The Exchanges

Q What have been your learnings from them? What is it required to scale 50 to hundred X?

A I think few learnings are one, they need to solve a big problem. And big problem means a large market. And if the participants in that market are very diffused, Which is the case with most consumer, ah, businesses. Then organizing that market can deliver you a very big impact. So look at our scale ups, ah, like Daksh, it was participating in a hundred billion dollar outsourcing industry. Or make my trip, ah, twenty billion dollar travel industry growing very rapidly. Or you take big basket, three hundred billion dollar grocery industry. So I think one common theme is that it need to be a very large market, highly underpenetrated in terms of how it is organized and how digitally influenced, ah, it is. Two, I think the early mover advantage. Though many of these will not be winner take all markets, But they will certainly be winner take disproportionate value, uh, markets like make my trip is really stood out from the pack or big basket has half of the grocery market in the country, in spite of many other people being in the same business. So I think that is the second characteristics or red bus, which organized buses and one of, and was one of the earlier players. So large market, very diffused, uh, Early entry. Those are the market, uh, characteristics. Second, I think, is all about the founding team. And in founding team, I believe, there are, there is one, there are many ways…

AI assessment note: “I think few learnings are one, they need to solve a big problem.”

Q What are the market wins you had, where you had a thesis?

A Yeah. See, three buckets where we have, uh, done reasonably well. One bucket is the entire, uh, travel industry. Where the winning companies that came from our stable are, uh, make my trip, uh, red bus, then, uh, taxi for sure. And we have a very promising company in Ray, Ray Liatri. So I think given that there is so much of, uh, Information is symmetry in this market, and it is less physical and more information, ah, driven. We have had lot of success with, ah, travel as one vertical. The other vertical which has done well for us is, ah, vertical commerce. Because, ah, retail, as you know, is, ah, six hundred billion dollar industry out of two, two trillion plus GDP. And there are some very large markets like, ah, grocery, which we participate through big basket or, ah, furniture, where we have, ah, live space as an online Home design company. So, that I think through the sheer market size, and the nature of unorganized industry, has been our second strong area. And the third one is the next generation outsourcing, where we have companies like Ambar Research, which was acquired by Moody's, uh, United Lex, which was acquired by CVC, uh, the private equity group, and currently we are investors in Xtria, which is a data science, uh, startup serving pharma industry, uh, around the globe, and growing very Uh, rapidly. So there the theme is leveraging India's intellectual capital, w…

AI assessment note: “three buckets where we have, uh, done reasonably well.”

Q Would you love to know more about how did you started the Fundamentum Partnership? How did you and Nandan came together?

A Right, right. Actually, if I were to take you back in time, when I was working at Daksh in year 2000, We were able to create a very strong startup. In six years, we had gone to build 20,000 people organization. And my first endeavor was to be able to take the learnings that I had of building a company to the rest of the entrepreneur, entrepreneurial world. And Helion was Born to focus on early stage, ah, investments. And then we found that as the world of tech investing and entrepreneurship had evolved, the big void was not in starting up. Ah, but in, ah, scaling up. And, ah, given that Nandan has been instrumental in building institutions like Infosys or Aadhaar, which is all about, ah, scale thinking, and my own brush with, ah, Daksh, and then working with, ah, entrepreneurs like Deep Kalra at Make My Trip and Sudhakar and Big Basket gave me some sense of scale. Both, ah, very closely involved in my own startup and then seeing it from a distance. So we thought if we can pool our combined, ah, capability and experiences and create an institution which is not only about capital. But capital plus advice in helping organizations build scalable, build to last institutions, ah, that is how our fundamental thinking was, ah, shaped. And build companies with very strong underlying fundamentals so that they can live for hundred years.

AI assessment note: “So we thought if we can pool our combined, ah, capability and experiences”

Q Sanjeev, what habits do you attribute to your success?

