Siddhartha Ahluwalia 0:46

Hi, this is Siddhartha Ahluwalia, your host at Neon Show and Managing Partner of Neon Fund, a fund that invests in the best of enterprise software companies starting from India. I have today two of my oldest friends, Venture Capital, who I counted upon when I started my journey as a VC back in 2019. I have Gaurav with me from Prime Ventures and Naman from Stellaris.

You both come from either founder or founding backgrounds. How tough has been the transition into a VC journey?

Gaurav Ranjan 1:15

So when I joined initially, I joined with a very open mind and I thought you’re doing the same thing, you’re building startups and evaluate startups and invest in them. But one big difference that I found initially was the speed at which things move in VC and in startups. When you’re building a startup, every day is a new challenge.

You launch a new product, you launch a new category, something is breaking, something is working well. So every day you have something new to do and when I was in VC, when I joined for the first three, four months, we didn’t do any deal. I was like, is this how VC operates, right?

That was where I think it took some time to get used to how the investing world operates. It’s not that we’re not looking at startups, it’s just that in a fund like ours, we invest in six startups a year. So just getting used to that pace was, I think, a bit of a change for me.

And then you realize you just focus on the input side where you like keep meeting people, keep meeting startups and investment will happen eventually. So that was one big change and learning for me.

Siddhartha Ahluwalia 2:22

Yeah, Naman, how was it for you being a founder and then

Naman Lahoty 2:24

So you know, I’ve started two companies across five years before I transitioned into the VC role. And I would agree with Gaurav that it is very hard, more because of the shift in mindset that is required. Like, you know, as a founder, you are able to see impact on a daily basis, on a weekly basis.

There are things to do and of course, a lot of things are on fire that you are trying to settle down. But in a VC, nothing changes in a month or even in a quarter a lot of times. So getting used to that pace, you know, is quite difficult.

In a startup, you work six or seven days a week. In VCs, you know, when I saw a weekend job for the first time, I was like, what’s happening? Why is nobody working on weekends?

So that mindset shift is required to be more patient. It is more a thinking oriented job than a hardcore day-to-day execution kind of a job. So settling in takes a bit of a time.

But I think one thing that I really like is that, so if you have been a founder or an operator before, you are able to relate with the founders quite a lot. So ability to empathize with the founders and build that instant connect with the founders is very, very hard because founders also see you that, you know, you’ve been on the other side of the table, you know what it is like, and hence, like, you know, and you can empathize with them. So in that sense, it is also easy, but it is hard from the mindset shift perspective.

Gaurav Ranjan 3:45

I mean, to your point, Sid, I think it should not come out that VCs don’t work. I mean, when there is real activity, we do work and everybody works, right? I mean, so when there is real activity, I mean, we were recently on an off-site, there was a hot deal that we were chasing and during the off-site, on one side, I was making presentation for like annual plan and the other side, we were like having pitch meetings.

So when there is real activity, of course, it is there. But otherwise, yeah, it is far, I mean, you can control the pace compared to what it would be in a startup when you are in an operating role or a founding role.

Naman Lahoty 4:15

You are not chasing a target.

Gaurav Ranjan 4:16

Yeah, you are not chasing a target. Yeah, true.

Siddhartha Ahluwalia 4:21

And among the ecosystem that I have observed, since I started a company in 2012, I think we also started during the same time and we joined as a founding member in the same time. The traditional set of VC teams were usually made of people who are from Ivy League or from then they did consulting and then joined VC. So I was never able to relate to them, neither as a founder nor as a VC today.

Right. How was that ecosystem shift for you both?

Naman Lahoty 4:48

Yeah, I think so when I joined VC at that time, I was probably one of those few odd one outs. I am not from a consulting background. I don’t even have an MBA.

So getting into senior VC role.

Siddhartha Ahluwalia 4:59

You are the only MBA on table.

Naman Lahoty 5:03

Yeah, so that was a bit odd. But I think it was a lot more easy to transition into a VC role. If you have been an operator or founder before, as I was telling that it is easy to establish that instant connect and relationship with the founder.

So I think over time, people in the industry have realized that MBA or consulting doesn’t necessarily teach you anything that is required for you to evaluate to start up a relationship with the founders. Of course, it gives you formal education about businesses, but on ground education is equally and maybe more important. I am biased towards being an operator or a founder.

So I think it is more important to understand nuances of the business and build relationship with founders.

Siddhartha Ahluwalia 5:45

Gaurav can tell us how MBA made him a better VC

Gaurav Ranjan 5:48

I think the only benefit I get out of MBA is the network that I built and a lot of people would agree with that. But yeah, I mean, moving from initially when I joined, yeah, same story, like very few people with operating background. But then back then when I joined in 2018, there were very few startups which had done well or where people could exit and like join a VC and VC ecosystem also relatively small than what it is today.

So I would agree with Naman that just the ability to connect with the founders is there because I’ve been through the same grind. You know what it takes to like hit a monthly or quarterly or yearly target, what it takes to build a team, what it takes to hire a team, right? So that connection is there right from the beginning.

And second thing you also understand, which comes when you’re investing in startups, when you start investing is that it’s very easy to build models on an Excel sheet and like write stories and vision on slides, but converting that into like actual outcome, there is like a lot of hard work that goes into that, right? So that you start appreciating when you have been on the other side, because we would also submit our monthly and quarterly plans to our VCs and those would be audacious, ambitious targets. But when you’re, when you had to hit that, that’s when you realize that what it takes to like hit the target.

And a lot of times we see founders who say, okay, we’ll grow like 5x in a year. And it looks very beautiful on an Excel model, right? You’re growing like 15%, 20% month over month, you’re adding more people, revenue is growing, retention is happening, all of that, right?

But then when you like have been on the other side, you know that what is there in the Excel sheet, like translating that into like actual numbers and actual results. There’s a lot that goes in between that, right? So that also you’re able to appreciate a lot more, right?

And you don’t ask founders for like, why you’re not growing 10x in like three months, because you understand that in some cases there’ll be like some groundwork that needs to be done before the scaling up can start.

Naman Lahoty 7:40

I think if you’ve been an operator before, pitched to a VC, and then if you’re a VC, you will not believe in any projection.

Gaurav Ranjan 7:51

So normally, I mean, I discount all numbers by at least 20, 30%, whatever.

Siddhartha Ahluwalia 7:54

I discount every number. Because I know that first 5 years of the journey will, if you’re able to survive, no number will be hitting the target in 99% of the cases.

Naman Lahoty 8:09

I think either you grossly underestimate or you overestimate.

Siddhartha Ahluwalia 8:13

There is no linear path, like Excel is all built on linear models, right?

Gaurav Ranjan 8:17

Yes. I mean, you can do some exponential growth, but what will it take for that to happen on ground.

Naman Lahoty 8:23

But I think the mindset is changing. I think more and more VCs are now open to hire people with X founder background or X operating background.

Siddhartha Ahluwalia 8:30

Or I think other thing is also happening. A lot of folks who are consulting or MBA who joined VCs directly after without any operating background or being a founder, they are now leaving companies to start becoming founders or leaving funds to becoming founders. We have two portfolio companies where the founders have done exceptionally well.

They were VCs earlier, like Rapid Claims where one of the founders is from Together Fund, another is from Matrix, they were itching to build. And the other is from WizCommerce, Divyaanshu, he was part of Bessemer earlier. I think so VCs might add, I don’t know, right?

Might add some edge to founders, what do you think about it? Being a VC, would you consider a founder differently if they have been VCs in the past?

Gaurav Ranjan 9:17

No, I would not. I mean, to be very honest, I mean, when you look at founders, you just try to understand what they’re building, what’s the story, what are the motivation. So I mean, being a VC does give you some advantage in terms of you have a more broader perspective on things because you’ve seen like multiple startups, right?

And multiple sectors, how they evolve. So that is one advantage that you have, which an operator may not have because they would have normally operated in a single industry or a single function. So that is one advantage that you have, right?

But I don’t think that is a big enough advantage for you to like build things differently or have an edge over somebody who’s coming from an operating background.

Naman Lahoty 9:57

In fact, I think it is more of a disadvantage because your execution capabilities are, you know, because you haven’t executed on a day-to-day basis for a very long time, you know, like team building, team leadership, all of those things. You don’t get to experience as a VC, like VC is still more of an IC kind of a role. So yeah, there is no natural edge that VCs carry in a startup.

