The Exchanges

Q Final question for, before we move into the quickfire and it's purely based on the global nature of DST. Because it's, it's incredibly interesting when you look at the global spread. So talk to me about this. Um, why does being global help, do you think?

A Absolutely. So, uh, being global has been very useful for us in pattern recognition, and we've also been fairly thematic in our approach overall. So we saw what was happening at mail, and we invested in Facebook, and then followed that with WhatsApp, Twitter, and Snapchat. So social was the early theme that we had. The other theme that we worked on was Starting in 2011 was e-commerce. So we invested in Alibaba and JD in 2011. Then got involved in Zalando in Europe, Flipkart in India, Vision House in the US. A similar story with on demand transport as well. We got involved first with Didi and then got involved in Ola and Gojek in Indonesia. So it's been a pretty important element of our sourcing. And also our founders love to know what's going on around the world because they're interested in learning what they can learn from. From their peers outside, that they could apply, and this being global really helps us to share our view, or also connect them to our network. For early stage, being local is a competitive advantage, as you're, you know, actually involved in building the product, hiring the engineers, etc. The later stage, global becomes, becomes a competitive advantage as well.

AI assessment note: “being global has been very useful for us in pattern recognition”

Q Final question for, before we move into the quickfire and it's purely based on the global nature of DST. Because it's, it's incredibly interesting when you look at the global spread. So talk to me about this. Um, why does being global help, do you think?

A Absolutely. So, uh, being global has been very useful for us in pattern recognition, and we've also been fairly thematic in our approach overall. So we saw what was happening at mail, and we invested in Facebook, and then followed that with WhatsApp, Twitter, and Snapchat. So social was the early theme that we had. The other theme that we worked on was Starting in 2011 was e-commerce. So we invested in Alibaba and JD in 2011. Then got involved in Zalando in Europe, Flipkart in India, Vision House in the US. A similar story with on demand transport as well. We got involved first with Didi and then got involved in Ola and Gojek in Indonesia. So it's been a pretty important element of our sourcing. And also our founders love to know what's going on around the world because they're interested in learning what they can learn from. From their peers outside, that they could apply, and this being global really helps us to share our view, or also connect them to our network. For early stage, being local is a competitive advantage, as you're, you know, actually involved in building the product, hiring the engineers, etc. The later stage, global becomes, becomes a competitive advantage as well.

AI assessment note: “being global has been very useful for us in pattern recognition”

Q No, that makes sense. We recently had Jules Malts on the show from IVP. Uh, and he said that we've seen the transition in late stage investing from reactive to proactive. So in terms of the, the sourcing and the picking of companies, I'm interested as to, to what extent you'd agree with this statement first?

A Sure. I think, you know, it's become proactive in a way around the sourcing side, because you have to build a relationship with the founder before they reach the late stage or whichever stage you're investing at. And so that's kind of like being helpful Even when they are still not at the stage at which we would be, uh, we would be investing. And you can get, like, a much more informed view, as he was speaking earlier as well, about the founder, if you spend more and more time with him. So I would say proactive, proactive definitely helps. You can have early access to one of the smartest ideas around. And so what, what I would say I would be doing is, you know, be constantly thinking about which companies have the potential to be, say, five, ten billion dollars in GMB scale, if they're a transactional platform, or which have The potential to have a million orders a day, and both these sets are very small on a global scale. There are only 10 internet companies globally, public or private, which have ten billion GMB, and there are less than 15 companies It's globally with a million orders a day. It's quite astonishing that in a three billion internet user world, we only have like so many companies. It's a very select club in a very valuable club. So we would start early on thinking about which sectors, which verticals can create those kinds of, uh, those size platforms. And if yo…

AI assessment note: “it's become proactive in a way around the sourcing side”

Q No, that makes sense. We recently had Jules Malts on the show from IVP. Uh, and he said that we've seen the transition in late stage investing from reactive to proactive. So in terms of the, the sourcing and the picking of companies, I'm interested as to, to what extent you'd agree with this statement first?

