains can’t be used to pay medical bills, take care of kids’ tuition, build homes, and support pension liabilities.
As much as sourcing & picking the best investments, another core job of a GP is to proactively create liquidity for LPs so the cash can be used towards human needs.
2/ Psychology
One of the biggest changes I have seen in myself as an investor over the last decade – I now spend significantly more time studying the psychology of both the markets I am playing in as well as specific individuals I am working with.
3/ 1st-Time vs Repeat Founders
While second-time founders are great risk-adjusted bets, I keep reminding myself that a majority of generational tech companies were started by 1st-time founders both in the US and India.
4/ Non-Consensus-And-Right
2024-25
“Hot” theme of the year: Gen AI
What I have been investing in:
(1) AR/VR
(2) Edutech
(3) Robotics
(4) Drones
Periodic reminder: outlier venture returns are non-consensus-and-right.
5/ Alpha
Given AI is leading to massive competition in every obvious software opportunity, perhaps a good way to improve the odds of true venture returns in the portfolio is to index on “potential for category creation” much more than ever before.
This will require being open-minded to narrative violations, leaning in on products that look implausible/ hard to understand at this point, believing that future winners are unlikely to be simple extrapolations of the past, and having the courage to act on this belief.
However, one thing remains the same. The fundamental traits & qualities of a top-notch founder don’t change across cycles.
So, rather than thematic or market-driven, perhaps a truly “founder-first” venture investing style (backed by a humble admission that it’s hard to predict how markets will evolve over the next decade and which products are likely to eventually win) is better poised to do well.
Founder-first style + looking for category-creation plays = Alpha?
6/ Value-Add
What founders need help with the most is customer intros…
BUT…few investors can repeatably & scalably help with this.
ALTHOUGH…investors can introduce you to connected cliques who in turn, can potentially connect you to customers through a chain of intros.
THEREFORE…a major value add investors can bring to the table is connections to cliques that founders can then mine.
7/ Top 5 Learnings From A Decade Of Angel Investing
(1) Choose a “strategy” ➡️ many can work, focus where you have an edge.
(2) Take enough “shots-on-goal” ➡️ adequate diversification/ portfolio size but watch out for “di-worsification”.
(3) Respect “power law” (few winners will account for the majority of the returns) ➡️ hence, Point (2) is important.
(4) “Access” is everything ➡️ watch out for adverse selection.
(5) Brace for long periods (10+ yrs) of illiquidity to let compounding kick in ➡️ Knowing “when to sell” is going to be super-important, and unfortunately, it is an art rather than a science.
PS: for your own good, see this chart once daily 👇🏽(Source: David Clark of VenCap).
One nuance though is that smaller pre-seed/seed firms can start returning DPI in phases through secondaries in growth rounds, while still holding on to a chunk for harvesting during the eventual main exit (IPO or M&A event).
“Your Fund size is your strategy” holds truer than ever before.
9/ “Access” vs “Picking”
In a venture upcycle, “access” becomes more important.
In a venture downcycle, “picking” becomes more important.
Currently, we are in the latter.
10/ Power Law
Venture Capital is all about “finding the best companies”, not just “doing deals”. The power law is so extreme that the latter almost guarantees failure.
11/ TAM Fallacy
Having very rigid views on TAM at seed stage is a classic VC fallacy. The best founders either create new markets or expand to adjacent markets over time. So the TAM keeps growing.
If a startup remains sub-scale, in most cases it tends to be due to founder motivation, quality of execution and team/culture issues, rather than available market.
At the seed stage, better aspects to evaluate include 1) founder-market fit and 2) competitive differentiation/ right to win (I call it “non-incrementality”).
12/ LP Updates
In an undistorted venture market, valuation markups should always follow operating progress toward PMF. This order got reversed during ZIRP, where markups happened in anticipation of progress.
The right logical structure should ideally, also be reflected in LP update emails from VCs.
The primary section upfront should cover operating updates from the portfolio [revenue, ACVs, product releases, key logos, churn, patents, team additions, etc.].
This should be followed by a “financial” section, positioned as an enabler of the operating progress. This can cover follow-on rounds, mark-ups, runways, etc.
The last 2 years have shown that private valuation mark-ups are transitory anyway. Core operations are the real building blocks that stay and continue to compound across cycles.
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Chapter 3: Economy
1/ Top vs Bottom
With the S&P500 hitting ATHs post the election results, many are wondering if we are at the top.
Sharing my post from last year wherein I covered John Templeton’s framework of thinking about market cycles. As we stand today, it seems to be playing out perfectly. Stage 2 (“grow on skepticism”) seems to have ended and we seem to be at the beginning of Stage 3 (“mature on optimism”). This stage can last a few years, till we reach the “point of euphoria” (the last one being Nov 2021).
I follow the mental models of Charlie Munger and therefore, know that the future is unknowable and predictions have little value. However, I also follow Howard Marks and believe that it’s still useful to estimate where we are in the market cycle.
Enjoy Stage 3 of the cycle!
2/ Liquidity Cycles
The way the world works…
When you really need the capital, no one is ready to give it to you. And when you really don’t need it, they trip over each other to hand you the cheques.
This is the way liquidity cycles work.
Source: hard knocks from multiple cycles.
3/ Mean Reversion
Mean reversion is one of those laws that’s so powerful and yet, is actively utilized as a mental model by only a few. One can see it in everything from stock multiples and startup valuations to BigTech headcount.
If understood and used well, it’s a really powerful tool for scenario analysis and being prepared for various eventualities.
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Chapter 4: Careers
1/ PMF Approach To Careers
My career arc started changing the moment I started trying to figure out:
1) What I am uniquely good at, relative to competition
2) What’s the best way to bring that unique value to the world
3) Who will pay me for it and how much
The key is to approach it like a PMF-finding process for a product, indexing more on “discovery” and “inputs”, as opposed to “outputs” like compensation, title, and career trajectory.
The key is to get the input strategy right, align your mindset, lifestyle, and family goals to it, and be patient enough to execute it for decades, taking feedback and iterating along the way.
As simple as that.
2/ Networking
Whether one likes it or not, networking (I prefer the words “relationship-building”) is a key skill to succeed at anything in the real world, particularly as a founder.
During Web 1.0 and 2.0, the Internet rewarded “volume” of content. But now with AI, anyone can churn volume.