Siddhartha Ahluwalia 10:19

I think VCs are in business of pattern matching because I think pattern matching is a low cognitive exercise, right? It gives you the easy answer, at least on paper. So one thing that I’ve observed, which might be a complete biases, both in case of RapidClaims and WizCommerce, the founders were like hardcore operators before, not founders, and in WizCommerce the founder was an ex-founder before, before they jumped into VC to learn what VC is like and then shift again to a founder.

Gaurav Ranjan 10:50

And that could be a good journey, right? You’ve been an operator, so you know how things operate on that side, how to build businesses and then you go to a VC, you know, like what story will sell to the VC? How can I ride on this quick commerce wave and quickly raise money?

Naman Lahoty 11:03

You have the execution muscle from your operating experience and then you have a storytelling muscle or at least, you know, the broader sectoral level story.

Gaurav Ranjan 11:13

You can anticipate what questions will be asked and prepare for that, whether you will do that or not is a different thing. But yeah.

Siddhartha Ahluwalia 11:20

So Gaurav, how many founders would you have spoken to in the last seven years?

Gaurav Ranjan 11:25

In seven years, I would say, I mean, in terms of teams, anywhere from 1500 to 1800, I would say.

Siddhartha Ahluwalia 11:35

Do you measure them? Yeah.

Gaurav Ranjan 11:36

I mean, we do keep a track of the pipeline. So from that.

Siddhartha Ahluwalia 11:41

But for yourself also, that how many of those, let’s say, Prime would receive 3000 or 4000 companies every year. So out of that, how many companies did you speak to individually?

Gaurav Ranjan 11:50

So now we have a larger team, earlier it was just three partners and me. So now, of course, we have a larger team, so it gets distributed. But yeah, I mean, that would be the rough number, I would say.

In a year, about like anywhere close to 200 to 250 startups in a year.

Siddhartha Ahluwalia 12:10

So overall 1800 companies in the last, what about you Naman?

Naman Lahoty 12:13

Yeah, I think I have, I haven’t not counted how many companies I have met, but I’m pretty sure the number would be 1000 plus as well, because we typically end up meeting like, you know, six to eight companies or sometimes even more in a week, translates to 150 to 200 plus companies in a year. And I think in last six years, probably definitely 1000 plus companies that might have evaluated to probably 100 odd startups out of those 1000, a lot more deeply in last six years.

Siddhartha Ahluwalia 12:39

And how many companies you would have like been part of the team that led the round out of these?

Gaurav Ranjan 12:44

So as I said, I mean, before 2022, between 2018 to 2022, I was part of all the deals. Since then, as the team grew, I think every year I end up doing like, on average one. We have a fund, we do like six deals a year.

So like one.

Siddhartha Ahluwalia 13:02

So I assume roughly 10 to 15 deals that you would have been part of?

Gaurav Ranjan 13:06

Yeah, I mean, in terms of being part of deals, more than 20 for sure.

Siddhartha Ahluwalia 13:09

20, what about you?

Naman Lahoty 13:10

That number is 10. We typically do like, one individual gets to do one to two deals a year. So I have been part of 10 investments so far in last six years.

Siddhartha Ahluwalia 13:20

I have done 59.

Gaurav Ranjan 13:22

59?

Oh, this includes your like angel?

Siddhartha Ahluwalia 13:24

Yeah, some pre-fund check, but pre-fund was only a very small, like 10 companies. But if you consider fund one, fund two, fund three.

Gaurav Ranjan 13:30

In three, no, in four years, you have done?

Siddhartha Ahluwalia 13:34

2019 to 20 was pre-fund 10 deals, 10 deals and from 21 to 22 till now, like 49 deals.

Naman Lahoty 13:42

You are a veteran now, I think we should seek guidance from like that.

Gaurav Ranjan 13:47

But how do you do?

Siddhartha Ahluwalia 13:48

I mean, I think what might be my strengths and weaknesses, my bias for action is very, very high.

Gaurav Ranjan 13:55

Yeah, I’ve seen.

Siddhartha Ahluwalia 13:59

So now, and now since the last two funds, we have a proper IC of four to five members, right?

And like every company has to be like the IC majority vote kind of, in most of the cases.

Naman Lahoty 14:13

Now the pace will slow down because you have to convince other people as well.

Siddhartha Ahluwalia 14:17

And this has been for the last 33 deals, there has been an investment committee.

Gaurav Ranjan 14:23

Oh, wow.

Siddhartha Ahluwalia 14:24

But I think the bias for action, overall, the culture has been built for higher.

Let’s say if we like, recently, we invested in two companies or gave term sheet to two companies. And the last one month, we would have done three. But before that five months, we didn’t do anything.

Gaurav Ranjan 14:43

Oh, how did you manage in those five months without doing anything?

Siddhartha Ahluwalia 14:45

I was focused on the race. So that gave me some dopamine.

Gaurav Ranjan 14:49

Yeah. Yeah.

Siddhartha Ahluwalia 14:53

But yeah, our thesis is like do actively and in this fund, we are taking like 10 to 15 person positions for one to 1.5 mil kind of checks.

Gaurav Ranjan 15:04

So what is the typical timeline from like first meeting till you give them a term sheet like a yes or no decision?

Siddhartha Ahluwalia 15:12

Many cases that have been in one week, like we do entire DD within one week.

Gaurav Ranjan 15:15

Oh, wow. That’s impressive.

Siddhartha Ahluwalia 15:18

Yeah. And in these cases, we thought that they are competitive deals. So we needed to move fast.

Gaurav Ranjan 15:26

Yeah. I mean, I remember during 2021, deals were so competitive. We used to meet founders on Thursday and we said, okay, we’ll set up next meeting on Friday or over the weekend.

Over the weekend, we’ll get a mail. Thank you guys. Our deal is done.

So that was 2021.

Siddhartha Ahluwalia 15:42

Thankfully, we have never regretted because of speed of action. I think the four or five companies that shut down from Neon portfolio overall were only because they couldn’t achieve product market fit. So I would say that even if we took one month on them, the answer would have been almost the same.

Gaurav Ranjan 15:58

Yeah. So that I agree. I mean, whatever deals that you look at, you tend to have some like inclination the first one week.

Yeah. And after that, you’re just trying to revalidate and reinforce your bias, whether it is yes or no. The next couple of weeks, we’ll just go and reinforcing that.

So yeah, I agree. I mean, whatever you decide in the first week is eventually what happens.

Siddhartha Ahluwalia 16:22

Yeah. Or unless you’re until like in a couple of cases, let’s say we were, it was a yes from the IC. And then we said like, before saying a yes to the company, we’ll do a DD.

And in case of DD, the first few design partners that we met were also advisors or shareholders in the company. So that was like a big alarm that went off.

But usually, at least in our case, we have tried to move quickly. And I think speed, in today VC, is very competitive, unlike when I started six, seven years ago, as a VC fund, trying to make conviction was very different. Today, it’s not the case.

Naman Lahoty 17:01

Yeah. It’s still like, it is still better as compared to 2021. But yeah, I think 10 years back, I think when we started a company, I think that time people used to take more than a month to diligence, you know, they have all the time.

Siddhartha Ahluwalia 17:14

Some of my ICs went on for six, six months, one IC is done, next IC is after four months. And even a small company, the data gathering never stopped.

Naman Lahoty 17:26

I think when we started in 2015, 16, that time, I think investors evaluating us for more than a month was a norm. I think now, if you are evaluating for more than a month. you are…

Siddhartha Ahluwalia 17:37

Either the company is really good, you would have gone and you would know that if you’re still evaluating after the month, then they’re not able to raise from anybody.

Gaurav Ranjan 17:46

True. That is a question that we at times ask if the deal is taking too long from our end, we say it’s been like four weeks and we are still not in a decision. But the company also doesn’t have a term sheet, not a signal we should look at.

Siddhartha Ahluwalia 18:01

Recently, what happened is a company came to us on Friday, a Bay Area company. By Sunday, we had to take it to IC because founder said that this is like Monday we gave a term sheet and they by Wednesday, we obviously term sheet have certain time, right? By Wednesday, they said that we have a term sheet from a US tier one kind of a fund.

So that’s the speed of execution. Right. At least.

