Siddhartha Ahluwalia 01:13
Hi, this is Siddhartha Ahluwalia, your host at NEON Show and Managing Partner at NEON Fund, a fund that invests in the best of enterprise AI companies between US India corridor. Today I have with me Somesh Dash, General Partner at IVP. Somesh, welcome again to the NEON Show after five years.

Somesh Dash 01:31
Good to be back. The world’s changed a lot, Siddhartha, since 2020 when I was last with you.

Siddhartha Ahluwalia 01:36
Yeah.

Somesh Dash 01:36
Good to be here in person.

Siddhartha Ahluwalia 01:37
And fantastic to record this in the Bay Area in person, you know, so much more context now we have together.

And I want to start by something which is common to both of us, which is, you know, what is happening in your perspective between the US and India corridor. I think that’s interesting for our audience. And then definitely we’ll dive into perplexity, Figma.

Somesh Dash 02:02
Yeah, all the fun Silicon Valley stuff. So we’re going to start hyper global and hyper local. But they’re intertwined because I think, you know, we’re sitting here in Palo Alto.

And if you think about just less than probably about 60, 70 years ago, where we’re sitting was mostly orchards. And so in Palo Alto itself, even when my parents emigrated in the late 70s, in these areas you would see older orchard farms. You know, the Silicon and Silicon Valley only came in the integrated circuit memory and semiconductor revolution, which really was kind of in, you know, famously it’s Fairchild Semiconductor than Intel and companies like that.

That family tree you’ve probably seen. But the reason I bring that up is if you think about the group of people that really put the silicon in Silicon Valley, who were they? They were immigrants, right?

You look at Andy Grove, who was one of the original group at Fairchild and Intel and became CEO. He was a Hungarian immigrant, right? You think about even more recently Elon Musk, right, from South Africa, right?

Or Sergey Brin, you know, like many came to this country as immigrants or as children of immigrants, even more like myself. So to start, as you think about the US and India, it’s been a symbiotic relationship, you know, from waves of immigration, the earliest immigration waves between India and the US started actually in the 1900s when the Industrial Revolution was happening, when railroads were being built. And when railroads were being built, this Western belt going from as far north as Vancouver to as south as Los Angeles, many of the people who came at that time were actually from India.

And they’re from Punjab, many of them. There were actually, you may not know this, there’s a lot of literature on this, there were laws that restricted them from bringing their wife and children. So many of them actually ended up marrying, many people from agriculture from Mexico who were emigrating.

So there’s many families, if you find their fourth, fifth generation where their great, great grandfather was Indian, and, you know the…

Siddhartha Ahluwalia 03:56
Americans or the Mexicans?

Somesh Dash 03:58
More Mexican Americans to the cultural similarities than kind of Anglo-Saxon Americans. But I think what’s amazing is, you know, that’s how long ago Indians started coming, right?

And then the biggest waves happened when there was a skilled labor shortage. If you look at the immigration acts passed in the 1960s and 70s, like it was Truman, you know, Eisenhower or other people who passed post-World War II acts that enabled these waves with H-1B being the biggest recipient. But actually, Indians have done an incredible contribution to Silicon Valley.

And I think, you know, when we first were, I grew up here not far away, you know, you would be hard-pressed to find an Indian CEO or the founder, and, you know, you have to pay tribute to people like Manohar Khosla and others who kind of paved that way, you know, Kanwal Rekhi, Suhas Patil. These are early in the 80s and 90s, they took their companies public, they started Thai. But you look today, and you look at like the S&P 500, if you look at the S&P 10, right, and you look at who is sitting atop of some of the most powerful companies, whether it’s Microsoft or Google or Adobe or YouTube, you know, you see folks from India, IBM, Indian Diaspora sitting there, and they’re in leadership roles and very, very quintessentially American slash Silicon Valley companies.

So I’m an optimist, first and foremost, that even if the rhetoric in the last 14 days has devolved to a level that none of us expected, ultimately what we will see is a very healthy, productive working relationship. You know, in any relationship, sometimes you need to have an argument, sometimes you need to let a little air out of the bag, things were going like this, you know, there was so much momentum that in a way a little bit of cold water doesn’t hurt to focus on what is the most strategic parts of the Indo-US relationships. And for me, it always starts with immigrants themselves, right?

For me, it starts with trade and what specifically, if you think about the conflict that’s happening, both sides are actually negotiating. If you think about it, you could have accepted a deal that would have been not as great for the United States, could have accepted a deal that wouldn’t have been as great for India. I’m very bullish, though, that this is going to cause the right strategic dialogue to happen, you know, between India and the United States in the coming months.

The defense sector, which you and I were just talking about, is extremely focused on finding the right primes and startups to actually become a second source to Russia. I am involved in a lot of these conversations, you know, informally, informally, and my optimism is that this is going to be a slight aberration, but ultimately, it’s going to continue being a really great relationship.

Siddhartha Ahluwalia 06:27
And what do you think, you know, are the key elements right now that are, you know, at risk here as we talk about this relationship?

Somesh Dash 06:38
Yeah, well, I have to make my first discovery. I am not an elected official, I’m not a politician. I am, you know, a venture capitalist and a citizen here.

And so I am a deeply patriotic American, but India is my culture, India is my roots. So I want nothing more than for the two countries to continue to build together. It’s the two most important countries for me and my family.

The most important thing to remember is, you know, what are the most important things for each side? So in the United States, we’re going through a period now, we’ve gone from kind of multilateralism to what I’m hearing is now called mini-lateralism, right?

Siddhartha Ahluwalia 07:14
What does that mean? Both the terms?

Somesh Dash 07:15
Basically, this idea that with each country, you want to create your own accords and trade pacts versus grouping them. The general idea since World War II has been you create these factions or alliances of five countries, 10 countries, the largest one, the UN, and you negotiate as a bloc. Well, I think what the current administration, the President of the United States, President Trump has done is said, actually, each one is bespoke and each one actually requires a little bit of nuance.

And he recognizes that India is a huge economy, even, you know, don’t take his comments totally literally when he said, you know, two failed economies, Russia and India. I think he recognizes, you know, when he’s not upset that it’s a very important country. I think for the United States, it’s making sure that there’s the export of a desire to export certain agricultural goods, defense companies, of course, you know, more traditional trade of goods and services, which is really big.

On the Indian side, though, I think there’s a recognition that if you heard his comments, Prime Minister Modi, is that you have to protect the livelihoods of the farmers, the fishermen, the dairy workers. This is a huge… There’s 100 million plus farmers in parts of India, right?

And I think that’s a group that you can’t just suddenly create uneconomic balance where you’re creating goods and services coming in at a much higher rate and you’re taking out an important part of the economy. So I ultimately think what’s going to happen is they will find a point at which they will basically be able to find like a medium, a compromise. I think one of the more trickier parts of this has been actually around the Operation Sindoor, which happened earlier this year.

That has bled into this. Part of this is economic, but part of this is also social and political. I think both sides have recognized that the Pakistan dialogue with the US and the Pakistan dialogue with India complicates things.

My hope is that if you really believe in this mini-lateralism, then you’ll have to deal with India differently in the United States than Pakistan and not group them. I think the confusing thing has been the Iraq conflict, the US feels it played a role in mediating some of this. India feels like maybe it was not as big a role.

So there’s a little bit of that going back and forth. This happens though. You see this in bilateral talks all the time.

I think the most important thing is going to be the largest companies in the United States and the largest business leaders in India also coming together in different de facto settings to be able to discuss what makes the most sense. I was pleased to see that they’re going to keep having these dialogues occur, both with the US administration, the State Department, as well as the Indian Foreign Services, Indian government. I think the Indian Foreign Services folks, whether it’s Sri JaiShankar or Bhishko and others, these are very experienced, skilled people.

Prime Minister Modi, he is, I think, the longest standing world leader of scale. He’s been there since 2014. He was there when President Obama was starting his second half of his second term.

He’s been through Trump term one. He’s been through President Biden’s term and now Trump two. So I think in some ways he has the longevity and the institutional knowledge and many of the people in this cabinet have also had that with the United States.

So it’s not like this is a brand new relationship that people are still trying to figure stuff out. That was India and the US in the 50s. This is a much more mature relationship that’s building on a foundation of trust and going together.