So, what matters now? Hypothesis:
(1) Targeting sharply-defined niches
(2) Going deep into concepts
(3) Keeping a high bar on quality
(4) Sustaining adequate volume while doing #1-3
4/ Clarity
Speed is an outcome of Focus.
Focus is an outcome of Clarity.
Seek Clarity of Thinking.
5/ Make It Interesting
Even if you are writing what you believe is the most helpful (or technical) content on a topic, you still got to make it interesting for readers.
Helpful but boring content won’t work at scale.
6/ Getting On A Plane
Getting on a plane to meet people you are doing business with is an execution superpower that is accessible to everyone.
7/ Urgency
A sense of urgency is a superpower not just for founders but also investors. Unfortunately, while it’s a standard expectation from the former, I don’t see much of it in the latter.
8/ Superpowers
The best career advice can essentially be distilled down into one sentence:
“Find your superpower and double down on it.”
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Chapter 5: Life
1/ Personal Burn
The person/business with the lowest burn usually ends up winning.
2/ Life Is A Marathon
Quick note to all youngsters out there:
Based on what I have seen across the world in my life so far, you should assume that achieving reasonable success at any endeavor in life will most likely require a decade of focused work on that craft.
Account for these timelines as you plan your career (& life).
3/ Immigrant Mindset
As immigrants, we have no choice but to be brutally driven and almost emotionless while making important life decisions.
The reason is that we and those around us have sacrificed way too much. We literally can’t afford this not working out.
4/ Courage
The real arbitrage in the world is “courage”.
Those with courage become owners.
Those without courage serve the owners and make them rich.
5/ Name Dropping
Life has taught me to instantly get my guard up when someone starts name-dropping in the first few mins of a conversation.
6/ Winning
Winning in the short term vs winning in the long term – two totally different things!
7/ Opportunities
As a founder/ employee/ investor, you will likely stumble upon only 2-3 truly asymmetric-upside opportunities in your lifetime. So when you know you have one, try your best to make it count.
Rest of the time is spent grinding towards creating a funnel that hopefully, someday, will get you to these 2-3 opportunities.
8/ Upper Middle Class
The upper-middle-class are the true suckers in an economy:
(1) High enough income to get royally taxed. Yet low enough to keep them on the treadmill.
(2) Not large enough economic outcomes so need to keep aspiring for downside protection for kids (eg Ivy League education). But just enough assets to be able to afford this protection (keep saving in 529 plans for 18 years).
(3) Just enough W2 to put a downpayment and get a mortgage on a “stretch” house. Yet, slow income growth so keep paying the mortgage for 30 years.
A decade back, all Indian VCs were flipping their portfolio companies, especially those in the SaaS/ enterprise space, to the US (Inventus Law was a big beneficiary of this move).
Then, as YC doubled down on India, everyone stopped discussing this issue. Whether consumer or enterprise, if you went to YC, you did a Delaware C-Corp.
Now in the last few years, with Indian public markets ripping and showing a major appetite for IPOs (including SME/mid-sized ones), founders are getting blanket advice to domicile in India to take advantage of this market.
A few things to consider on this topic:
Even in the Valley, IPO outcomes are rare and outliers. Most exits happen via M&A. If you are playing the odds, this is an important idea to keep in mind as global acquirers are generally reticent to acquire Indian-domiciled companies, especially in software. This could change, and I hope this changes going forward, but this is the present state of things.
Indian public markets being gung-ho right now doesn’t guarantee how they will behave after 5-10 years or when you are ready to go public. Though, it’s reasonable to expect that macro secular tailwinds will continue over the next decade.
It makes sense for domestic consumer companies like Razorpay and Groww to re-domicile to India, given their business is domestic consumption-based and they are already late stage/ IPO ready.
Indian public market demand for domestic consumption themes might not necessarily translate to other areas/ sectors in the future. Would Indian markets have an appetite for your specific deep tech or enterprise business N years down the road? Something to think about…
Right now, there seems to be more than enough INR/domestic capital demand for consumption-themed companies across the early->growth->late stage/pre-IPO spectrum of VC/PE. But is that the same case for enterprise and deep tech? Would these companies have a higher reliance on global growth capital in Series C and beyond rounds?
This is a highly nuanced topic and I am not a legal or tax expert. But what I will say is that like most things in business, your specific context as a startup is very important. And many of these calls are extremely hard and expensive to reverse later on.
So, while I can’t offer broad-based/ cookie-cutter answers on this topic, I would definitely encourage both Indian founders and VCs to avoid thinking in broad strokes on this matter, and partner with cross-functional experts to together explore the nuances of each case.
2/ India’s Seed VC Landscape in 2024
From what I am seeing in my deal flow over the last few months (and my focus is (1) enterprise software and (2) deep tech), I feel there is almost a dearth of quality, structured & consistent angel/pre-seed/seed capital in India right now.
From what Founders are telling me, almost all major Indian VC firms seem to be holding out & looking for late-seed/pre-Series A levels of traction even to start a real conversation. The proverbial $1Mn+ ARR, 2-3x y-o-y growth…
Anecdotally, it looks like only previously successful repeat founders are mopping up large seed rounds from these firms at the idea/pre-product stage. Pre-seed/seed seems to be significantly tighter for first-time founders.
Genuine question for myself and many India-based enterprise & deep tech founders out there who are fundraising – who are the angels/ seed firms in India that are comfortable in CONSISTENTLY writing checks at the true early stages in enterprise software and deep tech (idea/pre-product/MVP/design partner/some usage stage)? And by consistent, I mean doing 10-12 deals per year.
3/ Indian Elections 2024
The 2024 Indian elections almost turned out to be another 2004 “India Shining”. Probably the delta this time was the personal charisma of the PM.
The Indian economy is already close to a tipping point so the current govt getting an opportunity to continue the work it started in 2014, for another 5 years is a good sign.
Finally, this election just goes to show that this economy is underpinned by a vibrant democracy that has all the checks-and-balances that the likes of China continue to struggle with.
To global investors – India will continue to lift millions out of poverty, put more disposable income in the pockets of its citizens, build world-class infrastructure and digital public goods, export innovation via its tech startups, and deliver growth that is sustainable for all stakeholders.
4/ Domestic Hardware
Wanted to throw out a challenge for Indian founders – in this next generation of the ecosystem, can we aim to build our own domestic smart EVs to compete with BYD and Xiaomi?