Gaurav Ranjan 18:31

But do you guys get influenced if startup says that we have some term sheet? Of course, we move fast, but like in terms of decision bias

Siddhartha Ahluwalia 18:40

We follow a principle that if you have, if you have a term sheet, we’ll not replace either. You get both of us, right? Because if you can replace me with somebody else, then I’m also replaceable.

Naman Lahoty 18:50

But to answer your question, I think we also like try to build independent conviction and not sway our decision making because of somebody else’s conviction. I think you can’t borrow conviction in this business.

Siddhartha Ahluwalia 19:02

And the thing is, in VC as a founder, because you are seeing pulse of day to day of a company, you are able to see direction whether it’s going right or not. And you always know that if these things could happen as an investor, it takes a lot amount of time. Right.

A company that you would have bagged 4-5 years ago, you would still not know whether it will break out or not.

Naman Lahoty 19:26

Yeah.

Siddhartha Ahluwalia 19:28

The feedback loops are extremely long, especially at earlier stages.

Gaurav Ranjan 19:34

Yeah. I mean, the feedback, the real feedback loop is 10 year long, like 7 year long. Yeah.

I mean, at least some early signs you start seeing in 3-4 years. That was one big, I mean, the first question that you had, that was one big learning for me as well. You invest in a startup and then for the first year, like nothing moves, they’re still like building team.

And then you’re like, when will I get to know that this is a success or not?

Naman Lahoty 19:55

I think the downstream effect of that is that you can’t be super experimentative as you can be as a founder. That you know, you can try a lot of things, figure out what’s working, what’s not working and accordingly change your strategy or direction. As a VC since the feedback loop is longer, you have to be more thoughtful in your approach.

So more than like being executed, like on execution speed, trying too many things, learning because the mistakes are costly, you’re actually losing money on those experimentation.

Siddhartha Ahluwalia 20:21

I would say still, you know, money is one part, but now you have committed your time and all of your entire resources to one company for the next 10 years. So that’s why we are extremely careful while saying yes, that hey man, even if it goes down then that’s okay. But for the next 10 years, I’m going to have weekly calls.

Naman Lahoty 20:40

And more than the companies, even your strategy of investing, your, you know, all of that needs to be a lot more thoughtful than only action oriented because like the feedback loops are longer.

Gaurav Ranjan 20:52

Yes.

Naman Lahoty 20:52

So you can’t rely on taking a lot of actions and then learning from the results and then changing your strategy. Accordingly, you don’t have that luxury as a VC.

Gaurav Ranjan 20:59

Yeah.

Siddhartha Ahluwalia 21:02

And what’s been your biggest unlearning in the last six, seven years?

Naman Lahoty 21:08

Unlearning. So I think I’m trying to unlearn pattern matching, actually it’s very counterintuitive. I think, you know, when I started my VC journey, at least a lot of people talk about, you know, VC is all about pattern matching, but if you see all the great companies that have been built, they have been like antithesis of pattern matching.

They are the first of their kind. And in a sense, I’ve started to believe that VC is more about pattern breaking as compared to pattern matching.

Siddhartha Ahluwalia 21:38

I would say it’s neither pattern matching or pattern breaking, but what it is, is if you start going into pattern recognition, you are trying to offload the cognitive load, right? So it’s like saying that these two founders who are VCs, they worked out, so now let’s look for another founder that has been VC, so it’s an easy answer.

Naman Lahoty 22:00

Yeah, and I think majority of alphas, all the new really, you know, outsized outcomes typically are first of their kinds. So you have to be unconventional and non-consensus in your approach.

Siddhartha Ahluwalia 22:11

You can’t also try forcing non-convention that this guy looks completely unconventional.

Naman Lahoty 22:16

So you can’t completely do that.

Siddhartha Ahluwalia 22:17

17 year old or 16 year old starting a founder, drop 10th class.

Naman Lahoty 22:21

But that’s what I think pattern matching is still relatively easier, but thinking about where can the pattern be break, you know, can break, that is a lot more difficult to judge. And like honing that skill of pattern breaking, like this is where we can really break the pattern and this company can be different from others, identifying that one out of a hundred who can be different, but still not create anything is a lot more harder, but at least that is the thing that I’m trying to unlearn that, you know, don’t try to figure out what pattern is working. You need to figure out where can you really break the pattern and make it a really different and large.

Siddhartha Ahluwalia 22:59

Yeah. What’s your unlearning?

Gaurav Ranjan 23:01

So that is definitely one of it. The other for me is, I mean, coming from an operating background, when like building things from zero to one, you’re always very optimistic, macha denge, fod denge, sorry for using Hindi words, but we’ll win, we’ll win over everything, we are very optimistic in everything that we do. As VCs, of course you have to be optimistic, but with some amount of caution, you have to be cautiously optimistic and you can’t be like bullish and optimistic on everything and everything that the founder says, can’t believe that.

So that is one thing that I had to like build in. The second thing was, I wouldn’t say more unlearning, but something that a bit of unlearning and new thing that happened was, when you become a VC initially, right? And when you have like build things in the past, so you are very enamored by cool ideas and like cool innovation.

Will that translate into a big outcome is something where you, I think that muscle you have to build, right? Because at the end of the day, whatever we do, right, we invest in startups, cool ideas, new innovation, we are money managers, right? You have to like return money at the end of the day.

So if you bring in that lens that your money managers and investing in like startups is a means to that end, and of course, you have to find the best ones. So that was one big, I think, takeaway for me as well, that don’t get too sold on just cool ideas, but also think about the financial returns that you can make out of that because that is what will ensure that you are in the game for long.

Siddhartha Ahluwalia 24:35

Yeah, on your point, right, matching pattern, I think it’s very also easy to fall into conclusion. Let’s say somebody like on conclusion on writings, for example, Fred Wilson wrote this that try to find founders who are like this, this, this, this, so it becomes these points become talking points, right? And then you are trying to fit retrofit into some existing, you know, behavior, a new set of team.

So, so I think read everything, but don’t believe anything.

Naman Lahoty 25:09

I think you can’t go with a preconceived framework that, you know, these are the checklists or these are the checkbox, let’s say, consumer founder should have a checkbox, a SaaS founder should have. I think if you see most of the founders who have become big, all of them looks like a different personality with different strengths, weaknesses, you can’t put them under one cookie cutter kind of approach.

Gaurav Ranjan 25:29

And the other thing with like pattern matching is there’s a lot of survivors who are biased in that, right? Because you only see the ones which are successful, right? And that’s what you try to match patterns with, whereas there’d be like 100 more companies trying to follow the same pattern, which like didn’t do well, right?

And I can relate back in the day, hyperlocal was a big thing, right? And I was with Houcha, you were building Dormant, right? So and today there are successful companies built out of that, right?

So you can’t match a pattern and say, okay, like home services was a need. If somebody else comes up with a 30 minute home service, it should work, right? Because like the way companies are built, the way founders operate, they’re like a lot of nuances into that, right?

So while patterns, you can use pattern matching to some extent, but like, you’ll have to go beyond that to actually build connections.

Naman Lahoty 26:13

I think in 2015, 16, 17, I think on demand was the really hot thing. And of course, a lot of them didn’t work out, so people had a negative pattern matching around it. Now it is rebranded as quick commerce, which is effectively on demand.

But now this is, it is what it is, you know.

Siddhartha Ahluwalia 26:32

Unfortunately, in both these cases, the winners were clearly visible and then this company started emerging. Whereas in both these cases, it’s a winner takes all market, right? But I think people just fall into a trap of if there has been one Zepto, there’ll be many Zeptos.

Or there was one Urban Company at that point in time, there’ll be many of those. I think mistake on both the part of founder and the VC’s without thinking.

Gaurav Ranjan 27:01

There’s a lot of like Uber for X kind of story.

Siddhartha Ahluwalia 27:05

Decks used to contain Uber for X.

Gaurav Ranjan 27:09

We saw that across like verticals from hospitality, travel, education, everywhere.

Siddhartha Ahluwalia 27:17

And during your, you know, six years and your seven years, right, how have you seen overall ecosystem evolve if you have to think of it in terms of mental models or summaries?

Naman Lahoty 27:30

I think one thing that I’ve clearly observed is the founder quality and maturity has gone up at least by order of magnitude, if not more. I think when I started, I think we were quite immature in thinking about how business should be run, you know, kind of inciting that needs to be there. I think today, if we talk to founders, at least it blows my mind that how mature a lot of folks are.