A I think one of those, it's ironical that I put the answer in both the questions. Is that I'm fairly honest about myself, and I seek periodic feedback from peers. So I really have this, my ability to, I think, Marry my strengths to the underlying opportunity in a timely way has worked well. Examples being, Daksh was a first mover, so was Helion, and so was Fundamentum in thinking of scale up investing when India goes to the next phase of growth. So I think the ability to marry Ah, strengths with opportunity is one habit. Second thing is ability to trust and empower. Ah, so spend lot of time in putting together the team. But once you have the team, then you give them lot of autonomy. Like I was mentioning to you in Daksh, we had to go from 500 people to thousand people. So we put in place business units which were very autonomous, and that became the template for, ah, scale. So I think that is my second strength from a professional standpoint. And then, ah, zeal for operational excellence. How do you have very strong governance mechanisms so that you keep getting better, ah, day in and day out? Those would be, I think, some areas that are my strengths.

AI assessment note: “ability to marry Ah, strengths with opportunity is one habit. Second thing is ability to trust”

Q And Sanjeev, was there any point in your life you felt lost between being an entrepreneur to take a decision being a VC or starting another VC firm?

A Yeah. I think my journey from entrepreneurship to VC, which is from Daksh to Helion, that was very hard because of what I explained to you in the earlier part of our podcast, that in that business, you get quarter to quarter response, you get early feedback. In that business, you run a large organization. You can delegate a lot of things, and, uh, we see investing is pretty much do-it-yourself kind of a role, because we have very lean organizations. Structures are very, uh, flat. So I think lack of resources and, uh, delayed feedback. I had struggled with those, uh, elements in my transition from, uh, Entrepreneur to VC. But once I got past the hump, then the joy of seeing multiple entrepreneurs go on to build scale companies and to be continuously in that process has been very gratifying.

AI assessment note: “my journey from entrepreneurship to VC, which is from Daksh to Helion, that was very hard”

Q And, uh, what were your thesis when you invested in FarmEasy?

A FarmEasy, again, uh, vertical commerce. Uh, and we drew a lot of inspiration from Big Basket because there is a lot of similarity between the two. Both are subscription type, uh, businesses. Once a customer buys from you and has a good experience, he continues to drop on your Needs of either monthly grocery or monthly, uh, pharmacy, uh, pharmacy two, three times, uh, in a month. So it goes to create a very, uh, sticky relationship. And pharma industry has too many, ah, layers of distribution. So online is a very good way to disintermediate the industry. And let the benefit of disintermediation, which is, ah, cost of drugs be passed on to the consumer. Uh, and also the fact that it's a very large vertical, twenty billion dollar plus, uh, industry. So I think ever since we entered, company has grown, uh, three X. So again, that's an example of A very large market with some annuity characteristics, subscription type business, and very high quality founders. Pharmacy is just the starting point. I think it will become a overall healthcare provider over a period of time.

AI assessment note: “FarmEasy, again, uh, vertical commerce. Uh, and we drew a lot of inspiration”

Q So, coming on to our more personal journeys of your, what are the hardships that you have faced about, which most of us don't know about, and where can be lessons for entrepreneurs?

A Yeah, yeah, yeah. You know, one, uh, Big challenge we faced was when we were running Dash, all of us founders had come with an experience of not running more than a hundred people organization, and we were in our second year, and we had built about a 500 people organization, and we got a project to do a thousand people implementation within six months. So we had to bring to India, ah, customer service of a large telecom carrier, and customer service really is all about their brand. So it's a very mission critical, ah, process. And I think, While we won the project, we were all very worried that we have never handled such large workforce. We have never recruited so many people over such a short period of time, and then trained them. So, after a lot of deliberations that happened between the management team, we decided that we will now decentralize the company and create business unit structures. And then empower those business units to be independent companies with almost like an independent CEO. So Daksh was not then one company. We broke it into three companies. So from that, the learning was that that became a template. That if you can decentralize and give leadership to those decentralized business units, lot of autonomy, then wonderful things. Happen. That was one learning organizationally. Second learning was from my professional career, where I once transitioned from runn…

AI assessment note: “one, Big challenge we faced was when we were running Dash... learning was”

Q Typically, how have you built the Fundamentum team? Like you mentioned a lot about complementary skills. Yes. We'd love to know more about that.

