The Exchanges

Q Can you tell us about the consumer investments you have made since you came back? In your growth role at Chico?

A Sure. Uh, in last three, four years, we have been, um, investors, we have invested in many consumer internet businesses. I think one of the most recent ones of that is Mama Earth, uh, which is going after the thesis that I just mentioned of, uh, being a digital first personal care brand for their consumers. And, uh, the founder Varun Alaa comes, uh, from a very rich brand, uh, Manager background, and, ah, has taken a very different take to this market, something we have not seen before, and we are very excited to partner with him. Ah, few other investments, ah, Sequoia has made in the consumer internet space would be, ah, business like Eruditis, which is an education business, which is focusing towards its consumer to help them, ah, do higher education, but without taking the break and going to US for that, but they are rather bringing those, ah, Ivy League, Tier one U S education brands, uh, closer to their consumer, allowing them to upscale and get the degree. Uh, these would be a few examples.

AI assessment note: “I think one of the most recent ones of that is Mama Earth”

Q Can you show more light on the Razorpay investment? What were your thesis when you were making that investment? And there have been so many payment gateways, so many payment B to B solutions. What made you invest in one more?

A Well, uh, first of all, payments has been a extremely positive theme for us as Sequoia Capital globally. In India, starting from Prism Payments back in the days, which, uh, was an ATM, uh, uh, company, then Pine Labs, uh, Citrus, And now Razorpay Bhalkpay. So, uh, it is a sector of high interest. Within that, uh, what excited us about Razorpay was, uh, the vision of Herschel and Shashank. I think, uh, you are right that there are many businesses in this space, but their approach to this category is extremely unique. And, uh, they are extremely engineering and product focused when approaching the problem of payments and, uh, keeping the merchant And the merchant's consumer at the center of problem solving, um, which has allowed them to come up with very unique upgrades in the space, which includes, uh, reducing the onboarding time for the merchant significantly. If you're a merchant, you don't have the time to spend days and weeks trying to, uh, uh, bring online a payment method, and, uh, Razorpay reduced that time to a few hours from a few days. Then they have also gone to launch innovative, uh, payment products such as, uh, enabling payments through links, um, helping their merchants reduce frauds, uh, on, uh, cash on delivery through their products like Third Watch to increasing their customer satisfaction by enabling instant refunds. Um, and then most recently, uh, they have…

AI assessment note: “their approach to this category is extremely unique. And, they are extremely engineering”

Q Can you throw more light about in a deep manner on the companies at Sequoia that you have been a part of the investment committee or you are a part of their board now?

A We've been very active investors in financial services, uh, recently. Um, we have invested in, uh, three, uh, offline NBFCs, uh, namely Five Star Finance, Aptus Housing Finance, and Finova Capital. Uh, Five Star and Finova are, uh, MSME lending businesses, while Aptus is a housing finance business. And a common theme across all three is that, uh, they have been run by extremely experienced founders, uh, who have focused, uh, their strength On serving a specific class of consumers, and, ah, building a culture of, ah, strong underwriting, which has led to a very high quality book creation. And the second set of companies we have invested more recently are payments businesses, which includes, ah, Razer Pay, which is an online payment aggregator, and Bharat Pay, which is a significant market leader in the QR payments, ah, space. Uh, both of them are growing extremely fast, um, and, uh, have a lot, uh, a lot going for them, and we're extremely excited to be partners with them. Um, the third set is, uh, more marketplaces in the fintech space. Companies like, uh, Credex, who have, who are taking a off-book approach, uh, towards lending and enabling lending by working with many financial partners. Ah, Money Tap has done something similar. Ah, they are a more, ah, more hybrid approach, ah, so as to say, but these are the few companies we have invested in recently.

AI assessment note: “We have invested in, uh, three, uh, offline NBFCs, uh, namely Five Star Finance”

Q In your time at Sequoia India, how have you seen the Indian startup ecosystem evolve in the last nine years?

A Oh, it has evolved so much. Well, one way to think of it is, uh, if we were having this conversation exactly 10 years ago, in, um, January of, 20, 2020, 10, uh, Flipkart and Zomato would be extremely young companies, maybe two, three years old, and, uh, Ola and Oyo and Baiju's would probably still not be born. Um, Fast forward today, each of these businesses is an extremely successful large company defining the tech ecosystem for India. Uh, now put this in context of the fact that India is a much deeper market today than it was 10 years ago in terms of number of consumers who are, uh, online, uh, digitally savvy enough to consume online and have more money available with them. And that there is more capital than ever before available for the founders who are trying to tackle the problems of these consumers. I think we have not seen a more exciting time than this ever before. What has also changed is that the first set of fantastic businesses of India, uh, like, uh, Uber, uh, like Uber, Ola, Zomato, Flipkart, Paytm, Baiju's have provided us with a terrific set of Next generation entrepreneurs who have the benefit of having folks such as Sachin and Bini Bansal, Bhavish, Kunal Shah, Dipinder, Baiju as inspirations for them, and at the same time, many of these successful founders, we know, have taken out a bunch of their time to act as mentors, as guides to these young founders. So…

AI assessment note: “Flipkart and Zomato would be extremely young companies... Ola and Oyo and Baiju's”

Q Ishan, what's unique about the Sikawa culture that you mentioned about?