So overall I think ecosystem is matured in terms of a lot of seasoned founders, experienced founders coming up in last like six, maybe eight, ten years, there were no large startups to look up to. So there were a lot of fresh blood people right out of college or from different kind of an experience were coming and starting up. Now we already have successes, a lot of existing founders, like people coming from existing startups who are coming up and starting up.

So that is one change that I’ve seen in last six, seven years that the founder quality has gone like significantly higher. Yeah.

Siddhartha Ahluwalia 28:40

But has it also translated into the terms of outcome quality right now? Or it’s yet to be translated?

Naman Lahoty 28:40

It will translate 10 years down the line, because that’s what it is. So I think the way it will translate is probably both the size of the outcome. I think probably six, seven years back, you know, people were thinking, OK, one billion outcome is possible.

Now, all of us are starting to think that, OK, two to five billion outcomes are also possible in 10 years from now. So it is very difficult to see today because, as we said, the cycles are long, but pretty sure that in 10 years we’ll see much larger outcomes than what we used to see.

Siddhartha Ahluwalia 29:21

And what’s the metric that you are measuring the founder quality and the other things that you mentioned?

Naman Lahoty 29:28

So essentially asking, how do we evaluate founders or how do we measure founders?

Siddhartha Ahluwalia 29:32

Just the metric, right. You would have some metric if you have to put something on it that seven years back and today the founder qualities is changed by X. So what is what….

Naman Lahoty 29:42

We have certain framework like the way so like one that we indexed really highly on a strategic thinking. So that has significantly.

Siddhartha Ahluwalia 29:50

What do you mean it?

Naman Lahoty 29:51

So are you able to think both in terms of near term and long term? Are you able to take decisions depending on how the market and competition evolves? So I think being able to zoom in and zoom out across different times, that is one part of a strategic thinking.

How should you react according to the to the market? Some kind of a second order thinking is what I’m alluding to that has significantly gone up because a lot of people are coming from being on those roles which required some kind of a strategy building when you’re leading. That’s when you are a founding team member of our existing startup or when you are leading a big enough initiative for a larger company.

I mean, larger startup, not necessarily MNC. Then you have been on those strategy roles day in and day.

And you are able to bring that, , muscle, right. When you’re starting up on your own, , as compared to working in a corporate where you don’t get as much direct experience to strategic thinking. The second thing that we look at is your learning agility.

Again, like people who have worked in startups in the past, I think they are very, very agile in their execution, in their thinking, in their experimentation that, like number of people who are like, who have that learning agility has also gone up. I, or the people who are starting up are starting out who have been in that, that, that environment, in their past roles.

Siddhartha Ahluwalia 30:41

Gaurav, what’s been your..?

Gaurav Ranjan 31:25

So, I mean, I would agree that founder quality differently has, , gone up. , the other thing which has also happened is that earlier in the day, right back in 2015, 16, , or even when I joined VC in 2018, the equation was heavily biased in favor of investors and VCs, because one, there are few VCs. And, second, I mean, people are still, I mean, it was still early days of the startup ecosystem.

So you had founders who are still, like building, figuring out things. Didn’t know how to like read, how to storytell or like what would sail with a VC. Now for good, it has changed.

At least I’m seeing that a lot more now, in favor of founders, right. Where founders can decide who to raise from, what at what terms to raise from, right, which is a good thing that have happened at the founder phase. Starting up, you have multiple choices, right.

Multiple options where you can go to. So that is definitely the other thing that I have seen, which has changed. , the other angle is, I mean, which is somewhat related to founder qualities in terms of the, the audacity that you have now to build large outcomes and compete at global scale, , that I think founders think from day zero, I mean, we invest a lot in enterprise SaaS like you, and we see a lot more founders saying, okay, I will go and compete in the US with the best of the U S companies, , right. And that also come from the experience of like building and working in startups, which have done that in the past, whether it was an Indian startup or a Valley startup.

So that are the other thing, which were a lot more confident, audacious founders is what we see now.

Naman Lahoty 32:59

And not just in SaaS, I think even a lot of consumer founders are not thinking of, you know, building globally and, you know, building in a U S. So I think seven years back, nobody was thinking about building a consumer company, globally. Now we see a lot of founders who are trying to build, consumer solutions at a global level.

Siddhartha Ahluwalia 33:17

My observation has been the, the courage in founders, , has become 10 X. For example, the way they are hiring right now, for example, the quality of talent, even expensive. They are able to bring on, let’s say between day zero and day 10, the way they are able to build cross-border teams starting from year one.

I think that is fantastic. I would say it’s, equal to, or even some of the better, like, because we invest between both India and the U S corridor and some of the Indian founders that we invested in are based in, in U S our founders here were building both cross-border teams are their execution is better than some of the parallel American companies that we have seen is it’s a matter of time that we will see the results happening, but the courage is huge. I think some of the factors would also be leading to that.

Courage is more examples, more access, global accessibility and more amount of capital at their disposal.

Naman Lahoty 34:18

Yeah. And the other thing which I also see, which has happened is, I mean, I remember back, like 10, two years, when I decided to join a startup, there are a lot of questions like, why are you leaving like a good job out of B school and joining a startup? Those questions don’t come like now, right?

People are okay with their like, I mean, parents are okay with their kids joining startups and like doing startups. So that is a big cultural change, which I think also plays to the fact that now people are a lot more confident that they know that, yeah, well, this is risky, but then you can still have a great outcome here if it works out. All right.

So that gives that confidence.

Siddhartha Ahluwalia 34:50

If you were to start your journey in VC today, Gaurav, what would you do differently?

Gaurav Ranjan 34:57

Differently. So one thing, when it is, we see when people, it is a deal flow business, right? That’s how it looks from outside.

But when you spend enough time, you realize it’s more of a people flow business than deal flow business. That is one thing that I would like to do differently. Instead of changing deals, like you, of course chase deals because that’s part of the day to day job.

But build meaningful connections, not only with VCs, but with operators, with people working in other companies, right? Just build your own network, right? Which, which kind of pays back in the long run, right?

If you’re playing the long game in the VC, that is the most important part. , right. And it took me some, I mean, well, Amit had mentioned, like, he used to my mentor. He mentioned that, I mean, focus on people flow, but it was not very intuitive, right?

Because day in day out looking at the next best deal, the next best founder. So invest in people flow, build a network, build your connections. Right?

So that is one thing that I would definitely do differently now.

Naman Lahoty 35:53

Yeah. I think if I were to start today, I would probably index a lot more on building an independent thinking and independent learning as well. Like a lot of time you try to borrow learnings from, you know, by hearing what other investors have done or, you know, through somebody else’s experience.

But I think Indian VC ecosystem is such an essence stage that the data points are very, very small to really borrow your learnings. There are not enough data points to actually match patterns. So I think indexing very heavily on your own independent learning and independent thinking is where you will be able to generate that, that alpha, like you need fresh thinking and not, somebody else’s learning or thinking.

Like that may end up you making some mistakes as well, but I think, that’s, that is where your chance to really differentiate yourself. If you learn from somebody else’s and follow their learning and their pattern, then, you’re not really trying to differentiate yourself and, you know, create a disproportionate outcome.

Siddhartha Ahluwalia 37:00

Yes. My, my learning is like, differentiate yourself from day zero.

Naman Lahoty 37:06

Exactly. That’s right.

Siddhartha Ahluwalia 37:07

That’s what the better differentiated you are in the ecosystem or even outside the ecosystem, the better the founders will be able to associate yourself with. And my thesis recently have been that if neon is able to, to win in Bay area among 4,000 funds, that definitely gives us chance to win in local trying to, to build muscle on, on that framework now.

Gaurav Ranjan 37:40

Yeah. And the related point to that is right. I mean, well differentiate yourself, create an independent brand, right.

And people may come for a Prime or a Neon or a Stellaris, but you would want people to come chasing, okay Siddhartha Ahluwalia. I want to raise from Siddhartha Ahluwalia. I want to raise from Naman. Right. So that also kind of pays off a lot in the long run, right. Which is somewhat like not exactly like differentiating yourself, but creating your independent identity right. Along with the firm that also helps.

