The Exchanges

Q So what was your first firm and subsequent journey in U.S.?

A So essentially, um, this is post-business school. Before business school, I had worked in consulting, so we let that go. In the investing space, during business school, I worked at a shop called Wingstring. It was based in Palo Alto, right across from business school, and I would go there after work. And spend my time from five p.m. or six p.m. all the way up to, whatever, midnight, one a.m., just looking at deals. And that was very exciting because I could, ah, look at an incubator-like setup, which is what it was. It was not a pure VC shop. And we looked at a few companies invested and backed seven of them, and I was part of a few of them. And, ah, that whole incubator business model was flawed. Although we made some really good investments, that did really well, but the cost structure of an incubator, including a 30,000 square foot facility, and four partners, only seventeen million dollars under management, was not sustainable. So obviously, we ceased to exist after one year, but of the seven investments we made, I'd been involved in three. I joined one of them as the, ah, number two to the CEO, doing everything he wanted because he was transitioning from Israel into US, and that company was action based. It sold process and product and meeting management software. Uh, developed in Israel into US tech startups, but totally different business model. The expectation was that …

AI assessment note: “In the investing space, during business school, I worked at a shop called Wingstring.”

Q So, uh, when you invested in Clay, Clay was just a one cent company, as you told. What, what gave you the confidence to take that investment?

A This again goes back to my personal journey, and this is a critical part of, uh, how, what we experienced as a couple in the U.S. My wife used to work at Oracle in Redwood Shows, and I used to work in, uh, San Francisco at Outlook Ventures, and our son was born. And she didn't want to give up work. That was critical to her. And we didn't find good, adequate quality daycare near home. But Oracle had a provider called CCLC because of which she could go back to work and she would drive our elder boy to work, drop him off at CCLC, get her work done and drive him back home. And that was very comforting because she felt like he, she could take care of him And be with him when he needed help. And that's really important to a mom, especially early years. So we saw that as an obvious business model. India has the same characteristics. You know, a lot of the people who work at Redwood Shoals Oracle are of Indian origin, and they often transit between India and abroad, and that story is replicated across many corporates. So the market seemed to make sense from a first sense level, as opposed to total deep, you know, market research level. So we, ah, when we met Priya earlier days, and she was running one center, this became a critical part of our discussion, and we saw this as a strong vehicle for growth and differentiated vehicle for growth, and there was nobody else providing good servi…

AI assessment note: “I could see the same opportunity being replicated in India that we saw with Oracle”

Q What, across these 13 companies, what has been the average engagement time before you cut a check?

A That's a very good question. So we normally, ah, depends, but we don't, unfortunately, we won't have a simple answer here. It is company by company. The shortest could be four months, three months, actually, and the longest could be a year, year and a half. Um, like Vartana, we knew Steve three years before we invested because of stage, but we knew him for three years when he created Vartana. Uh, Priya we knew for about nine months. Uh, Topper we knew for three months. I knew Zeeshan earlier, Nirav, uh, the partner knew Zeeshan earlier, but engagement as an investing opportunity was a three month engagement, and we went because we knew what we wanted. So it depends. It can be very fast, or it can be prolonged based on, we like the person, we like your company, your idea, but you're not at a stage where you should be. Why don't we stay engaged, and we see you grow, and then we'll invest when the time is right. That's what we did with Vartana and with Clay, and both worked out nicely for us.

AI assessment note: “shortest could be four months, three months, actually, and the longest could be a year”

Q So how did you started being an investor in the US in the first place?

A I think, ah, I went to business school at Stanford. When I went there, I had only done consulting work before then, and consulting is very exciting, and it can be intellectually very promising, and, ah, very, very, ah, it delivers a lot. You feel like you've accomplished a lot, but you don't feel like you've finished the accomplishment. So I decided, ah, during business school that I would not do consulting anymore, and being in Silicon Valley, What made most sense was to be in tech in some form, and I had no tech skills. I could not be a developer or a product manager. I knew that very quickly, but I could be an investor. I could apply my analytical skills towards investing in tech, so I sort of found my way to investing as a, and I worked second year of business school full time at a venture capital shop with the express purpose of transitioning into investing role upon graduation. I didn't want to waste more time, so second year I worked full time, And that helped me get back, get into investing.