A Sure. I think, you know, it's become proactive in a way around the sourcing side, because you have to build a relationship with the founder before they reach the late stage or whichever stage you're investing at. And so that's kind of like being helpful Even when they are still not at the stage at which we would be, uh, we would be investing. And you can get, like, a much more informed view, as he was speaking earlier as well, about the founder, if you spend more and more time with him. So I would say proactive, proactive definitely helps. You can have early access to one of the smartest ideas around. And so what, what I would say I would be doing is, you know, be constantly thinking about which companies have the potential to be, say, five, ten billion dollars in GMB scale, if they're a transactional platform, or which have The potential to have a million orders a day, and both these sets are very small on a global scale. There are only 10 internet companies globally, public or private, which have ten billion GMB, and there are less than 15 companies It's globally with a million orders a day. It's quite astonishing that in a three billion internet user world, we only have like so many companies. It's a very select club in a very valuable club. So we would start early on thinking about which sectors, which verticals can create those kinds of, uh, those size platforms. And if yo…

AI assessment note: “I think, you know, it's become proactive in a way around the sourcing side”

Q discussed slightly before, um, and it's with a statement that VCs often say to me, and it's, it's all about the founder, Harry. And, uh, I recently had the likes of Rory O'Driscoll at scale on the show, and he said, actually, at growth stage, markets make outcomes, and the team and founders less important. I'm intrigued here. What's your take on founder importance as we move down the funnel?

A Sure. So, I think, you know, obviously, respecting Everybody's view here, but I have a slightly different view. I think strongest founders create disproportionate value, and the pace at which the tech industry is moving, long-term vision has become an extremely important part of the success of these businesses, and you have to invest five, 10 years out rather than managing the business on a quarterly basis. So you look at what Facebook, Amazon, Netflix have all managed to do as public companies. A big portion of their success goes to the ability to manage the business, It's pretty much like a private company, and strong founders attract amazing talent, right? So it's, it's their vision that gets people attracted and excited about, about, like, what they are building. So our investment thesis has always revolved a lot around the founder, and we've only invested in founder-led companies from the very beginning. At the same time, obviously, we combine the founder view with the view around the product, you know, competition, category leadership, the market, the potential, how big the company It could be, et cetera. So there's a different elements that go into it as well, but the founder is at the center stage of that decision-making process. So this is like my view from a consumer internet lens, and I'm sure, you know, someone who does more enterprise might have a slightly differen…

AI assessment note: “I have a slightly different view. I think strongest founders create disproportionate value”

Q Can I ask, how important do you think is it for the founder to make the transition from founder to manager?

A I think that is actually something very important as you go through the growth stage, because when you start, you know, you could be a genius at product or tech, or if you have a sales orientation, you could be amazing at that, but it's extremely important to transition from like a founder to a true CEO, and that is something that we have to judge. Could manage a company which is 10, 20, 30 times bigger than when we are investing? Will they be able to attract the talent? Will they be able to, you know, work with a larger group of people? Can they motivate and inspire other leaders to be born in the company, etc.? And can they retain the smartest talent? So that is an extremely important aspect, and which is why we spend so much time with the founders, with the management teams, to understand their personality and their working style. And you see, actually, a lot of founders grow over time as well. So, you know, not everybody's a born leader, but the smartest founders, and this is kind of like where we, you know, help them in a small way as well. You put them in touch with the other most successful founders, and they spend like an hour or two together, and they pick up amazing ideas from that on, you know, how they have to groom themselves and grow. So it's, you know, they kind of like find mentors themselves through that process, and they observe what the success, the traits of…

AI assessment note: “I think that is actually something very important as you go through the growth stage”

Q Can I ask, at the growth stage, in the stage that DST invests, is that a stage where the founder should have already made the transition to the visionary and the manager, or is that still the very early stages of being the early stage founder?

A I think there will be three stages, right? One is the stage in the seed or series A, Second is a stage as a growth slash late stage kind of a founder. And third is more of a public company founder. So when we would be investing, they are already in that process or have actually truly become very mature leaders as well. And even if they have like, they have like a couple of areas that they have to improve, the path is pretty clear. And a lot of them obviously have to learn on the way, along the way, uh, in terms of like being a public company CEO, because the demands of that could be like different. So I think you're right. In saying that we would have observed them grow, but what we would do is we would be building relationships as founders much before we would actually invest. So we would have chance to actually observe them even before we have made the investment. So that is the process when you see them grow as managers, and then when they are, when they are there as leaders and managers, then you, you know, then you can always, then you basically get involved.

