Siddhartha Ahluwalia 0:42

Hi, this is Siddhartha Ahluwalia. Welcome to The Neon Show. I’m your host and managing partner for Neon Fund, a fund that has invested in some of the best enterprise AI companies coming from India for the globe, like Atomicwork, SpotDraft, CloudSEK. Today I have with me Gaurav Jain. Gaurav, welcome to The Neon Show.

Gaurav Jain 0:59

Thank you for having me.

Siddhartha Ahluwalia 1:00

Gaurav, your story is really interesting, right? You come from India. You migrated to Canada with your parents in high school. Then you built a company, worked at Google as one of the early PMs in the Android team, and then worked at another fund before starting Afford, and you did Cruise. And in Afford, you have done some of the remarkable companies of our generation, like Hitech, Karma. So congratulations on all the success.

Gaurav Jain 1:26

Thank you. As they say, you only connect the dots looking backwards. Honestly, sitting as a kid growing up in Dehradun, a small town at the time, now it’s gotten much bigger since it became the capital. But at the time, it was a small town. I could not have predicted the journey would take me where I am, but I feel very humbled and very privileged.

Siddhartha Ahluwalia 1:45

What are some of the things while sharing your journey that just changed your orbit?

Gaurav Jain 1:52

I think some of that is, frankly, just putting one foot in front of the other. I think not getting too caught up on the long-term vision. But when I went to Waterloo for undergrad, the thinking at the time was I wanted to be an engineer at Microsoft. At the time, Microsoft was the hottest company. By the time I graduated, it wasn’t. And so much changed while I was in Waterloo, because they have this co-op program where you study four months and you work four months, so I had a bunch of different internships. And through that, I learned that I actually didn’t want any of those jobs. I wanted to be an entrepreneur. So I ended up starting a company, and then that brought me to the Android team. So one thing leads to another. I think you just have to keep iterating in your mind in terms of what you’re good at, what you enjoy when you get out there. I think you have to move fast. I think you have to do good work. And you have to be patient. As they say, Rome wasn’t built in a day. And I think for me to get here, it’s a 25-year-old journey. And frankly, when you look back, it feels like, wow, so much has happened. But in the moment, it feels like day to day. Not a lot is changing.

Siddhartha Ahluwalia 2:54

And you have accomplished a lot. I think you’re, what, less than 40?

Gaurav Jain 2:58

I just turned 40. Yeah, that’s right.

Siddhartha Ahluwalia 3:00

Amazing. You have accomplished a lot, like build a fund in the last 10 years that has one of the great reputations in pre-seed domain in the Bay Area. You’re building a name for yourself. It’s fantastic. It’s such a competitive market.

Gaurav Jain 3:13

Yeah, thank you. And again, same thing here. When we started four 10 years ago, this year will be 10 years for us. Pre-seed, which has now become a category, was not a category back then. It was actually a negative term. It was reserved for founders who could not raise a seed round and were forced to raise a small pre-seed round. But we saw that the founders were being underserved. So you always start off with a hypothesis. Our hypothesis was that these founders are underserved. And if we take this institutional capital that we are focusing a seed and put that at pre-seed, we think we can serve these founders much better. And that’s where we started. At the time we wanted to make pre-seed a first class citizen. So we said we’re going to raise the world’s largest pre-seed fund. Thankfully, there weren’t many funds out there. So the bar was very low. And with the world’s largest would be our target was 40 million. We ended up raising 47. And look, the early days were not easy. Fundraising was hard for us.

Siddhartha Ahluwalia 4:10

How much time does it take to raise the first one?

Gaurav Jain 4:12

Yeah, I mean, it took us probably nine months from start to finish. Part of it is because educating LPs on this new category was hard. Because we would talk to LPs about how we think pre-seed will be the new seed. And they would turn around and call their seed managers that they were already invested in. And the seed funds would be like, no, pre-seed is a fad. It’s going to go away. We do pre-seed, whatever. It’s not real. So it was really hard to convince investors that this new category will come together until they talk to founders. When they talked to founders, the founders would tell them, yeah, seed funds told me I’m too early for that. Because I don’t have a product in market, because I don’t have traction. So yeah, if somebody was willing to lead my round before that, I would work with them. So that took us some time to educate first the investors to be able to raise the fund. And then the founders as well. On, hey, look, if you’re first round of funding, you should call it pre-seed. You should talk to pre-seed funds, not seed funds, because you’re going to be too early for these seed funds. And that took some time. And we started this pre-seed summit. We had founders of Pinterest, Instacart, DoorDash, CloudFlare, Stitch Fix, Affirm, I can go on and on and on, where we had them talk about their pre-seed journey. And pre-seed, obviously, they didn’t call their round pre-seed back then. But we really had Tony Zhu, who started DoorDash, talk about PaloaltoDelivery.com. That’s where this started. It started with this rough idea, where it was not obvious, and it was hard to find investors. And then it suddenly became obvious, and it took off. I think that just took some time. So yeah, now we look back and go like, wow, pre-seed has become a category in and of itself. In fact, when Sequoia launched their most recent fund, they said, guess we’re now pre-seed investors too. So it’s kind of amazing that pre-seed has now become the default first round of capital, but it wasn’t always the case. And again, this is where I talk about, you just got to put one foot in front of the other. You got to do good work. You got to solve problems for your customers, and then good things will happen.

Siddhartha Ahluwalia 6:05

And what are the things that you have done differently at Appore?

Gaurav Jain 6:10

Yeah, many things, I’d say. One, obviously starting off with this idea of nothing is too early for Appore, where we pioneered this idea around pre-seed and willing to lead rounds and price rounds before there was traction. But I’d say that one of the biggest things we’ve done differently is never settled for what’s working. And I think we take inspiration from the best founders we invest in. The best founders we invest in are constantly evolving their product, evolving their go-to-market. They’re never complacent. You look at their business, and every year, every two years, it looks very different than what it was before. And they didn’t change it because it wasn’t working. It’s working because they’re changing it. And we looked at venture firms, and we’re like, wait, hold on. Venture firms kind of have the same products, same go-to-market, same strategy for decades. This doesn’t make sense. And part of it is maybe because we’re product people from background, so we love experimenting and trying things. And the problem with experiments is a lot of them don’t work. And maybe that’s why VCs don’t want to try stuff, because a lot of stuff is not going to work. But we’re okay with that. And we’ve given a lot of license to our team to try stuff. And a bunch of stuff has worked, which is how we now have three different products, not just one. And that came through a lot of experimentation. So the first product is where we started, which is pre-seed, which is where we lead rounds, $1 to $2 million check, companies are pre-revenue, pre-attraction. But then now we have a founder-in-residence product, which is for founders who we think have a very strong team, but maybe the idea needs some work still, or maybe they haven’t picked their idea yet. And we have them come work out of our offices here in San Francisco, and put them in front of customers, refine the idea. And then once they’re ready to then run with that idea, either we’ll give them more money or help them fundraise. And then we have a third product called founder-in-residence U, U being for university students, where we’re now seeing increasingly college students dropping out. I don’t know how that is in other parts of the world, but certainly in the US, these high school students go to college. And in the first year of college, they’re sitting there and going, wait, stuff I’m learning makes no sense, because what’s happening in the real world is so different. And I possibly cannot sit here for four more years and learn the ancient technologies when agentic engineering and whatever else is the future. So what they end up doing is starting to hack on the side, things start to work. And they’re like, well, how do I make this my full time hustle? And that’s where a four comes in reverse saying, Hey, look, why don’t you take a leave of absence, come to our offices, work with us, we’ll give you a little bit of capital, we’ll put you in part of the community, and help you basically build a company around it. So that came through a lot of different experiments as some that a lot of them that haven’t worked, but I’m glad that we’re constantly iterating on our product and never feeling like, Oh, wow, well, we’re the world’s largest precede fund and precede has become a category. So great, we’re going to keep doing precede, we feel like in 5-10 years, maybe, maybe it won’t be precede, maybe it was something else. I don’t know. And I think we’ve just got to keep keep evolving.