Siddhartha Ahluwalia 38:09

I think that that can, can only be made when enough numbers of founders start speaking about you in the same language.

Gaurav Ranjan 38:19

Yeah.

Siddhartha Ahluwalia 38:21

And that has to be built by hard work and organic thing. There’s no shortcut to that. Right.

That would to make, you know, conversation more interesting. I’ll start rapid fire. So Gaurav, I’ll start with you.

One company that became big, that you passed.

Gaurav Ranjan 38:38

BharatPay

Naman Lahoty 38:39

When you are really pressing where it hurts. And I’m sure the number is not one. It is more than that, but you know, I look at consumers. So, you know, there have been a couple of companies that have become large that we passed, I think Sleep Company is one, Sleep Company, Snitch. Both of these brands will have viewed many years ago. They’ve become large now.

Gaurav Ranjan 39:01

Yeah. I mean, I mean, if you ask anyone, they’ll be like more than one company, but I just pick one that like I can name at least 10 one. I learned just from the people.

Naman Lahoty 39:08

Nobody wants to name a more number of companies.

Gaurav Ranjan 39:12

There’s one I learned just now, while before this podcast, when you’re talking about some other company.

Siddhartha Ahluwalia 39:17

So Gaurav one company that you were very bullish on, you press the partnership, but today you regret not investing.

Gaurav Ranjan 39:25

So that is Winzo, so, so it was like first few months, right?

Siddhartha Ahluwalia 39:29

IIM Calcutta, right?

Gaurav Ranjan 39:30

Yeah. He’s like, so Paavan is a very good friend.

Like we’re batchmates at IMC. And then we also worked together at, Zo Rooms in Zostel. So I knew him really well. What, what he was doing was not yet done before, right?

So that’s where the part matching thing could come in that he was a consultant. He worked in operating growth. This is pure gaming, like but I knew him really well to say that, I mean he was ambitious, go getter, macha denge, fod denge kind of a mindset, right.

But, back in the day, RMG was relatively new. The regulations were not very clear around RMG. , right.

And that’s the reason we said, , , we’ll not take a bet right now, but that is one where, I mean, knowing the founder, I knew that this, I mean, something great would happen here. , so I regret that.

Naman Lahoty 40:17

I think for me, that name is Pixis. Yeah. So many years back, like, you know, I’ve been coming from the startup background.

So we have done the digital marketing. We understand that problems, what comes, you know, while marketing. So when we met that company, I really, you know, resonated with the problem and really wanted to do it, but of course, yeah, couldn’t get it.

I think for me that time, I think when we evaluated Pixis, I was probably in the second month as a, as a VC. So it was, it was, it was the first company that, you know, I diligence and I was bullish on that right from day zero. So it is very hard to, you know, understand whether it is your optimism coming from as a founder or like, you genuinely believe in the problem.

Gaurav Ranjan 40:59

And yeah, I think the biggest learning for me from that was that index a lot more on founders and business models will change on market, of course, will not change my business model change. Things will evolve. Yeah. And then if you have conviction, go all in. Yeah.

Siddhartha Ahluwalia 41:14

I think that the other tool that can be used is, I’m willing to put my own money. Whatever little. Similarly, where he was not able to convince, he say that publicly was delhivery, but Accel actually didn’t invest, I think in delivery, but he put his own personal money, 10 lakhs, that became a thousand X.

Gaurav Ranjan 41:32

1000X? Meet Abhishek again. Let me have recalibration of his net worth. But yeah, I mean, he has told about both these stories that, , I said, I’ll quit Accel and put my own money.

If you don’t invest, then he said, okay, we’ll put some money here. And delivery, he mentioned that he had to break his FD to like invest there. So, yeah, I mean, we, we can’t do that.

Siddhartha Ahluwalia 41:58

I mean, I don’t know if nobody’s allowed to do that, but yeah, but if you are saying that this is one company, I’m willing to put my personal money, if it helps to convince your case, because you can’t be saying for every single company.

Gaurav Ranjan 42:12

Now I can say that if I’m convinced, I’ll leave it go if you don’t do it.

Siddhartha Ahluwalia 42:17

But that tool is only available for once or twice. If you’re an investor in early days of Indian startup ecosystem, which startup would you have loved to invest in?

Gaurav Ranjan 42:31

Yeah, this is, I would say, I mean, if you look at it in hindsight, only look at successful companies. So I’ll name one, which is very successful, which is Freshworks. I would have like loved to invest in, and the other, which I found the product very useful, but company, of course, didn’t do well, but I would invest it was Zoom car.

Like I’d use like the Zoom car a lot, right. And love that model. So maybe one where I would have invested in not a great outcome, but like I would have invested in.

Siddhartha Ahluwalia 42:59

Naman?

Naman Lahoty 42:59

I think as an investor, it is very easy to look back in hindsight and decide which one would you should have invested in, because you already know the outcome and the answer. For me, that answer would be Zomato. I think, probably one of the highest value company also listed, publicly listed.

So, yeah, I think it’s a very easy answer for me, the company that has generated maximum return. I think, as an investor looking hindsight and like figuring out what the answer should be is like very easy.

Gaurav Ranjan 43:31

What about you?

Siddhartha Ahluwalia 43:33

A couple of companies like Icertis, HighRadius, , because I think Indian ecosystem is still indexing very high on Freshworks kind of a model in B2B software. Right. So, so I would have my learnings to be more diversified and those founders, I think don’t come out much and speak.

Gaurav Ranjan 43:55

Yeah. Yeah.

Siddhartha Ahluwalia 43:57

And one investor from India and one globally that you admire the most.

Gaurav Ranjan 44:03

Globally, I would say not a VC, VC per se, but like Warren Buffet, like follow him, and admire him a lot. , if I could pick a VC, it’s a little hard, but recently I’ve started following, like Foundation Capital, Ashu Garg a lot, right. And then his thought process around investing, like you should only invest.

I mean, you have the, not the power, but you’re in a position where you can influence how things will shape up in the next 10 years, invest in like category creating category, defining tech, right. Not in like the incremental stuff. Right.

So that thinking I like, and hence I would say, , in India, I would say, Sanjeev Bikhchandani, though he is not very, very active right now, but like back in the day, I mean, it’s still active, but like, , he has a fund and the people managing the fund, but I think Sanjeev Bikhchandani is invested in Zomato, Naukri, Policy Bazaar, Policy Bazaar, Naukri founded Policy Bazaar. Right.

Siddhartha Ahluwalia 45:01

What about you?

Naman Lahoty 45:02

So I would say exactly the same answers.

Siddhartha Ahluwalia 45:05

Same answers? You’re making your cognitive load easier.

Naman Lahoty 45:08

No, No, No. Actually genuinely think like he’s one of the best investors in those days. I think investing in two great companies, which have like really delivered 10 billion to 10 billion plus outcome in India are like very, very rare.

Siddhartha Ahluwalia 45:24

I think the other metric to calibrate is I think he invested like as a, as a fund, though it was not a fund 300 crores in that cohort. Right. And that cohort today is valued at, I think, 33,000 crores.

Naman Lahoty 45:36

Yeah. Yeah. So I think, sheer by numbers and like, even from the impact perspective, number of companies, which really generated and delivered return and exits, not just like on paper.

I think he definitely stands, by far ahead. The second, I think probably could be Kunal Bahl as well. I think he, his portfolio is also done quite well.

Globally, I had, unfortunately, I don’t follow too many VCs globally. So again, my answer would be similar. I think really admire Warren Buffett.

The fact, I think I’ve read, read about him a lot. What I admire about him is he’s able to take emotions out of his decision-making of investing. I think I read somewhere that for him, that, you know, that it’s like a number and he wants to chase that number irrespective of, or how can he make it larger in the long period of time?

And that takes away all the emotion out of it. That, okay. What if you lose, you know, these many dollars, you know, what can you do if you, you know, earn these many dollars when you just think of it like a game, it is a number and you want to maximize it, then you’re able to take the most objective decision and take the entire emotion out of it.

So that thought process, I really like and admire him, but, I don’t follow US VC ecosystem as closely as I focus more on Indian consumers.

Siddhartha Ahluwalia 46:50

Yeah, I think, I think two people for, for me in India, one is Karthik Reddy from Bloom and other is Alok from Stellaris. I think both have been very helpful, in my own journey in terms of connects. I think connect with specially, you know, let’s say LPs ba

Gaurav Ranjan 47:21

Yeah. How much would you believe in the theory? I mean, he has a theory that you just back really good founders and let them do whatever they do.