And I think if you think about President Clinton and President Bush, who came before Prime Minister Modi, you think about the nuclear agreement that happened. You think about some of the bilateral trade talks that started with President Clinton and Prime Minister Vajpayee. It’s really building on that, which I think is the key.

So if we take it to more hyper-local, two letters, AI. The reality is the quality of the companies we’re seeing coming out of India right now. It’s not just that these are the best companies in India.

These are going to be global companies. And I think what you see is an entrepreneurial ecosystem that has awoken from a slumber. There was always entrepreneurship in India, but there was always a stigma associated with being an entrepreneur in India.

And now that stigma has been mitigated. And I think a lot of the founders are saying, hey, we want to build the best products to compete with the best companies in the world. We want to hire the best and brightest to work for us, who would normally go work for Microsoft or Google.

We want to recruit them to work for us in Bangalore or Delhi or virtual. What is a company’s headquarters? Today, it’s more of a figment of paperwork than in reality.

People are all over the world, some hybrid, some in-person, some remote. So I actually think if you get down to where the world is going, the AI innovation ecosystem is so powerful. And India and the US are going to be the leaders in it.

And Indian founders, whether they live in the United States or they live in India, are going to be leading the way.

Siddhartha Ahluwalia 11:43
For example, Aravind from Perplexity, he was born and raised in India, migrated to the US for his PhD, I believe.

Somesh Dash 11:49
Yes, correct.

Siddhartha Ahluwalia 11:50
And then created a $20 billion company.

Somesh Dash 11:52
Well, here’s something more even remarkable about that, right? Aravind Srinivas was born in Chennai. He grew up in India.

And many of the Indian entrepreneurs who’ve come have gone more into semiconductors initially and then infrastructure software, application layer software, but more of the higher IP. Very few have come and actually built consumer companies of scale with an underpinning of deep research and great computer science and great innovation. And when I first met him about two years ago, it was at a WeWork.

And that’s where he was working. And I was pretty surprised. I thought, OK.

Siddhartha Ahluwalia 12:26
How big was the company when you met him?

Somesh Dash 12:28
I believe the company was about 20 employees. They had just launched early versions of the Perplexity product.

It was still in beta, and it was still pretty small. But I was surprised to see how thoughtful he had been about where he spends money. He was spending money on a great talent, but he was not wasting money on silly things like 10-year leases on buildings before he had product market fit.

And what really impressed me about Aravind was how much of a student he had been about Google. He had understood Google. He had read the books.

He understood the strengths. He had deep respect for what they had built. He also saw the vulnerability based on just the innovator’s dilemma.

Seeing what he’s done recently, especially if you look at the launch of Comet, which is the new browser that they’ve launched, you see now not only a great answer engine for knowledge, you see also the agentic browser, which is going to actually create huge productivity gains. I mean, I encourage everybody. Actually, I know in India they’ve made an announcement on Airtel, like they’re going to be preloaded on a lot of the Airtel phones.

You know, India, if you think about a lot of what you can do now with it, is the simple things of buying food, delivering it, researching a vacation, thinking about applications to colleges, tuition forms, all of these sorts of things become much easier if you have something like Comet.

Siddhartha Ahluwalia 13:43
And was it two years ago that you put like 100 million and 500 million in Perplexity?

Somesh Dash 13:50
It’s all blurring now, I think, because everything has been so busy. But I believe it was in the fall of 2023, we led the Series B round. It was around the price, as you said, I haven’t done exact dilution math, but somewhere around there.

I think what we saw in Aravind fundamentally is someone who is an innovator, right? He understood where there was the ability to build a new product. And he was, I think what we look for in founders is not just, can you build something that’s slightly better?

It’s, do you have conviction about where the world is moving? And have you worked backwards to think about how to get to that end state in the optimal route possible? Because I think the problem with being an entrepreneur is not that there aren’t enough choices.

Great markets have lots of opportunities. How do you stack rank? How do you prioritize?

I’ve learned a lot watching Perplexity and Aravind, actually. And one of the things that’s funny is, Aravind and I were speaking about a year and a half ago. He was asking about some historical companies.

And it’s the first time I really felt old, because you know, back in the day, a long time ago. And I was like, that wasn’t that long ago. Oh, wait, it was 10 years ago.

And so in that sense, I feel like I’ve been almost like a history lesson for him on certain things. But he makes me proud as being an Indian, seeing what he’s done. And you know, you saw, whether it’s Prime Minister Modi or Erdogan, you know, people, he is putting India on the map in many ways as a proud, he is the example of why I believe the United States should continue bringing in skilled immigration, the best and the brightest to come and build companies here in the US and India.

Siddhartha Ahluwalia 15:16
And what traction was Perplexity at when you backed them?

Somesh Dash 15:20
I’m blanking on the exact numbers. What I do remember, though, is we hadn’t seen that kind of daily active usage and organic engagement since we had looked at Discord or at Snap. So we benchmarked basically best of class consumer companies, and we look at a lot of consumer things.

We were Series B investors in Twitter, in Snapchat, a little bit later in Discord. But all of which we did, we did well below a billion dollars in venture price. And in Perplexity’s case, what we saw was just how quickly people were using it and how it became, it went from kind of monthly active to weekly active to daily active usage.

And it was global from the beginning. In fact, a funny story is, one of the things I remember as diligencing was, hey, is it really US usage? Is it too skewed towards the Philippines?

The Philippines are like, we weren’t, at that time, there was no real talk about monetization. It was more product. And so we were sort of trying to investigate where the usage come from.

What we concluded was, this is going to be more of a global phenomenon than just for one market or the other. And all of our expectations that we had for Perplexity, the companies exceeded. And we’re just proud of them.

And look, the work continues. Because if you look at AI now, you could win yesterday’s war but lose tomorrow’s battle. To think of just how innovative he is about where the zeitgeist is going and to build something like Comet before it’s blatantly obvious that the world is moving agentic, that’s vision.

And that’s what he has. And watching him do it has been a real masterclass for me about prioritizing certain resources and certain products and certain introductions and certain markets. He is very thoughtful about what to do and what not to do.

Siddhartha Ahluwalia 16:53
Okay, And what do you say would be special about his execution and timing?

Somesh Dash 17:00
Well, one thing that’s kind of interesting if you look at, so historically, the organizational structure of Silicon Valley has been you build teams, right? But the thing I’m seeing with Aravind and some of the other AI entrepreneurs, we had a forum last fall here nearby where we brought a lot of our AI founders and Bipul Sinha, another founder I worked with, he put it really well where he said, you can’t take an AI product market fit for granted. Every six months, you’re rediscovering product market fit, whether you’re a startup or you’re a large company.

So what you really want is to A, use AI tools. So in Aravind’s case and all the other entrepreneurs, they’re utilizing the very tools that they’re building, right? The second thing is you want to have lean teams of doers, right?

You want to keep it agile because speed is everything right now. The models are changing. We’re sitting here only 24 hours after GPT-5 came out.

But here’s a question. Do we think in three years, OpenAI and Anthropic are going to keep doing launch parties for each model? No, at that point, it’s just going to be a product release, right?

And you’re not going to see behind the scenes, which model is it, five, is it 15, is it 25? That’s not going to matter. It’s a little bit like iOS and Android, they didn’t do huge launch parties after a while.

I mean, Apple, I guess did, but Google didn’t. At some point, it just becomes as a consumer, hey, the product is going to extract out the best model for my use case. But I think what he did that was really amazing, if you look at the launches of some of the vertical products, whether it’s finance or sports, it was keeping the teams lean, focusing on getting production code out quickly.

I think there’s this issue that a lot of startups have where they want to be perfectionists because if you think about our education system, to do well in the United States or India, education kind of moves you to trying to be a professional. You got to get into the best schools. You got to get good grades in everything to get into a good college.

So it causes you to be a generalist. But actually what Aravind and other founders have showed me is that it’s better to find the specialist in category A, the specialist in function B, put them together in lean teams, and then just start innovating and trying and having honesty about what’s working and what’s not. Look, for every product that comes out of any great company, whether it’s Discord or Snap or Perplexity, there’s five that don’t make it.