A Well, um, I've not been at many, many other investment firms, so I don't know if it's unique, but, uh, what is special is, um, our singular focus on doing the right thing for all our stakeholders. Namely, our founders, our limited partners, and, uh, the people who work at Sequoia. And it manifests in different ways. For our, uh, limited partners, it translates into being extremely performance focused. That is the core of every decision we make. We have the fortune of working with the limited partners who are institutions who impact millions of lives across the world, uh, such as endowment funds, hospitals, pension funds. So in some way, uh, all our efforts, all the returns we generate are in turn, uh, helping them make millions of lives better, and it gives a sense of purpose to us. Secondly, for our founders, ah, the way it manifests itself is that, um, we are extremely founder first, and if you spend a day at Sequoia, you'll realize that founders are at the core of every action, every decision we take, and it reflects very well in our mission statement, which is, ah, we help the daring build legendary companies from idea to IPO and beyond. That's our mission statement. That, that is what drives us, and it's also something we are really proud of. We want to be the four a.m. call for our founders. They should feel that we are their partners, and be open to sharing the bad news,…

AI assessment note: “what is special is, um, our singular focus on doing the right thing”

Q So, across these, ah, nine years at Sequoia, what has been the key to decision making, especially at the growth stage? How does that process work?

A That's an important question. Um, see decision making is, uh, at the center of everything we do. So we have spent a lot of time and a lot of hard work in making sure we create a culture of decision making, which is a fine balance between conviction and consensus. And the reason that these two are very important together is, uh, conviction helps us, uh, identify outlier opportunities. Conviction is defined by The ability of a few individuals to articulate an investment thesis and paint the dream case to the full group. Uh, this is extremely important because if we were not to follow this and only be consensus driven, we could reduce our decision making to only lowest common denominator decisions, which everybody agrees to. While we have seen in the past that some of the best investments, uh, Sequoia has made have been driven by Conviction of few than, ah, consensus of everyone. Ah, but that said, ah, we try very hard to balance this with consensus, and, ah, what consensus helps us with is, ah, it allows us to benefit from the, from the combined wisdom of the group, of the people, ah, who are part of our team. Ah, if, ah, we were evaluating An investment opportunity in the content space. Uh, my partner Rajan, who used to be the head of Google in India and Southeast Asia, is best placed to, uh, provide his perspective on the space, on the product, on the company. Uh, and we would …

AI assessment note: “create a culture of decision making, which is a fine balance between conviction and consensus.”

Q So, uh, you are a growth stage investment advisor at this moment. So when you are evaluating a business, what's the right time for that business to be known to you? It could be X million dollars of revenue or having so many millions of customers.

A So that I wish we had a perfect answer for that. Unfortunately, we don't, uh, and, uh, we discussed this quite often, uh, as a group as well. Uh, but the truth is, uh, different businesses have different metrics, uh, that are important for, uh, for it to, uh, achieve product market fit. And, uh, product market fit is what is most important for us as growth stage investor, investors. Um, But what we like to do is that we don't want to wait for, ah, for this moment to come. We would like to be in touch with the founders and companies at a very early stage, and, ah, stay in touch, ah, see how things are progressing, how their business is growing, and, ah, when they think it is the right time for them to take growth capital, and, ah, we believe that they have a cheap product market fit, is the best time for us to, ah, Engage and partner with them.

AI assessment note: “We would like to be in touch with the founders and companies at a very early stage”

Q What's the most important things that you have learned working here?

A Learned many things. Um, maybe the most important of them is, uh, being open-minded. See, I'm an engineer by background, uh, and the Indian education system teaches you to be right. You have to always gun for the right answer. That's how you score marks. Uh, that's what, what we are told in maths, in physics. But when you start doing investing, I think the biggest thing I have learned is that, uh, nothing is given. Uh, there is no perfect right or wrong answer like in maths. It is instead a complex chemistry of decisions you make on a daily basis, and there are many ingredients that impact the final answer, and it's full of exceptions. In our business, we are more often wrong than right, and it is extremely important to keep an open mind, and, uh, be willing to change your mind, uh, when, uh, counter data and facts present itself. Um, that has been the biggest learning, and, uh, these, uh, These facts and data points come from many directions. It could come from a team member asking a question that I had never thought of before. It could be, um, through a founder who presents a very different take, a very different perspective on a certain sector and how it's evolving. It could be a customer's reference call with somebody explaining how they use a product, which is very different from how I originally thought it would get used. So that has been my biggest learning. Be open-mind…

AI assessment note: “maybe the most important of them is, uh, being open-minded.”

