With prevailing startup (particularly accelerator) dogma around solo vs multiple co-founders, the reality of how businesses actually get built the world over is quite different.
In various contexts, both in terms of new deals I am evaluating as well as some recent developments in the portfolio, I have been mulling over how I should be thinking about backing solo founders.
However, my lived experience of my own portfolio, as well as observing many more startups in various situations, tells me that this discussion deserves much more nuance:
1/ Anecdotally, at the pre-seed/seed stage, I have noticed that at least 20-30% of founding teams end up separating in the first 24-36 months.
Btw, this number aligns with the below analysis ChatGPT put together on this question:
So the reality is, as a seed investor, while you might be drawing comfort in backing the classical 2-person, “technical + GTM” co-founding team, it’s very likely to be a false signal, and if the company ends up surviving the valley of death, it will most likely fall back on one founder.
2/ Even in classical 2-3 person co-founding teams, one founder is usually the Alpha, the lead who inspires the core of the trust & conviction that investors build around the company. In almost all cases, the Alpha is also the CEO of the company (if the Alpha isn’t the CEO, then the team has bigger problems).
In my experience, until the Alpha doesn’t give up on the company, we all stay in the game, as even after team splits, the Alpha has the vision, tenacity, and storytelling skills to hire new talent, and even onboard another set of earned co-founders.
So, with the probability of founders splitting being significantly high, even while backing a full-stack founding team, the reality is that we as seed investors are really betting on the sole Alpha founder as the core kernel of the company.
I understand what YC is trying to say by propagating this idea, and maybe it even makes sense in the specific context of its target persona: young, out-of-college people ganging up together on short notice to “attempt a startup”.
In my experience, this notion of a 50-50 split has turned out to be entirely disconnected from the overarching ground realities of how businesses the world over get built, how teams get structured as per both the risk each person takes as well as the tangible value they bring to the table.
One of my driving principles around early-stage investing is that, irrespective of tech or non-tech, AI or non-AI, Silicon Valley or India, some fundamental principles of “how to build a new business” never change. Things like you need to target a very clear customer persona, your value proposition should achieve both the job-to-be-done and do it in a differentiated way against competition, the core unit economics of your business should be profitable, you need to be present where your customer is to drive distribution, the lowest cost producer will always have an advantage, etc.
These are principles that keep getting repeated across generations – from Charlie Munger & Warren Buffett to Sam Walton and Jeff Bezos. You can almost call them “Business Laws of Nature”.
I have repeatedly stress-tested and validated these principles both as a repeat founder myself as well as a venture investor for more than 15 years now. Each and every time, I have found these principles to be true, and whenever anyone has tried to pitch, argue, or sell any notion that violates any of them, the person has lost, and the principles have held their ground.
A dogmatic 50-50 equity split rule is in violation of these business laws. I haven’t heard even one generational founder, be it 1st-generation or a family business, ever talk about it. These people have built companies that have stood the test of time and delivered true value for decades to both customers, employees, and shareholders. If this isn’t something that they have acted on or professed, I am inclined to believe that this 50-50 split is more of a Valley YC dogma and shouldn’t be taken as set-in-stone advice.
In fact, let me give you a different, and might I say radical, perspective from the non-tech, real operating business world. In his amazing book with a super-cheesy title – “How to Get Rich”, OG media founder Felix Dennis (who started as a college dropout, with no family money, created a publishing empire, founded Maxim magazine, & made himself one of the richest people in the UK) had this to say on ownership (sharing excerpts):
To become rich, every single percentage point of anything you own is crucial. It is worth fighting for, tooth and claw. It is worth suing for. It is worth shouting and banging on the table for. It is worth begging for and groveling for….
…Never, never, never, never hand over a single share of anything you have acquired or created if you can help it. Nothing. Not one share. To no one. No matter what the reason—unless you genuinely have to.
So, if you refuse to believe in the 50-50 equity split startup dogma, implicit in this is the argument that, more than solo or multiple founders, what really matters is whether the ownership split between the starting bunch of individuals makes sense from the perspective of the fundamental business laws of nature.
TLDR: the devil is in the details…
Therefore, my working POV is not to discount single founders straight-up. Especially if the founder is a compelling Alpha, has shown the ability to hire top talent, and execute on the business, it makes sense to dive deeper into the L2 and L3 level details around the genesis history, why the founder has chosen this operating model, what it says about their behavior patterns, and what their go-forward thinking is on this topic.