And you have to have that courage to fail, to experiment and fail. And when you see the early signs of success, you double down as quickly as you can and start reinvesting the growth engine into those products that have promise.

Siddhartha Ahluwalia 19:21
And when in your diligence, when you were talking to early investors, I believe LRGill was one of the early investors. What special thing that they saw? Because before like really you guys came in, there was no mouth out for the previous set of investors.

Somesh Dash 19:37
Yeah. Yeah. So I think, look, NEA was there before.

Actually, there’s some good shared DNA here because, you know, Ann who led it from NEA and Pete Sunstein, someone who we worked with for a long time, they’re people we’ve known for a long time. But there were a lot of people on that team, my partner, Cack, who led it, who worked at Uber also, which is a company that we were very involved in. And Uber always had a very strong business team.

They were always extremely quantitative, metrics driven, really, really great at execution. And so we saw some of the people reappearing as advisors. So the DNA was kind of Uber, you know, Cack, my partner who founded, she was very connected to the Databricks team.

And a lot of the folks, Dimitri and others, came from Databricks, right? So Databricks infrastructure training, Uber, BizOps, strategy, front end training is a great combination. Ilad, who I just spoke with yesterday, is somebody who I’ve known for a long time, admire.

We just co-led a bridge together, you know, about nine months ago, one of the rounds there. We don’t have formally anything saying like, if Ilad doesn’t, we do it, or he doesn’t. It’s nothing like that.

But what we do have is shared attributes and an understanding. These are partnerships. People think, even maybe your listeners think, that if you read the press, it feels like these guys are just like gladiators in the Coliseum fighting each other tooth and nail.

And that’s not true. I think the reality is there’s a period of time where a company has lots of term cheats and they’re trying to figure out who to work with. And at that point, everybody is putting their best foot forward.

In Silicon Valley, there isn’t a lot of negative selling. It looks bad on you. If you start thinking the best way to convince a founder to say bad things about everybody else, just focus on what you’re good on and the best decision will be made.

And remember, in almost any great, you know, Figma, which we’ll talk about when we’re public, if you look at the cap table, there were a lot of investors, right? So the reality is you collaborate way more. You may compete for a week or two, but then if you invest, it’s eight to 10 years to an IPO.

And you’re collaborating for those eight to 10 years, and you’re sitting in boardrooms together. You’re recruiting and interviewing people together. You’re working on committees together.

So whether it’s a lot or any of the other venture firms, I mean, yes, we are all competitive and we want to win the best companies. But so much of this is knowing that there’s relationships that go back. And I actually think in the Indian ecosystem, I’m really pleased.

There’s so much collaboration I see today versus 20 years ago when I was in India and I was seeing at that time the venture industry, there was very little collaboration.

Siddhartha Ahluwalia 21:57
Yeah. Yeah. And this brings me to my next point on Figma, right?

Somesh Dash 22:02
Yeah.

Siddhartha Ahluwalia 22:03
You invested, the firm invested in Figma at $10 billion valuation, today it’s above 60.

Somesh Dash 22:09
Yeah.

Siddhartha Ahluwalia 22:09
So what gave you conviction at $10 billion that the company could become big? And there was a moment that, you know, at $20 billion, it was getting acquired.

Somesh Dash 22:17
Right.

Siddhartha Ahluwalia 22:18
Would you remember how much excise IVP put in?

Somesh Dash 22:21
That I don’t remember exactly how much we did, but what I do know is we met Dylan Field and Figma way before we invested. We typically invest about two years after we meet a founder or get to know them. In this case, it was even longer.

Dylan is amazing. I mean, most people don’t know this, but he’s 33 years old. You know, he was, you know, a student at Brown and actually became a Teal Fellow, came out here and had the vision.

When nobody had this vision on the future of design, way before AI, he had the vision to build this company and he was willing to learn. He was like a sponge. He was going out and learn.

And I, you know, we had a chance, I was looking back, we had a chance to go see Dylan right around the series B actually, because a few of the earlier investors, Danny Riemer in particular, who was the first investor, someone I’ve looked up to, has been a mentor of mine from Index Ventures. And Danny was the first one who told us, hey, this is a individual you should spend some time with, as well as John Lilly, who’s a friend of mine from Greylock. They were the cheerlead board members.

When we went to their offices in San Francisco, it was just very clear at that point that Dylan was building not something just for design, but for business work and collaboration more broadly. What we didn’t have the evidence of is like, is that the way they were going to sell it? Is that a part of the market they were going to capture?

We didn’t know. When we started seeing those signs come up, then it was clear to us that it was time to do it. We also, I have to give my partner Ajay Vashee credit, Ajay was CFO of Dropbox and joined us in 2021.

Figma was his first investment actually. What was very interesting is, one of the people who worked for him actually at Dropbox, Praveer, ended up joining Figma as CFO. Almost organically, he became helping Praveer, mentoring him, because they had a working relationship.

In some ways, because of that, he said, hey, I think this is a company that’s thinking much bigger than we ever really thought. We did invest around that time. We invested along the way even more.

I actually think Figma, this is still, the IPO, just so everyone knows, IPOs are financings. I know everyone celebrates it like it’s the end. It is a milestone.

It’s not the end. If you look at, we had three companies in the last 14 months enter the S&P 500, CrowdStrike, Datadog and Coinbase.

Siddhartha Ahluwalia 24:29
Are you still holding them?

Somesh Dash 24:32
The fund has portions of some of them and has distributed a lot more, but I personally am holding all of them. I’m a personal believer in these companies. Typically, the firm does hold for years after the company goes public.

Just as context, all of these companies we met when they were little startups, we invested very early in the growth stages of these companies.

Siddhartha Ahluwalia 24:52
Like 500 million kind of valuation?

Somesh Dash 24:54
That was Datadog. CrowdStrike was around two, and then Coinbase was about one. Just to give you a sense of market caps, I think Coinbase was the high a few weeks ago with crypto.

It was 110. CrowdStrike had a high of 130 billion. Datadog was about 50.

That just shows the scale differential. All in less than a decade. This happened in the last 10 years.

The reason I bring it up is Figma today, in my opinion, has a long journey ahead of it. If you look at the prospectus and what they wrote to the public, they’ve written very clearly kind of their roadmap for what they want to do. We’re still in the earliest of days with AI.

They haven’t even really launched a lot of AI stuff that’s going to be exciting. They’re just in the early, early days. It could be a transformative company.

A couple more turns in the next few years.

Siddhartha Ahluwalia 25:40
Wow. And right now, do you believe the current public markets are overvalued in the US?

Somesh Dash 25:48
I do not. No. I think, you know, look, it depends on which lens you look at it.

So on one hand, there’s a lot of excitement for the S&P 700 versus, you know, but if you look at the S&P 500 or you look at just the indices, I mean, they have outperformed ever since I came back to IBP for business school from 2010 to 2025. Every 18 months, there’s a long article about how the S&P 500 is at its absolute max. And the reality is the growth engines of the top companies, the S&P 500, carry the markets around the world.

And if you look at NVIDIA as an example of this, you know, there’s one argument that’s If you look at a PE ratio, NVIDIA is very expensive, right? And it’s, you know, potentially overvalued and there’s, you know, TAM constraints. But if you look at where AI is going, you think about where CUDA can be.

You think about what Jensen as a founder is continuing to innovate and do at NVIDIA. I think you have an upside case, which is materially larger than what you would get in most safe investments. So I actually think that most of these companies, Google, Microsoft, you know, NVIDIA, if you, I would actually wager that if you looked at it five years from now, they’d be significantly higher than they are today because we’re still in the early days of AI and AI is transformative.

So there are parts of their business that will be not as robust, but they’re also reinvesting a lot of the profit and making acquisitions to go into the areas that are strategic, right? And I think that’s the part that’s really exciting for me is you have startups that are growing, but you have the big companies that are also innovating and not sitting still. 25 years ago, if you looked at a Microsoft, they were not as innovative, you know, vis-a-vis a new platform like the cloud that came out.

Today, if you look at Microsoft, you look at a really well-run company and you look at what they’ve introduced and they’re going to be formidable, you know, for the next decade.

Siddhartha Ahluwalia 27:35
One curiosity that I have is, you know, does every company today needs to be a $10 billion company to be called a success?

Somesh Dash 27:42
No.