In the last cycle, I had a ringside view into how in smartphones, Indian companies like Micromax and Lava had massive dependence on Chinese OEMs and ultimately, ended up bowing out to OnePlus and Xiaomi.
Given the ambitious goals we are setting for the Indian economy, it’s time we invest towards controlling the hardware stack too. From what I am hearing about all the work already happening in semiconductors, automotive, space and manufacturing in general, this is totally doable if we have the courage.
I also believe that there is enough global capital available that is positive on India and will be ready to back this courage. Or perhaps our Indian conglomerates can also step in there with INR capital?
The role model here is how Sachin Bansal and Binny Bansal stood up to US and Chinese competition in eCommerce, ultimately ensuring a homegrown & enduring market leader Flipkart continues to thrive to this day.
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Chapter 7: Other People’s Ideas
1/ Network Density
As always, massive insight-per-sentence from Fred Wilson on how “density” matters a lot while building networks.
2/ ACV Expansion
The key to ACV expansion 👇🏽
3/ Emerging Managers
For all emerging managers out there who are trying to understand the world of LPs:
This 10X Capital episode on How to Pick Top Decile Venture GPs is awesome. Albert Azout of Level Ventures candidly shares some amazing insights on how LPs evaluate emerging managers, what separates the best GPs from the rest, common pitching pitfalls etc.
4/ Talk Less
This is a very, very important and practical insight for fundraising, or any sales process for that matter. Thanks Hugh Geiger for putting this out there!
(1) “Doing more with less” by leveraging creative thinking.
(2) Moving fast with campaigns to keep up with the speed of culture vs getting caught up in analysis-paralysis and bureaucratic over-planning.
6/ Stay In The Game
If you are going to read one thing today, please read this (especially if you are a parent).
7/ An LP’s Perspective On VC
Nice convo between David Clark (VenCap) and Jason Calacanis. Was interesting to hear a top LP’s perspective on venture capital, manager performance and portfolio construction.
Across a sample of 12,000 companies that VenCap analyzed, only 1% were “fund returners”. Power law in venture is intense.
Venture is a game of finding outliers. The best managers aren’t afraid of high loss ratios. In fact, loss ratios are surprisingly similar across various percentiles of funds. Even the best strike out a lot.
The best managers have the confidence to let their winners run. You might have 1 fund returning outcome in a portfolio of 50 companies so if you don’t let it run, it is a bigger sin than not having invested in it at all.
Breakout private companies with real businesses tend to hold their value. But when these companies go public, VenCap has seen the stock going down by a lot in subsequent years in many cases.
In WeWork, the only people that won were Benchmark (exited pre-IPO with a $2Bn outcome) and Adam Neumann (via secondary sale).
In venture, less capital is more capital. If you get too big, you become more of a capital allocator than a venture investor.
Under-performing managers tend to put more capital into their under performing companies vs the winners. The opposite is true for the best performing managers.
PS: also check out this amazing X thread where David shared raw insights on power law in venture.
8/ Learnings From Scaling To 10Mn ARR! – via Bessemer Venture Partners
Attended an awesome US-India SaaS event organized by Bessemer Venture Partners in Redwood City. Key takeaways below:
Session 1 – Learnings from a decade of building Manychat
Mike Yan shared candid founder learnings from 8 years of building Manychat (a marketing platform for chat eg. IG DMs, WhatsApp etc.), wherein the company had to be completely reset during Covid before reaching tens of millions in revenue at present.
(1) The art of decision-making with limited data:
One of the key jobs of a founder in the 0-to-1 stage is to take strategic direction bets with very limited data. Eg. Manychat pivoted in a specific direction with only 40 beta customers by asking, “Are what these 40 customers doing representative of millions of other businesses?”.
Being able to develop the right judgment even with limited data comes down to how deeply the founder understands the market. To quote Mike – “your mental neural net has to get to the level where you can say with 80% confidence that this is going to work at scale”.
(2) In the initial stages of building products, it’s important to remember that data acts as a rear-view mirror into the past. It doesn’t necessarily show you the future.
(3) Value of focus:
To compete as a startup, it’s important to sharpen your product and business knife by saying no to a lot of markets, features, geographies etc. That’s how you get to a point where no one can compete with you in your sharp niche.
(4) Importance of Events for demand-gen:
Manychat has found holding flagship events to be very successful in demand-gen. The company works with influencers and paid marketing to drive maximum traffic and sign-ups for these events.
Events are also a good internal forcing function around new product launches, feature rollouts, fresh campaigns etc.
Interestingly, Manychat charges a small registration fee to ensure attendees are invested in the event. Also, all the content gets hosted on the event portal. They have found hundreds of people browsing through it daily many days after the event.
It’s important to note that events only work when a product has a basic resonance with the market.
(5) Key to differentiate in a crowded market:
To differentiate as a startup, it’s important to have a clear ICP and nail down messaging just for that ICP, and no one else.
One common mistake is talking about the technology more than the benefits to the ICP. Eg. while most of Manychat’s competitors were talking about how cool Facebook Messenger was when it was launched and where all they could integrate with it, Moneychat’s messaging focused on what its ICP (email marketers) could do with FB Messenger, how they could run a campaign on it and what outcomes they could drive from it.
Session 2 – Selling to large enterprises
Ashwin Ballal, ex-CIO of Medallia, shared the following insights on what founders should keep in mind while selling to large enterprises:
(1) For a customer CXO to take a startup seriously, you must solve a deep-seated personal problem for the exec. Else, it won’t be important enough to warrant their bandwidth.
(2) Every enterprise shouldn’t be a “customer” for your startup. It is important to be surgical and focus on an ICP.
(3) There are essentially only 2 high-priority problems that any customer is looking to solve – (1) growth and (2) cost optimization. A startup needs to hit the core of these problems. Everything else like productivity improvement is a nice-to-have.
(4) Given weak macros over the last 2 years, cost optimization has become so important that CEOs are mandating the CIO and CFO to work together and bring down costs by being willing to adopt cheaper software even with relatively inferior UX.
A new solution has to create a minimum of 25-30% cost savings to have a chance at displacing the incumbent solution.
Customers look at this potential cost-saving both in terms of being able to boost the bottom line or being able to use it for extra headcount to drive growth.
(5) Large enterprises are increasingly looking to adopt “bundled software” to reduce IT costs. They are also looking to transition from per-seat pricing models to consumption-based pricing. These elements are going against specialist incumbents which turn out to be significantly expensive.
