The Exchanges

Q Uh, Raja, uh, would love, you know, before I introduce you to the background, but would love to hear from you, right? What's your background? What brought you to the U S and how did you came into Churchill? And then next set of questions would be from mine would be what's Churchill's background, right? And, uh, what's the broader industry that the firm operates in?

A Yep. Um, thanks for, again, thanks for having me. Uh, like everybody, you know, a lot of people in my generation, Um, I'm one of those people that made my way to, to the U S from India at the age of, I want to say, 22, 23. Um, and at that time, this was sort of mid to late nineties. Uh, you know, all the immigrant Indian immigrants. Um, at that time I started in tech as a software engineer. I've done that a few for a few years. Um, then went back to business school. And took an interest in starting businesses inside of large companies. And then, you know, that sort of progressed into, uh, corporate venture capital, investing in startups on behalf of large corporations. And then that sort of progressed into more and more into the venture ecosystem. Um, you know, as a venture allocator, uh, now at Churchill Asset Management and Churchill Asset Management is a Fifty billion dollar AUM private capital asset manager, and Churchill's businesses are, uh, private equity. We're an LP in, uh, three hundred-odd private equity firms, and largest, uh, private credit provider in the US for middle market, um, companies. And venture and growth equity, um, is one of the businesses at Churchill that I manage. Um, our business at Churchill and venture and growth equity is we are a, an investor in venture capital funds, primarily in the U S and a little bit, um, internationally, but primarily in t…

AI assessment note: “I'm one of those people that made my way to, to the U S from India”

Q Yeah. And let's say VCs, you know, demonstrate their value to entrepreneurs by providing go-to-market, by providing portfolio management teams. How do LPs or funder funds provide their differentiation when competing for the top decile VC funds?

A Yeah, it's a really interesting question. I think I, I, I'd put it in a couple of different ways. Um, typically what's been, um, sort of, uh, touted as a, um, uh, desirable LP These two different things that people, you know, VCs look for. One, um, how sticky is that capital? You know, is their, uh, investment time horizon long enough? Because VC is a long asset class. So are they patient? Is that patient capital? And can we count on them as long as we're, you know, I'm, I'm, I'm speaking from the perspective of a VC, uh, firm. As long as we're performing according to sort of our promises, Can we count on that LP capital long-term? Um, that's, you know, that's important. And then two, um, are they, uh, are they forward-thinking enough? Because venture is investing in, you know, sort of, you know, new technologies. Sometimes there could be cycle, you know, technology cycles that, you know, go, um, may not go according to plan. There may be a vintage, um, that may not be top quartile. Are they understanding of, um, sort of the, Patience in, in understanding cycles. Um, and then the other, you know, sort of lately, you know, there's the other aspect of, are they helpful? Just like, uh, founders look for how helpful the VCs are, are the LPs helpful? And the help from LPs could come in the form of, can they help, uh, introduce us to other LPs as I'm raising my new funds? Um, can, ca…

AI assessment note: “One, how sticky is that capital? ... two, are they forward-thinking ... are they helpful?”

Q Got it. Got it. And, uh, right now in this environment, let's say, uh, how many funds, uh, have you seen closing down or pausing on the next fundraise? Has it happened with your existing?

A I think it has. Not in our book, but, um, but I've seen some anecdotal data, you know, online that, um, the mortality rate from fund one to fund two is like, You know, I think we went from 7000 or so active. I forget the number. Is it 3000 or 7000 active funds to more like 1500. So that tells me that a lot of funds either have decided not to raise their next fund, um, or they are unable to raise. Um, but I'm also seeing the opposite. There's a lot of new fund announcements. People that are branching out from, you know, you know, reputable, Firms and starting out and doing, you know, starting their own funds. I've been seeing that as well.

AI assessment note: “I think it has. Not in our book, but, um, but I've seen”

Q Got it. And, and why do you think so that that's the case?

A Um, I don't know, I don't know why, but it's really hard to, uh, create a company that's worth enduring and that's worth multiple billions of dollars. I mean, if you look at all the public companies in the US today, um, companies that are worth more than a billion is about 300 companies. That's it. So it's really difficult to, to, to, to produce a company that's worth in more than a billion and, and that will continue to be worth more than a billion. Um, it's just, that's the way the laws of capitalism works. So, uh, so the most likely outcome would be sort of a two to three hundred million dollar outcome, which is why, which is why I think the fund size is important. So if you have a billion, you know, if you have a five hundred million dollar seed fund to do a three X net, um, so that means you have to produce, um, two to three billion dollars worth of total outcomes, which is very difficult to do.

AI assessment note: “it's really hard to, uh, create a company that's worth enduring”

Q And what would be the sector split across these 25 funds?

A We, we tend not to focus on sectors, um, because we're, you know, it's, you know, this is a sort of a, you know, time, the time frame for a venture fund, um, is sort of a, Three year deployment period, and then a 10 year, 10 to 12 year sort of, uh, exit. So we, we tend not to be sector focused, especially, you know, seed and pre-seed. We think you're, you're betting more on the founder. Um, you're underwriting the founder more than a thesis. Um, I mean, there are some that are sector focused, uh, seed and pre-seed funds. We haven't done those yet. Um, the ones that, the only ones that we've been somewhat curious about lately, and we haven't done any, is sort of the defense and space and, you know, newly Um, renewed interest in industrialization of the US. Um, we've been studying that sector, but so far we've been mostly generalists, not sector focused funds.

AI assessment note: “so far we've been mostly generalists, not sector focused funds.”

Q And one last question, you know, before I dive into the next section, right? Uh, how do you think about the public markets in India versus public markets in the U.S.?

A Yeah, it's a really interesting, um, public markets in the US have been, um, I mean, some people say they're closed, they're not, um, it's just the criteria for, you know, what a successful IPO candidate, um, has been changing and moving around. So, uh, you know, we've sort of had probably the longest period of, um, you know, lack of liquidity for private privates in the, in the US. But I've been lately hearing the opposite. Um, in India that, um, you know, if you have a, a software company that's, uh, you know, seven, you know, 50 to a hundred million dollars in ARR and growing at a healthy clip and on the way to profitability, um, you know, uh, I saw a tweet the other day, um, that said.

AI assessment note: “public markets in the US have been... But I've been lately hearing the opposite. in India”