AI assessment note: “when we would be investing, they are already in that process or have actually truly become”

Q We spoke about kind of pragmatic and mature founders there, and one element that a lot of very pragmatic and mature founders kind of perceive now is the rise and prominence of the importance of unit economics. So I'm intrigued with regards to this as how much of a role does unit economics and its importance play in your thinking and evaluation process?

A Sure, no, great question. So unit economics is definitely a very important element in our evaluation, along with other met Metrics on growth, retention, engagement, market share, etc. However, one has to be cognizant that if you're creating a new user behavior, it can be unit economics inefficient for some time. So we are also focused on understanding whether the industry structure would fundamentally support like long-term profitability or not. And what can happen is a company can be operating in multiple geographies, multiple cities, multiple categories of products. So you also have to see whether they have Positive in economics in its more mature markets or categories? And if so, what does the growth look at that timeframe, right? So companies could be investing in their developing markets, could be profitable already in their mature markets. So if you overlay the growth at that stage, then you get the real picture. So it is an extremely important element, but has to be looked at in conjunction with, you know, a number of different things. Also, Take longer for unit economics to be fully proven out, uh, as there is significant investment that goes into building the infrastructure. Like you see what happened in Chinese e-commerce or Chinese ride sharing, or there could be significant competition as well, which can impact near term unit economics. So there is no one size fits …

AI assessment note: “unit economics is definitely a very important element in our evaluation”

Q Can I ask, at the growth stage, in the stage that DST invests, is that a stage where the founder should have already made the transition to the visionary and the manager, or is that still the very early stages of being the early stage founder?

A I think there will be three stages, right? One is the stage in the seed or series A, Second is a stage as a growth slash late stage kind of a founder. And third is more of a public company founder. So when we would be investing, they are already in that process or have actually truly become very mature leaders as well. And even if they have like, they have like a couple of areas that they have to improve, the path is pretty clear. And a lot of them obviously have to learn on the way, along the way, uh, in terms of like being a public company CEO, because the demands of that could be like different. So I think you're right. In saying that we would have observed them grow, but what we would do is we would be building relationships as founders much before we would actually invest. So we would have chance to actually observe them even before we have made the investment. So that is the process when you see them grow as managers, and then when they are, when they are there as leaders and managers, then you, you know, then you can always, then you basically get involved.

AI assessment note: “they are already in that process or have actually truly become very mature leaders”

Q We spoke about kind of pragmatic and mature founders there, and one element that a lot of very pragmatic and mature founders kind of perceive now is the rise and prominence of the importance of unit economics. So I'm intrigued with regards to this as how much of a role does unit economics and its importance play in your thinking and evaluation process?

A Sure, no, great question. So unit economics is definitely a very important element in our evaluation, along with other met Metrics on growth, retention, engagement, market share, etc. However, one has to be cognizant that if you're creating a new user behavior, it can be unit economics inefficient for some time. So we are also focused on understanding whether the industry structure would fundamentally support like long-term profitability or not. And what can happen is a company can be operating in multiple geographies, multiple cities, multiple categories of products. So you also have to see whether they have Positive in economics in its more mature markets or categories? And if so, what does the growth look at that timeframe, right? So companies could be investing in their developing markets, could be profitable already in their mature markets. So if you overlay the growth at that stage, then you get the real picture. So it is an extremely important element, but has to be looked at in conjunction with, you know, a number of different things. Also, Take longer for unit economics to be fully proven out, uh, as there is significant investment that goes into building the infrastructure. Like you see what happened in Chinese e-commerce or Chinese ride sharing, or there could be significant competition as well, which can impact near term unit economics. So there is no one size fits …

AI assessment note: “unit economics is definitely a very important element in our evaluation”

Q I'm too interested now. As a VC myself at Series A, I like to get to know them when they've just raised their seed round. At what stage do you like to get to know founders to build up that narrative and life cycle?