Note: if you are intrigued by this topic, check out one of my earlier posts – ‘Co-founder Breakups’, wherein I share some insights/patterns from various co-founder breakups I have witnessed over the years.
On misreading founders, moving too fast, and why portfolio construction is my safety net.
Over the past few weeks, I have been doing a retrospective analysis of the Operators Studio portfolio. Given that I have adopted a “founder-first” investing style, I have been specifically trying to analyze cases where I got a wrong read on the founder.
Startups can struggle/ fail for N number of reasons. Especially as a seed investor, most of these externalities are out of your hands. Therefore, while doing such analysis, I like to keep reminding myself not to fall into the “Resulting” trap.
Annie Duke defines Resulting as “the cognitive bias of judging a decision’s quality solely by its outcome, rather than the decision-making process itself”. Top poker players are really good at avoiding Resulting while studying their plays post-facto.
So when outcomes turn out to be negative in a seed investment, rather than fixating on “why the company failed?”, it’s more useful to ask “how should the investing process be improved for future deals?”. And in my context, it’s typically the process of evaluating the founder.
Coming back to the retro analysis I have been doing on my deals, I have been able to identify a couple of blind spots that seem to be showing up repeatedly. Here’s a deep-dive on each of them:
1/ Getting blindsided by the founders’ pedigree
Sometimes, founders show up with just a jaw-dropping pedigree – IIT Bombay Computer Science, Stanford PhD, top leader at Big Tech etc. This pedigree is typically also accompanied by a strong show during the pitch meeting, demonstrating differentiated access & networks, and just overall self-belief that screams “I am awesome!”.
Looking back on such pitch meetings, it’s very easy as an investor to get carried away by this pedigree & show. However, as I am learning with some pain, pedigree doesn’t automatically translate to the many enablers of eventual success in a founder – grit, the ability to pound pavements selling stuff, controlling your ego, resolving conflicts, and frankly, eating glass during tough times.
One of my key maxims learned over a long venture career is to always distinguish whether the person is a strong professional or a (potentially) strong founder. Both are very different things.
Even with this hard-earned insight, it turns out that executing this day in and day out is extremely hard. Even the best of us get swayed by past track records.
This retrospective is a self-reminder to bring back this maxim as part of the core of my investing process.
2/ Pulling the trigger without spending enough 1:1 time with the founder
My natural style as an investor is highly instinctive. This often manifests in quick Yes’s during the first pitch meeting itself.
Over a long career, this has mostly benefited me. Almost all my major wins were quick Yes’s. But there is a difference between “moving with a pure initial instinct” and “being trigger-happy”.
In a few cases, I have pulled the trigger without spending enough 1:1 time to peel the layers on a founder. If I go one level deeper, in most cases, this was due to some fear – fear of being on the wrong side of deal heat & not getting allocation, fear of feeling disadvantaged as a relatively small check writer, fear of deployment pressure (“I need to do a deal this month”).
These fears are particularly amplified by the current investing environment, where seed deals move in days, where lead VCs have particularly sharp elbows, and where many founders fall prey to becoming over-transactional during the fundraising process.
I have come to realize that these fears are incredibly counterproductive to a long & sustainable venture career. Seed investing is at least a decade-long journey that is full of ups and downs. An important way to create a strong initial foundation that then delivers a consistently good experience to both the founder and the investor over multiple years is to dedicate enough effort upfront to build trust & a mutual connection.
When this trust & connection exists, the wins taste exponentially sweeter, and the pain of losses gets blunted.
Any diversified enough venture portfolio of decent quality is highly likely to catch at least a couple of winners. But the key to amplifying success over decades, both as a founder and as an investor, is to play repeated games with a set of highly trusted people. The starting point of these relationships is almost always the foundation of trust built during the first-ever transaction between two people.
Even empirically, if I study all my deals since 2011, whenever I have built a strong mutual connection with a founder upfront, the eventual outcomes have almost always been positive economically and/or experientially (the randomness has only been in “how positive?”).
Therefore, this is again a self-reminder that I should ensure I am devoting enough upfront time to build trust & a mutual connection with new founders I meet. And once I have built an informed instinct around a new person, given I now have 15 years of on-ground data on how it usually pans out, I should default to trusting & following my judgment without any fear.