Siddhartha Ahluwalia 47:29

I completely believe in that. So, so when anything, let’s say comes up in ICN, we said, we’ll invest if these founders, let’s say change this. I said, we are, we are the, we are, we’re going to be the last ones to advise them anything to change because I don’t want them to change anything.

If you’re going to back them, let them evolve at their own pace. We don’t want, we don’t want to cause any force factor of making their evolution faster or slower.

Gaurav Ranjan 47:56

How about you? Do you take a decision based on with the founder, listen to you? Or will it, I mean, listen is a second thing, but is he open to feedback, is he or she open to feedback?

Naman Lahoty 48:06

I think they should be open to at least hear a different perspective and still take their own decision. So if a founder, you know, index too much on your decision, okay. You know, I would look forward to your advice and then decide accordingly that is not as much preferred, but I think. So of course we do believe in like founders should take their own decisions, take their own, charter, their own path, have their own learnings. But at the same time, I think there may be certain blind spots and people should be open to at least hear from different perspectives and still decide like what they think is the best.

So, there at least, you know, when, like while we know, can we can’t change anything material to the outcome of the company or the success of the company, but at least we would still want to have a really good relationship with them so that you can have informal conversations with them and you can give them your candid point of view and it is up to them. how much do they want to give it as to it? How do they calibrate it and take a final decision whatever they think is the best.

Siddhartha Ahluwalia 49:07

I think one thing, and I would like to take both of you in person. One thing that I’ve learned is which Indian ecosystem is very heavily object, like, you know, focused on in the U S people are flexible as ownership. For example, you know, you guys might like 15, 20% ownership, same with you in us, what I’ve observed, even the biggest of the funds would, would like to be part of earlier extraordinary journeys because they know that in some of the extraordinary journey, even 3% or 5% ownership for a 300 mil fund, right?

The, the outcome tomorrow can be Coinbase or Uber or, recently moveworks. And I think in India, though we are expecting 5 or 10 billion outcomes in the next 10 years, but the ownership’s criteria is still backward looking.

Naman Lahoty 50:01

Yeah. So I think the, , the reason probably is India is very early in its journey.

Siddhartha Ahluwalia 50:08

Yeah, that’s what I am saying. Though we are projecting $10 billion outcomes in the next…

Naman Lahoty 50:10

So, we don’t…

I think none of us project or index on 10 billion outcome because they’re very far there and some will get created, but you can’t take that in your, like in your model.

Right. So, I think effectively it is a function of that, you know, , in US, you might be okay taking 5% ownership because there is a possibility for the company to be 50 or a hundred billion dollars that have been past examples of that and hence people have started believing, okay, something like this can be created and hence we should invest in it. Right.

I think once, in India, it starts happening that people are seeing more and more 5, 10 billion plus companies. I think people would be okay. It’s basically math.

And if your math doesn’t work out at 5%, then, people would hesitate in investing in it because even if the company does well, which in current standards of India is let’s say if you’re one or $2 billion, you might as a fund, you might still not make significant needle moving money. Now over time, there is a hope that, you know, this, as we get into more diverse businesses, more innovative solutions, as we start targeting global companies and start winning in global markets, maybe that needle will move up that people are okay to see, okay, you know, I’m indexing or benchmarking my portfolio on 2 billion, 3 billion, but maybe there is a potential for certain kinds of companies to be 10 billion or plus, and there are people might be locating lesser on lesser ownership.

Siddhartha Ahluwalia 51:36

Gaurav?

Gaurav Ranjan 51:36

Yeah. So I think that I totally agree with that. So in, I mean, US, you have like multiple 10 and a billion dollar outcomes.

So even a 2% ownership in that is significant or 5% ownership. And that is significant in India. If you own a 5%, if you start with 5% for a company, which will eventually become a unicorn by the time you get your exit, it will be at 2%.

So it’ll be like 20 million return, right. For a company, which went to unicorn and where you were first investors in US, that number could be 200 million. Right.

It could be a 10 billion dollar out. So that is one difference that I totally agree with. the other now things are of course changing, right.

And alluding to my previous point of the balance, right. I mean, it’s just shifting in favor of the founders. The founders can command how much they want to raise, who do they want to raise from and how much do they want to dilute.

Right. So, but I mean, unless we see more of like 10 million dollar outcomes. And the ones that we have also seen in India, by the time they went to 10 billion dollar outcome, the first investors would have diluted 80% of the initial stake.

Right. So that also kind of plays out.

Siddhartha Ahluwalia 52:38

Gaurav, so what’s the most fascinating startup story that you have heard both from one within the portfolio and one outside the portfolio?

Gaurav Ranjan 52:48

So let me first share the one which is outside the portfolio. I mean, is I would say the founding journey of Slack, the way it is today. Right.

I mean, everyone would have used it. Anybody who works in tech or startup should have used it. But the way it started was, the founder, Steve Butterfield, if I remember right, so they’re building a game called Glitch.

And they had disputed teams. So for their internal communication that build this, , tool or Slack, I think the full form is something like Simple Log Of All Conversations And Knowledge, something like that, that’s what Slack stands for, the game didn’t go anywhere.

I mean, Glitch. Um, so they had to shut it down, I think in 2012 or 2013. And, , but this product was like widely used internally.

And then they thought of like launching it publicly. , they launched, I think end of 2013 or somewhere around in 2013. And within a year, like it went to like a billion dollar valuation less than a year, right?

So that is one story, right? Which is. He was building a game.

The game went nowhere, but what he built as an internal communication tool or for people to chat within game that came out of the company valued at 25, 27 billion when Microsoft acquired them, there’s one from outside the portfolio, , within the portfolio, I would say, Dozee, which is like a healthcare, healthcare services companies are building remote patient monitoring systems. So they, I mean, their story is very interesting on a couple of fronts. One is, I mean, Mudit, the founder himself, right?

So, he, I mean, he personifies grit and determination and what you can do. Right. So he has shared this publicly, so I can share it here.

So he lost one, one of his hands to a crocodile while trying to save his own dog. Right. And while his hand was half chewed off, he drove the car to the nearest hospital, got himself admitted, called his friends, family, whoever, right.

So he is something he operates at a different level, but even for the company, Dozee, the product, the way it, I mean, he shares the story is. So that build this heartbeat monitoring device, , right. Which for humans and it’s still in prototype stage.

And, one day they’re going out of the house and they had a pet dog. So the dog would chew everything was young. So they hit the device under, under the mattress.

And when they came back, the dog was sleeping on the mattress and later on, when they check the device, the dog’s heartbeat was recorded. Right. So then they realized, okay, this can go under the mattress and can get into like even sleep monitoring and remote patient monitoring in hospitals and things like that.

So it was a chance discovery, which like kind of led to a great outcome.

Siddhartha Ahluwalia 55:44

Yeah. Very interesting. This is the more interesting of the two stories.

Naman Lahoty 55:50

Yeah, this is quite interesting.

Siddhartha Ahluwalia 55:52

Naman, what about you?

Naman Lahoty 55:54

Yeah. For us, I think, like for me, I think a couple of interesting stories that I have, you know, there’s, so I run this program called a startup navigator where I interact with founders just to help bridge the way investors think and the founders think since I’ve been on both the sides of the table. So in that program, I met a founder.

And of course people usually come when they’re struggling to raise money to figure out what their story and which would be, so he was struggling to raise money because building something in the preventive health space, a lot of people have tried, died, you know, while building in that space, , I’ve never seen a guy as passionate as him to solve this problem and, you know, his co since they were bootstrapped because nobody was funding them, I got to know sometime back that his co-founder, he has been working in a company. And so, and like the way they are managing their fund, like finders, you know, he’s the one, one guy is working and he’s putting all whatever he’s earning into the company to, you know, keep it running. And of course now they’re doing relatively better, still not raised a proper round, but he has invested significant amount of money while working in a different company.

I think that really talks about the passion and what people are willing to give up to continue to build. I think that seems quite fascinating to me. So that is one. In the portfolio, I think, there is one, interesting story, of a pivot effectively when we invested in a company called Rupicard, they were trying to build a secured credit card.

