The Exchanges

Q How did you and Sanjay meet? And when did you both decided to partner to start Bloom?

A So Sanjay and me, uh, it's definitely thanks to Mumbai Angels. So though we are contemporaries, both, uh, engineers from the mid nineties, basically we didn't get to meet until Mumbai angels. We found ourselves on a few common cap tables. And then, uh, we were kind of introduced by folks saying, Hey, you both are thinking about doing something in early stage. Maybe you should talk. And that's how the dating began. And it probably took, uh, nine months of that, uh, various vetting by, you know, my potentially one of them, a family office that was going to anchor him, his, Dad and brother and their family offers. And, uh, that journey led to finally us saying yes in middle of 2010. And so, uh, and then we never, never looked back. Uh, so very complimentary skills, very complimentary networks, very complimentary people. And so I think that's what, that's what's made it work.

AI assessment note: “we didn't get to meet until Mumbai angels... saying yes in middle of 2010”

Q Which markets where you had a thesis didn't work out for you?

A I think where thesis areas were either weak or where we were acting on the impulse of Uh, a little bit more emotion and a little less objectivity or getting market sizing wrong is where we have failed a bit. Um, gaming would be an example, right? First fund, three bets. Nothing has scaled or worked. Um, I don't think in the Indian market was ready. That's what all the series AVCs said. Never bet on any of them. So it became self-fulfilling. Um, all these guys struggled. Uh, two of them are still alive, but barely. They make They break even, but they're all million dollar-ish businesses. Um, the other thing I would argue where we failed quite a bit was trying to do vertical product commerce. Got onto the cycle too late. That entire commerce engine works as a herd mentality. Either everybody's making bets or nobody's making bets. And then you would bet on something like sports or school supplies or, Purple is the only one who survived. And I think they're built incredibly frugally from that generation. But otherwise all our bets died, right? And so there it's very tricky because the business scales, runs out of money. If you can't get the next round, you're screwed. And we didn't anticipate how critical that will become. We just, I think there was a lot of assumptions that, hey, you show a certain set of metrics and series A comes. I think in the first cycle we were as naive as t…

AI assessment note: “gaming would be an example, right? First fund, three bets. Nothing has scaled”

Q As part of the Bloom DNA, we would like to know, when you bought grey orange, there was no taker for that market in India. Say, where do you teach robotics in India?

A Yeah, yeah. Fund one, I mean, we're not going to take more credit than we deserve, right? It was about the diversity of our portfolio allowed us to carve out, because we did 70 bets, seven, eight or nine bets were deep tech. And I could get away by the valuations are so cheap. Uh, I don't know which era you've been tracking the market from, but if you look at 2011, 1213, our portfolio, 90% of our investments were made between a million and a half and three post. 90% of our investments, right? Nothing outside that range. That was where the market was. Nobody's giving paisa, no one's giving crazy valuations. And so as a result, we, with 200 K, we got a lot of the company and we got to take this risk and you got that leverage rest of it from a bunch of angels, right? The Bits Angels and a few other people. So if you didn't make those bets with that leverage and those odds, when will you make it, right? So partly it's structural. The market allowed us to take a lot more risks. That's it. We've played grey orange in every round since. All the way to the last round, close to half a billion dollars. That shows that we are evolving and saying we have conviction now. I don't care whether the rest of the Indian market thinks it's worth it or not. Thank God, you know, the Flipkart guys referred them to Tiger. Tiger came in. Rest hopefully will be history, right? From there we never looked…

AI assessment note: “partly it's structural. The market allowed us to take a lot more risks.”

Q So how, uh, were you able to build the first team at Bloom? What were the first three team members and how did you find them?

A I think the minute, uh, we got, uh, you know, people to, uh, listening to our pitches, a lot more people got to know. So everything from pipeline to team members, everything was reference LPs, everything was referral based, right? So you would pretty much have to, you're literally selling the vision and you're hoping that believers jump in. As any stakeholder. The guys who took money from us also had to believe in us, right? Uh, we, the first guys who took money from us took money when we had, like, you know, a first close of, like, 20 crores in a hundred crore fund. What if we didn't raise the rest? What if we didn't give all our money? So everybody believes in what vision and pitch you're making to them as well. Um, so, quite naturally, it's people who are connected to us in some form. And, uh, now that you ask that question, and I think about it, uh, two of the first three were through Mumbai Angel as a network. Adit used to volunteer there, uh, Adit Parekh. Uh, he had worked in Avishkar, but he had gotten out and was working with his uncle, who was an entrepreneur in logistics, and doing this on the side. And so when he heard that we were starting, he was very keen to be a part of the early team. So he was the first guy. Then Ashish was my, like, wingman even in the times group. Which was my last day job. So there was, again, this familiarity that allowed for me to bring on…

AI assessment note: “two of the first three were through Mumbai Angel as a network. Adit used to volunteer”

Q What challenges or hardships you have faced, which most of us don't know about?