The final line of defense against these blind spots…
Even at our most introspective and self-aware selves, we still have the same monkey brain that has been wired by hundreds of thousands of years of evolution. Even the best of us should expect to keep falling prey to various kinds of cognitive biases and blind spots across multiple deals.
The mark of growing up as a venture investor is accepting this truth and then acknowledging at a deep, internal level that the only line of defense against our own foolishness is portfolio construction.
As a young VC Associate way back in 2011, I used to always wonder why OG VC GPs kept harping on portfolio construction, spending hours poring over Excel sheets that frankly, had most of the numbers pulled out of thin air (an undeniable fact of any financial modeling efforts in early-stage venture).
Similarly, when I decided to come back into venture in 2023, I kept hearing how LPs care a lot about portfolio construction. And that it is the difference between someone being just an investor vs being a professional fund manager.
Studying my still fledgling portfolio today, I can already see how following even a rudimentary portfolio construction strategy has saved my a** several times already, and its impact will manifest in major ways over the remaining Fund life.
When you experience something working in real life, your buy-in starts growing organically, giving it higher chances of eventually becoming a sustainable habit. I can see this playing out with my rapidly growing appreciation of all the beauty and nuances of portfolio construction.
In fact, I can guarantee that 2026 will see my study and obsession with VC portfolio construction go many levels higher, and thankfully, I don’t need a New Year’s resolution to make it happen.
Note: My next post will be on some portfolio construction insights I have gleaned from listening to Roger Ehrenberg, Founder of IA Ventures. Stay tuned for that!
To break through AI noise in the Bay Area right now, figure out your “why should anyone care?” pitch.
Important tip for international founders who have recently relocated to SF and are looking to build their networks here for customers & fundraising:
As you meet new people, it’s important to have an abstracted-out, 10-20 second mission pitch that clearly outlines “why should anyone care?”.
More than market analysis, facts & data, this pitch should have a strong underlying emotion that can immediately connect with someone who might have an overlapping world view.
There is immense noise in the Valley right now, and every space/ vertical has tens of startups going after it. All pitches sound similar, most founders have similar backgrounds, and all content looks the same.
Breaking through this clutter is hard, especially for folks who don’t have a high-signal, prior track record in the Bay Area.
In these cases, dialing up the personal authenticity quotient big time, and having a clear “Mission-Pitch” with a strong emotional pull can be extremely helpful in winning over new relationships.
In an ecosystem where every decent startup is flush with capital and early traction, founders need to 1) go deep, 2) go sharp, and 3) manage the psychology of market participants in order to stand out.
Default-alive vs growth-at-all-costs: how founders can balance survival, PMF, and fundraising windows to play the long game.
As a founder, if you are *truly* in it for the long haul, it’s in your absolute best interest to get to “default-alive” as soon as possible.
Default-alive ensures you can play the right long-term game, adopt an operating strategy that doesn’t over-optimize for the short term, and execute in partnership with stakeholders (employees, customers, partners, investors) that are deeply aligned with you.
And then, when all the pieces of the orchestra are starting to come together in the beginning notes of a beautiful symphony, that’s when you raise maximum capital and step on the gas.
You know what the best part is? In this case, you continue to be the orchestra’s conductor for a long time, with maximum ownership & ultimate value capture.
Now, there is a Catch-22 here. Getting to default-alive usually comes at the cost of rapid growth. And as we all know, VCs index on growth while evaluating startups. So does the company become unfundable while on the default-alive path?
My response is, it depends on the market dynamics, competitive intensity, and progress towards PMF/ how much time & effort will it take to get PMF (eg. h/w vs s/w, large enterprise contracts vs PLG/prosumer etc.).
That’s why it’s a very nuanced and contextual decision that founders need to think through, ideally jointly with seed investors.
Private market windows are fickle and keep opening & shutting down based on sentiment around the domain, progress in the business, the founder’s storytelling etc. As a founder, one has to be able to survive (often at the cost of growth) when the window is shut. And then create momentum & raise again when the window re-opens and/or an inflection point gets reached in the business.
In the majority of cases I have seen, it plays out like this:
Company raises a round -> burns towards finding PMF -> is unable to raise the next round, either due to not hitting adequate milestones and/or market conditions -> founders raise a bridge and continue with less resources.
It can play out in 2 ways from here:
(1) No PMF possible, founder loses conviction, shut down, or
(2) Grind towards early PMF, still have conviction, try to raise again.