AI assessment note: “I worked second year of business school full time at a venture capital shop”

Q So, uh, what have been the markets in the last five years in education? You have been focused on what have been your wins based on the market thesis that you had?

A Yeah, I think the, ah, there are three areas which have been really exciting to us. One is the childcare space. Obviously, you know, Clay is a big winner there. Second is the entire employability space. That has been a tough nut to crack because employability, ah, is not a pain that is felt by the person who needs to feel the pain. That is the employment seeker. Employability is a pain that is, ah, felt really by the, ah, employer, and therefore the willingness to pay on part of the job seeker is limited because the job seeker is of the opinion that they've got a degree or a diploma and that's good enough, and often that is not good enough. So the realization of the lack of skill occurs after the job has been acquired, and at that point it becomes the problem of the corporate, the employer, to train the person, to skill the person. So there is no obvious market there. It's often subsumed in the corporate. That's the market which has real value to create. Then there's the other segment within that, which is the blue collar segment, and that clearly has got bigger issues because of lack of standards among employers, willingness to hire for less cost as opposed to high skill, and there is no follow-up, unlike Germany and Australia, where employers need to follow a strict set of standards before they hire anybody, including blue collar. In India, in particular, it is a rush to whoe…

AI assessment note: “there are three areas which have been really exciting to us. One is childcare”

Q Any three advices which you would like to give to entrepreneurs who are building their companies right now?

A I, so, you know, I think, ah, one advice, number one, is to identify the problem you are solving at any given stage very clearly, and the problem may, has to be clearly identified at a deeper level. Sometimes when entrepreneurs say, I am solving this problem, like, I am solving the problem of online education, That is the symptom. That is not the problem. That is the solution seeking the problem. The problem might be they're solving the problem of, ah, providing at home personalized learning to students who don't have access to great teaching. That's the, that's the real problem. Then online is a medium. But if you think of online education as the problem, then you'll never move away from online if the world has moved away. You will be still stuck on it without, and you would have forgotten the problem you're solving is that of personalized education, which can be online, offline, anywhere, right? So I think identifying the problem accurately is a critical part, and it's a very hard part. Second corollary to this is continuing to identify the problem as the world changes, as you change as a company is the second part of it, which goes hand in hand. So those two are number one, and most entrepreneurs have a difficult time with it. Number two is communicating that identified problem and your solution in a differentiated manner to the investor is very important. And that, so a lot…

AI assessment note: “one advice, number one, is to identify the problem you are solving”

Q So you have been an investor for approximately 15 to 20 years. What difference do you see in the companies which have scaled 50 to hundred x since you invested, and which have only scaled to two or three x?

A There's so many differences, right? I think the core difference is that the companies which scale, ah, multiples, have amazing leadership. Clear vision, the ability to make some tough decisions, have identified a market In a way that it needs to be seen. So let me sort of clarify that a little bit. Everybody says that the market is big. That any company should target, and that's an obvious one, but that's not the most obvious thing to me. Of course, the market opportunity should be big, but the immediate position with which the company enters the market should be unique, uniquely differentiated. The solution they come up with should be unique, and that solution might target a small portion of the market, but should be able to leverage that small solution, pointed solution, to wedge in, to create, and to grow the market with them, and to grow into that market, be the number one leader.

AI assessment note: “I think the core difference is that the companies which scale, ah, multiples, have amazing leadership.”

Q So what is the stage of the company with, at which an entrepreneur should approach you for investment?