Earlier and while in their journey, they tried to figure out some GTM hacks. So, you know, as a secured credit card, they were trying to get users, which who typically don’t get your regular credit card. And hence they had a lower CIBIL score and they thought they’ll start the journey with sell by selling secured credit card along the journey.

You know, they started giving this communication. Okay. We’ll help you improve your CIBIL score through this, through this journey.

And that value prop resonated with a lot of users very strongly. And people started paying itself for that product in itself, which was just a small GTM hack. And over time, you know, now that has become their main product.

Siddhartha Ahluwalia 58:18

So, so back when I started in 2012, I quit my job in 2012 and, , my co-founder Satyadeep and Sowrabh, right. So I didn’t have any money and I burned all my savings and they were both pulling money from their jobs to keep me alive and they joined full time after one year and for another year, they kept on pulling whatever of their savings were left to, to keep the company alive. So one, one interesting story from within the portfolios of AtomicWork, right.

If you know Vijay, his background, he, he comes from a family of farmers and he was raised by his aunt. He shared his story on podcast as well. And like he, he studied at his aunt’s home because the parents were farmers and they couldn’t afford his schooling.

And, and he, he then joined a normal engineering college, nothing fancy. And after engineering, he worked for a few companies, then started a company in 2012, nobody was giving him funding till long point of time. In 2016 is when big breakout happened when his company was acquired by Nutanix for 60 million.

And even after that, I think he’s, he’s very relentless. So he didn’t keep quiet. He served for four, five years at Nutanix.

He built a $300 million business inside Nutanix. I think when he came out, he said like, why can’t I have the best of co-founders in the Indian ecosystem? So he got as co-founders Kiran and Parsu, who were like the founding team of Girish in Freshworks.

And the best of Freshworks, he, he got inside Atomicwork.

Gaurav Ranjan 59:58

Yeah. And some of those hustle stories are like crazy. I mean, what you have done, like the story that you shared, like we recently invested in a company.

It’s not announced yet. So I mean, the reason you spend more time with founders is you get to know like such, otherwise the pitch presentation, you know, this is my background, this is what I’ve done. This is, so they’re sharing the story when they started building.

Initially they were selling to some customers in India. It was not going well. And then randomly they got an inbound from US.

So they spoke to the customer and the customer said, do you have this, this and this, this, so of course we have everything, They said, okay, tomorrow I’ll get my head of tech or head of it. Can you demo it to him? And he said, sure, we’ll demo it.

And they had none of that. So this was their pitching at around 9pm in the night, the meeting was scheduled for next day. The whole night we coded, whole day we coded, build some basic features and next day we demoed it. And then that’s how we got their first customer in the US.

So these hustle stories are, I mean, really inspiring and incredible at times.

Siddhartha Ahluwalia 1:00:55

Yeah. One memorable lesson that any founder has taught you Gaurav?

Gaurav Ranjan 1:01:06

It is, I mean, somewhat related to what I already said, right? Which is about just grit, determination, perseverance, and hustle, right? If you are really passionate about something, just go all in for that, right?

That is something that I’ve learned while interacting with all the founders, right? I mean, they don’t care about, really good founders and passionate founders don’t care about building out an outcome. They just want to solve a problem and passionate about that.

Don’t care so much about money, about social life, everything, right? So if you’re really passionate about something, go all in and enjoy that journey, right? That’s something that I’ve learned through all the interactions, not single lesson, but this is like one common thing that I could take out from all the founder interactions.

Siddhartha Ahluwalia 1:01:51

Naman?

Naman Lahoty 1:01:51

I think one memorable lesson, I think there are many memorable lessons, which are pointing towards the same thing, which is never say never kind of an attitude. I think a lot of time as investors, we boxed on into, you know, this has not happened in the past or, you know, this is very difficult to build or nobody has cracked it. And time and again, I think multiple founders have proved us wrong.

You know, even if you think this is not going to happen or very difficult to do it, they have somehow proved that, you know, this can be done. So at least, earlier I used to index more on the, okay, okay, this is not possible or this is very difficult to do. Now, at least the lesson is, you know, can you turn it around and think of it in a way that what if, you know, this happens and, you know, start thinking possibilities beyond that lens that, you know, if this happens and what all can be done.

So at least I have stopped saying, yeah, this can’t be done or this will not happen. I think always be open for the possibilities.

Gaurav Ranjan 1:02:50

That’s something I definitely agree with, right? Because that is some sort of a limiting belief and also like tied back to like pattern matching. If this doesn’t, if this has not happened in the past, most likely this will not happen.

But you also need to understand we’re in the business of investing in outliers, right? And hence you need to believe that suppose in sector investing in the greatest outcome that has happened is a billion dollar outcome. And you’re saying, oh, how can this company get to that?

The biggest outcome in this sector is this or this space is this. Then you’re limiting yourself in terms of your thinking and like betting on outliers, right? So that I definitely agree with that.

Don’t think of whether it has happened in the past and if it has happened, then that is the upper limit of where it can go.

Siddhartha Ahluwalia 1:03:33

I have spoken to you at both of you at various points in time, right? So you had itch of starting on your own during your investor journey and similarly you. So what has kept both of you in the game?

Gaurav Ranjan 1:03:44

Oh, that itch keeps coming every now and then you see a founder building something that you can relate to. And so let me also do this, right? So, but jokes aside, when you come from operating background, right?

I mean, at least that was my thought process. I’ll spend some time in VC, get a broader perspective, build network and then get back to building things, right? But if you think about what you want to do, right?

Whether it is a job or a startup or investing, whatever it is at the core. For me, like two things matter the most, right? One is the kind of work that you are doing.

Are you enjoying that? Are you having fun in that? Are you learning every day?

And second is the kind of people that you work with, right? And again, these two factors can differ depending on the stage of your career. At least for now, these two things are the most important things for me, right?

So the first thing like what I do, I mean, all of us here would agree that it is one of the best jobs, right? Not because you get to invest in startups or because you get to see what is happening around what new innovation is happening in consumer and enterprise, how AI is going to change the world and things like that, right? So you are at the cutting edge of at least if you’re not building, at least you’re seeing how things are changing very fast in front of your eyes.

So that keeps you going. And then you also meet very interesting, smart people. I mean, your team is good.

You work with founders who are really smart, very inspiring. So I think that keeps you going, right? So these are two things like as long as you’re doing that and you’re having fun, sometimes you get that thought, but then what you’re doing is equally inspiring, exciting, fun.

So maybe because of that, that itch hasn’t gotten to like an actual action. But the day I feel this job is boring, maybe that’s when I’ll start thinking about it seriously.

Naman Lahoty 1:05:34

I think honestly, even when I came into VC, my thought process was similar because I worked for a couple of years and I’ll go back to building. But I think during those times, I basically fell in love with the job as well. I really like meeting a lot of people.

And I really like talking about business ideas and evaluating what can be done, what can’t be done. I can do that all day long. And this job allows you to do that, that you can think about, talk about businesses, different types of businesses with different people.

And over time, I started liking it, enjoying it. And hence, like six years have gone by without even noticing it so far. The way I say, to summarize, the way I say it is you get 80% of the high, what you get of building with 20% of the stress because you’re not actually doing it.

So it’s in that way, it all plays out well. But like, I would love to ask a couple of questions. Maybe the one is what do you miss about building or being in the operator role or being in the founder role earlier versus now?

Siddhartha Ahluwalia 1:06:41

I don’t miss anything. I’m daily doing what I used to do as a founder. Go out.

Naman Lahoty 1:06:47

20% of the stress.

Siddhartha Ahluwalia 1:06:47

I’m taking 100% of the stress. Go out with an empty bag of money.

So that I do and being part of the founder journey, like I don’t miss that like building products, but like building the fund. So a fund is also a product, building a team in the fund. That gives me all the high of a founder and everything gives me all the stress of a founder.

Gaurav Ranjan 1:07:17

Building a fund is like doing a startup, right? I mean, you have to raise funds, you have to invest, you have to like manage teams. For me, I think I miss the kick of like doing new things every day and then having that quick feedback loop and figuring out, okay, this worked, this did not work.

So that I think I miss a lot. And second is, I would say when you’re here, you work closely with founders, right? But they’re the ones who are like driving.

You’re sitting in the backseat. So you miss that, right? This should be done like this. Let me go and do that.

