The Exchanges

Q So, so enterprise infra, what are the areas for founders to tap in? What are your learnings from your existing company? You have invested in some of the fantastic companies like Nile.

A Yeah, Nile, Yuga Byte, Acryl, which is now called Data Hub. Um, so I would say in enterprise infrastructure, which is a vast stack, includes data, includes security, includes orchestration, includes site ops, SI, you know, many departments, many personas. One particular sub area which is a legacy area that I am super excited about to see how LLMs will impact them is in all things observability. So, the area say that today Datadog, Splunk, Elasticsearch, all of them play in the old New Relic and the massive budget. You have to opt their software that you pay for to operate your business and to know if your site is working okay, right, and then debug problems. I feel, and the underlying infrastructure is using, Mongo in some cases it's using Clickhouse in some cases, but a lot of it is based on the backend of Datadog. It's based on Elasticsearch, on the Elkstack. I think this area requires a couple of new companies with LLMs as their backbone. Um, so, throwing a challenge out. And the interesting thing about this area is, what kind of founders do you want to find there? I think this area is both hard with massive upside is because the DNA of founders needs to, there has to be a co-founder who knows applied AI really well. There has to be a co-founder who knows the observability and the whole thing about what we call MET, the nature of data. It's like metrics, and events, and logs…

AI assessment note: “One particular sub area which is a legacy area that I am super excited about”

Q So last thing is, you know, what are you doing beyond work in the India-US corridor? What is, what are your passions?

A Yeah, right. I would say I've always been fairly involved in the nonprofit sector. You know, we have been backing projects, whether they're in the South, whether they're East, Urissa, Bengal. So, in terms of, ah, you know, I have a nonprofit called Saxa, and we have always been big into women's and children's education and healthcare related initiatives in India. That is always true. Education remains a huge passion of mine. And I think education for a changing India, and for a changing US for that matter, is very important to me. And new modes of education, coursework, how do you teach differently, what are the skills that you want more from a trade side versus fundamental learning, remain very important to me. So, backing nonprofits and, you know, groups like Pratham in India, which works with the government, these are very important to me. A second is, you know, big into arts, especially music. Try to support a lot of the India-US corridor on music. Ah, also very passionate about the sacred music traditions of all over the world, especially India. Ah, music traditions which bring people together, you know, bring people together at a spiritual level. Ah, want to call out, there's a beautiful music festival that we, ah, we've been supporting for, for six, seven years now in New York City called Raga's Life. I'd be proud to say it's the only 24 hour Indian theme music festival …

AI assessment note: “I've always been fairly involved in the nonprofit sector... big into arts, especially music.”

Q So let's dissect, first of all, why do SaaS companies get high multiple? What's, why is?

A That's a deeper question that you're putting me on the spot. I think SaaS has also gone through a reboot. Ultimately, to me, the reason a lot of forward facing high multiples have been given There are a few drivers below it. One is that usage-based pricing will keep on growing without too much input. You don't have to throw bodies at it. That installed base will keep growing. That there's a lot of software in the act of doing that business. That's number one. Number two is in SaaS, if you look at just pure departmental SaaS or vertical SaaS, there are two or three winners, and the ones who will get network effects will actually end up winning big, right? If you go into this department, Sales or what marketing. That once you start winning, most people buying sales software will actually buy from you. To me, those are key, like, those are key parts. You have to come back and think about whether that's going to be possible in, in AI enabled services businesses. In terms of how, how will you buy the next five companies and scale them? Is there a network effect there? I would posit that's going to be a tough one. That, that, that once you have grown to hundred million dollars in revenue by buying three companies, growing to four hundred million dollars by buying 10 more companies, that's not a network based act. That you will probably have to do some special stuff to do those things…

AI assessment note: “the reason a lot of forward facing high multiples have been given There are a few drivers”

Q with something that you believe very corely in, which is, you know, the, the new set of services that are getting developed. People are talking about AI enabled services, uh, reimagining of IT services industry like TCS, Infosys. So, if you have to explain to a layman first principles wise, what are the various opportunities available in the services ecosystem today for entrepreneurs who come from software era, SaaS era?

A That's an amazing question, and as you and I talked about, I'm deep into it, and trying to struggle my way through creating thesis, and actually investing in companies, maybe even building companies, uh, services, and I think, ah, the reason it's very, very relevant to this conversation is, it's such an important part of the Indian economy. If you think about it, some numbers would be helpful. I think, if I, if I don't get this wrong, the amount, the revenue coming into India from services BPO, IT, non-IT is about four hundred billion. The total economy around the services economy, if you add the families and the schools and the hospitals and everything else is 1.2 trillion. And if I'm not getting it right, Indian economy is approximately 3.7 trillion. I think I'm getting the ballpark. So think about the magnitude of, uh, of impact this industry and its secondary economy has. Ah, at AVC and at a personal level, ah, when we do builds, when I think about a new thesis, we ask the question why now? In the services industry, the reason people are excited about it, or they think there will be massive dramatic transformational changes happening, is because of the new wave of Gen AI, right? Because, not because of old machine learning, not because of old neural nets, but because of this whole, ah, you know, foundation models which are based on transformers, which can do very, very powe…

AI assessment note: “In the services industry, the reason people are excited about it... is because of Gen AI”

Q Can you give some examples in the portfolio?

A In the portfolio, We have, ah, we have a small investment in a company called Titan, which is in the MSP IT roll-up phase area. We are very proud of our clinical trials company called Tilda, which is now in the, ah, which is about automation of clinical trials, which is now in the CRO space, which is in the research space, which is doing extremely well. We have a company called Loop, which is not based out of India, which is based out of here. Ah, Tilda has its engineering team largely sitting in India, which, so there's a Strong India, but Loop is an amazing company in the, in the entire payment cycle space for, you know, supply chain and invoicing. It's a very promising company. It's built amazing software. And we have a bunch more. We, maybe we have something in legal we can't talk about. Maybe, ah, ah, we will someday have something in that, the services aspect of travel that we can't talk about. But, ah, in the context of the US market, from USA, we have a lot of companies. Coming back to the India corridor, I would love to see, I mean, the expertise that is sitting in India at all levels. Business level, exec level, product level, around all things services is phenomenal. Probably number one in the world. Why shouldn't the AI-enabled revolution in those services industries not be happening from Bangalore and Pune and Chennai and Hyderabad? Would love to see that happen mo…

AI assessment note: “we have a small investment in a company called Titan, which is in the MSP”

Q But you had an MB offer or a job offer from IIM Calcutta?

A No. I had a job offer from HCL and a job offer. There were very few jobs. So the economic opportunities did not exist. So that's one. The other part is, I was always interested in computer science at a micro level and going and doing a PhD in, you know, in a good place in USA was always like studying algorithms was my passion, right? So it's a very micro thinking. There was no major thinking there. At that time, it wasn't that easy to find a professor, get into IIT Madras or Kanpur, the only two places, even Bombay, IIT Bombay CS is not like now it's like world top department. So in our generation, the opportunity was not there. It's just as simple as that. For somebody like us, a group of us who wanted to study. So it's a micro decision, right? It was not like you're running away from India, you're running towards something. It so happens that the confluence of hard work, history, and all the infrastructure that post-independence India built in a painstaking way, is the reason why the industry, including the IT industry that we talked about previously in this podcast, developed, and then the network effect that you and I just discussed happened of how that journey took for 20 years, right? Now, I have a lot of amazing friends who did their PhDs and came back as faculty.

AI assessment note: “No. I had a job offer from HCL”