Siddhartha Ahluwalia 9:04

Yeah, what have been some of the lessons backing companies like Hightouch, Gamma, Goldcast?

Gaurav Jain 9:10

Yeah, you know, let’s talk about some of those stories. So with Hightouch, when we invested in them, believe it or not, it used to be called carry travel.

Siddhartha Ahluwalia 9:17

How did you meet the founders?

Gaurav Jain 9:18

The founders actually came through an angel investor who was roommates with with Kashish, who was one of the founders of Hightouch. And he himself is an angel investor and a founder. And he’s in our network. And he was like, Look, my roommate, I think he’s a force of nature. He’s a special founder, you should meet with him. He’s very early. So I don’t know if you do investments that early. I was like, No, no, like, we love early. So please make the introduction. We met with Kashish. At the time, you know, he was building something for corporate travel. Right. And frankly, our if you look at our memo that we wrote for carry travel now called Hightouch was love the founder, the idea, maybe less so but you know, I think I think I think I think this idea can evolve into something special. Then COVID ended up happening. And you know, corporate travel is not what you want to be selling in during COVID. So the company was forced to go back to the drawing board and try a bunch of different iterations. And look, we always believed in the team, right, the team will figure out, you know, what the right thing to build is, whether it’s in travel or not, went through many different iterations, pivots, if you may, and then they kind of went back to their backgrounds, everything came from segment, they really were deep in the data space. And they started off with essentially what’s called reverse ETL. So like taking data from from data warehouses and putting that in the SaaS apps, which I think was a good start. And they got a bunch of market traction, but they never, they never settled, you know, then that became kind of CDP, right, this idea of a customer 360 platform. And now they talk about agentic marketing. Right. So this is again, going back to like this idea of evolving the product to go to market, I’d say that team is really, really special. And that’s what we saw in them when we backed them. Could we have foreseen that, you know, what is it in six, seven years later, they’d be doing AI marketing? No, frankly, it was not part of the underwriting. But I would still, you know, still stay that that is how we should be investing at the pre-seed stage. You know, Goldcast is a similar story where, when we back them, these founders, and I think you’re gonna have Palash on your show, you should, you should tell you about the story of kind of raising the first round of funding, but they were still in school, right? They were still in business school, they did not have a visa to stay in the country.

Siddhartha Ahluwalia 11:23

Yeah.

Gaurav Jain 11:23

Right. And they were working on something where the closest competitors had already raised 10s of millions of dollars in funding from top tier firms. Right. So for a whole host of reasons, they got a lot of no’s, right? They got a lot of no’s. And we’re very lucky that we ended up investing in them. We ended up leading their pre-seed round. But I believed in the founders ability to build a company. And I was like, look, there’s some obstacles along the way where they have to get, you know, visa system in the country. I think it’s solvable, especially once we fund them. There’s competition, but I think if you stay focused on the customer, I think you can compete them. And all those things ended up being true. Their competitors all went out of business eventually and Goldcast had an amazing exit for us and for the founders last year. So again, the through line in all of these has always been the team, right? And the team’s ability to really evolve and grow and iterate and let the customer lead the dance. You know, you’re ultimately in service of a customer, right? Let the customer, the market kind of pull you into where there’s real demand and then you’ve got to move fast, right? I think that’s the other thing we really look for in teams. Are they going to be able to learn faster? Are they going to iterate quickly or are they very slow moving? And then of course, the third thing I say is grit, right? These are long journeys, right? I think Goldcast was an exception where start to finish was five years. In most cases, it’s 10 plus years, right? And I think founders have to really, you have to believe that the founders want this to be their last job, right? If this is working well, they’re just going to keep going with this versus looking for a quick exit or a quick flip or giving up. And I think that’s what we really look for in pre-seed. I think that’s been the case in our best performing companies.

Siddhartha Ahluwalia 13:05

And how did you meet the founders of Gamma?

Gaurav Jain 13:07

The founders of Gamma, we met through another angel investor who used to work with the founders of Gamma at Optimize. So the founders of Gamma came out of Optimize. This was a company that was in the AB testing space that really did well at one point in time.

And my friend, my business school classmate used to be colleagues with him at Optimize. And these guys were the Gamma founders were spinning out starting Gamma. And my friend said, hey, look, you had invested in Airtable, which is a sort of an analogous company in the sense that Airtable built a prosumer horizontal tool, in their case, focusing on Excel and like sort of making a better version of Excel, if you may. And Gamma’s initial thesis was we can do the same thing for PowerPoint. PowerPoint is obviously used by millions of people but hasn’t changed much in decades. But the world has changed a lot in terms of how we do work. We don’t sit on our PCs anymore. It’s a lot over the cloud. It’s in our phones. It’s very collaborative. And we think there’s a new kind of version that should exist. So I think that was probably why I got pulled into that opportunity. And we were very lucky to invest in the first round of Gamma. And the company, again, has changed a lot over the last few years. And of course, the world has changed a lot, given AI especially. And this team really leaned in hard on AI. As AI started to take off, instead of fighting AI, they said, well, hold on. This will give superpowers to our mission. I think we can achieve our mission faster, better, quicker. So I think the team really leaned in on that. And they’ve become one of the most used AI consumer companies.

Siddhartha Ahluwalia 14:45

And you mentioned earlier that you missed RAMP. Tell us about the story.