(6) There has been a trend over the last decade where software buying decision-making shifted from the IT/ CIO org to functional teams. Now, with capital becoming scarcer and more expensive, cost reduction is back at the forefront, and therefore, CIO/ IT orgs. are again becoming important stakeholders.
Startups often make the mistake of not looping in the CIO org early on in the deal and not building relationships within that team. This often derails deals at late stages. In addition to functional champions, important to have a parallel champion within the CIO org too.
(7/) Nobody is doing AI in production at scale. Most projects are still POC stage so long way to go in the space.
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About the Author
I am Soumitra, a venture investor focused on the US-India corridor. I invest in Global Indian founders via my Fund Operators Studio.
I like to say that “I am a writer in the costume of a VC”. I write about Startups, Investing and Life on An Operator’s Blog. Also check out the AOB Podcast on YouTube.
In any growing and economically vibrant location with strong future prospects, real estate always seems very expensive and almost out of reach in the present moment.
However, in hindsight after multiple decades, the same asset looks dirt cheap.
Anyone living in a major and growing economic hub would have felt the pain while looking at home prices. From SF and Singapore to NY and Gurgaon, home prices always feel “out of reach” in the moment.
However, now that I have enough grey hair from living through multiple economic cycles, hearing stories from many generations in my family, and also personally going through various real estate deals both as a buyer and seller across the Bay Area and India, I have noticed an interesting paradox:
In any growing and economically vibrant location with strong future prospects, real estate always seems very expensive and almost out of reach in the present moment. However, in hindsight after multiple decades (or sometimes even as short as a decade in alpha zones like the Bay Area), the same asset looks dirt cheap.
Story #1 – the grandparents
As an example, in the 70s, my maternal grandfather built a house in Lucknow, the capital city of the Indian state of Uttar Pradesh. As a kid, I remember hearing stories from him and my grandmother about how they had to struggle to put together money each month to pay the contractors. They ultimately built an amazing house over many years of scraping and saving. Cut to today, 50 years later, the location of the house has become very central and extraordinarily scarce, organically driven by the growth of the Indian economy. Needless to say, its price today has exponentially appreciated.
Story #2 – the auction
Second story – while growing up, we stayed in a rented house in South Delhi for a few years. For those who don’t know, South Delhi is now one of the premium parts of the Indian capital, but when we used to live there, it was just about at the tipping point with the first-generation multiplexes and the first-ever McDonald’s store coming in.
Our landlord was a very senior army officer and a really nice gentleman. As a teenager, I remember him telling stories of how he bought the house. While he was away fighting on the border, his wife saw the ad for plots of land being auctioned in the area. Even though in his own words “this was the time when there was nothing here and one could even see foxes in the neighborhood”, these plots of land were still out of reach for a working-class army officer.
Gathering courage, his wife borrowed money from her parents to make the downpayment and ultimately, got allotted a plot of land in the auction. Through monthly savings, they ultimately built this house. Cut to today, this house is now in one of the most prime locations of the capital of the soon-to-be world’s 3rd largest economy. You don’t even want to know the current price of the asset. In hindsight, the prices in the original land auction look like a steal.
Story #3 – the parents
A similar story from my family. My parents purchased a home in the mid-90s again in South Delhi and much before its tipping point. As a kid, I remember how big of a stretch that was for the family back in the day. My parents borrowed from every source of capital – my dad’s employer, his old business associates, my dad’s brother, my mom’s sister. Servicing this debt required major financial discipline on a monthly basis, needing hard choices that both I and my sister remember to this day.
Cut to today, the location of that house has become super-premium, and again, those prices that stretched our family thin back in the day, now look like a steal.
Story #4 – the Bay Area
Over the last decade, I have observed similar trends in SF/ Bay Area at large, albeit on a significantly compressed timeline (heck, we are talking about Silicon Valley here where everything happens exponentially faster and rises exponentially higher):
Then, downtown SF ended at the Giants stadium. Once you crossed the creek, you felt unsafe. Now, that same area begins with Mission Bay (home to the Warriors and UCSF), moves on to Dogpatch (home to YC), and beyond.
Then, Potrero Hill was just starting to get premium, and Bernal Heights had those old SF single-family homes with weird layouts and stairwells. Now, Potrero Hill is beyond premium, and Bernal is now what Potrero was back then.
Then, we used to make fun of one of our colleagues who bought in San Ramon in 2013 (who lives in that jungle anyway?) and made the commute to Mountain View every day. Now, San Ramon is one of the most premium Bay Area locations, especially post the development of Bishop Ranch and City Center Mall.
Illiquidity is key to long-term compounding
As I reflect on these stories and experiences, I kind of see why people call the illiquidity of real estate a feature, not a bug (Btw, I say the same thing about venture capital as an asset class).
Of course, this doesn’t mean real estate is a free lunch. I know a few Indian diaspora tech folks who took a bet on Oakland back in 204/15, buying homes there driven by news at the time that the likes of Amazon and Uber would be moving there. Unfortunately, Oakland has become an even bigger sh*tshow since then. Governance and security have massively deteriorated, none of the tech giants have moved there, and major sports teams like the Warriors and the Raiders have ended up moving their home bases out of Oakland.
Buy great assets – pay more, if one has to, for quality.
Invest assuming we will own the assets forever – even though we may not. Eg. Brookfield has owned marquee buildings in Manhattan for 20+ years.
Go against the trend and buy value, especially in times of distress.
Finance prudently, as surviving downturns is paramount.
Acquire when capital is scarce (in other words, when interest rates are high like in 2023-24), as it is the best indicator of the right time.
Never become too positive, or too negative.
If this is too much, I have a TLDR for you:
Outsized long-term compounding in real estate seems to happen in locations that are positively aligned for future economic growth over decades. If you can buy at the bottom of the cycle/ in times of distress, even better!
I don’t know if this post is helpful for you. It’s definitely a departure from my usual topics of startups and venture capital. Still, I felt like penning this down, more to document these stories and aggregate my observations around them. Hopefully, you found it interesting!
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As we enter the era of a new generation of critical technologies, from AI and AR/VR to EVs and robotics, the technical and entrepreneurial horsepower of immigrants will be more important than ever for Silicon Valley.
Yesterday, I had the opportunity to attend Entrepreneur First‘s first-ever demo day in San Francisco. Folks in the US and India might not be too familiar with EF – they are one of Europe’s top incubator programs, with a particularly strong presence in London and programs now in Paris, New York, and Bangalore.