A I think, um, I still don't think too many people appreciate how difficult it is for our side to raise capital, right? Uh, and it's incredibly tough. Uh, as much as I have to do it for a living, I'm not fond of that job. Uh, and it's no different from a founder's struggle. And we asked founders to, uh, Empathize with our empathizing for them by saying, look, we understand your pain. Don't lose heart because we do this for a living all day, and I wish it were easier for us. It's not easier. I'm hoping it'll get easier from fund four because we'll have results, but first three funds were all equally tough. Um, gets better, but it's equally tough. Uh, it's like somebody saying series B is easier than series A or C. No, it's tough. And, and that's one, one part. Second, I've realized is, uh, How much ever you feel like you're building a cute little 10, 15 person, now we're up to 16 people, small organization, I'm, I realize it's not necessarily my core forte. It's like, I, that part of entrepreneurship, I probably didn't, you know, fully sign up for in my head. I have to grow into it. So, it's not hardships, but it's just much tougher than you expect. Because you'd rather just be, you know, cutting checks, managing portfolio, you do fundraising, And suddenly, you know, you realize that you're responsible for a team that keeps growing, right? And their futures and their, and you're a…

AI assessment note: “I still don't think too many people appreciate how difficult it is for our side”

Q And what have been the challenges from the first, raising the first fund, deploying it, getting the money back to the LPs from the first and second fund?

A So I think one realization is that cycles are very long in this business, and that's not, uh, India's, uh, uh, specific, that's not a Bloom-specific problem. It's, uh, A and India-specific problem, and it's anyway a venture capital problem. So it's not like we are way off targets, because we have to benchmark ourselves. When we go overseas, by the way, you take a flight and get out of this country, they say, why the hell should I invest in India? Leave alone you. I have, I can invest in China, or I can invest in the US. So you're benchmarked overnight with global investors. Right? So it's not even your peers in India. You're suddenly somebody saying, I'd rather just not play a fund like you and I can invest in some Chinese fund. So the benchmark, we're not way off benchmarks, by the way. So we are eight years into our first fund, only three and a half years into our second fund, right? Closing in on four years later this year. And our first fund is marked up above three X. We've returned half the fund and that's not totally off whack. They just want to know, like somebody says, oh, I think you're going to be a great fund benchmark to global funds. They want to know that you can hit a five X. That's all they're asking. They're not expecting more given that India was a tough market, right? It's not been easy to see exits per se. My disappointment would be that we haven't yet buil…

AI assessment note: “our first fund companies are still predominantly subscale”

Q You have, as a fund, shied away from secondary exits, I would say. Why have?

A Philosophically, I don't believe in it. So until a company kind of reaches a billion dollars in valuation, and then I've lost track of why the hell they're raising more money or why they're mindlessly raising more money. I've not yet been in that luxurious position, to be honest. The only time those decisions have been imposed on me is because I've held Ola or Zomata stock or Truecaller stock as a By virtue of them acquiring my company. So I have no visibility into them. So we did sell all our stock. So it's not like we've never done. That's the only case we've done it. One case. And, and when the companies break into that unicorn territory, I feel like I lose visibility. I meaning I'm speaking for the firm. We lose visibility on, uh, where or why these companies are raising money, how they're executing the business. If miraculously I continue to be on the board, I still don't think I'll sell. Unless I believe that it doesn't meet my threshold of 30% IRR, let's say, right? Because that's what I'm kind of trying to promise my hot, my LPs who want me to be the hottest VC, right? Then if it follows below that, falls below that threshold, why am I still invested? But if I think it can maintain that threshold, why should I sell, right? And so I'm a believer that if the founder is the ultimate insider, And I'm the next best insider. I'm the next, I'm the guy who cut the first check m…

AI assessment note: “Philosophically, I don't believe in it.”

Q So B to B doesn't remain a core bet for you?