Gaurav Jain 14:50

Oh, man, that one hurts. I was hoping you wouldn’t bring it up. So I think this has been a learning for us, where our business really is a business of exceptions. Our venture capital is really a power law business, where a few investments end up really moving the dial, end up mattering. And exceptions can be many different ways. Exceptions could be the founder’s background, could be the idea, could be the market, could be so many different things. And I think one of those exceptions we have to feel comfortable making is around the deal terms. When we saw RAMP, and frankly, RAMP was, as you put it, our right to win, because my co-founder used to be on the board of their previous company called Paribas. And the founders of RAMP were actually one of our first LPs in FundOne. So when we were starting our fund, we obviously called founders in our network who had had exits to see if they wanted to support our fund. And Kareem and Eric were one of the first people to put their hand up and said, yep, we’re in. And then I believe like a year later, they came to us and said, hey, we’re starting this new company called RAMP. Obviously, we love them, we thought very highly of them. And the idea was interesting as well. But given that they were repeat founders, their first round of thing was like a 25 million post money, which to us at the time, we were like, wait, hold on, we just like raise this pre-seed fund on this thesis around investing early, early generally means low price. They’re raising a 25 post, like we debated, debated, debated, and we’re like, this is off strategy. And so, you know, thanks, but no thanks. Of course, one of the biggest mistakes we’ll ever make, you know, I think the company’s last valuation was 32 odd billion dollars would have been an amazing outcome for us. But we have used that learning to iterate, you know, again, going back to this idea of like evolving the product. So now we added what we call a non core bucket, right? These are investments that we would have loved to make them core, but for whatever reason, it’s out of spec. It generally is because of deal terms, it’s out of spec. And it’s usually repeat founders, right? It’s usually founders, from a risk perspective is still pre seed, right? So it’s pre traction, pre revenue, pre product, you know, pre product market fit, like all those things are true. But because of repeat founders are able to command a higher price. And we think that is still pre seed, you know, like, again, we’re not going to get the ownership that we want, given the checks as we write, so it can’t be core. But I think we want to make those exceptions and do those as non core investments, when we see them when we’re lucky enough to see them. So anyway, that’s helped us improve our product. But you know, the mistake still hurts.

Siddhartha Ahluwalia 17:19

And how many times you have to do convincing the reverse pitch to get in a company?

Gaurav Jain 17:24

Every single time, every single time. I think, uh, you know, we’re, we’re in the business where founders pick us more than we pick them. I think, I think if you look at venture capital, it seems like a business where, you know, we sit around like Shark Tank style, and we’re like, Yes, no, yes, no. That’s not how it works in reality. In reality, it’s really a sales job, right? You’re selling people to take a meeting with you, you’re selling people to take your money, which, by the way, is a little crazy to think about. Somebody who grew up in India, I didn’t know anything about venture capital. And I remember when I was going to become a VC, my uncle, who’s a lawyer in India, he I was trying to explain to him what venture capital works. And he was he kind of listens to me and he goes, Wait, so you give people a million dollars, like what collateral do you get? And I was like, nothing, we just give them a million dollars and like, hope for the best, you know. And, and it sounds crazy, frankly, to most people on this planet. And it should, it should sound crazy, because it is a little crazy that it works. And not only that, not only do we not get any collateral, but we have to sell them to take our money. And it’s and the reason for that is because there’s the constraint actually is not capital, as I’ve realized over time, there’s a lot of money in this world, the constraint is talent, right? There’s a lot of people who want to start companies. So that’s not the constraint. There’s very few people that are really good, or could be good founders, right? And a lot of things have to go right, right? You have to be technical, you have to have all the qualities that we talked about, it is a very hard job, you have to be, you have to be a little crazy, to be honest, not only do you have to be really smart, and hardworking, and, and, you know, all those things, but you also have to be a little irrational, because the people that we invested, they can get amazing jobs anywhere, right? They’re not starting a company, because they’re unemployed, they’re starting a company, because that’s what they want to do. And risk adjusted is a terrible way to make money, because most companies go to zero, right? So when you see gold, a lot of other people also think it’s gold. So you have to then convince them to take your money as to why you’re the best partner for them to get to the next stage. And that’s why we’ve always stayed focused. I think it would be easy for us to become a multi stage fund. But the problem is, the moment you become multi stage, your focus shifts, and you’re not able to do justice to that 01 journey. And we feel like because we’re so focused, we’re able to make a very cogent case to our founders, that we very confidently believe that we will increase your odds of getting to product market fit of getting to Series A more than anybody else. And I think that is how we how we sell founders to work with.

Siddhartha Ahluwalia 20:06

So I was a founder, like 2012 2017. My first round of 300k pre seed or seed, whatever we call it, right, was made up of 40 angels. So that kind of product never existed, right, where I could keep my capital clean. I don’t have to get 40 different signatures and convince 40 people. It took me like three to four months, even to close the last five or 10k.

Gaurav Jain 20:27

Totally. And it’s not just time. But it’s also people who may not quite understand how venture capital works, right? The fact that a lot of them go to zero, right? Some of them might be friends and family, it’s a little awkward to lose money for friends and family, they probably can’t help you as much because they don’t have like domain expertise. They’ve never seen a venture backed startup. So for a whole host of reasons, it’s like not a good setup, right? Not a good setup. And that’s why we believe like institutional funds like ours and yours exist to be able to provide the best product for the founders at that stage, right? Where we understand what we’re walking into, right? We understand the risk we’re taking, right? We understand the ups and downs. Look, the zero to ones journey. It’s like, one step forward, two steps backwards, you know, two steps forward, one step backward every single day, right? The first few months are just like banging your head against the wall trying to figure out the right idea to work on. We’re okay with that, because we understand that that’s what it takes to find, you know, the high touch and the Gamma, like they all went through these ups and downs. If you’re not used to that, it can be a, you know, tense place to be in that relationship between the angel investors can be, can be tenuous for that, for that reason.

Siddhartha Ahluwalia 21:32

And the hardest thing to accept for both founders and investors, the journey is very nonlinear. You don’t know, like, if you’re hitting a rock 100 times on which hit the rock will break, or even it’ll break or not.

Gaurav Jain 21:45

Totally. And then even after it breaks, then that’s good for a little bit. And then you got to break another race. So you got to keep doing right. They just like high touch went from travel to then reverse ETL to CDP to AI marketing, there might be next frontier. I don’t know. Right. And I think that is, it’s just a constant kind of evolution that I think as investors, we’ve seen the movie enough that I understand that that’s what that’s par for the course. Somebody who hasn’t seen the movie, it may not be as obvious.

Siddhartha Ahluwalia 22:10

And what have been some of the other misses in your journey? And what are the lessons like, from the Ramp, you learned that, like, the valuation cap is not a barrier for VC, where you need to find exceptional talent. Yeah, sometimes whatever the cost, yeah, whatever the ownership will be.

