The Exchanges

Q And typically, uh, when you invest, what kind of value you bring besides money?

A Sure. So I think one is of course, you know, the strategic thinking and the inputs. Um, our founders, we leave all our internal departments open for them, the know-how open for them to come and meet Anyone they want. They can meet the sales head of Naukri. They can meet the marketing head of InfoEdge. They can understand how we do PR. It's all open for them to know and understand how we go about things. Second is we help them a lot in hiding. So if they want to make any top level hires, typically they have me or Sanjeev or both of us interview the candidate and, you know, then share opinion, et cetera. And the third is, of course, the general strategic direction of the business. We have frequent Meetings for brainstorming, business reviews, and more than the formal board meeting regime, we replace it with informal reviews where everyone gets included.

AI assessment note: “we leave all our internal departments open for them, the know-how open”

Q Yeah. And let's talk about the recent investments. So what do you saw in shop Kirana that you made investment and again did a follow on round?

A So, um, it's a great team, right? Um, they are experienced guys who have come out of PNG, right? Managing the supply chain, managing brand partnerships, so super understanding of the space and how to service the small retailers who they cater to right now. Uh, what was very interesting is that they had been operating in only indoor when we first invested, and they had made the economics work. It's very tough to make the economics work in the grocery supply chain space because the margins As they stand today are thin, so what do you do to increase the margins, or reduce your costs, or keep them in line, right? They demonstrated that to us, and then they scaled up with the first money we gave them. They went into Bhopal and Jaipur, and just the growth there was phenomenal, and the economics were great. So overall, I think it's a super team that is going after a space that they fully understand. It's a very large market, right? The B to B grocery supply chain is huge. Uh, lots of brands in India which are still under penetrated or don't have access. You know, we hear of the HULs and the PNGs, but lots of regional local brands, right, which need distribution. Uh, Kirana stores need better servicing, right? They are very small for the large distributors or for the best prices of the world. So I think overall, just everything, the thesis just seemed to have come together for the team…

AI assessment note: “experienced guys who have come out of PNG... and they had made the economics work”

Q And typically, it's a misconception that InfoH tends to take a 50% of the company. What's your take on that?

A Yeah. So, so I don't know how that came about, right? Because if you look at the current portfolio, only in one company, Uh, we have over 50% stake out of that, out, all the others are minority investments, and the first, uh, shareholding that we look for when we enter is typically between 15 to 25%, which is extremely regular and typical for an early stage investor, series A kind of, or a pre-series A investor to take. Uh, so I don't, so it is kind of misguiding, and how this comes about, uh, not very sure, but yes, we, we, we function like a typical, A venture capital investor would in terms of shareholdings or the way forward or the terms in the investment.

AI assessment note: “only in one company, Uh, we have over 50% stake”

Q You mentioned about corporate governance. What kind of, you know, policies you bring in terms of corporate governance to help startups work in a more structured way? Yeah.

A So, you know, um, once we invest, uh, we do put in place, um, the audit committee and we put in place other committees, right? And we make sure that there is, uh, independence of those committees at all times. We also make a provision for an independent director, even in our extremely early state startups, even if those seats remain Unfulfilled for a while. We at least make the provision that if someday the founder knows that the expectation is that someday if they find someone very credible and independent, they want, we want to get them on board for the company. It's good to have. Uh, try and go in for an, uh, for a chairman who is a non-executive, which is what we have at InfoEdge as well. It is good corporate governance, we believe. Uh, apart from that, just your regular audits, uh, are, there's a finance team internally that Helps our investing companies in completing their audits. We also have relationships, very robust relationships with the big four. So any kind of introductions you need, uh, you know, can be made and, uh, we prefer that you hire, you appoint a very good stat auditor, right? So all of these things we try and bring into place. Plus on a day-to-day basis, just trying to help the founders, um, you know, understand that any miss on corporate governance irrespective of the intent Or that it was just a small slip can have big consequences. So just be really c…

AI assessment note: “we do put in place, um, the audit committee and we put in place other committees”

Q And was it any point in your life you felt lost and what helped you recover from it?