A It does. So when I say deep tech, it's predominantly B to B. I don't see us selling, you know, necessarily something genomic or Uh, you know, software, which is deep, anything in software, AI, robotics, which becomes consumer oriented. So that's B to B. It's just that even in B to B, I'm a little tired of playing marketing automation or like, you know, vertical software, sales efficiency. I'm like, where is our edge, right? We're competing with global players. There are going to be 16 such guys in the U S stuff. So we navigating some of that Early stage founder risk to occur, which we started with a couple of US funds. But when it comes to India centric, what deserves a million dollars, I'm saying, show me what, what's going on and how somebody is truly tapping artificial intelligence to build better customer centric, customer service centric applications. That's one of our bets. Or how's, uh, you know, how will we be doing, uh, truly indigenous Uh, three wheeler electric vehicle, small cargo. That's as narrow as that, right? And we're saying we'll double down on that kind of risk and that kind of a founder rather than simply pick something generic out there.

AI assessment note: “It does. So when I say deep tech, it's predominantly B to B.”

Q And how you see the vision for Bloom evolve in the next five to 10 years?

A So I think we, um, we see that, um, we've have to grow to what the customer wants you to become, like any good business, right? You can't say, no, I'll just be this, you know, cute guy cutting one crore checks. That's what we used to do and, uh, not move to where your customer wants you to. So I think we've been listening to our entrepreneurs. I don't think We're driven by the fact, of course, it's driven by the fact that we want to build a bigger team. We want finally a nicer office. We want to be able to, you know, get world-class institutional investors. That doesn't happen if you're 2030, 40, fifty million. So in a nutshell, we've been telling ourselves, Hey, what drives a, our partner vision and how do we translate that to our next level of leadership and the, to be, you know, uh, lifetime, you know, team members. Hopefully someday become partners. And then what kind of culture do we build to bring in more such people? So I want to be able to attract that passion and that talent as a team, because that's the fun of working together. Of course you can check out and just work with your founders, but that, then you could have done that as an angel investor. Why bother doing it as an institution? So the passion is to build a world-class or rather best in class institutional investor in this, at this scale. So that's why I say best in class, not Making tall claims that every as…

AI assessment note: “passion is to build a world-class or rather best in class institutional investor”

Q I would like to, you know, now come to the founder part. Since you have stressed on that quality so much. What have you observed in those founders who grew 50 to hundred since you invested and those who couldn't grow after the investment?

A So I think there are a bunch of, you know, in my opinion, there are a bunch of reasons. I don't think it's about, um, um, Only, I wish you can blame it all on the founder, but I think the various things, right? There's, uh, market conditions. So the crowd space gets super crowded and then the number of check writers disappear. Uh, there is, uh, niche markets, which we are guilty of funding in the first fund. Nobody seems to care about it after us. So then you're at two, three X, if you don't sell the business, You'll either become a lifestyle business or you'll die. So you might as well exit at two, three X, right? Uh, so niche markets don't work very well. Uh, and founders should have known better. We should have known better. Uh, so we drive away founders to think bigger now if they come back with too small a vision. Um, and, uh, finally it's, it's fatigue, I would argue, uh, where, you know, uh, three years pass, four years pass. There's not fatigue just at the founder level. It's across the organization. You're saying, hey, it's not like I'm getting 30% pay hikes here. Right? And we've been doing this for four years and growing organically. Nobody's cut a single check after the last round. So I, I'd rather just exit and move on. My opportunity cost is too high. And in a sense, I think the venture industry has got acclimatized to that behavior. They're saying, hey, if the op…

AI assessment note: “I don't think it's about... Only, I wish you can blame it all on the founder”

Q Do you see this herd mentality, sorry to say, of VCs, especially at the later stage, going away in the coming time?

A It's not easy. I think it's a probability game, right? Uh, it takes one person. I keep telling founders are super frustrated, right? They'll come to us and say, man, I've just finished like my, I'm looking at my Excel sheet and I've pitched to 80 people. How can nobody get this, right? What they don't realize is whether it's them or whether it's somebody who's raised money or I'm sure at some point, uh, you know, Dipinder or, uh, Sugi or Oyor, everybody would have gone through this. You feel like, hey, just because you got to where you are at, every round there was a bunch of people outside the door waiting to give you a check. No, it's usually just one person, right? It's a question of whether that one emerged out of 1520, or emerged out of 80 to hundred. And the reality seems to be the tougher the proposition, the more people you have to meet to make that probability work. So, I don't think the herd mentality is going away, right? Because effectively, It's led by how you think the next check writer is going to think. Right? And which automatically means by then the herd mentality is forming. Right? If you're not ahead of the curve, that means it's, you're already a part of the herd. And that's the irony of our business. So, uh, but that said, I think it'll resonate if there, if there are deep thinking thesis investors, and you don't need every one of them to be that in every …

AI assessment note: “I don't think the herd mentality is going away, right?”

