The Exchanges

Q Ashwin, so, uh, tell me about, you know, you were part of ShareChat journey, right? How you came to invest in ShareChat? Like what stage you invested? I'm interested to know. And have you taken exit?

A Sure, sure. So, um, uh, share chat is from our Uniquid Angel portfolio. Uh, I have known the IQ guys for a long time. Um, uh, both Madhukar and Anand have been friends and, uh, we do a lot of work together. Um, so, uh, there was an opportunity that they had in an internal bridge round, um, that only insiders were doing and we were able to get some allocation there. So that's about a year ago or just about. And, uh, you know, from then on that, uh, journey has been quite fantastic. They've raised, uh, multiple rounds post our investment. Uh, and obviously we've all heard about how they've become a unicorn. Uh, but you know, to be honest, that investment is all credit to the IQ guys. We are, uh, uh, more thankful to them to give us an allocation. Um, uh, but, uh, you know, we're very happy to be part of the journey. No, no, we have not sold any shares that I think, uh, um, it's too early for us, uh, in the journey, but, uh, of course it's one of those where, you know, the valuation has gone up significantly since we invested, but, I think we are very confident of the company and the performance over the next few years.

AI assessment note: “No, no, we have not sold any shares that I think, uh, um, it's too early”

Q Tell me, you know, so, so a picture cannot be all rosy, right? So what are some of the things that didn't work out for you? As an investor or in your investment journey.

A Yeah, absolutely. I think we, we all have a habit of, uh, only talking about our winners, right? No one really talks about how difficult this business is, right? Um, and, and you know well that out of 10 deals, four or five deals will not work, right? In the angel business, early stage investing business. Uh, so, um, uh, we've had lots and lots of learnings. Um, on the debt side, we've had restructurings. We've had, you know, uh, we invested, uh, in a, Uh, uh, a restaurant company, a restaurant chain, um, uh, which had pan India presence, uh, up until let's say February of last year, that company was our, uh, one of our best performing companies, not a single day's delay. We had an escrow on their receivables, uh, the first year, second year before even the landlords get the rent or the employees get salary, our money, our payment used to hit, you know, direct debit. We were there. Uh, and suddenly you see that the world has changed, you know, for six months, they had zero sales. Now, how can a business that was doing a 150 crores a year and profitable, uh, survive when you have six months of zero sales, right? Uh, you have to, uh, manage your expenses. You have employees, you know, we have 1250 employees in that business. So it was a real struggle. Um, but having said that, you know, uh, we had great founders, um, and we were lucky that in that business, we had some, uh, deep …

AI assessment note: “on the debt side, we've had restructurings. We've had, you know, uh, we invested”

Q And, uh, Ashwin, uh, because you are doing both the things, right? You are doing, uh, debt, which is, More, uh, you know, figs in nature, very less risk, and there is equity, which is very high risk nature at the early stage. So, so as, and what would be your preference, let's say in this decade, uh, as an individual?

A As I said, I think that, um, uh, okay, let's put it this way. In my view, um, we are in the golden age of early stage investing. Um, uh, the, I think that it's a parallel to how the US was, um, you know, in the sort of, uh, nineties, maybe early 2000, uh, you're gonna have some of the biggest companies, uh, built in India, servicing India and rest of the world. Over the next 1015 years. So if, if anybody asks me, you know, I have some extra capital, which I don't mind parking away for 1015 years, right? Not for a two year, three year thing, and I'm completely okay losing it, in the sense that if, if, uh, you know, if I have a hundred rupees, this 20 rupees, even if it goes to zero, no problem, right? Uh, I would definitely suggest you put it in early stage startups, because, uh, you're gonna see some of the best companies, and, and, and then, Uh, apparently some of the best returns coming from early stage startups in the next 10 years.

AI assessment note: “I would definitely suggest you put it in early stage startups”

Q And Ashwin, you know, uh, uh, tell us about your favorite consumer stories. You have been part of, uh, Raw Pressery, Beera, right? How did you get into, into these companies?