Right. So that bias for action, I mean, bias for action is here, but like acting that and like whatever thoughts you have, like putting that into action and startup.

Naman Lahoty 1:08:03

I think that you can’t implement what you think, right?

Gaurav Ranjan 1:08:06

I mean, at the end of the day, you discuss and debate with the founder, but decision is his or hers, right? So that is something that I miss.

Naman Lahoty 1:08:13

I think one thing that I miss is, you know, like while building, when you have a larger team, I think you have that lack of talking to a lot of people, working with a lot of people. Investing is usually a individual kind of a role, right? It’s an IC role in some sense.

Of course you have teams, but your day-to-day work is more individual. You’re not working with a team, DDK team, motivating a team. So, or going out with a larger team and having fun with them.

So that’s the one thing.

Gaurav Ranjan 1:08:41

That I used to miss a lot earlier, right? Because the team was small, three partners and me, and all of them were fairly senior. And I’d worked in startup where like I would have been on the high side of the average age group there.

So you were working with like youngsters, some new thing is happening. Some joke is being cracked, like people couldn’t use a slang, right? So that’s fun.

But again, over time you get used to the new setup as well.

Naman Lahoty 1:09:04

Which one do you enjoy more?

Gaurav Ranjan 1:09:08

Now the team is big. So I enjoyed that.

Naman Lahoty 1:09:11

It’s a controversial question which you asked.

Gaurav Ranjan 1:09:14

So, I mean, it is at times like investing becomes bigger than an IC role, it becomes lonely at times, right? So you would want to have people around you that you can like talk to, crack jokes with and crib about things. And it is there in Prime, you work there, so you know, like everybody is like very friendly, right?

Siddhartha Ahluwalia 1:09:33

One of the best team that you have.

Gaurav Ranjan 1:09:36

And very open culture.

Naman Lahoty 1:09:38

Yeah, I think that is one. Even for me, I think same as Prime. I think that is one of the reason for me to stay in VC for so long is because of the people and culture at the fund.

Because eventually you want to work at a place that you or work with people that you really like interacting with or want to work with. So I think that has increased my tenure as a VC as compared to what I used to do.

Gaurav Ranjan 1:10:00

And now there is no going back.

Naman Lahoty 1:10:02

Not right now.

Gaurav Ranjan 1:10:03

You still said, haven’t said no. Not yet.

Naman Lahoty 1:10:07

I mean, you have a lot of things to prove as an investor as well. Until you see that no, I am not fit for it, then you will think about it. But VC is a very long game.

So you are already in the midway.

Siddhartha Ahluwalia 1:10:22

You have already given 6 years

Naman Lahoty 1:10:24

Either you turn back very early or you probably go a long way and see, okay, either you are not made for it or you have already made enough money to retire.

Gaurav Ranjan 1:10:31

But when you decide you are not made for it, like at what point would you figure out?

Siddhartha Ahluwalia 1:10:37

For me, this is endgame. I have a dream of starting companies, but let’s say with Neon’s ownership of high ownership and basically incubating companies within Neon, let’s say a cloud company.

Gaurav Ranjan 1:10:52

For you, you have been part of, I mean, you were running your own startup. Then you joined VC for a short while at Prime. Then you went back to MNC at AWS.

Again, you are working in startups. And now you are doing a fund, which is also like a startup. If you had to go back to one of these or pick amongst these, which one would you?

Naman Lahoty 1:11:12

Except Neon, otherwise you will pick Neon anyways.

Gaurav Ranjan 1:11:14

Except Neon, which one would you go back to?

Siddhartha Ahluwalia 1:11:18

If I were not building Neon, I would start another company. That is for sure, because I like high bias for action and high ownership. So for me and all this journey, like when I was a founder, I didn’t have a great exit.

It was a small acquisition. So I was trying to acquire as much skills as possible before I start on my own. So I think when I joined VC, one thing I learned from Prime is like work with great people.

And then you enjoy the journey. And the other thing which I had never seen was humongous scale. Like AWS is the largest possible SaaS company that can be built in the world.

100 billion dollars of revenue. Possibly entire Amazon market cap of 1 or 2 trillion can be attributed to AWS. Amazon might be a minus on the market cap, but it can’t get larger than this.

And the lesson that I have to learn on enterprise sales or what works in India and US, that was picked a specific role that I became like head of SaaS ecosystem for AWS in India. The job was to give go to market to these companies in the US, which I could use for my own portfolio. You know, how do I learn that?

So I would say it was some sort of a vanvaas before starting.

Naman Lahoty 1:12:36

I think knowing both of you as well, I don’t think any of us typically want to go into corporate either. It’ll be, you know, investing or startups.

Siddhartha Ahluwalia 1:12:43

Corporate limits you. So I think you have, you get told what to do. So you have to find your own creative fuel.

Gaurav Ranjan 1:12:51

I mean, I go to some of these like events or demo days, and there you have to walk into a corporate office. Just the feel and the look of it is like.

Naman Lahoty 1:13:00

Have you ever worked in a corporate? I have never worked in corporate.

Gaurav Ranjan 1:13:03

Pre MBA. I’d worked with Nomura.

Naman Lahoty 1:13:04

I’ve never worked in a corporate.

Gaurav Ranjan 1:13:05

So that whole system of carrying an ID, swiping it.

Siddhartha Ahluwalia 1:13:09

Yeah, ID swiping that’s the hardest part.

Gaurav Ranjan 1:13:11

That gives me a BT.

Naman Lahoty 1:13:12

The largest company I’ve ever worked was Flipkart in 2012. That’s the largest company I’ve ever worked in.

Siddhartha Ahluwalia 1:13:21

Yes. You would have continued in Flipkart for the next 12 years. You would be retired.

Yeah. So you’re still retired. I don’t know.

Gaurav Ranjan 1:13:31

How about you, Sid? Like between building a startup and building a fund, which is also like a startup. How are the two different?

Siddhartha Ahluwalia 1:13:39

So I think I started a fund. I gave a lot of thought on what to do next. I started a fund because I thought like being a founder, I have only so much ability to attract great founders.

Right. I could, let’s say, get co-founders one level above myself. Right.

But being a fund allows me to tap into infinite potential. A few days ago, we reached out to Mohit Aron that we want to invest in him. Mohit Aron has built two decacorns.

He’ll not take our money, but there is no harm in reaching out. One is Nutanix, the other is Cohesity. But I would say the biggest joy I get is like being part of journeys like Atomic Work.

Right. Where the founders are like 10 notch above me. So there’s no chance that I could have been a co-founder of Vijay.

But this is the best role that I can partner with him and see the journey and learnings from Atomic Work. I think that’s the high that I would not trade for being a pure founder again.

Naman Lahoty 1:14:37

80% of the high. I know it is turning into Naman and Gaurav’s podcast.

Gaurav Ranjan 1:14:50

But I mean, investing looks easy till something in your portfolio starts breaking. Otherwise, it’s just investing.

Naman Lahoty 1:14:57

And let’s not go there.

Siddhartha Ahluwalia 1:15:00

So I think even when companies break, I just tell founders that if you start another company, at least I know you so well that I would want to be the first check. Or you come to work at Neon.

Gaurav Ranjan 1:15:13

What would you do differently now that this is the third fund? If you’re starting a fund again, like how do you start it differently?

Siddhartha Ahluwalia 1:15:22

First is, you know, in the first couple of funds, I relaxed as soon as the fundraising was done. Right. So I thought, is it done?

Let me know. So I would not stop fundraising at all. I will always be on the fundraiser.

I know till we hit something like Mamaearth, I would always be on the road. So I would keep on fundraising till that point in time, till it becomes inbound. Right.

And I think we built a team quite later because only in this fund we could afford a decent management fee. In the first fund, I didn’t take a management fee. In the second fund, I took the lowest possible management fee just to prove myself.

Right. So I would have built, had not taken that decision. I would have built a team earlier.

Having a team around is fantastic. For literally for the first couple of funds, it was a solo player game, like just me and Nansi. Nansi taking care of entire things on the podcast and off side and I on the investing side.

Gaurav Ranjan 1:16:29

I remember you were like making your own pitch decks and sharing.

Siddhartha Ahluwalia 1:16:33

Those were some of the terrible pitch decks. But thank you so much, Gaurav and Naman. I laughed a lot.

And you turned the table upside on me. That was fun.