Siddhartha Ahluwalia 27:42
Or more?

Somesh Dash 27:44
No. Well, look, from a pure mathematical perspective, right? If you think about it from an investment, I think what people have lost sight of is that, you know, a 10x can come either going from 100 to a billion or from 10 billion to 100 billion, right?

Now, to be fair, the dollars you put at work typically at 10 billion are more than what you would put forward in a billion or 100 million, right? So I think that’s the scale differential. So people think if the 10x is done with 10x amount of money, that’s even better, right?

Which makes sense. But I think the key thing is I don’t view, I remember when I was, you know, starting at IVP about 20 years ago, I once talked to one of our former partners, Jeff Yang, who started Redpoint. And he had a really good perspective of, he said, how do you define success, right?

As a venture capitalist, there’s lots of different variables with which you could look at success. And one is the financial return, right? And the truth is in our business, sometimes you have this wonderful alignment of new platform like AI today, cloud 10 years ago, SaaS 15 years ago, mobility 15 years ago, the smartphone.

You find the right company and you get either a big strategic acquirer or you get an IPO on the earlier side and you get liquid and all this stuff like that. So you have a great financial outcome. But there’s another type of success, which is companies that basically are innovating in a way that is so helpful for the ecosystem or the world.

And the example he gave was TiVo, right? And Netflix. Those are early IVP investments, we were Series A investors long time ago before I was there.

And TiVo really redefined the way in America people watch television. It was the first time you could digitally record a television program. Now in this world today where everything’s on demand or on YouTube and streaming, kind of doesn’t matter anymore.

No one’s watching cable like they used to. But for many years, the idea that you don’t have to tune into live TV, that you could record something for posterity was really revolutionary. And TiVo did a lot of the great work around that.

Now that investment wasn’t successful because ultimately the direct TVs and dishes embedded that into their service offering, right? The AT&Ts and other satellite providers. So that’s what happened to the business model.

But the company itself was, or another good example of this was Ask Jeeves, right? Ask Jeeves was a great product, great search engine. A lot of people use it, benefit it.

Did it have the financial success as Google? It did not. But it was still a really good investment.

And the teams then sometimes leave and start other companies. So I look at my own matrix of did the company build something of value, right? That because of our capital, we were able to help be a part of?

Yes. Did the company offer a financial success to all of its stakeholders? When you’re joining a board, this is important, you have to have a fiduciary duty not just to your firm, but to all the shareholders, right?

And then the final thing is did we help that company get from point A to point B in a way that was unique, right? And I think that’s the way that we assess did we do a good job. The founders decide if they want to be references or not.

So I think in the world we live in, there’s a lot of marketing. Everybody’s always putting up like this was a huge success, that was a huge success. But ultimately, you know as a person, if you accomplish what you set out to do.

And failure is celebrated in Silicon Valley. You learn a lot from failure. One of my earlier investments was a company called Clout.

It was not a failure by any means. We made money on it. We didn’t lose money.

But as a small anecdote, when I invested in Clout, I was young in my venture careers about 15 years ago. One of the first boards I took on and I look around and the people on the board were folks like Bing Gordon, who had been a legendary developer at Electronic Arts of some of the most popular video games in the world. He was a board member. John Doerr used to come to board meetings.

Omid Kordestani would come, who basically helped build Google and Netscape. And being in a board room with these people made me realize what it means to be a good board member. How to add value, what to say, what not to say, how to follow up in board meetings.

And then if you look at that team, members of that team went on to join Pinterest, members of that team went on to join other companies. The most famous, who I’m still close to, is Emil Michael, who went on to be COO of Uber. We ended up investing in Uber with Emil’s sponsorship.

Emil today is now the Undersecretary of Research and Development for the Department of Defense and has one of the most important jobs in Washington of any Silicon Valley person that’s moved over. So it’s really the people that you get to know in these companies. And the PayPal mafia has a great story of this.

I heard a recent anecdote where I think the combined market cap of the companies that the PayPal mafia has created is now well over $10 trillion. But what’s interesting is many of them, if you look at PayPal itself, when they were all there, it wasn’t a gargantuan, it wasn’t a $10 billion outcome. And so I think that’s why I don’t say you just have to look at $10 billion success, binary, under $10 billion not.

I don’t think you could look at life that mechanically. And the real question is, are you able to change the world for the better, like with a product or service or a business model? I look at companies that I miss that I regret.

One very high on my list is DoorDash. Tony, the co-founder and CEO of DoorDash, was a few years below me at undergrad in the business school and someone who I just admire so much. My own life has changed because of DoorDash.

Because of that delivery of not just restaurants now, but grocery stores and lots of other services, it has just caused convenience to come to our doorstep in a way that gives me more time with my kids, with my wife, with my parents, which is amazing.

Siddhartha Ahluwalia 33:09
So why did you miss DoorDash?

Somesh Dash 33:11
This is a good story. So we went in and spent some time with DoorDash and one of the things that we got wrong, we went and spent some time with Tony. I actually had a lot of confidence in Tony, that part I never had any issue with.

But the reason we missed it was, and I take responsibility, when we looked at it, I think it was the summer of 2017 or 18, at that time they were launching in cities and the economics were not great. There were negative gross margins, there were not too many large chains, there were mostly mom and pop stores. So we didn’t have any data that said that a cheesecake factory or a large chain or McDonald’s will someday come on DoorDash.

They didn’t have that data. But what we underestimated, I think more than anything, was just how great the driver experience was on DoorDash and just how much training and data they were using. That was what was under the hood, that we kind of underestimated.

When we looked at the financials, we got a little scared with the burn, the capex and the negative margins. And we made a very rational decision, but it was the wrong decision. And of course, no one would have predicted a pandemic was coming in 2020 and that would have changed the trajectory forever.

But DoorDash changed $100 billion to our public company, right? In a category that most people, when I looked at it, most people said, the TAM for restaurant delivery is $20 billion max, right? They were all wrong.

He expanded the category, he expanded the use cases, he changed user behavior. Very few consumer companies have been able to do that.

Siddhartha Ahluwalia 34:38
So when you are evaluating an investment, you talked about what investment success means to you. What does matter finally when you make a decision on yes or no?

Somesh Dash 34:49
See for us, we look at about a thousand a year. We seriously diligence and do work on 200. And we only as a firm do 12 to 14.

Each of us individual partners is one to two, right? So that’s how selective we are. I think the biggest thing we think about is not just, there’s an old hockey analogy, skate to where the puck is going to be versus where it is.

It’s not just where the puck is going to be. I think a good investor looks at the near future and says, what are you going to do next? But I think a great investor harnesses those first two things, but also has a thesis on where does this all go in five to 10 years?

And where can I be helpful and supportive and unlock some of the value here? So for us, we kind of go around the table. This is a little bit how our partnership works and say on a scale of one to five, we actually talk about this a lot.

If you aren’t a five out of five, then we shouldn’t go forward. Meaning you have that deep conviction.

Siddhartha Ahluwalia 35:50
What do you mean by that?

Somesh Dash 35:51
So like it’s a subjective measure, but a lot of what we look at is team, product, market size and growth, obviously valuation of the deal, the opportunity for upside returns. So for us, upside means like, does it have even a small probability of being a 10X, right? Can you make a case?

And that case is quantitative, but it’s 90% qualitative. This is what a Jyoti Bansal can do at an AppDynamics if it works. He could build from application performance management to operations management.

He could expand the TAM. He could go up markets in the enterprise. That’s the case we made.

That all happened and ended up being an even bigger outcome than we had imagined. We didn’t think when we backed CrowdStrike, our entry price was $3 billion in the big round that we did. We co-led that round.

We didn’t think it would be $130, $140 billion to our company within a decade. It was hard to imagine where the Falcon platform would be, but we deeply believed in George and we believe that this is one of the best companies that we would have a chance to participate in. So I think that’s a lot of what we look for is conviction.

At its core, it’s conviction and the person who leads it has to have conviction. The partnership has to have conviction. We can still make an investment if one or two people are not fully there.

It’s majority, not absolute. But I think the most important thing we are testing ourselves for is our conviction in the founder’s vision. And what we usually want the founders to tell us is not just look backwards.

It’s like, what do you want to build from this point on and why? Why do you want to do that? Great founders, their brains are working 24-7.