A So I think we are, ah, we love following entrepreneurs from the very beginning, right? We may or may not choose to invest in them after the first meeting or second meeting, or maybe we invest in them after three months or after three years. But really staying engaged with entrepreneurs is a critical part of what we do. Because as an investor, if we lose touch of what's going on on the ground, then we have lost it. So to be in touch is a critical part of our own KPI. For all partners at Kaizen. Therefore, we are happy to meet entrepreneurs at any given time. If not, be of value immediately in terms of investing, then be of value at least in terms of networking, any feedback, and learning from them. It's a two-way street. It's really important we meet some smart people that we may invest in three years down the line. That's happened before. So our current focus is to invest in companies which are profit making, but in the past, we invested in companies that are pre-profit. In the future, our next funds, we will look at companies which are pre-profit, domain by domain. So, I encourage entrepreneurs in education and related areas to definitely talk to us at any given stage. We can be of value to them, and I'm sure we'll learn a lot.

AI assessment note: “I encourage entrepreneurs in education and related areas to definitely talk to us at any given stage.”

Q So do you also have the same pressure to return money back to your LPs within a seven years time frame, and does that pressure translate to the founder, transfer to the founder?

A Yeah, I think unfortunately while we are partners, we are partners that exit And that is the nature of the capital we bring to the table. So, ah, in some cases the engagement is four years, some cases seven years, but the fund life is about 10 years, so we better exit around seven years, right? So, founders know that, and they essentially, ah, buy into it from the very beginning because we make it a very clear point from the very beginning that we will be, you know, not lifelong partners. You might come back in fund two, fund company two, or whatever, that you might start again, but for this journey, we have a time limit, and we instill that from the very beginning, and we start exploring exit options very soon, because exit is a process. It's a process that's a controlled incident. It's not an accident that you, oh my god, I'm reached, I'm reaching year six. I haven't thought of exit. That cannot happen. It has to be a process which leaves the company that you're working with sustainable after you exit, and ready for further growth. It cannot be a process which disrupts business. Not all exits will be friendly, but the underlying ethos is that the process may not be friendly, but what you leave behind has to be the best thing that you could, you could have left behind. Because education must continue and must grow. That is a critical part of where we come from. So we have, uh,…

AI assessment note: “we better exit around seven years, right? So, founders know that, and they essentially, ah, buy into it”

Q What are the habits and mindsets which you attribute your success to?

A I think a lot of this comes from three people in my life. My parents and my wife. They are very important to me, right, because they define how I live today, and you grow many times in your life. The first time I grew up in my life was through my parents, which, who actually enabled me to focus on hard work, ah, having a goal, and being self-reliant, because we grew up middle class, we grew up, ah, in a service family, where parents were both working, and We were scholarship students, right? As we knew that we had to fend for ourselves from the very beginning, and we did well, and they just supported us with everything they could. So we saw the work ethos, we saw the focus on family. So family and work were critical parts of my upbringing from the very beginning, and they remain so today. They're the number one and number two things. I don't have a number three thing except health. That's what matters to me. That retains. Then the second part, second phase of my life is growing up with my wife, which is critically about focusing on, ah, Detail. Focusing on, ah, ah, oneself. Focusing on family. And focusing on what is important to be supportive of each other, supportive to each other to achieve goals, which is critical. And that's something that has been a maturing part of my life. So I, therefore, as, as I look at where I am today, the critical things are covered in health, fam…

AI assessment note: “enabled me to focus on hard work, ah, having a goal, and being self-reliant”

Q So, what challenges have you faced while building Kaizen? And Kaizen, you have not decided to market it like a premium venture capital firm, that's a co-off. What's the reason behind that?

A So we are a homegrown fund, right? We are entrepreneurial fund. We don't have the legacy of Kleiner Perkins or Sequoia, 30 years of investment history with Yahoo and Google and all these other companies in our portfolios. We don't have that. We are still very young. The typical growth of a venture capital and private equity shop is really about getting the foundation right first. That may take 10 years. That's okay. If you try to achieve scale very rapidly, ah, then you're possibly giving up on the foundational activities which are needed, which is to build a set of ethos, investment focused processes, and people which are critical for the next 10 years. So, it is not about the Uh, who gets to a big AUM fast? It is about who sustains in the AUM business, makes the best investment over 30 years. If you're building a firm, and you're building an institution, So, and we're building an institution in a space which is generally a harder space, right? Making investments with a passion, with a cause, and that generally requires that the skill set we acquire is that of people who come with a similar thinking process, and that's a limited pool. It's not just about can you find, go out, the best entrepreneurs bring them in, invest behind them, sign the best deals, and get them to grow. That is critical aspect of it, but then you need to Enter with a philosophy which matches with the over…

AI assessment note: “We don't have the legacy of Kleiner Perkins or Sequoia”

Q What markets where you had a thesis didn't turn out well?