In (2), if you can raise, then it’s great. You have a PMF’d business + capital to deploy and accelerate growth.
However, if you aren’t able to raise and you aren’t default-alive, then even after finding that elusive PMF (which 9 out of 10 startups are unable to find ever), you can’t do anything with it and have to shut down.
But, if you have PMF and are default-alive, then you can still continue the journey (perhaps with lower growth) until you either hit another inflection point in the business and/or the private market window opens up for you. In which case, you then raise, accelerate growth, and continue building.
TLDR: If you can be patient and be willing to grind hard upfront without seeking external validation, being default-alive is one of the best ways to live & build!
Each use case has tens of funded companies. Each is churning out features rapidly, getting to parity faster than customers can imagine. Each has early traction and a worthy claim to win.
What will it take to eventually win the game?
1) Will it be about surviving the multiple shakeouts that each vertical/ use case will eventually see? Letting capital-bloated companies implode and letting the “tourists” give up…
2) Will continued product obsession be the key? Essentially refining the product beyond where others give up…
3) Will choosing non-obvious wedges/ ICPs be the way to differentiate & survive? Serve markets that others are choosing to ignore/ finding unviable to serve…
The technology is still so early, and we clearly have a few decades of upside left. Yet, there is a gold rush going on right now, which I am sure will push people to optimize for the short term.
In that case, will founders who are truly playing the long game ultimately win? Or is it more important to “surf the wave” in the present?
The former will look unattractive in current times and hence, will be undervalued and “contrarian”. The latter will appear to be imminent winners, yet could flame out.
Cutting losses is one of the hardest decisions in startups, investing, and leadership—but it’s also what separates winners from those stuck in the sunk cost trap. Here’s why mastering this mindset is essential.
Recently read this Forbes article on Igor Tulchinsky, a Billionaire quant trader who runs the hedge fund WorldQuant. In particular, this section on cutting losses caught my eye:
While I don’t come from the public markets world, I have taken a series of major risks as a founder, operator, and investor. Of course, now that I am a full-time venture investor, I live in a world where I take and manage risk every day, including macro, business, tech, portfolio construction, and people, among others.
Based on my journey so far, I can’t emphasize enough the importance of developing the ability to quickly cut losses. Interestingly, before making a major decision, most people are fairly good at identifying & mitigating key underlying risks. However, I have learnt with experience that even after executing the best risk management process, things will still go wrong. And once things go wrong, even the most intelligent organizations & individuals easily fall prey to the sunk cost fallacy (“throwing good money after bad money”).
Let’s take the classic example of finding your next job. As part of a thoughtful risk management process, an intelligent candidate consciously tries and figures out mutual fit during interviews, gathers feedback on the company’s culture, perhaps speaks to customers & competitors to evaluate the product, or, in the case of startups, even does a 1-2 week part-time project before commiting full-time.
A similar scenario is also playing out on the employer’s side. Most hiring managers give high weightage to candidates who come recommended from trusted connections or with whom they share a past history. The interview process consists of multiple rounds to stress-test skills & personality. The company does rigorous reference checks, often also focusing on off-sheet checks to eliminate bias.
So both employers and candidates follow a fairly rigorous risk management process. Yet, as most of us have seen in the real world, leadership hiring has a 50 %+ failure rate in Corporate America. Here are some summarized stats from ChatGPT on this:
In this case, even the most rigorous upfront risk management process can’t account for a variety of post-decision risks, including process weaknesses (a great hiring process can be undone by a weak onboarding & training process), uncontrollable externalities, and random one-off events.
In these scenarios, a willingness to quickly cut losses & limit further damage of time & money on both sides is the best way forward. And make no mistake, it requires a lot of courage. That’s why I found Starbucks firing their last CEO in less than 18 months of tenure to be a very bold move, especially for a company of that scale & history (you would expect them to be sluggish).
While exec hiring missteps can be major setbacks even for large companies, they can often become matters of life and death for an early-stage startup. A wrong hire for a critical role can do strategic & cultural damage that might be irreversible with the existing runway. That’s why the best founders believe in the “fire-fast” philosophy.
Zooming out from hiring, startups succeed by taking calibrated risks on top of a technology change that an incumbent would just find extremely hard to do. This requires running a bunch of iterative experiments with very limited upfront data, but balanced by an asymmetric risk-reward profile (if this works, it will massively move the needle).