They’re constantly reiterating and taking input from customers, from product testing, from the market itself, from competitors about what are the ways to win long term. There’s a great funny story where the iconic founder, Jim Clark, was at Stanford University and he was asked a question. And they said, how do you build a winning culture?

And he said, win. Which I think kind of describes it better than anything. You can talk about a lot of this stuff, but the best founders are people who understand that you can have the best smoothies and dry cleaning in the world.

If you don’t win as a company, it doesn’t matter. You have to win as a company and you have to succeed by delighting your customers, creating pathways for your employees. That’s what gets us excited.

A lot of our team today is a mix of operators and career investors. And I think what gets us all excited is when you see a business like a Perplexity or Glean come in, or in a bridge. A short story on a bridge, when I met Shiv, I have a lot of family, I’m Indian in the US, who are doctors.

It’s like the old phrase, you have to be either an engineer or a doctor. Venture capital was not in that list. Maybe now it’s in the top 10, it’s still not top two or three.

But in a bridge’s case, I do have family members who are physicians. And one of the things I would always notice is a lot of their time actually was spent when they weren’t with patients, writing the notes, reading the notes, filing the medical bill to the insurance company for reimbursement, figuring out the code for it. Is it hypertension?

Is it diabetes? And that administrative part of it became a larger percentage of their work. And most doctors, like most professions, why do they get into medicine?

For service. Why do we get into venture capital? Serve the founder.

So the more you take them away, compensation doesn’t matter as much as if you take them away from patients and clinical work, they’re not going to be as happy. A bridge, Shiv Rao, founder, another Indian, basically said, hey, I’m a cardiologist, I practice in Pittsburgh, this is the tool I want. And he tells a story, his own father got to a point where he retired early because he said, it’s this stuff that’s making me retire early, the note-taking by hand, it’s tiring.

It’s not what you want to do. Perfect use case for AI. So ambient AI comes, scribing comes.

Now a doctor says, hey, Siddharth, would you mind if I record this conversation? Those conversations now have an accuracy rate that’s getting close to 100%. And what’s amazing about that is not only does it record the conversation, it creates hyperlinks that basically give the doctor the metadata.

Siddhartha is showing some signs of potential early onset type 2 diabetes. Siddhartha is showing some signs of hypertension. This is what you should build, the medical insurance company.

This is the prescription you should call to the local pharmacy. So it becomes a smart transcript. And the medical system in the United States, different than India, has a lot of unnecessary workflow.

This is actually streamlining that. And one doctor said, thank you for letting me have dinner with my kids more because you took that part of my job out and automated it using AI. When he shared that with our LPs at our last AGM, you could see around the room the recognition that this is something that makes sense.

Siddhartha Ahluwalia 40:29
So essentially, what I’m hearing from you is that these companies are essentially changing lives at the end of the day. And inherently, the value is getting created out of that.

Somesh Dash 40:41
Yeah. I think the big thing I’m excited by, Siddhartha, in India, in the US, in AI, is certainly there’s going to be B2B companies that are going to do very well. We’re going to see a whole re-architecture of the enterprise stack.

I’m convinced of it. I think many of the systems of traditional mainframe computers that are still percolating in the ecosystem or ERP systems that are monolithic and legacy and on-prem, they’re still there. If you look at some of the way banks work or government agencies, they’re still using old software.

A lot of that’s going to get turned upside its head. That is there for sure. But I think beyond that, if you look at health care, you look at education, you look at defense, you look at retail, these verticals, that’s where startups have a big opportunity.

If you get down to it, what we’re seeing right now at OpenAI and Anthropic, Cohere, and some of the other large LLMs is innovation definitely on the compute side and the model side with GPT-5 coming out. But look at what they’ve also done on infrastructure layer horizontal applications, Cloud Code being a good example of this. Code generation, verdict is out.

It could be that a cursor becomes the dominant player in the space, but it could also be that one of the dominant players is Cloud Code. We saw this a bit with the public cloud. There were some early companies that are trying to build their own versions of what the public cloud was, but ultimately you look at market share, you see that it’s AWS, it’s Azure, it’s GCP, and then a few smaller clouds.

Same thing I think we see happening in some of the core infrastructure AI use cases for model layer stuff. But if you look within that, I think what you see in healthcare, for example, the hyperscalers are going to be your partners. The reality is a lot of their customers are looking for these solutions, and so you see more and more likelihood of a Microsoft or a Google or an Amazon partnering with certain education startups, healthcare startups in the US.

So I’m actually very bullish more on the vertical AI application layer. I was very bullish on the application layer, but now I would say that I think the vertical AI application layer is where the real opportunity lies. And these are also, look, heavily regulated industries, require tons of training data, require fine tuning on the model, inference on the fly.

These are all things that I think startups are better equipped to solve than like the traditional large computing companies. And so they’re all going to be still using NVIDIA chips and CUDA, like all the usual stuff’s going to go in there. But I think that’s where you can, I’m pretty sure we’re going to see 5 to 10 billion dollar ARR companies in healthcare, education, defense, and retail in the next 10 to 15 years that are not going to be head-on competing with the same companies that are competing in code generation.

Siddhartha Ahluwalia 43:21
So one question there is, what’s the revenue that you are entering? Let’s say you can take example of a bridge, when you entered a bridge.

Somesh Dash 43:31
A bridge was January 2024. It’s funny how much has happened. I still remember certain things.

I believe when we invested, the company was only at 3 million of ARR. Yeah, it was early. Now I think they had signed a couple of large contracts.

Even though those weren’t revenue yet or even deployed to the providers, the doctors, those were still people we could speak with to understand their evaluation process. And so Kaiser being one of those amazing companies that became a customer. I’m just so proud to see now some of the largest health systems in the world have become customers.

Mostly United States, but now they’re seeing some of the tentacles internationally. I think what’s also interesting when you think about medicine, one of the things I really like about AI is that what’s the number one thing that people are using ChatGPT for in the US? Health questions, therapy.

Our young people are using ChatGPT in this country. We all use Google and Yahoo. And they’re curious about existential questions, philosophy, ethics, health, mental health, history.

So in the way someone asked me, what are some education companies you’re looking at? I’m like, every one of these companies is an education company. I’m learning from perplexity.

I’m learning from anthropic. I’m learning from ChatGPT. And all of them are making, I think, they’re finding a way to get us closer to the truth.

The media industry is proliferated. It’s why I love your podcast. I like podcasts.

It’s one of the last mediums where you could actually hear from the horse’s mouth their perspective without it being completely convoluted. A lot of television has evolved in India and the US to be more talking heads. A lot of print media has changed a little bit in what their business models enable them to say or do or write or not but it’s actually the future of media, I think, is going to be a combination of podcasts, sub-stacks, creators being able to be fully, fully honest and vulnerable.

I think there’s less, 10 years from now, you’re going to see a lot more stuff that’s popular, that’s more emotional. In some ways, Indian media has always had that. If you look at 70s, 80s movies in Bollywood, it was as melodramatic as you can imagine.

Those are my favorite ones still. They’re beautiful movies. The highs, the lows are there.

I think you’re going to see more media that’s going to be not just how great is everything going and bombastic caps lock stuff. Even Sam Altman writes only in lowercase now. I think you’re going to see lo-fi almost in the way that media itself evolves.

I think what I’m excited by, actually in India, one thing I’m very excited by is if you think about the stories that are told in Indian media, our spirituality, our faith, our history, our mythology, so many of those stories have not been told in a modern form. You have these amazing directors in India who are attempting to do these at the largest budget. Actually, if you see how Hollywood and soon Bollywood is going to evolve, tomorrow, a 22-year-old who knows the native AI skills, who can edit, is going to be able to tell those stories in a form that’s extremely entertaining.

I read recently, Ahriman was here, the idea of using AI with symphonic instruments and musicians who pass away, these kinds of creative ideas, right now, consumer feels like it’s a little bit slower, but these are cyclical. It felt slow and then this thing called iPhone came out and then boom, there was a boom in consumer. Then the early days of AI maybe feels like enterprises where things are, but I think there’s going to be a whole new generation of consumer companies like Perplexity emerging.

