Tag: Venture Capital

Investing in the “Real India”

While many Indian VCs are chasing Bay Area deals, I’m finding some of the most compelling opportunities in India-based founders building unsexy hardtech products with global ambitions.

This tweet from Anand Lunia (IndiaQuotient) really got me thinking last week.

Here was my response to him:

I think Anand is bang on here. Based on my interactions with several large US-India cross-border VCs, they are all looking to invest in the Valley and are mostly on the lookout to back Indian-origin founders.

This, of course, is a great way to ride the current AI momentum in the Bay Area. At Operators Studio, this founder persona is also one of my core focus areas in AI/ enterprise software, having backed the likes of Loop (AI for Restaurants), Confido Health (Healthcare AI), Noon (AI for Designers), Soulside (Behavioral Health), Muro AI (Construction AI), and Guard0 (Cybersecurity).

However, these are also some of the most coveted and competitive deals. The Valley-immersed Indian founder isn’t an unknown or undiscovered phenomenon today, unlike, say, when the likes of Nexus Venture Partners started focusing on it in the 2010s.

For smaller, operator-led funds like Operators Studio that write $100-300K collaborative checks, I still have a shot at winning over the founder with a sharply-defined value-add. But for larger funds that are looking to lead rounds/ put sizable capital to work in these Valley deals despite being largely offshore brands, their right-to-win against Valley competitors is unclear.

But then, how do they play AI? I understand their predicament.

One of my core beliefs about venture is that the greatest alpha lies in backing undiscovered founders, the non-consensus teams and companies that eventually turn out to be “right”. I have written about this idea before in multiple posts, including An Investing Framework to Find Startup Diamonds, A Talent Scout Mindset For VC, and One Person’s Conviction For Easier Fundraising.

Ergo, my investing strategy has two pillars – in addition to backing Indian diaspora founders in the US, I also back founders based in India but building for global markets.

Double-clicking on the latter bucket, in terms of markets, I am most excited about hardtech products that are not only core building blocks for the Indian economy, but also have the potential to be exported eventually.

These startups are being built in the “Real India”, as Anand puts it. These founders aren’t necessarily hanging out at Third Wave and Beanlore in Bangalore in their hoodies. They are building messy businesses, require workshops & facilities to be created in far-flung areas, and require hiring & financing strategies that look quite different from the classic Bay Area or Bangalore playbooks.

To illustrate this, let me give you a sample of companies I have recently invested in or am deeply evaluating as we speak:

  • Naxatra Labs – motor-tech that can beat Chinese and European products. Manufacturing in Ahmedabad.
  • Astrophel Aerospace – space propulsion engine components like valves & pumps. Developed and manufactured on the outskirts of Pune.
  • Planet Material Labs – new-age composites for logistics boxes and containers. Developed and manufactured on the outskirts of Gurgaon.
  • Climate & materials startup that has developed a low-carbon, cement-alternative material for concrete mixing. The concrete unit is on the outskirts of Bangalore, and so dusty that one needs a layer of masks just to breathe.
  • Battery-tech startup in Ahmednagar (3 hrs from Pune) for new-age use cases like Robotics, Defense, and Power Tools.

It’s ironic that while Indian VCs are shuttling to the Bay Area, trying to invest in deals here, as an SF-based fund, Operators Studio is actively investing in India-based founders building real, no-nonsense, unsexy hardtech products with massive cross-sectoral local and global TAMs and market demand that needs no validation.

One final point – while I actively co-invest with several major domestic and global funds in India, specifically in this second pillar of “India-based hardtech founders”, my worldview has resonated the most with Rainmatter, the prop money fund of Zerodha founders.

From what I have observed, the Rainmatter team is smartly identifying problem statements that are core gaps in the Indian economy and society, and backing founders that have an authentic commitment, passion & and domain-fit with these problems. An unsolicited kudos to the team!

Large funds have a tendency to go top-down in venture capital, spending a lot of time understanding markets and building thesis & maps. While this probably helps in Series B & beyond, my view is that at Seed and Series A, going bottoms-up is more beneficial. And founders are the best suited to observe and identify these opportunities.

At least this is the approach I am taking at Operators Studio while looking to back India-based hardtech companies with global ambitions.

Are Solo Founders Venture Backable?

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.

Classical VC guardrails tell me to stay away from solo founders. YCombinator has almost made the classic “two co-founders” team into startup dogma. In my past venture roles, I was taught to filter out solo founders in the first pitch meeting itself.

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.

3/ This is the one I have a real pet peeve with – another YC dogma that founders should always split the equity 50-50.

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.

My Blindspots As A VC

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!

The “Mission-Pitch”

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

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!

The Applications layer in AI is getting brutal

This story can play out in many ways.

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.

Just some thoughts running through my head!

Why Cutting Losses Early Is the Hardest—and Most Crucial—Skill in Startups and Venture Capital

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:

Source: This Billionaire Quant Is Turbocharging His Trading Models With ChatGPT-Style AI

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.

Co-founder Breakups

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.

Insight Arbitrage

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:

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.

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US-India/India-To-The-World: 2024 Recap, 2025 Expectations

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

The importance of founders moving to the market where their target customers are, as close to Day 0 as possible, emerged again and again in various ‘An Operator’s Blog’ podcast episodes like US GTM Best Practices For Founders Starting up in India w/ Vinod Muthukrishnan (Cisco, Uniphore, CloudCherry) and Where is the real opportunity in AI for Indian startups? w/ Rajan (Upekkha).

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.

Audio Overview of this post (via NotebookLM):