Gaurav Jain 22:25

Yeah, there’s a few others. The one that comes to mind is Solana. The founders of Solana, when it used to be called Loom Protocol, believe it or not, we’re actually in this office here that you’re sitting in today. I think the first round might have been at, I don’t know, the high single digit post money, maybe low double digit post money. I think the company haven’t checked in a while, but it’s like 10s of billions of dollars, maybe $100 billion market cap. I think there, the reason we struggled to get there is it was crypto winter when we saw it. So crypto wasn’t hot. I think you needed to have a very nuanced understanding of crypto to be able to appreciate what they were pitching at the time. I think C, we failed to imagine the future with the founders, where the founders, Anatoly and his co-founder were here, and they talked about how they were building a layer one protocol to compete with Ethereum, but this was going to be a lot faster, and transaction speed is going to matter, and so on and so forth. And they talked about how that could be the future. I think we just failed to imagine that if that is true, why that’ll be so big. And I think we got stuck on that first piece. If I was to go back, could I pick it up, not being a crypto investor, we’re a generalist investor, we pack back people more than ideas, and a lot of times ideas changes, we were talking about earlier. So I don’t know, that was a harder one to grok exactly what the learnings are. Besides, I think our business is about imagining the future alongside the founders. And it’s not about what can go wrong, but it’s more about what can go right.

Siddhartha Ahluwalia 24:05

Because in my own journey, right across four funds, we are now raising non fund for $50 million. We have about 65 companies till now. I have never regretted on any company that failed, but I have the regret for all the other company that became known.

Gaurav Jain 24:20

Yeah. And the more painful part is, when it’s the anti portfolio, and you saw it, you could have done it, and you didn’t do it. And the company is successful, you see it all the time. I was watching the Super Bowl last year, got a bunch of friends, we’re excited to watch the Super Bowl turn on the TV, the first ad is Ramp. And I’m like, I love Eric and Kareem, but like, dude, it doesn’t need to be in my face. And like every I’m driving around San Francisco Ramp on all the buses and everything. And I’m very happy for them is great. Like, oh, and I’ll tell you this other painful point. At a Ford, guess who we use Ramp, my wife’s business, guess what she uses Ramp, you know, and it’s like Ramp is in my wallet. It’s like, it’s like everywhere. And, but you look, I think in a way it’s good because it keeps you humble, right? It keeps you on your toes that like, you know, you just cannot take it for granted. Right? I when I every time I meet a founder, you know, and we meet as a team, like 10,000 plus companies, right? It’s easy to be like, oh, this is not gonna work. But I remind myself that I could be looking at the next Ramp right now. I could be looking like Solana right now. And we have to be intellectually honest, we have to do the work, we have to search for the truth. We have to be open minded, we have to imagine with the founders. Otherwise, it’s going to be a painful journey.

Siddhartha Ahluwalia 25:38

What kind of spark and craziness are you looking at? When you were back in the preseason? First time founders with no pedigree?

Gaurav Jain 25:46

Yeah, I mean, look, founders come in all shapes and sizes. Okay. I really think founders and companies are snowflakes. And it’s hard to like, generalize on like, this is exactly what we’re looking for. Even if you look at high touch founders versus gamma founders versus Goldcast, and Solana Ramp, they’re very different people. But I think that I think there are some some similarities. I think one is they’re really deep in the details. You know, they’re not top down thinkers where it’s like, well, you know, the McKinsey study said this market will be big.

Siddhartha Ahluwalia 26:18

So nobody quotes McKinsey studies. I have realized that about the best of founders.

Gaurav Jain 26:22

That’s right. Right. Versus like, hey, I have discovered this like, you know, niche opportunity, maybe not a lot of customers just yet. But I believe for these customers that I’m going after, this is a hair on fire problem. And my product, while not perfect, it’s a 10x product, you know, I think that and then you can keep digging into the details with them. And it’s like, there’s never like a bottom, you know, and then you can do a lot of detail. I think, you know, one of the questions we ask is just like, walk us through the like the last six months, right? How many customers have you talked to? What have you learned? Right? How’s the product changed? How’s your thinking changed? Because again, I’m trying to extrapolate, like the last six months to like what the next six months, six years may look like, right? And you’re trying to understand like, is this a team that has has been, you know, you’re also looking for founders that have faced some adversity, right? I think building a company, as I mentioned, is going to be a lot of ups and downs, there is going to be adversity, it’s going to be hard, right? At the surface level, it looks like these companies were like overnight success stories. It’s never like that, right? How somebody having built a fund now and a company in the past and seeing my wife build a business, man, it’s hard, right? So I think you’re looking for those kind of founders. Again, the questions we ask are very different. We do a lot of back channel to really triangulate and understand this person that we’re backing. You know, like the new founders, they’re interesting because Aditya, like he went to IIT, apparently he had to do a GE, the whole entrance exam to get into IIT, but he went there for design. And I was like, wait, hold on. So you’re not only really smart, you’re also like a great designer, like how do you find this combo? And there’s probably like, I don’t know, a handful of people on this planet that have that background, you know? So when he’s trying to marry design and code, I was like, this is like your opportunity. You know, you understand this really authentically. So, you know, look, sometimes you see that kind of pedigree, sometimes you don’t, but you’re just trying to understand that person or people behind the company.

Siddhartha Ahluwalia 28:18

Got it, and what have you, let’s say some of the lessons that you share, what have you said that this is non-negotiable while backing a founder?

Gaurav Jain 28:30

You know, some of the obvious ones are obviously just around integrity, right? As I mentioned, we don’t get any collateral when we give money to people, there’s a lot of trust involved there. And it’s not just what we hear in the back channel about founders, but also just how they, you know, work with us when we’re negotiating the deal or talking about the future and so on and so forth. I’d say like that, that’s probably one. I think the second is like lack of coachability. I think when founders feel very closed off to feedback more for us to poke, you know, poke issues, but like, you know, questions around what they’re building and they feel very like, you know, defensive about it. It’s not that I want them to be able to coach them, but I think I want them to be open to like listening to that feedback from customers, right? I don’t want to have them have what we call happy years, right? Happy years is like, you don’t really hear the negative stuff, you only hear the positive stuff. And I think you want founders to really search for the truth, right? I think it’s really hard to convince people to use your product, to pay for your product. So I think you can’t get there by being overly optimistic. You know, I think, you know, there’s a mom test that, you know, there’s a book that I think is like goes into a lot of detail around like how to really, really, you know, not just like, let your mom tell you like, oh, this is great, let’s go do this, but like really search for that truth. And it’s a weird, like dichotomy, right? Because at some level, you want them to go search for the truth and not be happy ears at the same time, you need to be outrageously optimistic to build a business, you know, because it’s gonna suck along the way. And for you to do this for 10/15 years, you have to be a lot of optimistic person where you’re like, No, this is gonna work. I know it’s gonna work. I know it may not seem like it today, but I have this confidence that it’s gonna work. So having that that combination is, is, is important. And not everybody’s able to balance those two things.So that stuff is what what comes to mind. You know, obviously, some of the basic stuff around like, can we attract resources, right to their company, whether that’s capital, talent, customers, so on and so forth, I think they need to have some level of gravitas and pull to be able to do that. Because what the reality is, I can give money to these companies, but I don’t want to be the last check into the company, right? If it’s going to be a big business, they probably need to be able to attract more capital, right? Sure, they found a co founder, maybe they can find a few more engineers, but I don’t want that to be the last talent that goes into the company. I want them to be able to convince people who in a rational world would not be joining your company to be able to join your company, right? Because you’re going to pay them less, you can make them work more, there’s more risk with this company, but they’re still going to join your company, right? Like that is the kind of talent you want. And same thing with customers, right? Like rationally, they should not be using your product, because they could lose their job, whatever could happen, but somehow you convince them to be able to do that. So I think that’s sort of what you’re, what you’re looking for, which I think is it sometimes, you know, if I look at the anti portfolios on the companies we’ve invested in that haven’t done well, I think it’s where we’ve missed that in our diligence, right? Where, you know, the biggest mistake I’d say we probably made is like, fell in love with the idea, right? Where it’s almost like you think, like, if I was building this company, I would, I think it’s gonna be really big. But the reality is, we’re not building the company, right? We’re like a coach at best, right? But ultimately, the player is the ones that have to make all the plays. And I think it’s really important to be able to, to pick those people well.