A Yeah. Actually, in Fundamentum, our theme has been to have a very strong entrepreneurial DNA. And we have really two buckets. One is our finance and operating team, and other is our investing team. And our entire investing team has come from an entrepreneurial DNA, whether it is Nandan who helped build Infosys, or me with Daksh, or our partners, Ashish Kumar who's done two, three ventures in tech space, or Rohit Jain who's built Drishti as one of the co-founders, or Prateek who was in the beauty space. So, we believe that since a big part of our value add thinking is post investment, Entrepreneurs empathize with entrepreneurs, and that is really our, ah, common theme for entrepreneurs by entrepreneurs, which is guiding the build out of Fundamentum team. And then we have very high quality advisors as functional area experts. Strategic advisors like TN Hari, who guide our portfolio company on human resource capital. Or Sanjay Purohit, who was chief of strategy at Infosys when Nandan was the CEO. So he helps you think through a strong strategic framework. So that is the, those are the three legs you can say, finance and operating, investing, and then an advisory group.

AI assessment note: “those are the three legs you can say, finance and operating, investing, and then an advisory group.”

Q So you have traditionally stayed away from direct to consumer brands. Why is the reason for that?

A Direct to consumer brands, uh, we haven't yet made, uh, too many investments because the question is that is it better to invest in distribution or is it better to invest in brand? So far we have invested more in distribution. Because the question is when you are investing in a brand that is too narrow a market and will a customer, for example, invest an app if you are a brand. So I think that is a big question that brand will give you stronger unit economics, but brands will have very high, ah, cost of customer acquisition and repeat rates. So very quickly you will find that if you have very high cost of customer acquisitions, Then you can't be a single product company. And if you can't be a single product company, you will have to then go to multiple, ah, products. And then automatically you start varying towards becoming a retailer or a distributor, ah, than a brand. So I think a brand thinking is evolving. Maybe areas where there is a lot of stickiness and people come day in and day out, ah, would make some interesting bets, but So far, our emphasis has been on distribution than on brands.

AI assessment note: “brands will have very high, ah, cost of customer acquisition and repeat rates.”

Q What have been your strengths and weaknesses as a venture capitalist if you reflect back from the last five, 10 years?

A Yeah. No, I think that's a great question and that learning is work in progress because unlike a company where you get quarterly feedback on how you are doing in venture investing, especially early stage or scale up investing, the feedback loop is very long. You only get to know after 10 years. Whether you did right or wrong, and sometimes it could be luck, then skill. So, it's very important to be intellectually honest about how you think of yourself. I think my biggest strength is that being able to Assess the quality of founders comes to me quite, ah, intuitively. And, ah, while understanding the spaces, It requires a lot of work, uh, at my end, because each space has a very different nuance, but people really have some very common characteristics that you can pick. Like I mentioned to you, real estate had cyclicity, which we had ignored in our thesis building. So, one is that, uh, that is something that, uh, I think I'm good at, that I can spot scalable founders. And two, I think based on my own learnings of scaling up as an entrepreneur, I have an advantage that I can also give good advice to entrepreneurs post investment. So how to think about scaling up, how to think of organization, how to think of culture, people, which is a such a big aspect of scaling up once your product market fit is established. So I would say, uh, those probably are the areas which are my natural…

AI assessment note: “I think my biggest strength is that being able to Assess the quality of founders”

Q And Sanjeev, what do you see difference in yourself, Sanjeev, a VC, 10 years ago, Sanjeev as a venture capitalist today?

A I think that's a great question. And, ah, I think I'm more aware of my strengths and weaknesses. So I would be very mindful that what are the areas that I don't know. And I shouldn't therefore opine on those. And lean on others. Like I said, I am good at making a judgment on founders. But for me, judging the space takes lot more effort. So I lean on my other colleagues to learn about a space or about an industry. So I think that probably would be the crux of the difference, that I am more self-aware About where I can contribute the most in the investing in entrepreneurship value chain. And I stay close to the spots that I'm good at.

AI assessment note: “I think I'm more aware of my strengths and weaknesses.”

Q What mindset helps you keep on top of your day? Because VC is not a daily feedback business, as you said.