A So when I, um, graduated from IIM Ahmedabad, I was very clear that I did not want to work at a multinational, but beyond that, there was not much clarity. Right? I took something which was a little different, but it did not work out. Um, that, but, but still, you know, I wanted to stick to my conviction. I did not want to take up anything till I had it all figured out, so I took about two to three months off where I was just trying to figure out what's next for me, and which was a bit of a tough situation because I had just graduated, right, less than six months, and here I was trying to figure it out. Uh, I, there's a professor by the name of, uh, Mr. Sunil Anda, Who teaches entrepreneurship at I am Ahmedabad, um, and he's probably one of the best in the field. Um, lots of startup, uh, founders, he's groomed and all of that. So he was a mentor to me, and he really helped me keep the conviction that you're going to find something good. Don't worry. Don't hurry up. Life is long. You're still pretty young. We'll figure it out. And then, uh, he was the one actually who put me in touch with Sanjeev, right? And that's how the meeting happened. So, um, I would say that that was a tough situation because of the lack of clarity. And when you have your peers all going into these, uh, big companies, you just feel like, okay, I'm left behind, or what am I really doing? Uh, but just keepin…

AI assessment note: “So he was a mentor to me, and he really helped me keep the conviction”

Q Zomato and all these have been new internet companies. Has there been any sector specific focus also at InfoEdge? That you have to invest in these sectors?

A No, not really. Um, in terms of mandate, our mandate is fairly broad. We can make tech investments. We cannot do non-tech. That is outside our mandate. But amongst tech companies, we are fairly open. The reason it also looks way more diverse, uh, is because we don't invest in competition once we've invested in a company. And we are, we, we hold that very, very strongly irrespective of how that company is performing. That till we hold shares in one founder, We do not want a conflicting situation. We do not want the founder to ever be insecure or ever have to, you know, watch and not have that trust relationship with us, which is why our portfolio looks way more diversified than is usually the case probably.

AI assessment note: “No, not really. Um, in terms of mandate, our mandate is fairly broad.”

Q And what's your take on online education market in India? Have you, did, Made any investments in it? Are you looking forward to making any investments in it?

A So we've done Merit Nation, right? Um, we invested way back in 2008, nine, I think was the first time we wrote a check there. And then, uh, in terms of the education market, we've done a lot because we have one of our internal verticals, shiksha.com, that is in that space. And so adjacent to Shiksha, we've done companies like No Paper Forms, Uni Variety, uh, so we've done these in that tech space. Overall, we think it's a market that is very attractive. Um, finding, uh, you know, kind of a market size Uh, you know, think that can be a bit challenging for conventional VC investors, we think, because each of these companies can probably scale to a certain point, and they can be profitable, uh, because there's a lot of disruption possible today, right, in the education market, whether it is with universities, colleges, whether it is in career counseling, whether it is providing SaaS-based products to these businesses, or the consumer in general, right, learning online and all of that. So, very interesting space, but finding, ah, you know, markets there that are large enough for one company to grow into and become VC investable, so as to be able to give their VC investors that kind of returns can be a bit challenging. But having said that, you know, you have the likes of Baiju, etc. who's done that.

AI assessment note: “we've done companies like No Paper Forms, Uni Variety... Overall, we think it's a market”

Q So Kitty, what has kept you, you know, for the last seven years at InfoEdge?

A I think the first, the most, the biggest differentiator for me was how we treat founders or how we look at startups, right? Given that InfoEdge has built some successful businesses themselves, and they're all operating people like Sanjeev, Hitesh, et cetera, just being around them and seeing how they view startups or how they look at entrepreneurs with whom things have gone wrong, because it's very easy to be great with people when things are going right, but just Having the whole founder-friendly DNA running through conversations, through decision making, ah, is something that really attracts me and sort of makes you feel like you're adding more meaning to your day-to-day life than would otherwise maybe be possible while you're working with startups, ah, or in the investment space overall. That is the top thing. And the second thing is, again, you know, I think just how they treat their people, um, just, I mean, in terms of attrition rates at InfoEdge, they're extremely low compared to industry standards, and that runs across businesses. Uh, I think these two factors just come together in terms of how they view people, how they treat people, and then everything else falls in place.