Siddhartha Ahluwalia 31:57

And, you know, the founder of Goldcast has said that, you know, that Gaurav writing a check when you were two weeks away from giving up is the kindest thing that something has ever done. But I said that.

Gaurav Jain 2:12

Well, look, I’d like to think I did it purely out of kindness. I did it because I thought they were going to build a big business. I should have did. I you know, I don’t know if it’s a luckiest thing that we’ve done, but it certainly, you know, has worked out well. But look, I can see from his perspective, he sees that as being a gesture of kindness, because they heard so many no’s, right? They heard so many no’s. And we finally said, said yes. But I think it’s because, you know, the way we underwrite people and deals is very different than most people, right? We’re willing to take risks that others are not. And I think that’s why I believe it wasn’t a gesture of kindness. It was just, we saw it and we’re like, this is going to be big.

Siddhartha Ahluwalia 32:50

What are the most non consensus thing that you have ever done?

Gaurav Jain 32:56

Oh, man, there’s so many things. You know, certainly a lot of deals that we have done that have been non consensus. I mean, frankly, most of the investments we do at a four are not consensus. And we believe that’s where the alpha is, where, you know, I think if it was obvious, then, then somebody else would would also see it either the price would be too high, or it wouldn’t be an opportunity in the first place. So a lot of the deals, we debate them internally a lot. And as long as one person is excited about it, it gets done. It doesn’t have to be a consensus.

Siddhartha Ahluwalia 33:31

It doesn’t have to be even a partner to get super excited.

Gaurav Jain 33:33

No, only one person on the team has to get really excited. And obviously, my co founder and I, you know, can do deals, but even on the team, we give them a lot of latitude to be able to, to advocate for companies. And there’d be many investments that we’ve done, where my partner on a matter and I might look at it go like, I might not have done it. But this person has clearly done the work, we pushed back hard, they’ve come back with answers and responses to that. And we trust their diligence, right? We trust that they’re advocating for this, and we should we should do it. So and I think that’s how you frankly find alpha again, going back to the business of exceptions, right? If it’s going to be obvious, and that’s not where the exceptions are.

Siddhartha Ahluwalia 34:12

What is the lowest ownership and the highest valuation that you have gone through till now?

Gaurav Jain 34:16

As an entry price?

Siddhartha Ahluwalia 34:17

Yeah.

Gaurav Jain 34:18

You know, there’s been some stuff we’ve done in the non core bucket, where it was repeat founders, usually that we that were expensive, a company comes to mind called Koala, that we invested in repeat founders, I believe, at a segment that was a pretty expensive deal for us to get into, they were doing well to raise a Series A. And then they actually got acquired by Cursor. And we got cursor stock. And we’ll see where that movie kind of all ends up. But right now, it’s looking really good for us. And again, these just goes back to like, the reason they got acquired by Cursor, I think there’s a lot of reasons for the talent, right? Just an exceptional talent in the team. And they’re now running the enterprise business for Cursor. So if you just, you know, chase great people, obviously, you want to get in at a lower price as possible, but I’ll, you know, you will eventually, eventually do well, you know, in our business, I think three things matter in that order. I think number one, it’s a parallel business. So you’ve got to be the best companies, a few companies end up driving the returns, but that’s very fond of for the for the industry. And you’ve got to be those companies. Number two is ownership, right? Where you want to own as much as you can have these companies, not just at the entry, but at the exit, right? It’s not where you start that matters of where you end up, right? Obviously, very hard to increase ownership in best companies. So you better start strong. But it’s all about where you where you exit. And number three is the entry price, right? Obviously, lower the better, but you cannot skip a step. Right? You cannot chase low prices in companies that are, you know, not that excited about or the ownership is low, you can’t have high ownership at a low price and not great companies. Because guess what, 50% of zero is still zero. Yeah. Right. And, and by the way, if you’re in great companies with low ownership and a high valuation, not ideal, but you can still return the fund and then some, right? So ultimately, we see things in that order. And there’s probably companies where again, they’ve done well, but the other two things weren’t as good as we want it to be. And, and look, outside of repeat founders, if we generally don’t invest in companies that have significant amount of traction, because there are other investors that are really good at that, right? It’s not to say that’s not a good company, it could be a great company, just not in our focus area, you know, it’s not our ICP, if you may, our ICP is finding usually non celebrity founders, right? A lot of them first time founders, before it’s obvious to everybody else, what that means is usually you know, little to no revenue, usually no product, you know, maybe the idea is not even fully baked yet. That’s, that’s our space. And like, if those companies are expensive, like something is wrong, maybe they’re running a process. And a lot of times we another question we ask ourselves is why are we part of a process like we should have met these founders before they were running a process before they even were ready to fundraise like that is a time you’ve got to intersect with founders and help those founders. And if we do that consistently, then the entry price should be low and that ownership should be high.

Siddhartha Ahluwalia 37:04

How did you meet Aditya from Loom?

Gaurav Jain 37:06

This one is a funny story. I actually met Aditya for the first time through his wife, who I don’t know exactly how I got introduced to her.

Siddhartha Ahluwalia 37:16

Did he?