A You know, I think on one side, it is the optimism on the macros, and meetings with the entrepreneurs in India. They are very energizing, and I think they keep, they keep you very charged, because the beauty of a business is every day we meet Entrepreneurs who are doing something that will change some part of the country. So that is very energizing. But what also keeps us very grounded is that scaling up is not a linear process. For every two steps that one goes forward, there is one step backward. So you have to think with lot of pragmatism. Not be a pure optimist and have your eyes shut. So I think those are the twin rhythms. One keeps you very grounded. Other gives you a lot of positive energy.

AI assessment note: “So I think those are the twin rhythms. One keeps you very grounded. Other gives you a lot of positive energy.”

Q How do you advise them to seek insights into their business or in the market that are really path breakers?

A Yeah, I mean, my advice really comes on those three, four buckets. One is, are you solving a large enough problem? Is your addressable market large enough? Do you have any differentiation? Second bucket is, how are you organized to take advantage of that opportunity? Third bucket is, are you putting the right people platform in place? And then fourth, very strong governance mechanism. So my template is that within these four buckets, you can find answers to most solutions, to most problems. And if you can think of this like a sequential iterative process, like a virtuous loop, then you can keep reinventing yourself day in and day out. So thinking in these four buckets of Strategy, structure, people, process. The, is a fairly holistic way to think of scaling up.

AI assessment note: “my advice really comes on those three, four buckets. One is, are you solving”

Q What do you mean by first principles thinking?

A First principles thinking is you break down the problem and its logical component. Use, uh, pure logic. Uh, do iterations, uh, run small pilots before you start to Scale. So I think those are the kind of things that I would put in first principles thinking. Essentially problem solving in a very, very logical way, not with too many preconceived notion and going to the market and taking lessons from the market and then iterating on those lessons and keep refining your Business model. So I think approaching with a very open mind, very high degree of learning agility, that if one market is not working, Move to some, uh, other market. So I think those kind of, uh, thought processes are the first principle thinkers, uh, markers.

AI assessment note: “First principles thinking is you break down the problem and its logical component.”

Q Which are the markets you are focused on, 2019, 2020, if you find a great team you would invest in?

A Yeah, I mean, we really don't, uh, worry so much about the underlying market. We really focus on the larger themes that I was talking to you, which is a large, uh, industry. And, uh, within that, getting high quality founding teams. I think the areas, uh, are present across all elements of, uh, value chain, whether it is consumer internet, Or outsourcing, or travel vertical, or e-commerce vertical. Areas which are beginning to emerge are, uh, fintech, uh, edutech, uh, business to business, uh, commerce versus B to C commerce, because manufacturing, for example, has not been really impacted by The advent of internet and digitization. So a lot of manufacturing industry, the relationship between principals and suppliers, how can that be disintermediated? Lot of those kind of sectors of India's GDP are very early in their evolution from a digitization standpoint.

AI assessment note: “Areas which are beginning to emerge are, uh, fintech, uh, edutech, uh, business to business”

Q What, what have been your, one of your thesis was real estate. What have been the other thesis where the journeys to scale up has not worked out well?

A You know, the scale up journey, I would generally think in, I, I generally think of it as a horizontal. And as a horizontal, it is really about four things. Strategy. How are you thinking of shaping a market? Structure. What is the organization design? Putting the right people, and then having a very strong governance mechanism. Now, where these four elements are present, and, ah, strategy is right in that it pursues a very large market, then success is very, very high. Success rate is very high. But when this chain is not complete, I think then the Uh, then the scale up does not happen. That's the difference between hundred X versus, uh, five X. So we've had people who've been very, uh, good at envisioning, but have not been as good at converting that vision into operational excellence. So again, it won't convert, vision won't convert into reality. So I guess the learnings are more horizontal than Vertical other than the real estate, which I would say was more an industry, ah, learning. The other thing we've also found is that whenever a business is very distributed across hundreds of geographies, Uh, sometimes that kind of a business is also very hard to, uh, build. Businesses which are built, uh, centrally, like e-commerce businesses, which are not hyperlocal, tend to be lot more, uh, scalable than businesses, let's say an eye chain, which has to go clinic by clinic across t…

AI assessment note: “I guess the learnings are more horizontal than Vertical other than the real estate”