The Exchanges

Q Anjali, uh, now I would like to go back in time and would want to know how your journey started, right? You worked as an engineer in ISRO to being a consultant at McKinsey, then being chairman of a, of a very large bank and now a VC.

A It's been an interesting journey full of lots of learning, lots of new experiences. Um, I did my project internship at ISRO. I grew up in the generation that was fascinated by Isaac Asimov and Carl Sagan and space and Star Trek. Uh, so I thought I would actually go work at ISRO and potentially at some point go work at NASA and so on. But I think having spending a year in a lab helped me realize, and I think this is very important for entrepreneurs as well. It helped me realize what I like doing, but what my strengths are. And, um, that led me to then pursue a degree in international policy and business, uh, from Columbia, and then joined McKinsey in New York as a strategy consultant focusing on financial services. So from there, I actually got involved with the banking innovation, particularly as it relates to microfinance. I moved back to India in 2000, continued to work with McKinsey. Um, ended up sort of chairing the board of Women's World Banking, advising Seva Bank, getting very involved with microfinance, not just as a development tool, but also as a mainstreaming activity for an entirely new borrower segment. And, uh, some of the earliest, uh, companies at that time that we, uh, sort of supported through lending, whether it is a Bandhan Bank or an Ujji one today, are very successful large-scale enterprises. So from there onwards to my first entrepreneurial opportunity, s…

AI assessment note: “I did my project internship at ISRO. I grew up in the generation”

Q And when was your first investment, if you go back in time, in which startup, if you can recall? Either in personal capacity or through an institution.

A Probably very first wouldn't would have been make my trip way back in 2001, but, uh, and then for a long period of time, did not do as much in the startup space. Came back with one of my earliest investments would have been Nika in a personal capacity other than TPG, of course, and TPG have been involved with Lenscart and a number of other successful, both in India and overseas investments. But Nika, I think in some ways has been such an inspiring journey, having known Falguni for a long time. And, uh, seeing a very, very successful woman at the top of her career to give up what she's done in her entire career. She was a top banker and, uh, go into a completely new field. It was so inspiring. Um, and I'm just privileged to have had the opportunity to be a part of the journey.

AI assessment note: “Probably very first wouldn't would have been make my trip way back in 2001”

Q seen the last two decades, India shape, the startup ecosystem shape in the last two decades. 20, uh, uh, uh, uh, 20, you know, we had only a couple of public companies like, uh, MakeMyTrip and Naukri, and today, Every day we see a startup going public and that's phenomenal. But, uh, is it a bubble or is it going to continue the momentum, which is we are seeing today?

A So I wouldn't say that it is a bubble or not a bubble. I think there are always cycles. We are probably seeing, uh, we are towards the top of an up cycle. Will there be some volatility? Absolutely. At the same time, the momentum will absolutely continue. So volatility may create some uncertainty in the short term, whether it is short term, medium term. I don't have a crystal ball. I wish I did. Um, but despite the volatility, I think the momentum is here to stay. For all the reasons I've mentioned before, I think secularly we are sitting on the convergence of some very, very powerful trends. Uh, one, as I mentioned earlier, is this the incredible, uh, quality and the positive quality of entrepreneurial talent, the kind of young people we see who are taking risk and absolutely fearless in experimenting and trying new things and not looking for a job. So that combined with the availability of capital plus technology, I think India is very uniquely positioned because, uh, from a, not just from an industry point of view, but also from a policy regime, We are unique in the world in the sense of having large public digital infrastructure and population scale. So we have 1.3 billion people with a biometric unique ID, right? So they are identifiable. They're discoverable. They are serviceable as consumers of anything, whether it is product or our financial services. One, two, having a …

AI assessment note: “At the same time, the momentum will absolutely continue.”

Q SaaS? Because earlier it used to take 10 years for a, for a company, like Freshworks is one of the very unique companies which lead three hundred million in 10 years, but not, not the top 20 SaaS companies are growing at that speed. So do you see the Darwin boxes of today becoming bigger than Freshworks, uh, in, in the years to come, and would there be many more?

A I would like to think that there will be many more Darwin boxes. Um, but that said, I think Rohit, Jayanth, and Chaitanya are a very, very special team. They are a very well, um, aligned team. I mentioned complementarity. There's tremendous complementarity across the three of them in their skill sets and how they work. They have also been able to attract kind of the right capital. They have used their initial earlier networks as well as insight to build a really strong product, very differentiated unique product, and then be able to take, take it to market in the right way. They have, uh, sort of been strategic about assembling a band of angels who are supportive, um, influencers in various markets, whether it was India or Southeast Asia. And, um, so yeah, I, so I think that the speed has increased of go to market as well as scaling up, uh, if anything, COVID has actually helped because what required enterprise sales earlier required you to be there in person and meet people and, and because of COVID all sales have happened remotely and virtually. So I think it has actually helped to accelerate the growth of enterprise SaaS. I see this in large companies as well, by the way, I sit on the board of Siemens and, uh, some of our processes that you could never have imagined that sales and service could be done remotely. And somehow everyone's figured out how to sell switchgear remot…

AI assessment note: “I would like to think that there will be many more Darwin boxes.”