A Sure. That's an interesting one. So Beera, one of the first, uh, you know, very early investors, uh, Um, I knew Ankur for a while before we invested. Actually, Ankur started off with a business called Sirana, where he used to import Uh, some of the best beers from Europe and the US, uh, and, uh, uh, sell them through bars. Uh, unfortunately, the, the challenge was that the duty structure, uh, was such that the beer used to be for 600 rupees in a bar. So I used to joke to Ankur that I can't even afford this beer, right? But those meetings were the best meetings you would go and Ankur would have a, uh, in his office in Zamrutpur in Delhi, very tiny office. He would have about Uh, six or eight different beers, and he would insist that you try a little bit of every beer, right? Uh, so if you're talking about eight different, you know, high quality beers, some had five percent alcohol level, some had eight percent alcohol level. You never walked out of that meeting, uh, you know, uh, in a straight line. You are always tipsy. So those were some of the best meetings you had. But, uh, you know, so, uh, it took us a while because, you know, that was my, uh, you know, fundamental issue with that business. I was telling Ankur that You know, I cannot buy a 600 rupee beer when I go to a bar every time or a restaurant every time. So, uh, and he, uh, he found that and he found that niche and …

AI assessment note: “I knew Ankur for a while before we invested.”

Q And, uh, Ashwin, uh, uh, so moving from, uh, twenty-twenty-one, right, uh, what would be your preference or I would, the question should be, your balance would tilt towards which side more? Would it be debt or would it be equity in terms of your own IRR?

A So actually there are two separate pools of capital. Um, see IRRs, uh, so if you're in early stage venture business, uh, you know, your, uh, IRRs have to be, uh, you know, you underwrite to much higher IRRs, right? Uh, whereas on the debt business, we have delivered something like, uh, net of fees for the last five, uh, almost five years, uh, 1718 quarters. We've delivered about 13, 13 and a half percent net of fees in our funds. So it's a different investor who is a debt investor, who's happy with a quarterly payout, uh, like an FD, uh, he's getting anything between 12 and 14%. He's happy with, with that kind of, uh, return. Um, whereas in early stage, you know, if you are underwriting to 12, 14%, you're gone because, uh, only two of 10 will work, right? So we have to go for the 25, 30% IRRs on the early stage equity side. So, uh, in fact, we have many of our investors who started with us on the credit side, saw a track record, invested across two funds, and now do a lot of early stage investing with us on the, uh, venture side. So it's a, it's, it's a, uh, different mindset, a different pool of capital, uh, but, you know, uh, today even the most conservative debt guys have seen how, uh, early stage angels have done, you know, you've, you've talked about hundred X's, et cetera. Um, uh, so, you know, they're also wanting to get into the strong startup space.

AI assessment note: “actually there are two separate pools of capital. Um, see IRRs”

Q And to conclude our podcast, you know, uh, let's talk about a journey where we are both, uh, you know, uh, uh, on the same path, right? Neiman Shoes. Uh, right. How, how has your experience been in the last five and a half years, two years?

A Yeah. I mean, very, very exciting. Again, Neiman was the first deal. It's, it's a very special place in our hearts because that was the first deal from our Angel AIF, uh, the Aniket Angel portfolio. So, um, uh, the first one you always remember. And I always kid, uh, to our team that usually the first deal is your worst deal. Um, uh, uh, because you're in a hurry to do it. You want to show this, that, uh, first and last deals of a portfolio are ones that you should never back on. But here Taran has completely proved us wrong. I think, you know, he has built a very high quality product. The brand has really taken shape now. Very interesting. One of the top industrialists in India who are, I happened to meet him on the golf course actually. He's a, he's a, A very ardent golfer. Uh, and he spotted I was wearing Neiman shoes. Uh, and he said, wow, these are Neiman shoes. And I said, sir, you've heard of the brand. He said, yeah, they're my favorite shoes. I have six pairs. I only wear them. They're the most comfortable shoes. Um, so, you know, uh, really, uh, uh, uh, one product is good. Uh, B how they have branded it has been great. Uh, and their journey is fantastic. You know, uh, hopefully in the next 3030, 45 days, they're gonna announce Uh, uh, a new round, uh, as you are aware, uh, you know, it's, it's, uh, uh, being done by one of the best consumer investors out there. Um, a…

AI assessment note: “I mean, very, very exciting. Again, Neiman was the first deal.”

Q And Ashwin, it said that we are at the, we are sitting in, you know, June, 20, 21. Uh, it said that we are at the, you know, uh, just on the cusp of, uh, the ending of bull cycle. Do you believe that? Or is the bull run going to be for another two, three years at least?