A You would like to know them as early as possible to build a relationship, because that's an extremely important part of, of our sourcing where we would have the edge as well. But ideally, you know, call it 12 to 18 months before, and then you've had, like, a few interactions with them. They hopefully started to like you, and you kind of, like, believe in what they are doing, and then you, along the way, help them as well in whatever small way you can, so that they, they see the value of, you know, having you as well. But there's no fixed timeframe, but you want to meet, you know, if you tell me today there is an amazingly smart founder who's just done a seed, I would still love to meet him because it might not take, it might take him like only a couple of years before, you know, he is, uh, he's running a, you know, a significant, meaningful business. So knowing them as early as possible is, uh, is important. So I think the core of founder view comes from spending as much time as possible.

AI assessment note: “ideally, you know, call it 12 to 18 months before”

Q discussed slightly before, um, and it's with a statement that VCs often say to me, and it's, it's all about the founder, Harry. And, uh, I recently had the likes of Rory O'Driscoll at scale on the show, and he said, actually, at growth stage, markets make outcomes, and the team and founders less important. I'm intrigued here. What's your take on founder importance as we move down the funnel?

A Sure. So, I think, you know, obviously, respecting Everybody's view here, but I have a slightly different view. I think strongest founders create disproportionate value, and the pace at which the tech industry is moving, long-term vision has become an extremely important part of the success of these businesses, and you have to invest five, 10 years out rather than managing the business on a quarterly basis. So you look at what Facebook, Amazon, Netflix have all managed to do as public companies. A big portion of their success goes to the ability to manage the business, It's pretty much like a private company, and strong founders attract amazing talent, right? So it's, it's their vision that gets people attracted and excited about, about, like, what they are building. So our investment thesis has always revolved a lot around the founder, and we've only invested in founder-led companies from the very beginning. At the same time, obviously, we combine the founder view with the view around the product, you know, competition, category leadership, the market, the potential, how big the company It could be, et cetera. So there's a different elements that go into it as well, but the founder is at the center stage of that decision-making process. So this is like my view from a consumer internet lens, and I'm sure, you know, someone who does more enterprise might have a slightly differen…

AI assessment note: “strongest founders create disproportionate value, and the pace at which the tech industry is moving”

Q moats there. I'm, I'm really interested, because I, I was, uh, obviously reading about, uh, Evan Spiegel and Snapchat, and he said with regards to the proposition that there's no moats surrounding the opportunities. So I'm intrigued to hear your thoughts on kind of a no moat opportunity where it's a bet on a visionary or a product in particular. What's your thoughts around kind of lack of competitive moats?

A I think different industries have different moats. Like in the social world, your network is your moat already. It's very difficult for people to have 50 different networks in the social world. You know, you have Facebook, Snapchat, Instagram, WhatsApp. You already have those in the US, right? So it's not That's straightforward to create, like, new networks. So network effects becomes an important moat in some sense as well. If you have exclusive supply arrangements, that's an extremely important moat. So I think every industry is going to be different. A transactional platform will have different competitive moats compared to a social platform. Every, every industry has to, it has to have the right moat structure as well in a way.

AI assessment note: “I think different industries have different moats. Like in the social world, your network is”

Q I'm too interested now. As a VC myself at Series A, I like to get to know them when they've just raised their seed round. At what stage do you like to get to know founders to build up that narrative and life cycle?

A You would like to know them as early as possible to build a relationship, because that's an extremely important part of, of our sourcing where we would have the edge as well. But ideally, you know, call it 12 to 18 months before, and then you've had, like, a few interactions with them. They hopefully started to like you, and you kind of, like, believe in what they are doing, and then you, along the way, help them as well in whatever small way you can, so that they, they see the value of, you know, having you as well. But there's no fixed timeframe, but you want to meet, you know, if you tell me today there is an amazingly smart founder who's just done a seed, I would still love to meet him because it might not take, it might take him like only a couple of years before, you know, he is, uh, he's running a, you know, a significant, meaningful business. So knowing them as early as possible is, uh, is important. So I think the core of founder view comes from spending as much time as possible.

AI assessment note: “ideally, you know, call it 12 to 18 months before”

Q Can I ask, how important do you think is it for the founder to make the transition from founder to manager?