By the very nature of these experiments, a majority of them will fail. Combine this with a very limited cash runway that even the best startups get at each stage to get to the next set of milestones, and founders need to combine controlling the cost of each such experiment with an active intent to cut losses once it’s clear that the experiment is not working.
Essentially, a mindset to cut losses early till you get to something that is clearly working is a key requirement for startups to successfully emerge from this maze of early experiments with real product-market-fit. Windsurf CEO & Co-Founder Varun Mohan framed this idea brilliantly in his recent interview with 20VC:
Never fall in love with your idea…
One of the weird thing about startups is that you don’t win an award for doing the same wrong thing for longer.
Coming to my world of venture capital, I have seen many instances where the aversion to cut losses has come back to bite the investor. The context I have seen this the most over the years is in ill-conceived bridge rounds.
Classic scenario – the company has exhausted most of its last round of capital, has created just enough progress to keep existing investors somewhat interested, but if looked at with rigor and intellectual honesty, is nowhere near product-market-fit. Combine this with a founder who is good at storytelling and can pitch “if we get just this much more money, we will break through”, and existing investors are highly likely to cave in & bridge the company.
Unfortunately, in my experience, a majority of these types of bridge rounds don’t end up working. Peter Thiel said this uncomfortable truth a few years back about what he has observed in the Founders Fund portfolio over the decades (paraphrasing):
Once something starts working, people often underestimate it. And when things aren’t working, people often underestimate how much trouble they are in
Everytime a company raised an up round done by a smart investor, it was almost always a good idea to participate…
Steeper the upround, the cheaper it was…
In flatrounds and downrounds, it was almost always a bad idea to participate…
This behavioral weakness is perhaps why Michael Kim of Cendana, a major LP in emerging managers, recently said in an interview that the biggest mistake he has seen GPs make is deploying reserves poorly. My logic is that reserves deployment, especially in rounds without quality external signaling or real business progress, is particularly prone to multiple human biases kicking in, including loss-aversion, likability bias, optimism bias, and overconfidence bias.
Funds with relatively large reserve ratios should think deeply about potential solutions to this problem. One thing I have seen a few funds do is have a dedicated GP whose sole job is to evaluate each reserves-deployment situation like a fresh late-stage deal from the ground up. This can help counter the personal biases of the lead GP on the original deal.
To summarize, the ability to avoid the sunk cost fallacy & cut losses early is critical not just for entrepreneurs & professional investors, but also for each of you as every contact with the real world exposes you to risks big and small, whether you realize it or not. Getting out of sticky situations early enough ensures that you stay in the game and keep compounding your advantages.
Sharing some insights/patterns from various co-founder breakups I have witnessed over the years.
Recently, I received the sad news of a potentially powerful co-founding team breaking up rather acrimoniously. I had been tracking this team closely for several months now as a potential deal, and this happened right as the company received a seed term sheet from a Tier 1 VC.
Over a 15-year career in venture, I have expectedly seen several co-founder breakups, both in my own portfolio as well as those I have known well/ observed from the sidelines. This recent breakup got me thinking about any patterns/ insights I have noticed over several such instances over the years. Here are a few:
1/ Undergrad batchmates seem to have higher endurance
For some reason, I have repeatedly noticed that teams where the co-founders have been undergrad batchmates tend to survive much longer. Perhaps relationships born in those fledgling, relatively innocent years tend to have higher levels of subconscious trust and, more importantly, a sense of love and tolerance.
While it’s easier to find people with complementary skills and similar pedigrees (both of which look great on paper on the team slide), what keeps co-founders together is also what keeps people together in long-term marriages – having an underlying mutual respect & fondness, which leads to daily hours of fun as well as the willingness to both extend higher levels of tolerance to each other, as well as introspect and evolve to meet the other person midway.
Especially at the seed stage, company missions can evolve with pivots, but this mutual vibe is what keeps co-founders together across multiple iterations and often, multiple companies.
2/ Ex-colleagues and work friends seem to have a higher risk
My hypothesis here is that most people tend to put on a work personality at the job that suits their manager’s preferences as well as the company’s culture. Therefore, even after working with someone as a colleague, it’s very hard to know their real, full personality and values. In many cases, people end up misjudging mutual fit, especially when it comes under the immense pressure of doing a 0-to-1 startup.