Reid Hoffman at the EF Demo Day in SF
EF’s model is interesting – they operate in the -1 to 0 stage, spotting deeply technical founders, mostly in their early-to-mid 20s with many straight out of college, and help them identify and incubate a startup idea that aligns with their core technical skillsets and achievements.
And they are definitely spotting some outlier talent. Within this cohort, I saw everything from a Math Olympiad gold medalist, a Material Science PhD from Cambridge, and a 3rd year PhD dropout in Brain-Computer Interfaces to a Formula 1 aerodynamics engineer, someone who built systems for the US Department of Defense and another who worked on JP Morgan’s first AI systems.
This is what made the demo day super interesting for me. With the advent of AI, Europe is gaining prominence in the global tech scene courtesy of excellent technical universities and research institutions that produce some of the most cutting-edge research talent. A majority of EF cohort companies are in deeptech/ applied sciences and therefore, this demo day in a way, gave a glimpse into the future that leading AI research can potentially bring to life.
My 1 line takeaway from seeing these 32 companies pitch – the future is brighter, and full of “tech magic”, than we can probably imagine right now. Get a load of some of the ideas that are already in early productization:
1/ World’s first AI training processor using photons (directly taking on Nvidia).
2/ Optimizing farming 24×7 with low-cost swarms of Roomba-like robots that live in fields and spray everything from fertilizers to pesticides.
3/ AI platform that does automatic product placement within creator videos (a YouTuber can place everything from a Nike shoe to a Fiji bottle within a video in a matter of minutes).
4/ AI-powered real-time language translation that freelancers in non-English speaking nations can use to work with clients across geos.
5/ Exponentially simplifying going from a 3D render to a detailed pre-manufacturing drawing & design for any production process.
6/ Non-invasive neural links that can help soldiers in a hot zone communicate with each other without talking (telepathy brought to life?).
The raw intellect of these founders, combined with the product progress they appeared to have made in a short period, makes me think that many of these ideas are not that far away from commercialization.
What EF is smartly doing is relocating this entire batch to Silicon Valley, where the founders will live full-time, building product and raising capital. Seeing the ambition level of ideas the cohort is taking on, they definitely need the risk appetite and vision-backing mindset of the Bay Area. Can’t think of any other ecosystem in the world where such technically complex and capital-intensive ideas can be backed by a combination of talent, risk capital, institutional knowledge, and diverse networks.
Which brings me to another thought – how talented immigrants continue to move to the Bay Area to build the future. Imagine such unique outlier talent from places like Europe and India choosing to uproot themselves from their home countries, moving to the Valley, and offering their unique skills & knowledge to companies here. This makes me super-long on the Bay Area and clearly shows that the Silicon Valley immigration flywheel is still as strong as ever.
This macro trend is what also makes me equally excited about India’s emergence as a key supplier of founder talent for the world. And not just to the US, but also to regions like SE Asia, the Middle East, and Australia. I believe the Indian diaspora will make a defining impact on the global knowledge economy over the next 20 years. Combine this with the rise of a new generation of critical technologies (AI, EVs, AR/ VR, robotics, semiconductors, etc.), and this transforms into a generational opportunity that energizes me as a venture investor in the US-India corridor.
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The pandemic has taught people globally to not postpone living their lives. This behavior shift has profound economic implications for this generation.
I have been looking up air tickets for multiple upcoming trips, both for work and pleasure. I am observing that airfares are now consistently high across the year, irrespective of seasons and destinations. 5 years back, one could get relatively cheap US-India air tickets, even for the high season in Dec, if booked 6-9 months in advance. That’s no longer the case, even if one reserves as early as Feb!
Matching this with what I am seeing anecdotally in my network, demand for air travel is now significantly higher than pre-Covid. I see people taking many more vacations, going to fancier places, and generally being more willing to open their pockets for “experiences”.
Last month [Oct’23], the Transportation Security Administration logged 75.5 million passengers passing through airports in the United States — more than the 72 million who traveled in October of 2019. The TSA expects 30 million passengers to travel over the Thanksgiving holiday period alone. Globally, the International Civil Aviation Organization expects 2023’s passenger demand to outpace 2019’s by about 3 percent.
I am seeing this pattern across generational cohorts where post-Covid, people have started consuming much more than before. I don’t know if “YOLO’ing” is the right way to frame this behavior shift but going through Covid experiences seems to have given people a subconscious realization that life is finite and therefore, postponing enjoyment doesn’t make sense.
This behavior shift is starting to be reflected in US consumer sentiment data. Despite high inflation and record-high interest rates, McKinsey’s Feb’24 ConsumerWise research says that consumer optimism is at its highest level in 2 years. Here are some interesting consumer quotes from this survey that highlight their buoyancy:
I am seeing similar consumption unlocks in urban India. Even in my parents’ generation, people are now taking multiple overseas vacations and spending significant amounts on general entertainment. This generation in India, like the Boomers in the US, has benefited from the massive compounding in wealth that has happened in the country since the early 90s. They have considerable wealth but more importantly, are now starting to consume a larger portion of it, instead of disproportionately saving and handing it down to the next generation.
Urban Indian Millennials and Gen Z are also turning out to be big beneficiaries of this wealth creation. They have the safety net created by their parents, plus are seeing their own incomes rise courtesy of overall economic growth. This is driving up their overall consumption too.
These shifts are reflected in the data as well. As per the recently released Household Consumption Expenditure Survey by the Govt. of India, average monthly per capita consumer spending has grown ~2.5x between 2011-12 and 2022-23, both in rural (INR 1,430 ➡ INR 3,773) and urban India (INR 2,630 ➡ INR 6,459). Interestingly, Indians are spending less on food and more on discretionary items like consumer durables, services, and travel.
Source: Govt survey on household consumption expenditure via Reuters
Remote work, gig economy, and digital nomads.
Another trend that has a major impact on global consumption is the rise of remote/hybrid work as well as the gig economy.
A decade back, people had to work a standard 9-to-5 job that required showing up in the office 5 days a week. Now, I see Gen Z actively adopting a gig economy mindset to make space for other activities in their lives. My cohort, the Millennials, are actively using the ability to work remotely to take more weekend trips and even work from new cities for extended periods.