Gaurav Jain 37:16

Yeah, that’s right. Because she’s also founder herself. And she had pitched me her company, which is doing really well from what I can see now. But unfortunately, we passed. And but thankfully, she had had a good enough experience with me that she was kind enough to be like, actually, my husband is starting a company now, would you like to meet? So she introduced us to Aditya about a year actually, before we ended up investing. So we stayed in touch with Aditya. And then when the round was coming together, John, who’s now joined, joined Noon actually used to be at Scribble, he kind of gave us a heads up that like a round is coming together now. And then we’re planning to invest in that round. Do you want to take a look? So we, we moved pretty fast and ended up investing in that round. So, you know, again, going back to sourcing, you never there’s no silver bullet in this, right. And by the way, I get more deal flow from founders who I have said no to who I’ve passed on than founders who I’ve invested in. Right now, of course, partially because there’s 100 times more founders who have said no to than the founders I’ve invested in. But I think it’s really, really important for us as investors to make sure the founders have a good experience when they talk to us, they should feel like wow, well, Gaurav said not to invest, he’s probably he’s gonna regret it, which is I probably will. But at least those 30 minutes were useful, you know, at least hopefully you walked away with I’ve pushed your thinking a little bit, you know, you’ve thought about things that you weren’t thinking of before, like I asked good questions, at least, you know, and I think that that part is important to us. And that is why I think founders when they’re asked by somebody saying, hey, I noticed you’re connected to Gaurav on LinkedIn, like, all right, you know, do you know a four, they might say, hey, look, they passed on me, but I think had a good experience. So you should still talk to them. I think that is very, very important.

Siddhartha Ahluwalia 38:54

And how do you coach your set of founders for leading the next round?

Gaurav Jain 38:59

Yeah, look, I think raising money, especially the round right after us, you know, if our round is 100% storytelling, 0% data, the next round is still 90% storytelling and 10% data, there’s some early data, but it’s not like it’s obvious, it’s like, you know, breaking out, it’s not like millions of revenue, right? It’s still early. So I think a lot of the time work we do, and this is where we can be very helpful to founders is really crafting the story, right? But crafting the story for investors, not customers, it’s a different story, right? The founders are so focused on selling their product every day, and they’re sowing the weeds as they should be. Sometimes it’s hard for them to, like, you know, take a step back and figure out what the story is for investors, right? Or they feel like, why should like, I just look at the data or like, let me just walk into the product, like that should be enough. But the challenge is, like, when you’re an investor, you see so many companies, and you’re human at the end of the day, and you’re trying to predict the future, you have to prioritize where to spend time, right? And I think where the companies where you after the pitch, you walk away and go, like, you know, I felt something there, those are the companies you end up taking more serious. And I think it’s our job to help our founders get there, right? It’s our job to help our founders kind of figure out how to tell a story that’s very compelling, and that’s backed up by the data. And then also getting them in front of the right investors at the right time, right? Because again, this is a Series A or seed Series A, still a lot of judgment and subjective decision making, and not everybody is going to look at the same company and like come to the same conclusion, right? I think our job is to is to sort of play interference to be like, Oh, talk to person A, I think they you know, I’ve already told them about the company, and they seem really excited. Don’t talk to person B, I’ve mentioned the company, and it’s just not in their thesis, they’re not a focus area for them, and help you kind of optimize your time that way. And then of course, as they’re running a process really be that coach in the background, where literally, like when companies are active in the process, I’m talking to the founder, like three times a day, they’re BCCing me on responses and send to the investors when the response comes back from the investor, they forward it to me, they’re like, Hey, what’s the question behind the question, they’re asking for this, but I don’t think this is the real question was, and I can help you push that because I see at any point of time, a dozen companies fundraising. So we have this incredible like data points on like what it takes to be able to do put a successful fundraise together. And that’s where we look to help our founders.

Siddhartha Ahluwalia 41:13

Do you only invest in SF Bay Area funding?

Gaurav Jain 41:16

No, there’s no constraint from a geographical perspective, our our fund allows us to invest globally. Now, that being said, vast majority of our investments are in the US. And within the US they tend to be around San Francisco, a little bit in New York. Yeah, I moved to Canada. So I do a bunch of investments in Canada as well. But we’ve increasingly done a bunch of investments in India as well, right?

Siddhartha Ahluwalia 41:39

Especially only in India.

Gaurav Jain 41:41

Yeah, some in India is a company called newbie. You may have heard of in the consumer space, consumer fashion that we invested in. So that one’s based just in India. A lot of the times, it’s cross border, right, like a noon or something or Goldcast, where the engineering team might be in India, and the founders are here, and they’re back and forth. So, you know, we’re totally open minded to that as well. I’d say those are probably the big kind of pockets of where we end up investing. But we have an investment in a company in Latin America, we would invest in a company in Africa, a couple in Europe, so we can totally invest, you know, globally. And we also find a lot of times as the founders may start off in India, or may start off in Europe, but they want to move to the Bay Area. And I think that’s where we can be very helpful to them. Our offices are right in the heart of San Francisco, I think if you map our office is halfway between Anthropic and open AI. So we’re like really perfectly, you know, positioned from a talent density perspective. And then we have like 2025 founders at any point of time working out of our offices, right? And there’s a company that we share where the founder works out of this office. And because we can build that community around them. So when they come from outside of the Bay Area, they don’t know anybody here, we can kind of, you know, plug them into the community. And suddenly they have, you know, all the friends of the need.

Siddhartha Ahluwalia 42:52

And how many of companies today are from India? Like exactly like you mean?

Gaurav Jain 42:57

Just based in India with like no US operations. That’s, that’s a few, I think it’s like two or three. One of our companies called Onyx was acquired by Curefit, which I understand is like a pretty popular brand of fitness in India. And hopefully we’ll go public at some point. So we found ourselves in some of those companies. You know, I think part of our challenge, candidly, is if you’re building for the Indian market, I just don’t know, sitting here, I understand that enough to have a thesis, a non obvious thesis, right? Even new me was, frankly, a lot of it was the founders just came across as really strong. I don’t know if he had a thesis around like fashion in India. And like, my worry sometimes is like, I don’t want him to dump capital where like all the investors like you who are sitting in India said like, you know, this is not a good idea that I’m like, Oh my god, it works in the US and probably work in India, you know, it’s just I just don’t want to be that in that in that place. So I think we probably have seen a lot. I saw a company recently doing something in furniture, for example, the founders are really strong. It’s a really interesting idea. I just don’t know if I have an unfair advantage in being able to pick the right one.

Siddhartha Ahluwalia 44:03

And what’s your process to make sure good companies don’t slip through?