Siddhartha Ahluwalia 46:58
The next thread that I want to talk about you is, how are you thinking about the AI investment landscape and did you have a chance to invest in OpenAI and Anthropic?

Somesh Dash 47:08
Well, that’s a long story. We’ve had a chance to get to know those teams over the years. In fact, when those companies started, we had a chance to spend some time with them.

The original structure of OpenAI was such that I think it would have been difficult for us given the cap on the profits as well as the nonprofit structure. Obviously, things have evolved. We are investors in Perplexity and obviously, that’s been our bet in that space in consumer.

Anthropic is a company we admire a lot. We also very early had met them before they had done any of the stuff around cloud code or really built out the infrastructure layer and figured out what they want to do. People had just left OpenAI when we met them, so it was still early days.

I think the thing that’s impressive about both companies is the speed of innovation and the market expansion that they keep going after. Just when you think that they’re just focusing on building a slightly better model, they launch an application that’s killer, whether it’s ChatGPT or cloud code. Just when you think they’re not going to verticalize, you hear that they’re actually focusing on defense, they’re focusing on government, they’re focusing on healthcare, retail, insurance.

Just when you think they’re a US company, you realize that they’re actually doing a ton in India and other markets like that. I’m an admirer of those companies. I think they’re actually partners.

Anthropic partners a lot with many of our companies, including Perplexity. Many of our companies are building on some of the latest models that are coming out of these. I think these are remarkable companies.

If I think about them now, the scale they’re at, if the rumors are true and Anthropic is raising around $150 billion or OpenAI $500 billion, those are almost quasi-public investments. To call them startups is not totally accurate now. The CapEx looks like the GDP spent in most countries.

They’re not really startups. They’re almost quasi-public companies. They could go public tomorrow based on the financials that we’re seeing.

I think if I look at the landscape, so much has happened in such a small amount of time. ChatGPT itself launched less than three years ago. You think about in this first three years, what’s happened feels like what happened the first six to seven years of the internet revolution.

It’s almost like double the amount of stuff has happened in half the time. That’s what happens with each cycle. The internet felt a lot crazier than the semiconductor industry or the software boom of the 80s.

The main thing that I’d say is everybody’s learning. I’ll make an analogy to the web. Are groceries a good idea to be delivered? Yes. Webvan was the generation 1.0 company that happened. It didn’t work.

But if you hear what Mike Moritz at Sequoia or Bill Gurley at Benchmark said about it, they would do it again because they learned a lot about it. They met an amazing team. They took a risk.

I never regret if you find a big market with passionate founders and you make the calculated assessment that this is a company that we want to be involved in. The venture capital business is a power law business. I still think, I think I told you last time, Sebastian Malaby’s book, The Power Law, best describes that dynamics of how asymmetric this business is.

So anytime you see something that has the chance of being really big, you want to find a way to do it versus not do it if all things line up. My own assessment is that right now you see a lot of enthusiasm over AI. It’s been only one direction up and to the right.

Very similar to how the internet was from the time of the Netscape IPO to the downturn in 2001. What is inevitable though, if you look at that six-year period between the Netscape IPO and the downturn and you say everything’s happening at twice the speed, we’re probably pretty close to being due for an AI correction.

Siddhartha Ahluwalia 50:57
You think that we are closer to an AI correction?

Somesh Dash 50:59
It’ll happen. It’ll happen. You’ll start seeing is that a lot of these companies are going to start having the media cycle change.

Oh my God, they raised at such a high price and now, you know, we’re already starting to see it. There’s some companies that are sort of missing their revenue targets. And the media said, oh, they’re about to raise this amount of money.

And then suddenly they disclose the revenues are much lower. And then someone’s pulling the term sheets. If the stock market goes, if we go through a more broad domestic US or broader global recession, if we see interest rates start fluctuating, if we see tariffs start going into effect that are much more punitive, these macro things will trickle down first in the public markets.

This is what always happens. The public markets will correct first. Public markets have had a great run since the inauguration day.

Then you’ll see the late stage private. And that’s going to be a lot of these AI companies because a lot of them are raising, you know, a billion dollar prices from not venture capital firms, but sovereign wealth funds from family offices, from people that are like, this feels like a guaranteed way to make a double or triple. It’s not, right?

And then the last thing you’re going to see is it’ll trickle down at the end towards the venture stage. And that’s typically, you know, a year or two after it begins in the public market. So there’s still a ways to go in my opinion.

But I think the most important thing is if you believe in cyclicality, which is the most Indian spiritual concept of all, everything is cyclical, there is no way this is going to continue forever. I think every time you have a crisis, the one thing you get with experience and age is it just hurts a little less because you’re just, the first time it happened to me was when I was 22. I was coming out of college and I said, everything is up and to the right and all these companies like pets.com and, you know, Webvan are all going to be successful and every stock I buy is going to be up and it all came crashing down. And that was bad. 2002 to 2005 was dead time in Silicon Valley. It was, it scarred my cohort of young college grads where people were afraid of taking risks.

I think I talked to some friends from 2005 to 2007, most of us went to like safer places.

Siddhartha Ahluwalia 52:56
Like consulting?

Somesh Dash 52:56
Yeah. Banking, consulting, you know, like, you know, larger tech companies because people were scared after what they saw happen. When you’re young, these things are formative.

So we have a very young group of people in AI. Some of them haven’t gone to college, by the way, and they’re already starting companies. I heard of a company today started by a 17 year old who’s not going to college.

That 17 year old potentially is going to be someone who can be resilient. But the higher chances, if things get really tough, they’re going to start questioning if they’re going to keep down this path or not. So I think we’re going to see that.

That’s where it pays to remember the big picture. This is cyclical. You’re going to see a lot of these companies have down rounds, flat rounds, good talent leaving, founders showing bad behavior.

We saw a little bit of this recently where some founders are selling to companies themselves and their best people and leaving thxe rest of the people outside. That’s not good behavior. That’s not a startup mentality.

So I think it’s going to be very much a correction. And actually, the really interesting thing with your question is, if you look at Google, my friends who run the Acquired podcast have an amazing three hour episode on Google I was listening to recently. And it reminded me, I had a chance to see Google in the early days and had a lot of friends who joined early from Berkeley.

Before Google, there was 10 venture funded startups that had actually broken out, whether it was Lycos, Ask Jeeves, Alta Vista, Inktomi, Excite, which IVP and Kleiner were investors in. And these were companies that went public in the 90s. And everybody thought, like the Acquired podcast, Yahoo, human curated, you know, search experiences are the way to go, because the web was so small.

What Google understood was the web was actually growing. And that they created a whole new business model, right? With PageRank, which eventually became AdSense and AdWords, right?

Similarly, if you look at what’s going to happen here, I am pretty convinced that a lot of the Gen 1 Dodo companies won’t get there. They won’t become the 10 billion dollar plus outcomes you’re saying. They won’t be public companies.

But those people are going to learn the lessons you need to start different companies, next companies. And so actually, what generally has happened in tech history is the Gen 2 Dodo companies build on the foundation of the Gen 1 Dodo companies. Like Stripe learned a lot by having a PayPal before it, right?

Like you could see that foundation there. And I think for that reason, I think being patiently impatient, it’s a little oxymoronic. You need to play, you need to be in the markets looking at, we continue to look at a thousand companies a year, and we are going to continue doing 12 to 14.

We’re never going to go crazy and do a thousand companies. We’re never going to do zero. But I think what we also know is that which cohort in which year matters.

The 2021 cohort, the entry prices for every venture capitalist almost by definition was overinflated, right? I think the 2025 cohort is going to have some of that too. Because you’re seeing a lot of the early markups ratchet up people’s enthusiasm, then people start yoloing their way into all kinds of companies.

And ultimately, it’s only if you look at the power law, it’s only a handful of companies in the entire industry that drive returns. And so that’s why I think you see all this enthusiasm for certain names. Some will make it, some will not.

The other part that’s going to be interesting is dilution, right? Because if you aren’t being judicious about where you spend money, and by the way, a lot of these modeling companies are very CapEx intensive. And if you keep burning this kind of money using equity and not debt, and you keep throwing options at people and not managing your workforce, you’re ratcheting up, you know, sustainably 10-15% double digit dilution a year without financing.

That’s pretty dangerous and scary.