Q and the upcoming winners like Animal, uh, and one of the largest one being Urban Company. What are the common patterns that you have seen across these various entrepreneurs? Because you are also, you know, changing your thesis on a, I would not say on a daily basis, but changing your patterns, right? You can't invest based on what you saw yesterday, but what are your learnings across these themes?

A I think you've mentioned something interesting, which is the importance of being agile, both as a fund manager, as well as a founder. Uh, and more recently, I will add to this list, right? So companies like Farmart, Farmart is building the largest micro SaaS platform, uh, for rural detail and, and farmers. And within six months, they've got a million farmers using very little capital. Nika has been built using very little capital. So one of the things I find In some of the best founders is tremendous learning agility. So they're constantly learning. They're constantly taking cues from their environment and able to agilely shift, but do it in a thoughtful way. So they're not just randomly pivoting all the time, but they're actually using data and analyzing very rapidly, and it need not be quantitative data. So one is learning agility. The second is the humility. So on the one hand, of course, founders always need to have confidence, founders and fund managers. But also have the humility to say, I don't know everything and I'm going to learn. So in order to learn, you need to have the humility to want to learn, uh, to acknowledge mistakes and quickly move forward and just incredible focus. So they're very focused. I think the hard work, the tenacity, the perseverance, all of that is a hygiene, but, uh, they're very focused and they're excellent at attracting talent and building g…

AI assessment note: “one of the things I find In some of the best founders is tremendous learning agility.”

Q and you have, uh, chaired a bank. Are they taking fast decisions? Like say earlier, you know, it's, it's a joke that among SaaS entrepreneurs that, uh, it may take up to a year to close an enterprise deal in many cases. Are, are they now like agile enough to take decisions within a quarter? Would you? On, let's say, a deal worth a hundred K ACV, a 100,000 dollars.

A So, a 100,000 dollar ACV, I think enterprises are far more willing now to experiment and pilot. But, uh, it will, the sales cycle is still a longer sales cycle than selling to another digital startup. So for a delivery to sell to an e-commerce company would probably take less time. And it's, you're talking to people like yourself. That is, if you're selling into an enterprise, then they are typically older, less digital, and so on. But interestingly, that has also changed. Enterprises have increasingly more appetite Uh, they recognize that they will not have all the solutions in-house, or your traditional, uh, enterprise tech providers may not have the solution, so they're quite willing to experiment, uh, and also partner with startups. A number of large companies have created their, their own little incubator and lab systems, and folks like me, we, we encourage them to do that, to give it a shot. But at the same time, if it's a mission-critical application, then obviously they will be a lot more thoughtful and do a lot more diligence, and yes, it could take up to a year before they Do a full deployment.

AI assessment note: “if it's a mission-critical application... it could take up to a year”

Q funds has become extremely short. Sometimes even you have to make a decision in one call. These days because rounds are getting built up so fast, which is good for the entrepreneur, but all the things that you talked about, you know, the entrepreneurial trades, the market trades, right? How are you able to shift from making decisions over a few months to now making decisions over a few days?

A So at the early stage, I'm not sure we ever had a few months. It's just that it has gone from being a few weeks now to a few days. Um, As a growth stage investor at TPG and a late stage private equity investor, you know, one always took more time because the values were higher. You had to, you had a lot more data to process, but at the early stage, given the kind of innovative business models, there is very little data. So really you are taking a bet on the entrepreneur. So what we tend to do is, as I mentioned, you know, we have sectors of interest. We are constantly learning. We are constantly watching trends there. And we are constantly meeting teams in that space. So we develop a thesis about what will work in our view. And it's not like we are not wrong. We are sometimes wrong as well. And then when we find a team that we like, that is solving the problem in a space where we think there's a large opportunity, then we move very quickly. So we do have the ability to move very quickly, um, largely because, of course, one of the advantages of being an India-centered, India-located fund is, uh, our processes are agile. So we don't have to go through a lot of cycles and take investment committees elsewhere.

AI assessment note: “we develop a thesis about what will work... then we move very quickly”

Q Uh, Anjali, uh, your time at McKinsey, right? How has that shaped you? If you can share like two, three frameworks that it, it has helped you develop as a professional, uh, right. And, and what you could share with others who could, you know, look at developing themselves from your own learnings, what you observed at McKinsey.

A I'm very grateful to the firm, because it has really shaped me. My early years as a business professional was spent at McKinsey, and a lot of that was in New York, and then some here in India as well. But I would say three things. It's, it's probably a unique place where you develop strong friendships inside the firm, so it's not competitive internally. Actually, quite to the contrary of what the popular perception is. Internally, some of our, still some of my closest friends Are the people I started my McKinsey career with. And, uh, we've all had different career journeys, but still very close the whole alumni network. In fact, you get closer after you leave the firm. Um, so learning how to work with people is a very important thing. The second thing at McKinsey is putting the purpose first. So it's always about client first, firm second, self last. So that, uh, it's almost kind of the, um, Defining your purpose in a way that is other than yourself and personal gain is a useful thing to have. It's quite liberating. It takes the pressure off you because you're working for a larger cause than your own benefit. Third is just the ability to go into any situation and be able to break it down into a sort of structured problem solving approach. So breaking down something that is very complex and disaggregating it into smaller solvable components Uh, is a great skill set to have, and …

AI assessment note: “I would say three things... learning how to work with people is a very important thing.”