Gaurav Jain 44:07

Yeah, you know, we meet as a team, believe it or not three times a week, right? So most venture funds have a partner meeting once a week, usually on Mondays, we’ve extended up to three times a week, because we want to make sure if one of us on the team, the team of seven investors now see something they like, there’s a team meeting right around the corner where we can discuss and debate it and figure out like key diligence points and move fast and decision making. What we don’t want is you meet something on Monday afternoon, and you got to wait for Monday to like discuss this with the team. Right. But we are our whole thing is like, if we like it, we should have signed the deal before Monday. All the other venture funds are gonna discuss a deal on Monday by Sunday night. If you like this deal, do whatever it takes to get it signed. If you have to show up at the founder’s house, you do that, right? If all of us had to show up at the founder’s house, we do that. If all of us have to meet a Sunday at the office and discuss a deal, we will do that, right? They’re like, things move fast. You know, and then the founders were investing, and I think also appreciate that because they want to move fast, right? And they like that we move fast. And they like that everybody else moves slow and we move fast. I think that kind of also went back to like selling them on working with us. And then we often hear from founders are like, wow, how did you get so smart about these space and like my background so fast? Like it’s been 24 hours since I first talked to you, and I’ve already met like half your team, you know, and it’s because when we see something, if I if I really like it, you know, it’s like a it’s like an alarm goes off on our slack and like p zero and one of the channels where it’s like, hey, I just saw something that I think is special. And like, hey, you, you, you can you meet this company and then those people will drop whatever they’re working on, meet the founder the same day or like first thing next day. And then we’re constantly talking and we all sit next to each other like about that company and trying to make a decision pretty rapidly. Because also and founders at this stage didn’t want to spend a month fundraising, right? I’ve been a founder myself. You want to just raise money from people you like that understand your vision at fair terms, and move on and go build your company and sell to customers build a product like if you think about it, there’s two founders raising a precede, and they’re both fundraising or meeting investors. Nobody’s writing code. Yeah, nobody’s selling to customers, right? The business is essentially shut down for the purpose of fundraising. Nobody wants that, you know, so I think we’ve just got to be able to move fast, search for the truth, do the work that we need to get smart, make a quick decision and get it done.

Siddhartha Ahluwalia 46:22

You mentioned about earlier that the reason to be based between SF Bay area is particularly between the offices of OpenA and Tropic, the talent is really good, but the talent is also super expensive.

Gaurav Jain 46:34

Yeah, like a lot of times, I mean, that’s why we’re probably seeing a bunch of our companies like GoldCast, or Loop or Noon building kind of go to market functions here, but the engineering team in India, and I think that’s actually pretty good setup, especially if you can have a senior leader based in India. I think it’s hard to just outsource coding to the other side. But I think if you can have a real engineering center in that in that country, I think it could totally work or different parts of the world, we have companies sending in Argentina, and so on and so forth. So I think that’s partially how you solve for it. I think the good news now is with agentic engineering, you know, companies can crank out a lot more code for the same amount of input. You know, historically, 70 cents of every dollar we would give as VCs to founders would go towards hiring engineers, right? Because they don’t need machines, they don’t build factories, right? What is the cost, right? It’s people, right? It’s engineers. But now one engineer can do the job of 10, 15, 20 engineers, right? It’s only getting more, it’s only getting better. That’s great, right? That’s great. Maybe one senior engineer who’s not cheap here, can suddenly do a job that like you might have needed 20 people in the past. And I think that’s that’s sort of what you’re starting to see is like companies being able to produce product much faster, much cheaper. You know, companies like gamma that haven’t raised much money in the life of the company. In fact, they have what they call negative lifetime burn, as a term I’ve never heard before, but it’s a new term I’ve learned, which is they have more money in the bank today than they’ve ever raised in the history of the business, right? Not just cash flow positive today, they have more money than they’ve ever raised in the history of the business starting as time zero. And it’s because things have gotten so much more efficient. So look, talent is expensive. And again, everything has pros and cons and trade offs. And every founder has to figure out for their own purposes, where they should build the talent machine. And look, some folks are more the cutting edge of technology, or maybe more on research and infrastructure side, they should be here. If you’re building more app layer stuff, maybe you can have a talent team be somewhere else where you can find good engineers, but maybe not, you know, the ones the cutting edge who are coming out of open the eye. So I think it really does depend company by company.

Siddhartha Ahluwalia 48:35

And can you talk about a few portfolio companies that are hitting out of the park that we didn’t discuss?

Gaurav Jain 48:41

And there’s quite a few. Obviously, the ones we talked about are maybe some from some of our older funds. Those are more well known. The newer ones are less household names, but hopefully they will be in a few years. I’d say the one that comes to mind is a company called tasklet. This is started by the founders of Firebase. I was a seed investor in Firebase back in 2012. They sold out to Google, it was a great outcome for us. But also, more importantly, became one of the most used developer tools in the world. And they helped really build that inside of Google. Then they spun out to start tasklet. Again, the founders of Firebase were one of the first LPs in a forest. So we’ve got you know, it’s interesting to see that the journey, if I give you money, then you invest in my fund. And then and then we got a chance to invest in the next company, which initially was called shortwave. And it’s a new type of email client, which is a lot more efficient, faster, so on and so forth, the Gmail, which most of us use it for and we love it. And that was what that was growing and doing fine. But as as AI started to really take off, they asked themselves the question of like, what can this really be like email client is good. And email has a lot of information, obviously about us. But what can we do with that? And and through multiple iterations over the last year or so, it’s essentially become the way I think about is like open club and like fully managed for you. So you don’t have to get your own hardware secured, none of that. So you don’t worry about literally going here. And I’ve agents for a whole bunch of different things. So for example, every morning, I get a daily brief on like, who am I meeting that day? It does research on those people who introduced me what context do I have. So like I’m very prepared for my day. This is like a bunch of agents like that I built and all you got to do is just just check chat GPT, you type it out and and you can pick which models you want to use and like it integrates to all your tools. So like Gmail, Slack, Notion, whatever, as access to everything. And it’s amazing, right? It’s amazing. And it works 24 seven, because in the cloud, I don’t know, I can turn off my computer, it’s still working. It has virtual machines, I can do computer use in the in the cloud. So anyway, it’s been awesome. And it’s a company that’s gone from zero revenue earlier this year to I think, right now, like north of 5 million revenue.

Siddhartha Ahluwalia 50:40

What how do you spell the name of the company?

Gaurav Jain 50:42

Tasklet. So T A S K, like task, L E T, like tasklet.ai, folks should check it out. It’s it’s been a game changer. And especially for like, even though I’m technical, a lot of times I’m like get lazy on like setting up like hardware or software provisioning and all the security stuff. I love stuff out of the box. So I can focus and get things done and move on to the next thing. And if you’re like me, just love efficiency and want to just like see the output and not have to deal with all the inputs. Tasklet is perfect. So that’s one company that’s like really starting to take off. There’s a few more that’s a B2B companies in the healthcare space that are doing incredible work. There’s a company called Blooming Health that comes to mind, you know, something like a trillion dollars are spent in the US every year on non social security welfare programs for people. And this is basically an agent that helps get the right benefits for the right people at the right time. And that does some really interesting work around voice AI and stuff to make them make sure the benefits get to the right people. So that’s another company that’s really interesting. There’s a whole bunch, you know, we can talk for a few hours about that.