All these life choices are geared towards more consumption. Lines between business and pleasure travel have blurred, leading to the creation of a new category of travel called “bleisure”. Companies like Airbnb and destinations like Bali are beneficiaries of this shift.
Less kids, more spend!
There is another macro trend globally that I feel is a leading signal of even more discretionary consumption in the coming decade – declining birth rates! China’s population fell for a second consecutive year in 2023. The US has been seeing a long-term decline in birth rates for a decade and a half now. See what Brookings has to say:
Before the pandemic [in the US], births had been steadily declining for many years. There were almost 600,000 fewer annual births in 2019 relative to 2007—a 13% reduction. The size of the COVID-related baby bust and subsequent rebound were meaningful in that context, but they also represent short-term deviations from an ongoing trend of considerably greater importance. Birth counts in 2022 are still below what they were in 2019.
This isn’t limited to just the US or China. Anecdotally in urban India, I am seeing couples choosing to have fewer kids or no kids at all! In my parents’ generation back in the day, each household had 4-6 kids. In my generation in the 80s and 90s, this came down to 2 kids. Now, at least in the Metros, I am seeing this number at 0-1 kids, with DINK (double income no kids) couples being very common at least in my circles. Like how things have unfolded in China, birth rates could start declining even in Tier 2 Indian cities and beyond over the next 20 years.
People forego immediate consumption and save money primarily for 2 things – (1) retirement and (2) handing it down to the kids. Common sense tells me that in the US and India, (a) if the economy continues to grow (so per capita incomes keep rising), (b) inflation is under control, and (c) people have fewer kids, this is a recipe for more wealth and less propensity to save, thus driving up discretionary spends on things like travel and entertainment.
This gravy train should continue until falling birth rates start impacting the quantum of productive population* and therefore, economic growth (like perhaps what’s unfolding in China today). But till that happens, it’s a consumption boom baby!!
*The US is well-positioned to mitigate this risk by opening its immigration faucet to ensure an adequate working-age population.
Implications of YOLO? Higher demand, stickier inflation, generational impact.
YOLO as a persistent global behavior shift implies that one should expect sustained high levels of consumer demand across growing economies like the US and India. This further implies inflation will be stickier for longer than what one might be expecting, especially in discretionary areas where pricing isn’t influenced by the govt. (eg. air travel, hotels, dining, electronics, furniture etc.). It also means consumer demand will keep driving the economic growth engine in these economies, in turn providing tailwinds to stocks of companies that benefit from this consumption.
While YOLO’ing is largely used in frivolous contexts and has become a meme word, it actually describes a powerful behavior shift. And given Covid was a global phenomenon, this shift has happened across multiple economies.
These behavioral shifts, often with underlying milestone events like wars, pandemics, and technology inflections, tend to have ripple effects across generations. The cohort who survived and emerged victorious from WW I came back to consume and enjoy life like there is no tomorrow, driving the Roaring 20s. The cohort scarred by the Great Depression built a deep mistrust for the stock market, a majority of them never investing in it again.
The Silent Generation won WW II and again, came back to bask in that glory, consuming with abandon, building businesses, and making babies. The Boomers grew up in these glorious decades of America, with post-war technology advancements permeating every aspect of their lives.
The peak years of Millennials like myself have been spent in a world that is disproportionately driven by technology inflections: PC ➡ Internet ➡ Mobile ➡ Cloud ➡ now AI. These years have embedded events like the Dotcom crash’01, GFC’08, and Covid in 2020.
Whether or not we choose to ignore them, these events change the mindset of a whole generation, thus impacting our futures in more ways than one, from our jobs and real estate prices to how our stock portfolios perform and the cost of vacations.
While as a disciple of Munger, Buffet, and Howard Marks, I hesitate to believe in anyone’s ability to create macro projections, I do believe that it’s worthwhile to study shifts in human behavior and what long-term themes could emerge from them. While they might not impact micro-decisions, these themes can help us have an appropriate weighting between offense and defense in our overall portfolio of life choices.
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Sports can be a cruel teacher for even the best of us, as India’s recent heartbreaking defeat in the Cricket World Cup final showed. However, if approached with an open mind, there are none better ways of practicing and getting better at humility and grit.
One of the reasons I am a big believer in playing sports is because it’s one of the few things in life that forces a player to accept defeat with humility. Every sport is a microcosm of how life actually plays out – the best plans don’t work out, huge highs are quickly followed by huge lows, the Davids often end up beating the Goliaths, and given all this, the best players focus on process over outcomes (read my post: Conquering Uncertainty, Dhoni & Vinod Khosla Style).
The recent soul-crushing defeat of India at the hands of Australia in the final of the 50 overs Cricket World Cup was a perfect example. A rampaging team full of superstars, playing in home conditions and backed by the richest and biggest cricketing engine the world has ever seen, was comprehensively outstrategized and outplayed by a team that had most of its stars way past their prime, whose innate strengths were unsuited to the local playing conditions, and which had scrapped its way to the final.
Having grown up seeing many of the previous World Cups, 2003 in particular, there were a few things that were making me nervous about India’s chances even before the final game. Classical cricket analysts have always talked about the Law of Averages being particularly strong in cricket. Being a student of investing, I also believe in Mean Reversion and therefore, this Law resonates with me. India was coming into the finals with a 10-win streak, the longest winning streak ever at a World Cup. This stacked the Law of Averages against it, and ideally, I would have liked to see them have a bad game before the final.
There is another reason why India not getting challenged at all during this unbeaten run bothered me. Regular readers of my blog would know that I am a believer in overcoming failure via grit as being the #1 leading signal of success in life (read my post: Storyteller vs Scrapper Founders). As Mike Tyson’s famous quote goes:
Everyone has a plan until they get punched in the face.
Mike Tyson
Success in life boils down to having the muscle memory to throw counter-punches once your Plan A has failed. This is where most people give up. Unfortunately, in my experience, the only way to build this strong muscle memory is to go through repeated failures, to operate in scarcity, to be the underdog in the shadows, essentially – “to get repeatedly punched in the face by life”.
As opposed to India, which won 10 games on the trot with a specific Plan A largely working each time, Australia got punched in the face many times at the beginning stages of the World Cup. This forced the team to develop ways to counterpunch, even while dealing with unfamiliar playing conditions and a set of aging players. Having the agility to come up with Plan Bs and Cs on the spot during game time perhaps became a necessity rather than a luxury.