Siddhartha Ahluwalia 56:30
So what you’re saying is there’s an imminent bubble burst that’s going to happen in AI?

Somesh Dash 56:38
I think there’s, you know, I think what we’re going to see is the public markets have volatility, the VIX has already been at a high. I think what we’re going to see is we’re seeing good results so far. If you look at the print from the last two weeks of Microsoft and Google and Meta, you see a lot of enthusiasm about their CapEx investments and their early AI progress, right?

But I think what you’re going to also see is a lot of the later stage companies, native AI, take longer to find product market fit. To Bipple’s point, this stuff, you know, you have to refine it every six months. A lot of holding on to talent is going to be tough, right?

Siddhartha Ahluwalia 57:12
It’s a hundred million dollar engineers.

Somesh Dash 57:14
Right, there you go. So like that makes sense if you’re Google and Microsoft. But if you’re a startup, how are you going to compete with that?

Like in all my career, Google has been the talent magnet because of what they can pay and what they offer. Some startups say we’re just not going to play that way. We’re going to play a different way.

Some who’ve gone down that path have failed.

Siddhartha Ahluwalia 57:31
I think that’s where the India-US corridor, at least for our companies, makes sense because they have the best of engineers in India and Meta yet has not paid anybody in India a hundred million dollars.

Somesh Dash 57:42
No, yeah, but it may happen soon. Given the talent in India, I think it’ll happen soon. So I do think there will be a correction.

There will be inevitably a lot of headlines. I can just see it right now saying AI bubble burst, startups are panicking, venture capital is slowing down, fundraising difficult. That is the time to invest.

The golden principles of investing is always you want to buy low and sell high. People seem to, the human psychology of those inverse, which is you buy high and sell low, right? And so I think that’s going to be the real challenge is who’s got a fund ready to go when valuations drop?

And when people are scared, do you have the courage to move forward as an investor or as an entrepreneur?

Siddhartha Ahluwalia 58:26
But I assume you at IVP have been funding like 12 companies a year for the last 20 years? Sure.

Somesh Dash 58:32
I think it was 8 to 10 when I started 20 years ago. Today it’s 12 to 14. We’ve kept that basically constant.

Siddhartha Ahluwalia 58:39
So you are not like deploying in more companies when there’s a bear market?

Somesh Dash 58:43
No. Although if you look at it, the entry prices that we see are substantially lower like in the bear market. Now the challenging thing is not every entrepreneur wants to raise in a bear market, right?

That’s the thing that, so academically, if you had the perfect crystal ball as an investor, this is why public market investing is actually more effective for this. You could force every investor to order every company to raise at a really low entry price. But the really smart ones who raised in 2021, they didn’t have to raise in 2022, 2023, 2024.

Now, one thing that’s happened though is the native AI companies, they all need money to grow. They didn’t have the chance to raise in 2021 because many of them weren’t around and weren’t building stuff. So now they had to raise and that’s where all the money’s gone.

And even those who didn’t raise, I have a few that I’ve been following, many of them have to re-innovate. So yeah, you could be a $300, $400 million SaaS company growing 30%, 40%. But if you aren’t building things that are truly mattering to customers and you haven’t harnessed some of the AI trends, then it’s going to be difficult.

Siddhartha Ahluwalia 59:46
And at IVP, right? So you would have deployed the same, I believe, amount like a billion dollars in 2021 vintage also?

Somesh Dash 59:54
We deploy about, call it half a billion a year.

Siddhartha Ahluwalia 59:58
Okay. Right. So what do you call that, the worst vintage that you would have deployed in?

Somesh Dash 60:04
No, I think actually it’s funny, because again, we have a power law business. I can’t even answer that now because it’s only been four years. And some of those were series A, series B, series C stage companies.

The reality is there were some in there that were the right companies, but the price was probably 50, 70, 100% higher than it would be in normal markets. But in some ways it doesn’t matter because the earlier you go, if you paid 200 versus 150 for a series B that ends up being a $5 billion outcome, it won’t matter that much. For the later stage companies, it definitely matters more because your return horizons, like if you do a series D, it’s more of a three to five X.

So then it does matter if you overpaid by double, you end up with a one and a half instead of a three X. So it depends on stage. But in 2021, we also like, I remember I got involved in a company in hypertension called Hello Heart, right?

That’s an Israeli company. It’s been amazing to see their growth. When we invested, they were at 10 million of ARR.

They’re on the cusp of breaking through 100, you know? And they’ve actually built tools to help employers and governments. Look at the way for people to think about lifestyle and heart disease and hypertension that they’re doing, even even using AI. They have started to look at how can it be predictive about will you or someone in your family have a heart attack? What can you do to prevent it? And it’s been kind of amazing.

That was a 2021 company. So in some ways it’s not perfect. There’s probably correlation with like higher prices paid for sure in that year.

I certainly thought in 2023 it was a time where we had raised our fund. We had capital. We were excited thematically about AI.

We’d done a ton of work. We did an AI summit in Napa and both Aravinds from Glean were there. Shiv was there from a bridge.

Tuhan from base 10. All of them kind of assembled. And I think that fall I remember very fondly because I think we took risk into the earlier rounds of some of these breakout AI stories.

And that cohort of 2023 has done very well already.
Obviously it’s too early to know where they will all end up.

Siddhartha Ahluwalia 1:02:04
But I believe that just in that cohort even Perplexity would today be the entire size of the fund.

Somesh Dash 1:02:10
Yeah. At least on paper. We’re really enthusiastic about Perplexity.

They have so much progress to go. And it’s early days. If you think about Google today, this is a business that’s approaching basically its 30th year.

It’s not a 100 year old company. You know Perplexity is really in kind of year three or four since they got going in earnest. So if you think about what AI is going to look like and what Perplexity is going to build, we’re still in like, literally if you take a baseball analogy, the early innings.

Siddhartha Ahluwalia 1:02:42
But these are two contradictory things that you are saying at the same time. Where you are saying the bubble is going to burst and you are saying there are companies who will keep on growing even beyond 100 billion.

Somesh Dash 1:02:54
Absolutely. Because both can be true. Bubble bursting doesn’t mean every company is going to go under.

And remember, it’s all about access and company selection. So in a theoretical construct, if you said, I can only make one investment, concentrate my fund in that one investment, and have that be the 100 billion dollar company, it doesn’t really matter if the market’s up or down. And that’s a little bit of the theory of pure early stage investing.

I think if you’re a multi-stage investor, like most of the funds we’re talking about, you have to think about which sectors do you want to get in at which time. You have to think about how much of your capital you want to put into growth versus venture. All of these are decisions you have to make.

But if I look at the markets, I think the difference we’re seeing is we’re not seeing as many acquisitions. We’re starting to see some activity pick up in the first six months. I’m pretty bullish it’s going to continue in the US.

It was pretty slow in the last administration for reasons that you would guess. I think what we’re going to see more of is acquisitions by private equity firms and other startups, mergers, and of course, strategics, being a form of liquidity versus just the IPO. And I think you see continuity vehicles coming out as ways to provide liquidity to LPs and GPs that have been in companies for a long time.

But I think both things can be true. Siddhartha I actually think that for me, I’m not worried about when prices are too high, you still stay in the market and you don’t get paralyzed. There’s firms when the internet started, they said, it’s too crazy, we’re not going to touch it.

They all regretted it afterwards. And then there were firms that basically said, we’re going to put the whole fund in 2021, certain hedge funds who I won’t name, put like 70%, 80% of their fund at the top of the market. I give our finance team a lot of credit.

Every Monday they said, I know there’s a temptation to want to put more money in, but we told our LPs, we have to invest over a three-year time horizon. We’re on that time horizon, we don’t want to go faster. So we’ve been pretty judicious with how we do that.

Siddhartha Ahluwalia 1:04:52
And what do you think makes IVP not stick for five decades? Because the team has completely changed.

Somesh Dash 1:05:01
IVP and I were in the same cohort. I was November 1979, I think the firm’s fund was May 1980. So I was not there for the first couple of decades, but we’ve set the partnership up to be a true partnership.

There is no CEO of IVP, there’s no managing partner, there’s no super management company. It’s a very simple structure, which is in every fund, one partner, one vote. It’s what a true partnership means.