AI assessment note: “I think the first, the most, the biggest differentiator for me was how we treat founders”

Q And InfoH has been like a very stable, profitable company. So do you try to also build your startups in a similar fashion?

A Uh, no, it's tough, right? Uh, today's, I think the environment, the competitive dynamics, capital availability, expectations of investors. I think, uh, it can all be that, you know, you can, you want, you want to go for the hyper growth or for that kind of scaling up in the initial phase and worry about profitability or numbers later. Uh, so no, we are completely aligned with those investors as well, because we understand that the markets change, right? So what, You know, before things get very competitive, you've got to capture a certain market share or you want to be a certain size before that. Um, we do give them the direction, ah, that, you know, focus on your numbers and look at your economics and, ah, how can we, ah, cut costs or how can we increase revenue on this? How do you increase share of wallet? We have lots of these brainstorming sessions in terms of increasing efficiencies, right? Ah, and make the economics just better with the direction that, okay, in the long term, at least think about making profits.

AI assessment note: “Uh, no, it's tough, right? Uh, today's, I think the environment”

Q And any, uh, companies in the 20, which didn't work out? Yeah, yeah,

A yeah, for sure. Uh, so we did, we took an early bet in a fashion, um, e-commerce, one of those flash sales, uh, companies, which did not work for us because a lot of capital flooded the sector immediately after we invested and unit economics did not work. So that was one that didn't work. Uh, there was another one we did for at home services in the beauty, uh, segment, uh, that did not work because again, you know, the economics and, So, so InfoEdge has, ah, we have this thing for B to C internet companies. They are expensive to build, but, ah, if they get, build the brand, et cetera, the network effects can be fairly strong. Um, so yes, I mean, the chances of it not working out are also reasonably high, and both of these were B to C companies.

AI assessment note: “we took an early bet in a fashion, um, e-commerce... which did not work”

Q And typically, what's the discipline of the team like in terms of investing, in terms of evaluating? Like what, what are the key directions, you know, look for such kind of founders or such kind of markets.

A So, uh, I think there are no specific sort of, um, guidance that we, there's no specific guidance that we give them about, uh, exact criteria on these pointers, but broadly, you know, you want to look for teams that have, that are formed of extremely passionate people, complementarities between, uh, founders, uh, We believe is very good to have. You know, if one is good in product, there's one person who's also good in sales. It's not good enough to have someone only doing tech or only knowing business, right? So complementarity in teams, having natural organic traction. Uh, so just after launch, you know, if it's, if they are getting some users, then see the user behavior. Just make sure that the early cohort is looking like they're very engaged and without marketing, you've been able to get your product going. And of course, You know, the economics should make sense in the mid to long term, if not in the immediate term. And even if they don't make sense in the immediate term, it shouldn't be on account of high discounting. That is because of the competitive nature of the product or the environment, et cetera. So these are sort of the broad tenets we try and work from all of us across the company, I think.

AI assessment note: “broadly, you know, you want to look for teams that have, that are formed”

Q And in 2019, 2020, what kind of markets are you actively engaged in right now with the founders to invest in or would be, you know, looking to invest in?

A Sure. So, um, you know, as I mentioned, more than a market thesis, we operate more bottoms up, and then if we like companies, we find promising founders, then we do a top down on those sectors, right? But three, I would say, trends that are shaping up and look And we are also looking for attractive opportunities there. One is, of course, geo-making data accessible to all. The second is video becoming so big, cuts literacy barriers, cuts language barriers, and all of that. And the third is, of course, vernacular, right? So, what we are really actively looking for is companies which can bring these trends together, right? Whether it is through a commerce angle, whether it is through other engagement angles, or providing newer products or services to consumers which they did not know existed, or Uh, you know, kind of appealing to the aspirational, uh, lifestyle, desire, the desires of these, uh, of the common man. But yeah, I would say that we are looking for, uh, startups which will bring these together.

AI assessment note: “three, I would say, trends that are shaping up and look And we are also looking”

Q And you mentioned earlier in our conversation that, uh, you know, as an investor, you can take certain hits on behalf of the founder, like, you know, maybe reduce your dilution. So what kind of things have you done in the past for the founders?

