The Exchanges

Q In it, the second institutional check in that. So, so what, because it focuses, initially focused on a niche space. Now they have broadened to personal care, uh, you know, uh, so initially focused on mom and babies, especially during the, the pregnancy to post, uh, you know, delivery, uh, Uh, what, what made you think the space can become so large that it could be a billion dollar plane?

A So actually it is nothing to do with DTC brand. In general, the way we look at some of these startups is, are they solving one problem well? And can they expand from that one problem to multiple other problems? Uh, so that holds true here as well. What they were solving was one problem. And once the brand Uh, become successful and well-known. There is a lot that can be done from that one particular problem to solving other problems. And that's what they ended up doing. So it is not, uh, something, you know, uh, you, you look at kind of businesses that have worked well. Flipkart started by selling books, then electronics, and then everything. Uh, so there is, this is a classic example, and there are multiple of these examples worldwide of companies that become large. Uh, they do end up solving multiple problems. So that was the case here as well. And that has been demonstrated in multiple offline brands as well, right? In brand itself, you see one brand like Himalaya started with one category and they've expanded into multiple categories. Uh, you know, so there are, obviously there are boundaries for a brand, but within that boundary, there is enough room to expand, uh, from one single product range. And that was the thesis behind Momarth as well.

AI assessment note: “can they expand from that one problem to multiple other problems?”

Q Well, another area you are really excited about is EdTech, and you look at Silas and EdTech, you recently invested in Uh, I would want to ask is EdTech too much today because of the opportunity and are there space for any other billion dollar companies, you know, because Bayu and Unacademy and Topper, have they taken the shelf entirely?

A I don't think so. So if you think of the largest or the large companies in this space, uh, I don't have exact numbers. Maybe the largest would be like few hundred million dollars in revenue. If you look at the education spent in this country, beyond formal education, that runs in like tens of billions of dollars, right? Uh, and at least I feel there are multiple ways to cut the pie, and it is not, or it will be hard to imagine if one single company ends up being winner in all of them. Uh, this is, this is a services business. Uh, it is not selling, you know, a mobile phone or a, a, a, a book. That one single player will be able to be the dominant guy, uh, doing those activities. Because of different experiences in some sense, I think there are multiple winners possible in each piece and there are multiple spaces available. So there are, you know, the higher ed, there is, uh, uh, K-II, there is within K-II, there is test prep, there is tuition, there is extracurricular. Uh, so there are a lot of activities and the other piece is that increasingly global market for India ad tech companies is also opening up. There are several areas in which I would say Indian education companies will be considered as the legitimate owner of that space. Just like in Ayurveda, India would have, uh, you know, a very known standing in the world. Similarly in yoga, uh, I would say in STEM, Uh, globall…

AI assessment note: “I don't think so. So if you think of the largest or the large companies”

Q So, so, uh, what is the problem Swift Learn is solving and what made you invest in them?

A So there are a couple of things. Uh, one, Is what we saw as a trend that, you know, more and more parents, uh, want their kids to succeed, uh, in comparative exams at some point of time or in schools. And because I was an investor in Topper, I had seen that for test prep very clearly. Uh, the second was that the options that these parents have. See, teaching as a profession is not something that has been gaining, uh, you know, momentum in our country. Uh, in generally, General teachers get paid poorly. So it is not as if the quality of teacher is improving in general. So that is true everywhere, including schools as well as after school. So the options that parents had were very limited in the K-Ten segment. And third is emergence of live video, uh, that it was becoming after four G and in a four G expansion, it was clear that live video was a way of life. Uh, so what we felt Swift Learn, you know, when, uh, uh, Abhinav, the founder, He came, the idea was basically to solve the problem of tuitions or after school activities on the academic side using an online delivery method. The challenge is that the segment that these guys are going after, which is, uh, you know, maybe six to 16 year old kids, they're, they are not motivated to study. Unlike somebody preparing for a medical exam or an engineering exam. Where there's a lot of motivation. And what that means is that the busine…

AI assessment note: “the idea was basically to solve the problem of tuitions or after school activities”

Q So now we'll see hopefully at least couple of more, couple of more investments coming up every year from Stellaris. You know, I follow you guys very closely, you know, you, Alok, Ritesh on Twitter. You, you mentioned, you three all together discuss about biases a lot. What are the biases in, in investing, you know, which play a role in your decision making?