A See, I think no one knows, uh, you know, how long this party will go on for. I think, uh, you know, we've had a, uh, like a 20 year plus cycle. So I think, uh, uh, the odds are that it will end, uh, sooner rather than later. Uh, but having said that, uh, you know, if you invest, you know, in, uh, fundamentally good companies, good founders, right. Um, uh, and that's not that hard to do if you've been doing this for many years, right. Uh, he's very passionate. She's very passionate about her business. You know, the, uh, the market size is there. Um, uh, you know, the unit economics are there. You can see that, you know, maybe not today, but over course of two, three years, as you scale, you'll make money. Those businesses will test, you know, uh, will stay the course, right? Any market cycle, good, bad, ugly, you know, your, maybe your valuation will not jump as quickly. But again, if you are building businesses for 1015 years, even in the down market or even in a bad market cycle, uh, you will find the best of investors. Um, you know, some, some people say that when the markets are actually not so good, uh, uh, is the time where the IPOs that come out are the best in there, uh, the ones to subscribe to, right? Because in a bad market, somebody who goes public, uh, is already fighting, you know, not only a bad business environment, But, you know, the capital markets are not as f…

AI assessment note: “the odds are that it will end, uh, sooner rather than later.”

Q How do you, uh, because they are both different instruments. So how do you think about while investing debt, In a company, right? Whether they're, they're going to pay back, will be able to pay back or not in such a dynamic environment. And how do you think about what are your parameters, mental models to invest when you are as an equity investor?

A Sure. Sure. That's an excellent question. I think you're absolutely right. The companies that we fund on the, uh, debt side, they are much larger. So typically a hundred crore of annual revenues may even go to thousand crores of annual revenues. So, um, very large companies, um, typically PE backed, uh, companies and, uh, companies that are, uh, profitable. So that's the model that we have on the debt business. Uh, that's a blind pool of capital. Um, uh, the investors give us money to manage. We, we obviously, we have a significant contribution of our own money in the fund, but, um, uh, it's largely third party capital that we raise all domestic capital. Uh, and interestingly, Siddharth, we've raised all that thousand crores without a single distributor. We're probably one of the only funds out there, uh, who have largely, uh, raised money from references, friends and family, et cetera. Uh, so that's the debt business. Uh, on the, uh, equity business, uh, uh, we take, uh, we're open to doing very early stage. So seed stage, uh, investing two to four crores, uh, typically, uh, first check in, into the company, but we do love to partner with other, uh, investors, other groups, uh, and, uh, other VC funds. So we are very, uh, keen on, uh, you know, sharing the expertise that, People around us have developed in the ecosystem. So, um, so that's where, and at the same time, we're als…

AI assessment note: “companies that we fund on the, uh, debt side, they are much larger”

Q Ashwin, uh, you have also taken 10, 11 exits, but can you share more about those, right? Were they from the depth part or the angel part and how, what was the size of those exits?

A On, on the debt part, it's a very simple business, right? Um, we give, uh, a loan, uh, they pay us the interest and the principal. So, um, uh, we are very regular with exits there. Uh, and you know, we're very happy when a company pays us back, right? We never, um, uh, you know, not take, uh, we're always open to take premium prepayments. Uh, our thesis is we're giving capital for a particular opportunity. It's short term in nature. We charge a fee for, you know, the ability to close quickly and for the flexibility that we provide, but, you know, it's, it's temporary capital, uh, you know, it's bridge in nature or mezzanine in nature, uh, and it comes at a fee. Uh, so founders use it, you know, let's say that you're raising a next round. Uh, you're not getting the valuation that you are looking for, but you're very confident in six months, nine months, uh, with the pipeline that you have, uh, let's say you're a SaaS company, you can double, triple your, uh, you know, ARR. So, you know, you will get the valuation six months from now, and maybe your existing investor is not supporting you on that valuation, right? So you can come in and take a bridge from us, uh, once that, uh, next round is raised, let's say, 12 months from now or 18 months from now, Uh, we're very happy to get paid out. So, um, so on the debt business, we see exits very regularly. Uh, it's part and parcel, uh, …

AI assessment note: “So on the debt business, we see exits very regularly. It's part and parcel”