Q And can you tell us more about the macros of each sector, which excite you as an opportunity?

A So let me, uh, Keep it as two large buckets. One is consumer, and one is financial services. In consumer, India is probably looking the best it has ever in this area, um, and it's driven by a few macro trends. Uh, we now have five hundred million plus internet users. Uh, the data is at the cheapest. Consumers are consuming it every day more and more, and Indian consumers, on average, are richer than they have ever been. This concoction together is presenting a phenomenal Tailwind for many of the sectors I mentioned in the space, ah, to create businesses, and, ah, the nature of these businesses is also changing. Ah, to keep, to pick an example, if you were creating an FMCG brand, ah, seven, eight, nine years ago, the only way for you to do it was a traditional FMCG fashion. However, today, the way these brands reach their consumers, market to their consumers, Uh, distribute to the consumers has completely changed. The micro marketing is a big trend. You are using platforms like Instagram, YouTube, um, as compared to only TV marketing. You are, uh, using all the e-commerce channels, including your own website as compared to the general trade and modern trade that those were the only channels available. And this is creating a pretty interesting opportunity, uh, to disrupt the FMCG brands of yesterday. Ah, and to create a very large company over the last, next 10 to 20 years. Simil…

AI assessment note: “Keep it as two large buckets. One is consumer, and one is financial services.”

Q So now coming on to financial services, what are the key micro trends except, you know, the other thing you mentioned that there are more options available to pay. What has been, you know, driver of today's India financial services infrastructure and where do you think it's going?

A I think one of the amazing drivers for Indian financial services ecosystem has been the initiatives that have been taken by the government and by RBI, by NPCI. UPI presents itself as one of the most forward payment infrastructures. We have now seen the account aggregator model, which is providing a democratized layer For, uh, financial institutions to access consumer data in a more seamless fashion. Uh, so I would say that is one big, uh, tailwind that is, uh, helping the sector grow. I think the second is, uh, just more and more availability of data. I think consumers and institutions alike are, uh, present on digital platforms more than ever before. They are leaving, uh, a larger footprint about their own data online than ever before, and this Is allowing, um, financial institutions to actually, uh, lend to them, um, in a much better fashion because they're able to understand their consumers in a more rich fashion than just looking at their bank account and their transactions. Um, and I think that's a very interesting trend we have, uh, we have seen. Um, many companies are using this trend in different shapes and forms to build their underwriting models.

AI assessment note: “one of the amazing drivers for Indian financial services ecosystem has been the initiatives”

Q Something off a topic. We are sitting here in 2020. Every week we hear a new neobank opening up. What's your take on that? Where these guys will be in the next three to five years?

A I think it's a, it's an extremely exciting space. Uh, if you look at Indian, uh, public markets, the largest share of value, uh, lies with banks. Many of these banks, such as including PSU banks are very traditional, were created many, many decades ago, and I think there's an opportunity, uh, to create banking systems, uh, whether full stack or riding on top of the banking infrastructure, which is way more consumer Centric, uh, which is able to serve today's, uh, millennial consumers and, uh, and also the corporates in a more, uh, technology advanced, advanced technology fashion, and I think many of these companies will choose their niches, their group of customers, and, uh, cater to their needs much better than banks, and create very valuable companies, uh, not just in the next three to five years, uh, But, uh, companies that will endure and become very large businesses over the next 1020 years.

AI assessment note: “create very valuable companies, uh, not just in the next three to five years”

Q And what are your other learnings? I would say key learnings that are part of you now.

A The other big learning for me has been, ah, to always being, be long term focused. Every decision we take, every question we ask, think about the long term, and, uh, think about the five, 10 year implication of everything we do, versus the, uh, immediate next quarter, next year implication, and it's very easy to get caught in that, because, uh, that is measurable, right? You take a decision today, in three months there's an implication of that, next year financial, there's an implication of that, but in this business, uh, um, as partners, With entrepreneurs, what matters is the long term, the five year and the 10 year, because, ah, that's the time scale we are looking at when we are trying to create, ah, enduring companies along with our partner, founders.

AI assessment note: “The other big learning for me has been, ah, to always being, be long term focused.”