Q know, between, uh, to invest in the best possible companies and then how, how do these funds you have pointed out earlier, right? You'd have to build your niche, but, uh, how, how do these, uh, funds then, uh, is it the fastest thing to fast or has the entrepreneur been able to choose between, let's say, uh, X versus Y when they're both cutting the same amount of check?

A I find, uh, entrepreneurs and the best entrepreneurs are actually fairly discerning. And they have the tough negotiations and, uh, and bring whoever they want onto the captivity. So we've been in several situations where because the founder has wanted Avana to be there or to work with us, they have actually worked actively to include us in the captivity. And we may not be the largest check, but that's okay. Um, that said, I always think that it is important to, as I mentioned earlier, to balance the cap table, to have funds that can, um, and it, and it's perfectly okay, by the way, in my view, for a founder to say, listen, somebody else is giving me a two X valuation, so I'd rather go work with that fund. So, you know, if there's another fund that has more conviction and more capital, then so be it. But yes, there is, it is competitive. Funds do compete with each other. Uh, early stage, I think a lot more funds collaborate. Uh, we are active co-investors. We have long relationships with many of the other funds. So we are very happy to be co-investors and, and work in a very collaborative way.

AI assessment note: “entrepreneurs and the best entrepreneurs are actually fairly discerning”

Q And if you remember, uh, you were the first check in the company, uh, in 2014, 2015 kind of time frame, or, uh, much before that?

A A little bit later. A little bit later. Yeah, yeah. But I've been first check in a company called Alpha Vector, which makes bicycles. And we've done first checks in several companies, and, uh, more recently, Siddharth, as you know, in several very small micro VC funds. Because in my view, and we, we really believe in this, that the entrepreneurial energy in India is so abundant. We are full of young people with great ideas, great talent. We have the technology. So let many, many more flowers bloom. So happy to support and actually participate. And I think with all of these, I feel I gain more and not just from, from a returns point of view, but from a learning and energy point of view.

AI assessment note: “A little bit later. A little bit later. Yeah, yeah.”

Q a, uh, investor in, in various funds, uh, uh, what are some of the themes, uh, that you observe the new funds coming up with, uh, right? Would you prefer, right? Uh, a fund, uh, manager with a entrepreneurial experience or, uh, with an experience of, let's say B school, uh, McKinsey, right? What are the different types of them strengths versus weakness? If you would have to think, uh,

A So I think when one is investing behind an entrepreneur or a new fund manager, uh, one applies a similar lens. Are they doing it for the right reasons? What problem are they looking to solve? So is there a unique proposition? How well positioned are they? Do they have the skills to deliver against that unique proposition? Uh, and particularly with the newer micro VCs like hundred X, right? We are excited that folks like you are taking the risk. And rather than joining another fund, you're creating a platform of your own, uh, with a unique thought process. And, you know, you are out there hustling, competing, and creating an institution. So much like we evaluate entrepreneurs, we also think about fund managers in the same way. Ideally in a fund, I like to see a combination of skill sets and complementarity in the team. So having three people who are exactly the same, yes, that makes for a more comfortable team, but potentially less creative thought process. So if you have somebody who's been an entrepreneur, somebody who's been potentially a consultant, but obviously also has had some investment experience in the past, uh, is ideal.

AI assessment note: “ideally in a fund, I like to see a combination of skill sets”

Q experience, uh, uh, across the last two decades, uh, how have these, uh, you know, funds, except capital, built the startup ecosystem of India? Because today, Indian funds are competing with the best of global funds, right? And the global funds like Tiger take one week to do the entire process, uh, which is at a breath making speed and Indian fund managers haven't been used to such speed. So,

A I think no fund managers are used to such speed. So the age of the fast moving, not even growth funds, but really hedge funds that are, that are now competing in late stage tech is not unique to India. It's also in the US. So, uh, and I say, God bless them. They bring in a lot of capital. They bring in a lot of velocity. Um, it is really changing the funding landscape and, and the dynamics of the funding landscape. So the traditional VCs have all had to shift their processes and the way the game is played a little bit. And in India, I think one of the things that you have to continuously as an entrepreneurial fund manager look for are unique niches. And ultimately it's not about capital. So, so that once you'd asked me, you know, what should an entrepreneur look for or a founder look for? So large checks can be written. There's plenty of capital available, but at the early stages, it is important to pick investors who you think will be value adding beyond capital. So craft the cap table carefully of funds that can bring large checks and continue to support through various rounds. But also funds who are value adding in a different way. They understand the ecosystem. They can help with business building. They can help you network. Um, and sort of very, very, very founder friendly fund managers as well. So I think it's important to craft the right capital.

AI assessment note: “funds who are value adding in a different way. They understand the ecosystem.”