A Yeah, I think the, ah, thesis that, ah, has not turned out well is, ah, really also happens to be in the daycare space, right? And that is not a matter of market choice, it's a matter of the, ah, Choice of the people who were running the business. It really, in our business, if it, it is really, if you get the market wrong, then you should not be in the business of investing, right? If you get the people wrong, then it is, everybody is liable to make that mistake, but, ah, if you get the people wrong, then you better spend a lot of time in not making that mistake again, right? So I think, ah, it is a people business at the end of the day, ah, whether it's venture capital or private equity, it is not just a market play, because day on, day to day basis, It is really about aligning interests. It's driving everybody towards the same shared goal, towards having a similar interest and passion towards what you want to achieve, and that's something we've learned along the way.

AI assessment note: “thesis that, ah, has not turned out well is, ah, really also happens to be in the daycare space”

Q If you can share some metrics around how have you helped Clay, Topper, or Wadham Finance?

A Sure. Sure. I think, ah, Vartana For example, we're helping them go through the whole thinking process, and how to come up with this deeper engagement with their customers. They work with 4000 schools right now. How can you make them, their engagement more meaningful, and beyond just loans, and driven by a shared focus on quality education, through school assessment programs, through teacher assessment, et cetera. That's something we're working on right now. That will make them defensible for years to come. Nobody will approach them from that structure, because the existing schools will go only to Gartana again, And recommend Vartana to other schools. That becomes a strong word of mouth acquisition strategy and retention strategy, and then education benefits. It's a win-win, right? So that's something we're working on. With, ah, founding years, early days, it was really about ensuring that we gravitated the company towards, ah, more corporate focus, which was in Priya's DNA because of the IT sales background she came from, and she understood that very quickly, so that's one. Second, driving the company's metrics Ah, towards more financial metrics, to operations, to MIS, et cetera, ensuring that They were, while there was passion and focus and drive towards opening more centers, there was also a focus on spend. There was also a focus on what metrics to look at in terms of size o…

AI assessment note: “we're helping them go through the whole thinking process, and how to come up”

Q So Sandeep, we would like to now come to personal side of you. What's your daily routine? What time do you wake up? What time do you sleep? And what resources do you use for personal growth?

A Yeah, so I think, um, uh, there are few things which are critical to me on a daily basis, right? There's a, um, there's a set of people that matter a lot to me, which is my immediate circle of influence. That includes my family, wife, children, parents, sister, brother. So communicating with them frequently enough is very important. I travel a lot. So that leads to a second part, which is to manage my health. If I'm healthy, then I can help others. So, there's a thinking around living a purposeful life, at least as I've entered this stage of my life, I want to live purposefully. To be able to live purposefully, I should focus on myself first, and that's a critical part, and that means focus on health, mental well-being, ah, focus on happiness, etc. And when you're traveling, and you're focusing, and you're at the head of a company, and when you are away from your family, it is even more important, because a lot of problems stop at you. And you've got to resolve problems in your head. And how you do that? By being healthy. That's the ultimate answer. So, focusing on, ah, exercise, ah, focusing on sleep, and eating healthy are critical to me. So, ah, that's something of a, that's, that's an ethos we've transmitted through Kaizen, very clearly. Everybody here has, I think, is living a healthier life than before Kaizen. A hundred percent. So this is something that goes Through the …

AI assessment note: “I like to work out daily. I like to, ah, sleep enough.”