A Sure. So, you know, one, uh, one thing that we have done commonly is that we have actively encouraged, uh, ESOP, you know, participation in further ESOP dilutions across the portfolio. We also advise founders To keep a good amount of ESOPs for their leadership teams and teams that help them build the company, because at Infoage we have a very, very generous ESOP policy, and I've had it pretty much from the beginning. Um, so that is, that is one thing that we have helped them in. The other thing is just, I think broadly, you know, when things are not going as well as imagined, then any kind of restructuring of cap tables or anything that we need to do in order to give the entrepreneur a fresh lease of life or give them another chance with raising money and all of that. We are fairly accommodating, I would say, in that sense. And, you know, the third is just in general, you know, in terms of if there are misses that happen on business plans or targets, et cetera, I think we just give them that extra, those extra few months and help and, and try to understand how can we help them ride it out or what else can we do as InfoH.

AI assessment note: “one thing that we have done commonly is that we have actively encouraged”

Q And in the last seven years, what are the frequent mistakes you have seen your portfolio founders make? And what's your lesson for, you know, the founders who are listening To the podcast from them.

A So, um, I would not classify those things as mistakes, but I would say just the kind of environment we are probably in right now, uh, is that, you know, people, uh, at times they can get very disturbed with the kind of, uh, capital availability for competing startups or what's happening in the ecosystem, right? So let's assume you have a certain business model. And you were trying to follow a certain set of economics, and you thought, okay, this makes sense, but then there is another startup that just comes up, which is better funded, more deep-pocketed investors, uh, tries to kind of, you know, derail you from your economics, et cetera. So I think founders in general, uh, should just realize that, you know, that's okay. It's just part of, it's just part and parcel of things, and so instead of trying to Change your own strategy too much, right? Uh, it, it really helps to kind of stick to your own guns and, uh, stay at it. And of course, you know, take inputs from advisors, from your investors, from the others about what's happening, and tweak things a bit, it's fine. But in general, just stay more calm, less perturbed, and focus on execution.

AI assessment note: “instead of trying to Change your own strategy too much, right? Uh, it, it really helps”

Q Does it mark, you know, an end to it for them?

A No, no, not really. Right. Uh, we, we don't think that it marks an end to them. Uh, there are lots of ways, uh, to either number one, the best way would be that you don't have to exactly go head on and compete with the same guys who have that kind of capital availability till you yourself have it. So there is, that's when real innovation and that's when real strategic thinking IP using your IP that you've built till then, uh, really kicks in. Right? And the quality of leadership team that is willing to stick by you and figure things out, maybe take a new approach in the same market. Today markets are large enough, right? So if you've chosen a market that is large enough, there are lots of niches there, lots of things you can do, right? So I think that's, I mean, you know, we never advise that you just go head on and try and do the exact same thing without having matching capital, because most likely, you know, it's probably not gonna work. Might, if you're very lucky. But rather, you know, how can you do things differently? How can you reduce your master of cost of marketing? Can you go viral in some manner? Uh, can you innovate in your product? Can you appeal to a certain specific audience that your data shows is really sticky to you? I think that's what we advise.

AI assessment note: “No, no, not really. Right. Uh, we, we don't think that it marks an end”

Q Any special founder stories that you have with you, you know, or the relationships, like some instances that you would like to share with the audience?

A So it's tough to just specify a few, but I would say in general across the portfolio, you know, I interact very frequently with all the founders, pretty much end up speaking to, I think mostly all founders, at least a couple of times a week. This is across the portfolio of 20 companies. So I would just say that, you know, in general, there's this trust relationship that has gotten built and a lot of the times the things they say, or, you know, it becomes, it, it just comes down to becoming very friendly with them as well. Especially for someone like me, I think in terms of age brackets also, a lot of the founders today are fairly young, and we have a very young team, so we all often just hang out, or just chitchat, or it becomes a very friendly tone of conversation, so it's a mix of personal, professional, etc, across the spectrum, and that is what I enjoy a lot.

AI assessment note: “So it's tough to just specify a few, but I would say in general”