Siddhartha Ahluwalia 51:39

And can you share your journey in fundraising? Because like, you know, that’s the undiscussed part of venture capital. And when VCs like us have to do this, what have been some of the learning? What have been some of the toughest times? And how did you, you know, eventually build your ICP for your LPs?

Gaurav Jain 51:54

Yeah, you know, I think where it really helps us to have empathy, and an understanding of what it’s like to be on the other side. I think the challenge for LPs is they’re getting inundated by new funds and emerging managers and micro funds, and so on and so forth. So I think that one of the biggest things they’re all looking for, understandably is differentiation, right? What is it right to win? Right? Why will you see this deal in the first place? And why will you pick you versus somebody else? Right? And then of course, can you form the right portfolio to be able to have, you know, generate alpha, right? And alpha is like, not just a net 3x return, because they can get that from other places, but like a 510x.

Siddhartha Ahluwalia 52:27

Right?

Gaurav Jain 52:27

So all of those things have to, I think storytelling becomes really, really important. Because if you think about it, as a VC selling to LPs, what I’m basically saying is, hey, give me money to invest in companies I haven’t met yet. Yeah, I don’t know what they’ll be building. But just trust me, they’re gonna be good companies, you know, and like, especially as a generalist investor, I don’t even know what sectors are going to be here. Right? And like, I don’t know who the following investors will be. But like, just just give me money. It’s like, it’s absurd, like the ask you’re making, right, especially as a first time fund with no track record, which is why it’s hard. So I think your storytelling bar is really, really high, at least with like a company, you can show the product, right? You can be like, hey, check out the demo. I can’t show anything. I don’t know what I’m going to invest in. Right? I can tell you the strategy on how to find them. But like, is it going to work or not? I have no idea. So I understand only raising a first time fund is hard. I think storytelling has to be really, really top notch. And the other learning has been, it is a long journey, right? There were LPs who passed on fund one who came into fund two, there were LPs who passed on one and two came in three. And probably there were LPs who passed on one, two and three came in four. I think, you know, as a as an investor, sometimes when I because the way we operate is when we pass on a company, even if it becomes Ramp, I can’t really come back and invest later, because we’re so stage focused, I kind of assumed if an LP pass, like, I move on, right. But I think the learning has been it is, it is important to kind of show that progress of the business and the track track record, and so on and so forth. And they might come around and still invest in your fund. So just because it passed, it’s not a, I hate you, you know, never again, it’s sort of like, I don’t get it yet. But let me see a little bit more color here. There’s been many, many other learnings. Honestly, I think you’ve got to but it all comes back to like being able to demonstrate differentiation, being able to demonstrate that right to win. You know, really putting our founders front and center and like having them, you know, really sell the story for us being very communicative and transparent with LPs. I think also we were lucky that we had a mostly institutional LP base in the first fund. I think a lot of times, first time funds tend to be a lot of high net worth individuals. The challenge with that is by the time you’re raising your second fund, even third fund, you may not have a lot to show because companies are early, they wouldn’t have exited, the exited ones wouldn’t be very good. The markups might be few and far between, especially depending on when in the cycle you raise your first time fund. I think when you raise from institutional funds, it kind of almost it’s an expectation to invest in at least two funds or three funds, right? And then by that time, you’d better have something to show. And that helped us I think in fundraising, frankly, every single fund, you know, has been oversubscribed, right? We’ve always gone over target, we’ve always the hard cap. And I think that’s been a lot of that has been just an incredible LP base that we have. And it’s mostly the same LPs. I mean, 90% of our capital always comes from existing LPs. And frankly, there’s always demand to do the whole fund, but we cut them back because we always think it’s good to build a couple of new relationships in each fund cycle. But you know, our LPs always been happy to do prorata in every single fund, even the fund has gone from, you know, initially targets 40 meters 47, then it was 75, it was 78, then it was 125, it was 150, then it was 175, it was 188. And, you know, it’s always been like, like that. And we feel very, very fortunate.

Siddhartha Ahluwalia 55:30

Got it. And how did you manage to keep, let’s say, 90% institutional LPs across all your funds?

Gaurav Jain 55:37

I think your question is like, did we pick institutional LPs initially? Yeah, look, I think some of that is, you know, both Anirudh and I, we came from funds before, right? So while we were first time fund managers, we weren’t first time investors. And our previous fund GPs were very generous in making introductions to a lot of the institutions that we’ve gotten to know over the years, meaning those those funds, I think that that helped. I think we’ve always tried to prioritize, you know, the institutional LPs, just because, you know, we think, even though we can find capital, maybe more easily somewhere else, it’s short term, right, long term wrong. We almost think of fundraising this fund is like also raising the next fund right now. So like, are we putting ourselves in a place where as long as we deliver, right, obviously, we have to deliver, there’s nothing for granted. But as long as we deliver, the next fundraiser should hopefully be easier. Yeah. And look, fund four, we raised in 2023. That was like a really tough time to be raising money, right around here, where Zerp is gone, you know, AI is in the doldrums, AI is still sorry, tech markets are the doldrums and AI is still early, but it was still oversubscribed. Right. And I think it’s because the LPs kind of saw our track record from the first refunds. You know, they said, Hey, look, you’ve been executing on the strategies that you told us to do. The results might be early or the macro might not be very good, but we’ll still back you. Right. And I think that’s that part is important.

Siddhartha Ahluwalia 56:59

And what are the best DPI is that you have delivered across the funds?

Gaurav Jain 57:03

Yeah, you know, the what I can share is like our all our first the first three funds are top quartile, DPI and TVPI. And, you know, it’s been through like some organic M&A that’s happened through companies like CubeCost that was acquired by IBM and GoldCast and a bunch of other stuff. We also are pretty active in the secondary markets, right? You know, companies take a long time to exit these days, starting from, you know, where we invest in idea stage to like really becoming a public company takes longer than it ever has. But the nice thing is the secondary markets have become pretty robust along the way. So if you have good companies in your portfolio, you can usually sell either that position or sell part of the fund and so on and recycle capital to your LPs. And that has allowed us to stay top quartile DPI, which, you know, the LPs are very happy about because, you know, ultimately, we’re not in the business of just investing, but we’re in the business of returning capital to our LPs. And the returning capital part is very important and not just returning eventually, but returning in due course, so they can keep recycling the capital. Because it’s not just about DPI, but it’s also about net IRR. Right. And I think we’re very mindful of those two things.

Siddhartha Ahluwalia 58:13

Thank you so much, Gaurav. This has been a wonderful conversation. Thank you for being candid.

Gaurav Jain 58:17

Well, this was fun. This was fun. We got to do a lot of stuff. I know we can talk for a few more hours here. But thank you for having me again. And hopefully the folks find it useful.

Siddhartha Ahluwalia 58:24

Yes, absolutely. I enjoyed it. And I hope that my audience also enjoyed it.

Gaurav Jain 58:28

Thank you.