Q What's your purpose in life? And what's the purpose of Bloom?

A I think it's, um, when we started, I felt it was more because we love the idea that we can work with Uh, founders on the ideation stage of a business. And we were naive enough to think that that excitement will carry us through, to be very honest. Uh, so, but it has limitations. You can't build a team. You can't build an institution with twenty million dollar funds, thirty million dollar funds. It's tough. It's a lifestyle business as we tell other people who come and pitch to us. You can make it a lifestyle business, but you can't institutionalize that behavior. And so we, we've been constantly asking ourselves that, and I mean, I know, you know, it'll, it'll sound kind of, you know, uh, like any other VC's pitch. I think we've come to realize that, you know, it, it's not very different from any other world-class VC, right? I'm not going to be unique on that front because I have to be motivated enough to come to work every day and drive myself and drive my team, uh, to go out of their way to help these young founders. So clearly it's around Young, early businesses. So we want to sort of partner and nurture, you know, really passionate entrepreneurs who are trying to solve really hard problems. I think that's been the shift. We don't want simple, you know, gimmicky, tweaky problems, right? We want people who really want to solve really hard problems, really transformative in na…

AI assessment note: “we want to sort of partner and nurture, you know, really passionate entrepreneurs”

Q Well said, Karthik. The last question for the podcast. What three advices would you like to share with young founders to deliver excellence in business?

A Probably going to blog about this, so I'll write more in detail in the next, uh, hopefully in the next week or two, if not in the next month. I'm, I'm tired of anything but IPO-like thinking, right? You can't build a business worthy of an IPO. Don't build boss, right? And so I'm of the view that all these like tiny hacks and building some cute product and Like some funky game or I'm tired. Right. I'm not interested anymore. So from my perspective and the founders are entitled to go build a business, sell it for thirty million dollars and make a lot of money. Right. It's not for me. So, and the advice is therefore that's coming out of it, whether the founders want to take it or not, is that I think I have begun to realize that you get one shot at grand glory. Right. There are very, very few founders who come and build three unicorn businesses. Right. Or four unicorns. So when you start, you don't start with the intent of saying, nahi yeh innings mein thoda, you know, pad up karke idar udar chowka maar humga. Hit ho gaya toh thik hai. Otherwise, we'll figure it out. Next innings, I'll play for a century. I don't want to be advising or be investing in such founders. You come to the crease, you say, I want a bat, you play for the century. Right. Which in my mind is an IPO. Right. Don't tell me you're building a business on the promise of something elaborate which can never go IPO. …

AI assessment note: “I'm tired of anything but IPO-like thinking, right? You can't build a business”

Q So how do you think companies like Google, Facebook, Instagram, WhatsApp can be built in India, where the founders are deeply technical and can visualize scale, but not so good at storytelling?

A Very tough. Very tough. I think, I mean, I haven't met some of these guys. I mean, uh, like share chat, for example, obviously he's done a good job. And I think, uh, the passion comes through in more and more, uh, VCs. If you look at, uh, what, um, I mean, we call them outliers. We call them mavericks. We call them, uh, uh, I think, uh, or I has coined misfits. So I think you're beginning to recognize that you got to be able to not, uh, straight jacket these into a formula that the founder has to be this way, but almost learn to spot the, uh, you know, the exceptions, right? If he was going by a rule book, then everybody can spot them. Right. And so it goes back to how you build a founder detection framework in some sense, and whether the founder and, uh, for me at least, uh, the, the yardstick is, um, do I, the founder and I, if I'm the investor and my team member relate and deal with the problem in their head as passionately as one another. And it's, it's very true that VCs find the founders they like and the founders like the VCs they like, true seven out of 10 times. Wherever they're misfits, it's not a happy marriage, but, you know, otherwise it's true. And so, therefore, I feel, you know, your, your ability to, uh, somehow weed them out from 2000 people to how many checks you're doing in a year is basically the skill and gut you have to develop, which is why it's still a,…

AI assessment note: “it goes back to how you build a founder detection framework in some sense”