Interestingly, this applies to colleagues at both large companies as well as startups. As an investor, I often hear pitches where founders say, “We worked together in the trenches of this early-stage startup and discovered this idea”. While this gives the impression of a strong set of founders germinating inside the cauldron of another startup, I have frequently seen such teams breaking up soon. While they do have the claimed early product and GTM skills they together learned at the startup, the mutual co-founder vibe & grit end up breaking under pressure.
3/ Co-founders coming together via common friends/ relatives, without a strong shared history, is a miss
I see this scenario a lot – one person decides to start up, spreads the word around for a co-founder, connects with someone via a really strong common friend/ relative, and both decide to partner.
In the majority of these cases, there is no shared history, and the team also hasn’t had the opportunity to spend enough time in the trenches going through the ups and downs together. When pitching to seed investors, they usually tell the story of “our skills are perfectly complementary, and both of us have met each other multiple times at this X/Y/Z person’s parties over several years, and developed a shared passion for this idea”.
In most cases, this ends up being a window-dressed story of the co-founding team and lacks the underlying bond & trust needed to grind out the tough times.
4/ “Earned co-founders” are solid
In many cases, folks start as single founders, surround themselves with early founding team members, validate, iterate, and get to early PMF with them, and during this journey, 1-3 people naturally come up and start playing a critical role in the management team. In a sense, they start playing the co-founder role without the title (or the equity).
I call these earned co-founders, and these are solid personas. In many of these cases, I have pushed the solo founder to look at these 1-3 people as core parts of the leadership team, if not as full co-founders, and have it also reflect in their equity at the appropriate time.
Most investors try to “slot” startups in their heads, whereas extraordinary venture outcomes lie in the “slot violations”.
A few weeks back, I was helping a portfolio founder put together the story and deck for raising the next round. This company is one of the true category-creators I have seen in my career and has now reached a PMF tipping point that will lead to explosive growth going forward. Customers and channel partners are literally pulling the product out of the company’s hands, and all metrics are going up and to the right.
Despite this, the founder was sharing how difficult it still is for him to explain the business, the market opportunity, and how this is an extremely differentiated play to investors. Having seen this startup’s thesis play out as an existing investor, my conviction on it is 200% but despite powerful operating signals, it’s still non-trivial to put together a narrative that investors “get” immediately.
This isn’t a new pattern. I have seen this repeatedly play out with truly groundbreaking companies, simply because most investors prima facie, try to “slot” the company in their heads within the first few minutes of the 1st meeting. These slots are pre-existing buckets created by years of pattern-matching, and not surprisingly, 90% of startups can easily fit into one or more of these slots – eg. big company exec stepping out to start an enterprise company, young engineers hacking a dev tool, repeat founder building in the same market, generalist founders executing really fast in SaaS etc.
The issue is this – history tells us that extraordinary venture outcomes are created in the narrative violations (or what I now call “slot violations”). These are companies that are hard to understand in the present moment, being built by founders who are quirky and/or with non-obvious backgrounds, or resulting from messy pivots. Well-known examples include:
When Evan Williams was shutting down Odeo and hacking around with a micro-blogging tool (which eventually became Twitter), it had no business model even in the foreseeable future.
Imagine how Canva looked as a deal when the founders came to the Valley to fundraise – an Australian couple, no revenue, competing with Adobe, raising at $25Mn cap.
Uber had massive regulatory risks that most investors couldn’t get their heads around.
Almost every major VC has mentioned Pinterest as a big miss. It was totally unclear how Pinterest could be a “business”. Ben Silbermann talks here about “why every VC passed on Pinterest“.
As a venture investor, I think a lot about what mental models to use in order to spot these slot violations. Thinking through the earlier discussion with the portfolio founder, it was clear that even though investors might struggle to slot the company at this moment, the market was clearly resonating with the product. In a way, the early adopters in the market had been educated by the founder and therefore, were already bought into the “insight”, whereas the existing mental models of investors were lagging in their appreciation of this insight.
I call this “Insight Arbitrage” – the delta between the market’s and investors’ understanding of a startup’s unique insight. At the pre-seed stage, this market understanding will be mostly qualitative and anecdotal. At the seed stage, this understanding will still be likely on a very small base of users.
Because a majority of investors find it hard to build conviction in the above two scenarios, an Insight Arbitrage continues to perpetually exist in the venture world. And I believe that this is where an opportunity lies for investors like myself to generate alpha, provided we show the courage to trust this arbitrage and put our money behind it.