The beauty of adversity is also that it brings people together, creating deep bonds and trust under conditions of high pressure. Look at how Pearl Harbor united the US like never before, ultimately creating the likes of the Manhattan Project in record time. This is likely what happened within the Australian team too, unlike India, whose team dynamics never really got pressure-tested before the final.
Of course, teams can only overcome adversity when they have a basic foundation of grit in place. This is where the national sporting culture of Australia built over generations comes in. A healthy sporting culture gives importance to systems and processes, has a high tolerance for failure, and puts teamwork over individual brilliance. More importantly, the fans and general audience also imbibe this spirit, having the maturity to spot these aspects and applaud them over one-off wins and losses. This leads to the entire engine, from players and coaches to sporting boards and fans, being aligned on a particular philosophy of playing sports, what a company would call ‘Values’.
Admittedly, a lot of this analysis has hindsight bias and emotions baked into it. I don’t want to be too harsh on Team India, as they actually played superb cricket over several weeks, displaying strong leadership, courage, and individual brilliance. However, this unexpected defeat does highlight that more work still needs to be done in crafting the right sporting philosophy within the country’s national fabric. A set of values that frees players from the pressures of winning and losing, and rather than dealing with public expectations and the dreaded “what will happen if we lose?” fear, helps them unlock their individual skills while also bringing them together as a team to deal with unexpected punches in the face.
Closing out with another story. We attended the Thanksgiving Warriors vs Spurs game yesterday. As part of a youth program, my older son got the opportunity to do one post-game free throw on the Warriors court. He ended up missing the shot and spent the next few hours whining about it. As I comforted him while talking through how missing and making these key shots is the beauty of sports, it took me back to the World Cup final heartbreak that happened 8,000 miles away a week back. Hence, this post! And why I will continue to actively encourage my kids, as well as our entire household, to devote significant time and resources to the pursuit of sports.
PS: enjoy this awesome reaction from Giannis Antetokounmpo, star player of the Milwaukee Bucks, when a reporter asked him on his “failure” at winning the championship.
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Over a breakfast of dosa and piping hot filter coffee in Bangalore, here’s what a total stranger from Belgium told me about India.
On my recent trip to Bangalore, I ended up sharing a breakfast table with this fine Belgian gentleman. He works for a Belgian vegetable oil company and has been sourcing ingredients from India for more than 20 years.
Basically, he is the first Belgian I have ever spoken with in my entire life. On top of that, he is as far away from my world of US-India tech startups and venture capital as one can imagine. Being the collector of obtuse insights and mental models that I am, I started asking him questions about his experience and observations over 2 decades of coming here.
Here are some quick scribbles from the conversation that you might find interesting:
1/ Hubli
The first thing he mentioned was that he spends a lot of time sourcing from Hubli. During this trip, he was surprised to see a startup incubator on one of the local roads.
Even as someone who spends a lot of on-ground time covering the Indian startup ecosystem, this was an eye-opening observation for me. It just goes to show how deep the pan-India social buy-in into startups has gradually become.
2/ Professionalism
He mentioned how in his initial years of sourcing from India, he felt like his suppliers were these small, unorganized, and resource-poor family businesses. He was sourcing from what he saw as a largely poor country.
Over the last 2 decades, he has seen how the same suppliers have become more professional, their manufacturing floors have become more sophisticated, and now, he feels they are comparable to similar businesses in China and SE Asia.
This was heartening for me to hear. SMBs are the backbone of India’s economy and key to its resilience. Improved productivity in this part of the economy will unlock a lot of value that will also percolate down much better.
3/ Flexibility
Given rising global risk and uncertainty (eg. the Ukraine war near his region), having supply chain optionality has become more important than ever before. This person wants a sourcing network that is spread across multiple suppliers in different countries and is, therefore, resistant to global shocks.
He believes this trend is going to significantly benefit India, given it is one of the few countries globally that has scale in manufacturing capacity. While European and Chinese suppliers tend to operate in ‘boxes’ with rigid rules, he loves that Indian suppliers tend to be more flexible, thinking on their feet and problem-solving on the fly.
In my eyes, while the Indian business hustle (‘Jugaad’ mindset) is key to survival amongst a web of local complexities and inefficiencies, it has been a liability in terms of doing business with the world.
However, combine this hustle with strategic thinking, focus on quality, and a strong work ethic – and Indian entrepreneurs can create magic!
4/ Perception
He mentioned that very recently, a major national newspaper in Belgium published a story talking about the decline of China and predicted that India would be the next global powerhouse. It was essentially prompting Belgium to do more business with India.
However, he has also seen the flip side where there is a negative legacy perception around doing business with Indian companies, particularly across Europe and even in Asia. Apprehensions like nothing will get delivered on time, quality will be inferior, manufacturing guidelines won’t be followed etc.
He felt that for India to take its rightful place in global trade, its businesses need to make a conscious effort to break this perception.
I see similar biases at play all the time even with respect to the Indian tech and venture ecosystem. Things like:
“India can only do IT services and can’t produce a global software product company” – Freshworks changed that.
“India is the back office of the world and can’t do real innovation” – Chandrayaan, Covaxin, and Brahmos are changing that.
“Indian tech companies can’t dominate in developed markets” – Paytm’s Japanese product is already amongst the top payment apps in the country.
“Indian airports are the worst in the world” – check out New Delhi T3 and Bangalore T2.
We are now sitting on a generational opportunity to break these biases in almost every vertical. As a venture investor, one of my core thesis is around breaking the bias that “India can’t export cutting-edge innovation”. I see companies like Flytbase, Playto Labs, and Tydy in my portfolio that make me believe!
Closing thoughts…
So, my main takeaway from this convo with a Belgian stranger, over a plate of dosa and piping hot filter coffee, was this – India is changing…fast, and everyone globally is noticing it and experiencing it. We are, however, fighting against legacy perceptions, and it’s our collective responsibility to proactively change that by delivering the highest quality in whatever touch points each of us has with the rest of the world.
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New-age Indians are learning to bet & loving it. Everything from stocks to fantasy sports is fair game.
Unpacking this behavior change, its upsides & potential risks, as well as how it’s likely to shape India going forward.
During my recent India trip, one clear trend I observed was how prevalent retail day trading had become across generations. I met a 21-year-old fresh grad who does regular options trading. I met a bootstrapped founder who, to paraphrase his words, “goes into the market whenever his savings dip below a certain point”.