A See, so there are certain biases which are around founders, you know, X kind of founder or Y kind of founder or what trades have we seen in the past? How did they play out? Uh, so those are, Some are sometimes team-related biases. Then there are model-related biases, and then there are sector-related biases. Uh, so I'll give you an example, uh, and this is before COVID, so obviously during COVID things might look very obvious, but late last year we did a session where, and we have, you know, there is a team which is three of us who have been around and maybe slightly, you know, above 40 in age, and then there is a team which is, you know, in the thirties age group. So obviously a lot of time around a model when we have a discussion and we say, you know, we have seen when it does not work, uh, the other part of the team will always ask, why do you guys say so? And it is very interesting to have that discussion. So we did a session. One of the examples we discussed was the whole retail oriented models. And there was a pushback from rest of the other members of the team, the younger members, as to why do you guys believe that retail oriented models don't scale well? And at that time we were seeing, uh, people running extracurricular classes inside, uh, OYOs, for example.

AI assessment note: “there are certain biases which are around founders... team-related biases. Then there are model-related biases”

Q So till the time the brand is built, what, what's the moat? Let's discuss in this case of Marmar when they were building it.

A So see, first of all, brand also goes through its own evolution. When this, when you start, it is typically a functional benefit that the consumer needs to like, and it has to be different than what is otherwise available in the market. That's when you stand out. Uh, now those functional differentiation doesn't stay too long, uh, because others will copy you. And what you need to do is to move from a functional differentiation to an emotional differentiation. So, and that's the journey, you know, that allows you to stay ahead of your competition. The other piece is your ability to figure out new trends, uh, ahead of your competition, uh, which was the, uh, point I was making around product iteration. That, uh, you know, are you able to find, let's say, certain kind of ingredient will become important six months from now. Now, if you can build it into your NPD, you actually can launch products at right time. Uh, and third is utilizing different channels to, uh, to basically not only do marketing and transaction oriented business, but also do brand oriented activities. So right set of influencers, right set of branding activities, uh, uh, that, so all these three things have to match together to build a moat. Uh, and there is nothing which cannot be copied as in there are, you know, the innovations are not very different and that may vary from sector to sector. So let's say if yo…

AI assessment note: “all these three things have to match together to build a moat.”

Q And, and, uh, what are the other open spaces in EdTech where, where you believe, you know, large companies can be created? Because as you mentioned in the podcast earlier, uh, Unicorn can focus on only so much, uh, in the sectors they are operating in.

A So one is, as I said, global place. Uh, so clearly Whitehead is doing it, some, a few other companies, then that is just in coding. I would argue similar global places are possible in a lot of other areas. Uh, so any co-curricular activity, extracurricular activity, uh, similarly in higher ed, uh, things like, uh, you know, giving online degrees. That is something that you can do for India as well as globally across India. Uh, uh, you know, there are enough of these training companies preparing you to become a good software programmer. Again, there is no, there is no market leader yet, and that could be a large space as well. So there are enough of these kind of player plays that are possible, which are purely online, uh, and can be large opportunities.

AI assessment note: “So one is, as I said, global place. Uh, so clearly Whitehead is doing it”

Q And, uh, does it directly compete with Misho?

A To some, to some extent, yes. Uh, but there is one part which, as I was mentioning, this whole commerce, Or, you know, what people call, uh, uh, a lightweight Shopify integrated with logistics. Now that is something that I think Shopify is one of the unique companies, uh, from that time, which has been continuing. Most of the other guys have been primarily doing the, uh, supply side business, which is to tie up with manufacturers and, uh, help people sell, uh, those items. Um, but the first model allows, let's say I'm a, I'm a fashion designer who does not want any other item other than my own products to be sold on my website. Now that is a model that shop-on-one supports. Other people don't.

AI assessment note: “To some, to some extent, yes. Uh, but there is one part”

Q And, but, but, but for a venture capital firm, do you, that's why I'm asking that, do you think multiple such brands, you know, if you, uh, invest in, uh, can, can go to a hundred mil ARR, thereby becoming a five hundred million dollar or six hundred million dollar company?

A Yeah, I think so. I think that is clearly possible, but the business has to build in the right manner. A lot of companies end up burning a lot of money. Uh, so I think if you build it in the right manner, you actually can build large and a very good outcome for every stakeholder in the company. Uh, so that is clearly, obviously you have to be in the right space. You have to get the brand right. You have to protect your mood. There are a lot of things that have to go right. Uh, but this, like, you know, the advantage of consumer brand is that the margin structure is very favorable and, uh, you know, If you do it in the right way, you actually can, uh, do it in very low amount of capital also.

AI assessment note: “Yeah, I think so. I think that is clearly possible”