From my vantage point as a US-India venture investor, sharing what I observed in 2024 and my expectations from 2025.
As a venture investor in the US-India corridor via Operators Studio, I saw 2024 as the year of taking stock, of heads-down building for founders, and quiet contemplation for investors.
A. 2024 Recap
1/ AI(Enterprise)– after the unveiling of ChatGPT on Nov 30, 2022, and the peaking of the AI mania in 2023, 2024 saw a bit of dust settling down in the ecosystem. In the Bay Area, I heard more intellectually honest conversations amongst founders and investors, with folks going deeper into discussing operating details and how to best leverage this tech step function beyond the “AI is going to change everything” hyperbole.
(a) Focus on the Applications layer
Along similar lines, I saw US-India founders go into deep build mode in AI. Most appeared to focus on the Applications layer, which aligns well with their core strengths. Working closely with portfolio companies like Confido Health as well as interacting with several seed-stage US-India founders, it has been particularly heartening to see them doubling down on spending time with customers, while also ramping up on the latest developments in AI. They are actively leveraging new models and tools to quickly ship new features. A lot of early US-India SaaS vibes!
(b) Indian VC skepticism
In private conversations with many large VCs in 2024, I sensed a fair amount of skepticism on whether the current generation of Indian AI companies will be able to compete with global players. As a result, many of them are choosing to be extremely selective in terms of the number of deals, waiting, watching, and observing how things are playing out in the US, while occasionally backing de-risked repeat founders in one-off large deals.
A few are also experimenting with a multiple-bets approach, writing several small checks (up to $1Mn size) into high-potential teams and seeing how they execute. Tailored seed programs have been created to do this eg. Peak’s Surge, Accel’s Atoms, Chiratae’s Sonic etc.
2/ India-to-the-world deep tech
The domestic deep tech market opportunity clearly became mainstream in 2024, with a spectrum of 1st generation companies now well-established, ranging from public companies like ideaForge in drone manufacturing to growth stage space-tech startups like Agnikul, Pixxel, and GalaxEye.
Given these outcomes, almost all major Indian VCs now have a deep tech thesis, which bodes well for the next generation of founders in the domain.
(a) Rise of the 2nd-gen
In 2024, I saw the 2nd generation of deep tech founders like Sharang Shakti (anti-drone defense systems), Astrophel Aerospace (space tech) and Naxatra Labs (EV motors) emerge on the scene. They are piggybacking on the learnings and playbooks of their 1st-gen predecessors to move faster and think bigger.
(b) Global commercial traction
In parallel, I saw early green shoots of Indian deep tech startups starting to go global commercially in a more meaningful way in 2024. The biggest eye-opener for me in this regard was attending Speciale Invest’s Annual Summit in Nov’2024 and getting updates on their portfolio going global.
For instance, Ultraviolette has officially launched its EV Superbike ‘F77 MACH2’ for the European markets. Uravu Labs is starting to get some major international orders for its recycled water technology. Cynlr recently inaugrated its Robotics Design & Research Center in Switzerland. PS: for those interested in a few hours of deep-dive into the India deep tech ecosystem, the full-day recording of Speciale Summit’24 sessions is available here.
I saw similar signs of rapidly growing global traction in the Operators Studio portfolio too in 2024. Flytbase has now emerged as a clear global category leader in autonomous drone software, with major enterprise drone-dock installations across 16 countries. Cradlewise is one of the fastest-growing smart cribs in the US, and giving incumbents like Snoo a run for their money. Playto Labs has created a sharp niche of STEM learning using robotics kits and live instructors, with more than half of its revenue coming from outside India.
3/ Venture Capital
(a) No Enterprise exits
2024 continued to be a fairly tight year for VC financings in the US-India corridor. It feels like the VC ecosystem is still undergoing some sort of recalibration after the 2020/21 mayhem. While VCs saw some great IPOs at least on the consumer side, exits on the enterprise side were almost non-existent.
As a US-India venture investor, I primarily play in 2 areas – (1) AI/ Enterprise Software and (2) India-to-the-world deep tech. Exits in these areas are typically expected via M&A. With Indian acquirers being sparse, and the US M&A environment at a standstill under the previous administration, Indian enterprise exits saw virtually no action in 2024.