Even if you’re young and starting your career or you’re old and tenured, you have the same seat at the same table on to decide on not just deals, but operating decisions for the whole partnership.

Siddhartha Ahluwalia 1:05:39
And how many partners are there?

Somesh Dash 1:05:40
Right now there’s seven. And so there’s seven of us that meet every Monday, five of us in the Bay Area, two of my partners are in London, in our London office. But we get together.

I think the other thing that’s really helped is we spend a lot of time with each other. We spend a lot of time talking about the organization, developing young talent. Most of us kind of grew up in the firm.

We also find some of our best people we bring from outside worked at portfolio companies. So we really get to work with them. You have to have trust.

We had a conversation recently about an individual. And it was a fascinating conversation because this is an individual who was looking for a particular role. And we decided to bring that person on into more of a part-time role versus a full-time role because nobody had really worked as closely with that individual directly.

We all had met this individual in different constructs, but no one had actually directly worked with this person at a portfolio company or at an investment firm. And so for us, the biggest thing is familiarity and trust. It’s a small firm.

In that sense, we want to have big impact with a small number of people. But I think what we are probably most proud of since you and I last chatted, we built out our talent team. So now we have four people on our talent team who do full-time recruiting.

And it’s not just recruiting, it’s comp benchmarking, it’s structuring RSUs, it’s thinking through how do you actually manage as a founder stock-based compensation and dilution every year. All of that is a science. Davey Nichols runs it for us.

He was number two, early employee of Robinhood on the Google people team. We have a marketing team. Blair runs it from Sequoia.

She was at Sequoia for nine years. She’s created programs to help each of our founders and their executive teams in certain functional areas. So it’s much more education and mentorship.

It’s not just pure investing. I think what’s really fun for us is you can see how much interaction is happening between board meetings. It’s not just you show up at the board meeting and that’s your way of engaging.

The board meeting really is just one or two strategic things that you focus on as an individual representative of the firm. But everything that happens between a board meeting is rich with interaction and data. We love being active investors.

We’re not big believers that being passive investors in venture is a good model because you really want the data and you want the relationship as a way to figure out how can you help and what’s the right time to double down or not.

Siddhartha Ahluwalia 1:07:57
So bringing on to my next area, does Perplexity make IVP more bullish on the India-US corridor?

Somesh Dash 1:08:06
Absolutely. Now to be fair, it’s not that we were not bullish before. As I remind people, we were investors in Jyoti’s company AppDynamics.

Jyoti started two companies afterwards, Harness and Traceable. For me, he’s an iconic Indian entrepreneur, humble roots, went to IIT, came out here and has been probably in some ways almost like the Andy Bechtolsheim or Steve Jobs equivalent in infrastructure software and what he’s done with three companies in the last decade. The Rubrik team I’m really proud to work with.

Glean, of course, Arvind Jain came from Rubrik. The Glean’s been an amazing success story in the enterprise. But I think what’s cool now is that a founder who was born in Chennai can come to Silicon Valley and build something to compete with the biggest of the bigs.

And I think that part of consumer markets or healthcare markets with Shibrao being Indian-born founders or Indian-educated founders is also why I’m so bullish. And I think what gives me pride is that fundamentally they understand the greatness of the United States. The United States gives you an ecosystem that’s hard to replicate anywhere else.

We’re sitting right here. People have tried for decades to completely recreate Silicon Valley in different parts of the world. There’s a magic about this place.

Every time you feel like it’s falling a little bit, it felt like that a little bit in 2021, 2022, ChatGPT’s released a new industry and platform comes, suddenly people are rushing back. There’s an energy that you can feel in San Francisco and in the Bay Area more broadly. Same thing with the Indian ecosystem.

I think there’s points where people get a little bit bearish and skittish and then suddenly you see these unbelievable entrepreneurs starting companies going public on the BSE and you realize there’s so much opportunity there. I think the thing that I’m most happy about though is that the cross-pollination is there today. The best venture firms in the United States don’t look at India saying they won’t touch.

They’re harnessing those trends. Some of our friends in the venture industry have offices in India. Even if they don’t, they’re making Indian investments.

And the best Indian entrepreneurs, they’re no longer limited by just saying, hey, who are the best local markets? They want local folks that they can access, but they want global platforms. And I think that’s what’s so cool is you can start a company today in Haryana and get a guy sitting in Menlo Park to be your board member.

Siddhartha Ahluwalia 1:10:22
But are you going to do any like India-based investments like Zomato or Swiggy?

Somesh Dash 1:10:27
That’s the plan. We’re looking, we’re continuing to look at a lot of them. Our key is looking for Indian companies really trying to expand globally.

And at that stage, we’re the ones that we want to, those are the ones we want to back. So our model, we have an office in London, that’s our UK headquarters, our European headquarters. Our model is looking for the best innovation companies, technology focused around the world.

So whether they’re in India, Australia, we backed an Australian company recently. We backed a number of companies in Asia. We have no, and if you look at the headcount of some of our companies, more than half are actually in India.

And it’s not back office. It’s a lot of the innovation, the founders, they live in India. So for me, you know how bullish I am about the ecosystem.

I’m frequenting India all the time. I’m working on lots of different organizations that are trying to bring the communities of Silicon Valley and, you know, India closer together. But also geopolitically, I just think this is a really important time for the US and India to double down on their relationship, you know, in spite of what we’re seeing in the last two weeks.

Siddhartha Ahluwalia 1:11:26
Somesh, I would love to have you on one more because I could only cover like 30% of what I prepared for the podcast, but this conversation is so amazing. Like we touched on different topics. We covered India-US corridor.

We covered, you know, what makes Sigma and Perplexity what they are today. And what makes IVP a 45-year-old institution?

Somesh Dash 1:11:47
Yeah.
Well, we don’t take that for granted. I think one of the things that we want to do is harness the best parts of our heritage and history. I’m very grateful that in 2021, we had partners who had seen some of the boom cycles of the past, who asked us to approach certain things with caution to, you know, we had a companies go public like Coinbase, and we were able to distribute some of that to our LPs, which we’re very grateful for.

They’re very grateful for I’m sure after, you know, liquidity dried up for a couple of years. But we also want to keep innovating. Like one of the things we always like to talk about is, hey, if we were starting the firm today, what would we keep?

What would we do differently? We’re constantly iterating. I do a lot of personal, you know, advising, a little bit of personal investing in our alumni who start new funds, Fund 1, Fund 2, Fund 3, Fund 4.

And I like doing it because I learn a lot. You learn a lot from the new managers who are exploring. I’m really more bullish.

I know a lot of people are like, there’s so many venture firms, this is horrible, returns are going to go away. I’m actually, I think it’s the opposite. I think the markets are efficient enough where everybody’s got a specialization and a niche, and you get the right people on the right cap tables.

That’s why management teams work. How many companies have been one person who’s taken it public? No.

Maybe in AI it’s going to happen. But at least so far, what we’ve seen is people with different backgrounds and different skills coming together. Cap tables are the same way.

I think the most important thing is just to be self-aware about what are the firm’s strengths and where are the weaknesses that you want to actually improve. So a lot of our time is spent thinking about, okay, why did we lose this deal? We wanted to win this one.

What happened? Hey, we didn’t communicate enough with the engineering team. Hey, we didn’t spend enough time on the product roadmap.

We over-indexed on the financials. Like the DoorDash, understanding these things is important. And I give my partner, Cack, a lot of credit.

People come in with different workflows like QBRs we do to look through our pipeline and say, hey, why did we miss this? What did we learn from that? I mean, if you just assume you’re always right, you’re not going to do very well in venture.

In fact, by definition, you’re going to get things wrong more than right. But it’s getting things really right that matters once in a while. And can you find the ingredients of that that are actually applicable to other companies and then double down on that?

That’s the key thing that we try to spend a lot of time on. Some of the things we saw in Perplexity were familiar to us from our investments in Discord and Snap and Twitter. We had done consumer investing in Silicon Valley, but some of the things were very different.

And so we had to harness those trends together.

Siddhartha Ahluwalia 1:14:13
Thank you so much, Somesh. It’s been an amazing conversation.

Somesh Dash 1:14:16
Thank you. Thank you. I could keep doing this too.

Thank you, my friend.