A I think that is actually something very important as you go through the growth stage, because when you start, you know, you could be a genius at product or tech, or if you have a sales orientation, you could be amazing at that, but it's extremely important to transition from like a founder to a true CEO, and that is something that we have to judge. Could manage a company which is 10, 20, 30 times bigger than when we are investing? Will they be able to attract the talent? Will they be able to, you know, work with a larger group of people? Can they motivate and inspire other leaders to be born in the company, etc.? And can they retain the smartest talent? So that is an extremely important aspect, and which is why we spend so much time with the founders, with the management teams, to understand their personality and their working style. And you see, actually, a lot of founders grow over time as well. So, you know, not everybody's a born leader, but the smartest founders, and this is kind of like where we, you know, help them in a small way as well. You put them in touch with the other most successful founders, and they spend like an hour or two together, and they pick up amazing ideas from that on, you know, how they have to groom themselves and grow. So it's, you know, they kind of like find mentors themselves through that process, and they observe what the success, the traits of…

AI assessment note: “I think that is actually something very important as you go through the growth stage”

Q Can I ask, what's your thoughts on the kind of burning the boats thesis in terms of first to market and really taking the market before any competitors?

A Speed is always very useful. So if you have access to capital and the product idea fundamentally makes sense, then I would say it overall is the right thing to do to be pretty aggressive early on and try and take as much market share as possible. At the same time, you know, one has to be investing in the competitive moats as well. It's not just about burning capital and gaining market share because then somebody else can come in with a higher degree of capital and burn more. It's about what have you created from an infrastructure standpoint or ecosystem standpoint, which is actually as important as the early market share that you have. We really think about market share quite a bit. It's something which, you know, a lot of people would be focused on. And hence, some companies prefer to stay stealth. And we like that. And we have a few companies in the portfolio, which were given as late stage investments We never announced them for a long time. Uh, so founders wanted that to basically never have competition, or even, like, other players have a sense of how big they've become. Stealth can be pretty useful, so one should, you know, it's always good to make, make, like, funding announcement, but it has to, it also has to come with, uh, with the business, uh, logic around it.

AI assessment note: “overall is the right thing to do to be pretty aggressive early on”

Q Can I ask, what's your thoughts on the kind of burning the boats thesis in terms of first to market and really taking the market before any competitors?

A Speed is always very useful. So if you have access to capital and the product idea fundamentally makes sense, then I would say it overall is the right thing to do to be pretty aggressive early on and try and take as much market share as possible. At the same time, you know, one has to be investing in the competitive moats as well. It's not just about burning capital and gaining market share because then somebody else can come in with a higher degree of capital and burn more. It's about what have you created from an infrastructure standpoint or ecosystem standpoint, which is actually as important as the early market share that you have. We really think about market share quite a bit. It's something which, you know, a lot of people would be focused on. And hence, some companies prefer to stay stealth. And we like that. And we have a few companies in the portfolio, which were given as late stage investments We never announced them for a long time. Uh, so founders wanted that to basically never have competition, or even, like, other players have a sense of how big they've become. Stealth can be pretty useful, so one should, you know, it's always good to make, make, like, funding announcement, but it has to, it also has to come with, uh, with the business, uh, logic around it.

AI assessment note: “overall is the right thing to do to be pretty aggressive early on”

Q moats there. I'm, I'm really interested, because I, I was, uh, obviously reading about, uh, Evan Spiegel and Snapchat, and he said with regards to the proposition that there's no moats surrounding the opportunities. So I'm intrigued to hear your thoughts on kind of a no moat opportunity where it's a bet on a visionary or a product in particular. What's your thoughts around kind of lack of competitive moats?

A I think different industries have different moats. Like in the social world, your network is your moat already. It's very difficult for people to have 50 different networks in the social world. You know, you have Facebook, Snapchat, Instagram, WhatsApp. You already have those in the US, right? So it's not That's straightforward to create, like, new networks. So network effects becomes an important moat in some sense as well. If you have exclusive supply arrangements, that's an extremely important moat. So I think every industry is going to be different. A transactional platform will have different competitive moats compared to a social platform. Every, every industry has to, it has to have the right moat structure as well in a way.

AI assessment note: “I think different industries have different moats.”