Mar 9, 2021 · 53m · neon-show
Starting angel investing, understanding spaces & sourcing deals with Arun Venkatachalam
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Angel investor Arun Venkatachalam shares his frameworks for generating sourcing alpha, maintaining a strict circle of competence in B2B and fintech, and executing high-conviction venture bets while bridging his family conglomerate background with early-stage investing.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
Siddhartha as informed peer 1.2 Guest teaching 2.4 Guest disagreement 0.6 Siddhartha pushing back 0.3
speaking balance: gold is Siddhartha, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 0:10 Arun declines to share exact exit return figures
Arun firmly sets a conversational boundary, refusing to put specific financial multiples or cash figures on his exits despite the host's direct question.
Hardest push from Siddhartha ▶ 0:10 Siddharth narrows the question after a deflectionWhen Arun balks at revealing numbers, Siddharth quickly clarifies that he is not asking for figures, insisting on knowing the company name.
Biggest teaching moment ▶ 0:43 Arun lectures on NBFC leverage limits and valuation cliffsDrawing on his family's Cholamandalam NBFC experience, Arun gives a masterclass illustrating how fintech lenders face severe dilution due to RBI leverage caps compared to fee-income software.
Siddhartha holds their own ▶ 0:09 Siddharth connects his personal venture backgroundSiddharth asserts his industry pedigree by noting he was part of the Morpheus incubator batch and that Ashish Tulsyan backed his previous company BabyGoGo.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Siddhartha as informed peer | Guest teaching | Guest disagreement | Siddhartha pushing back | Why |
|---|---|---|---|---|---|---|
| Family Roots, Early Career, and First Angel Check | 1 | 1 | 0 | 0 | Siddharth asks an open-ended opening question about Arun's background, allowing Arun to recount his family history at Murugappa Group, public market investing, and his first angel check into Posist. | |
| Finding Focus and Navigating the Circle of Competence | 4 | 1 | 0 | 0 | Siddharth demonstrates his own familiarity with the early startup ecosystem by mentioning his own Morpheus batch and co-investing relationship with Ashish Tulsyan after Arun describes his early portfolio. | |
| Portfolio Returns and the Partial Exit from Zetwerk | 2 | 2 | 2 | 3 | Arun politely deflects sharing specific numbers on his largest exit, leading Siddharth to press slightly by clarifying he only wants the company name, prompting Arun to discuss Zetwerk. | |
| Shifting Strategy: High-Conviction Concentrated Bets | 1 | 2 | 1 | 0 | Arun reframes Siddharth's premise regarding average check frequency, detailing his strategic shift toward writing larger, high-conviction checks like a micro-VC to maintain cap table relevance. | |
| Portfolio Deep Dive: Quiet Compounders to High-Scale Giants | 0 | 3 | 0 | 0 | Arun provides an extensive tour of his major portfolio companies across SaaS, B2B marketplaces, and fintech, while Siddharth simply listens and offers brief affirmations. | |
| Angel Investing Framework and Advice for Newcomers | 1 | 4 | 2 | 0 | Arun educates the listener and host on angel mechanics, rejecting the idea of spraying small checks into competitive deals without domain edge or proprietary access. | |
| Founder Resilience, Runway Management, and Low Mortality | 1 | 2 | 0 | 0 | Siddharth inquires about portfolio mortality, and Arun highlights how backing resilient founders with long runway management (citing 'The Psychology of Money') minimized startup deaths. | |
| Building Sourcing Alpha and Playing the Long Game | 0 | 3 | 0 | 0 | Arun delivers a masterclass on generating proprietary sourcing alpha by developing sector depth and fostering founder relationships well before fundraising rounds occur. | |
| The Fintech Landscape: Fee-Income Platforms vs Spread Lending | 1 | 5 | 1 | 0 | Arun delivers an in-depth breakdown of fintech fundamentals, contrasting the regulatory leverage limits and dilution of NBFC lending with the uncapped scalability of fee-income platforms. | |
| Turnaround Role at CG Power and Concluding Reflections | 1 | 1 | 0 | 0 | Siddharth asks about Arun's day-to-day work, allowing Arun to detail his operational involvement in the turnaround of distressed industrial conglomerate CG Power. |
Statements from this episode (21)
Venkatachalam: Investing in Bajaj Auto Finance in 2009 was extremely lucky
“I happened to be lucky enough to invest in a company called Bajaj Auto Finance in 2009, which became Bajaj Finance. You know, it could have been the greatest investment of all time, but you know, it went up, it just constantly kept going up. I sold it 33 times…”
Venkatachalam: Investing small amounts in new sectors drives learning
“For learning, sometimes it's okay to allocate a little bit of capital into exciting new areas. So obviously I may not be an expert, but I will ask if I can be a part of it.”