One of my mother-in-law’s friends was boasting how “her son made 50 Lakhs profit in shares”. FYI this person is the 2nd generation heir of a massive family business. My father too, though not exactly a day trader, actively invests in hot Indian tech IPOs via these new-gen brokerage platforms (without ever consulting me, of course!).
To validate these observations, I went back to check on the growth numbers of Zerodha, the #1 brokerage platform in India by market share. And it’s a classic hockey stick! I am sure this isn’t news for many of you but for me, this was an eye-opening stat given I have a bit of a blind spot around India’s digital evolution during Covid years when I wasn’t able to spend much in-person time there.
Another similar trend I have been intrigued by, and again this might not be news for many of you, is the rise of online real-money gaming (RMG). Dream11, India’s top fantasy gaming company, has shown hockey-stick growth numbers similar to Zerodha. During my conversations with even the next tier RMG companies, their active usage numbers & profitability (hence, cash flow) are off the charts.
One clear takeaway from the above charts is that both these digital verticals took-off simultaneously in 2017-18, just after the launches of Jio & UPI in 2016. Jio’s cheap 4G services, combined with easier micro-transactions enabled by a UPI-powered digital payments ecosystem, have proven to be major unlocks. While Zerodha was founded in 2010 and Dream11 in 2012, their real inflection points came much later once growth enablers at the ecosystem-level were in place.
The widespread adoption of new-gen brokerage & RMG platforms is indicative of how markets in India will behave very differently in the coming decade. Accessibility, ease of use & small ticket sizes is unlocking retail “betting” behavior like never before.
Fresh college grads doing options trading at scale was unheard of in my generation (and I am a cusp millennial, so not that outdated!). In my time, both education & access were gaps. We didn’t have financial influencers sharing everything about markets on YouTube & Instagram. I still remember the good old days where one had to jump through multiple hoops of paperwork just to open a demat account, not to mention the terrible online UX that was impossible to navigate. And playing games with real money on the Internet? Forget it!
On the positive side, this broad-based participation in public markets is going to provide support to many different types of IPOs. Case in point is the recent SME IPO of Infollion Research. Its public offer was subscribed a massive 279 times at close. The retail investors’ portion was subscribed 264 times. The stock was listed at INR 209 as against an issue price of INR 82, a huge 155% premium.
Btw this isn’t a hot growth story riding a trendy tailwind like AI. It’s a business research services company with INR 35 Cr topline & INR 5 Cr PAT. A few years back, no one would have counted on such a company to garner this kind of investor interest. I believe this is a sign of a new type of retail investor coming into the market, which is fantastic for smaller companies that want to go public in India.
While it’s great that more people have an opportunity to own shares of public companies, this accessibility & ease unlock is also fanning dopamine-inducing emotions of greed & thrill. I have seen that happen with Robinhood in the US. In fact, one of my frequent advice to anyone looking to create long-term wealth with stock investing is to first close their Robinhood account. There is a real risk of young investors falling prey to the cocktail of ease of use, greed, fun & small “casino-style” bets.
Another side-effect of this trend is going to be more herd behavior. So, for any new investing pattern or idea that is starting to emerge, expect it to unfold at a significantly accelerated rate compared to a decade back. Similar to the meme stock frenzy that we saw in the US in 2021, will India have its own GameStop or AMC moment in a few years? Highly likely!
Finally, expect regulators to have a keen eye on these markets. We are already seeing the SEC crackdown on Coinbase, a company that is formally listed in the US & has passed all scrutiny to get here. With Indian retail investors participating in various markets in a big way, local regulators will need to be ahead of the 9-ball & safeguard both the interests of these individuals as well as the long-term stability of these markets.
The intertwined trends of retail trading & online gaming are going to have some fascinating implications for India. While I am all for more digital consumption & market participation, given a few grey hair I now have, I would also advise young Indians to navigate these markets responsibly.
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This happens everytime!! I have been “pitching” India since 2006 — raising money for it, investing in it, acquiring companies in it, creating jobs for it, getting foreign capital into it. Everytime you sense that the India story is finally coming together (around 2004 under AB Vajpayee when infra finally started improving; in 2007–08 when bunch of NRIs returned to their motherland; in 2014–16 when Modi got a strong mandate for change etc. etc.), the govt. and its policy-makers shoot themselves in the foot? It makes me frustrated, angry, disappointed…even sad.
Over last decade, I have worked to bring several large overseas companies and institutional investors into India — selling the classic “rising up to the top-right” Internet users slide, the “demographic dividend” story that never goes out of style, the “largest democracy in the world” jingoism. For anyone who has grown up in the country, studied in the country, operated in the country and essentially come up the ranks in the country, we know that this high-level analysis completely glosses over massive structural complexities and weaknesses in the Indian economy and legal justice system. In my heart, as an Indian, I want all of this to be not true, but as a global citizen, professional and custodian of capital (which is fungible), it’s hard to not be affected by these developments. At the end of the day, emotions can’t hide the wide potholes in the India story.
I want to be a problem-solver, not a problem-identifier or a jingoistic reactionary. But I don’t know how! I have rarely reacted to such issues on public platforms in the past. But seeing this story truly made my blood boil today morning. Founders are the most giving stake-holders in any society — they take massive risks, put their comforts on the line to build something, create value, technology, products and jobs, generate wealth for everyone (and themselves) but with huge professional and personal sacrifice. Grounds-up founders don’t inherit family businesses or Millions of $$ in a trust or estate — they start-up to build better lives for themselves and in process, improve all our lives as well! This kind of one-sided #angeltax activism and freezing bank accounts just disrespects entrepreneurship and true human enterprise that moves our species forward.
I am, and will always be, a big believer in Indian talent, and will continue to back it all my life. But unfortunately, I am not a believer in the Indian govt., policy and legal systems.
Note 1: I felt the same anger & helplessness when Nirbhaya and 2G scams happened during my last years as an Indian resident.
Note 2: today, as Indian founders battle the tax authorities and essentially the Indian govt., I am for the first time truly internalizing the use case for a decentralized world and crypto.
Note 3: my personal experience with Indian real estate has been similar (non-transparent, corrupt, no way to enforce rules, full of outrightly fraudulent and criminal behavior). Couple of years back, I vowed to not invest any $$ in Indian real estate going forward.
Note 4: it’s unlikely that I will ever invest again in Indian legal entities of startups via Operators Studio.