While smaller funds like Operators Studio can still generate healthy exits via secondary sales to growth investors, we as an ecosystem still need full company exits via M&A and IPOs to keep the liquidity pipeline flowing end-to-end over the long term.
(b) Limited seed capital
In the US, while the bar for Series As and Bs has moved significantly higher, seed-stage financings continue to see high levels of activity. In fact, most multi-stage firms like A16Z, Sequoia, and Coatue are also writing idea-stage checks into AI as we speak. Essentially, 2024 saw massive crowding at the seed stage in Silicon Valley, and given the bar for follow-ons has increased a lot, graduation rates have dropped significantly. As per Carta – “30.6% of companies that raised a seed round in Q1 2018 made it to Series A within two years. Only 15.4% of Q1 2022 seed startups did so in the same timeframe”.
India’s venture ecosystem behaved a bit differently in 2024. Established Indian VCs appeared to have become fairly risk-averse in the past year, reflecting both their larger Fund sizes (needing to deploy larger checks with more traction) as well as their efforts to triage the excesses of 2020/21. As I wrote in this post a couple of months back:
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.
Essentially, 2024 turned out to be an extremely tricky year for US-India founders to raise seed capital, with rounds taking significant time to come together, investors wanting to see much higher levels of traction, and valuations fairly compressed especially relative to the amount of progress in the business.
Of course, the other side of this coin was that these same factors made the US-India seed ecosystem an attractive pond to fish in for investors in 2024. In fact, looking at both the quality of the teams I evaluated as well as the entry valuations I saw, I believe 2024 will emerge as one of the best vintages of Indian venture capital a few years down the road.
B. 2025 Expectations
As we enter 2025, here are some expectations I have from Global Indian founders. These aren’t predictions; rather, a wishlist of things I would love to see play out, again in the context of my US-India/ India-to-the-world focus:
1/ Thinking bigger
In 2025, I would love to see a “Path to $1Bn ARR” slide in US-India startup pitch decks. As I wrote in this post a month back:
I would like to encourage Indian founders building software companies for the world to think significantly bigger and more aggressive 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 aggressive as an ecosystem.
2/ Thinking non-incremental
One of my observations is that we as Indian founders at large still have a tendency to go after low-hanging problem statements. As AI gathers momentum, these will be automated away quickly and easily especially by incumbents, making it increasingly difficult for venture-backed startups to differentiate themselves.
It sounds counter-intuitive to the whole Lean Startup movement of the last decade, but I believe that in 2025, it will be easier to build a differentiated startup by going after harder markets and tackling hard-to-build products that need to exist in a future that isn’t fully here yet.
In 2025, I would like to see Global Indian founders build for the world in a category-creation mindset from Day 0, and not be afraid to play the game on hard mode.
3/ Founders physically moving to their target markets ASAP
If you are trying to build a venture-scale AI/ enterprise software/ vertical SaaS startup targeting the US, every year you spend not physically moving here will be a lost opportunity. Within the constraints of capital, immigration regimes, and family reasons, I would strongly recommend that US-India founders expedite their move to the US in 2025.
4/ Accelerating Deeptech exports
I would love to see Indian deep tech startups build on their global momentum and double down on exports in 2025. In particular, I see the Global South as an extremely attractive buyer of Indian technology in areas like space tech, defense, energy, and agriculture.
While the West is a harder nut to crack from a commercial standpoint, it can be leveraged to access growth capital as well as cutting-edge research talent. Soon enough, commercial traction from emerging markets will provide these companies with enough product maturity and credibility to be able to compete in the US and Europe in a meaningful way.
5/ Bounce back of seed VC
We are in the early stages of a massive global AI super-cycle, and there are several categories and pockets where US-India startups are likely to have a strong right-to-win. While remaining diligent in identifying these right markets to go after, keeping a high bar on founder-quality as well, and asking tough questions to them, I would encourage Indian venture investors (including angels, family offices, syndicates, and smaller funds/ Solo GPs) to actively deploy at the seed stage in 2025.
The seed stage is where outlier angel outcomes and fund returners get created and especially at this point in the economic cycle, the risk-reward ratios are extremely strong. By all means, it’s fair to keep the bar high. But the ecosystem needs more courageous risk capital to step up at the earliest stages of building truly innovative companies.
TLDR: for the US-India/ India-to-the-world venture story, while 2024 was the year of taking stock, I expect 2025 to be the year the ecosystem starts coming out of the bottom of the J curve.
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.