Venkatachalam: Backs Sauce VC rather than investing directly in consumer brands
“In consumer brands, I won't do it on my own. It's just too hard. You have to just do that one in, you know, one sector all day, every day. So I normally was not an LP. I used to do things direct, but for consumer brands, I said, okay, I will be an LP in sauce …”
Venkatachalam: Portfolio exits have returned nearly all invested principal capital
“Yeah, pretty much. Yeah, for the most part. If I net off what I just did in the last six months, yeah.”
Venkatachalam: Small angel cap table allocations face information and buyout pressure
“Today this ecosystem has matured to a point where if you're too small on the cap table things are starting to get a little hard, right? Are you going to get information? You know, some people want you out. How are you going to be more meaningful?”
Venkatachalam: Shifting angel strategy to concentrated bets like a micro VC
“To be meaningful on the cap table and, you know, to be You know, important to a founder that, you know, I'm really putting my money where my mouth is do fewer, but do deeper and almost behave like a micro VC. This is just my changes as the industry does change…”
Venkatachalam: Posist hasn't diluted equity since 2014, growing purely on cash flows
“Since 2014, he's not diluted me even once, right? And he's built this entire business just on his own cash flows, right?”
Venkatachalam: Zetwerk is a once-in-a-decade Indian company that can go global
“I, if this thing goes to the moon, it's pretty much got all the trappings Of a success story, because it's truly, you know, once in a decade, Indian company that can go global”
Venkatachalam: Unsecured consumer lending is actually a collections business
“The problem with that is, you know, it's not really a lending business. It's actually a collections business.”
Venkatachalam: India's credit market constraint is supply, not demand
“In India, the issue is not demand. It's really supply of credit.”
Venkatachalam: Investors seeking diversified venture returns should be fund LPs, not angels
“If you want a portfolio approach and you wanted a portfolio like return, then obviously you should just try to be an LP in somebody else's fund, right?”
Venkatachalam: New angel investors mostly see deals top angels passed on
“If you are new and you're entering this market, it's, you know, it's almost likely that you will get a deck that probably a lot of angels who have the pick of the litter kind of passed out on, you know, passed on.”
Venkatachalam: Most Indian VCs are generalists unlike US and Israeli investors
“Most VC guys in India, I'd say, you know, there are a lot of generalists in this space. I don't think there are too many specialists, as you may see in other parts of the world, especially, you know, in Israel or the US.”
Venkatachalam: Investors ignored B2B medical supplies during Medikabazaar's raise
“So for example, in Medica Bazaar, everybody went to the B to C pharmaceutical delivery guy. No one wanted to spend time on the B to B, you know, medical supplies.”
Venkatachalam: Sourcing alpha requires deep sector focus and non-transactional networking
“If you really want to alpha in sourcing spend time in a specific sector that Irrespective of whether it's hot or not. You like it. You spend time. Go speak to people where there's no live deal. And build relationships with people. Nothing will come in the firs…”
Venkatachalam: Angel investors should not expect winners in their first 4-5 years
“One Kind of thumb rule that's patient is don't expect to have a winner if you plan to do this consistently for the first four to five years, right?”
Venkatachalam: Angel investing de-risks family's brick-and-mortar conglomerate holdings
“My family is not going to promote any technology businesses. Our business model is to, you know, brick and mortar. We will do, you know, value added manufacturing. We will buy a competitor who is, you know, on the ropes. We'll turn that business around. And we…”
Venkatachalam: Building a $1B NBFC book results in 90% dilution
“So what ends up happening, you know, so that is people want to invest in NBFCs, but you don't realize that you'll be like 90% diluted by the time you build a billion dollar book, because you will just be pretty much operating at two to three X leverage.”
Venkatachalam: Tech lending startups hit a cliff and get valued like NBFCs
“If you want to come and invest in a lending business as a technology business, your valuation is just some random technology valuation, which is fine, right? But if you build that business consistently, the penultimate investor before an IPO will value it like…”