After working at BCG for 2 years, Ishaan joined Sequoia India’s Analyst Program in 2011. He spent around three and a half years at Sequoia India. He then went to business school and joined Sequoia India back in 2016. In this podcast, Ishaan shares his experiences & learnings of investing in Consumer brands and Fintech Startups Watch all other episodes on The Neon Podcast – Neon Or view it on our YouTube Channel at The Neon Show – YouTube Notes – 00:42 – Joining Sequoia India’s Analyst Program 01:57 – Investing experiences over 9 years at Sequoia 03:34 – Culture at Sequoia India – “Singular focus on doing the right thing for all the stakeholders”. 04:45 – “We help the daring entrepreneurs build from Idea to IPO & beyond”. 06:23 – “While investing you never have the right or wrong answer”. 09:29 – Macro-trends driving Consumer Brands in India 11:05 – Financial Services in India are still unpenetrated 12:21 – Mamaearth – Being a digital-first personal care brand for their consumers 12:57 – Eruditus – Making Ivy league colleges more accessible 15:18 – Fintech Startups in India leveraging large digital footprint of their customers to serve them better 18:30 – Razorpay – Solving merchant payment issues with innovative solutions 20:34 – Scope & Future of Neobanks in India across various customer segments 28:37 – Challenges while investing from a large pool of amazing founders Read the full transcript here: Siddhartha 0:00 Hi, this is Siddhartha Ahluwalia. Welcome to the 100x Entrepreneur podcast. Today I have with me Ishaan Mittal from Sequoia Capital India. Welcome, Ishaan to the podcast. Ishaan 0:10 Thank you so much for having me. It is a pleasure to be here. Siddhartha 0:13 Ishaan, we would love to know about your journey. Ishaan 0:15 So I used to work at BCG, right out of college and having competed around two years at BCG, I got to know about this amazing analyst program that Sequoia runs through one of my seniors and I decided to apply for it. I was fortunate enough to be selected for it back in 2011. And that’s where the journey started. After that, I spent around three and a half years at Sequoia covering multiple sectors, working with many entrepreneurs. I then went to business school and then came back in 2016. Siddhartha 0:43 Ishaan, which are the companies you have been a part of Sequoia India deeply? Ishaan 0:48 Having spent nine years that list is quite long. It started with the Pratap snacks which was the first company that I got a chance to be involved with back in 2011. It’s an FMCG company based out of Indoor after that was SpineLabs, which has been a phenomenal success as a payments business, a market leader and a great investment for us. Apart from that, over time got exposed to businesses like Vinny cosmetics, which is a deodorant brand company. Brands called Fog more recently have been a part of our investments like Razorpay, MamaEarth or FINOVA capital and Five Star Finance which are NBFCc, so quite lucky to get a very overall exposure to as many sectors. Siddhartha 1:32 Nine years is a long time ago, what has made you stay here and what’s the most exciting thing that you look forward to each day? Ishaan 1:41 Yeah, it is a long time, many things, but most importantly, people. I have had the fortune to work with some amazing people at Sequoia. People at Sequoia are extremely nice, very supportive. But most importantly, everyone is extremely invested in ensuring that everyone at Sequoia succeeds. I think this is something that is culturally ingrained in Sequoia starting from the very top where Don, our founder did the same for Doug and Sir Michael Moritz, who then subsequently did the same for Shailendra, Mohit, GV, who then subsequently have been phenomenal teachers for people like me. Someone once told me that investing is an apprenticeship business. So I want to be at a place where the people I work with are spending time teaching me and I’ve been the beneficiary of amazing mentors throughout. So I want to continue learning from the best folks in the industry. To the second question as to what excites me, there’s just one thing which is the chance to meet amazing founders every day. It’s extremely energizing. Each of these founders is an expert in their sector in their area. I’m extremely fortunate that these people take out their valuable time to help us understand their businesses or their space. And every day I realize how little I know, and how much more there is in this world to learn. Siddhartha 3:09 What’s unique about the Sequoia India’ culture that you mentioned? Ishaan 3:13 Well, I’ve not been to many other investment firms. So I don’t know if it’s unique. But what is special is our singular focus on doing the right thing for all our stakeholders, namely, our founders, our limited partners, and the people who work at Sequoia. And it manifests in different ways. For our limited partners, it translates into being extremely performance-focused. That is the core of every decision we make. We have the fortune of working with limited partners, who are institutions who impact millions of lives across the world, such as endowment funds, hospitals, pension funds. So in some way, all our efforts, all the returns we generate our intern are helping them make millions of lives better. And it gives a sense of purpose to us. Secondly, for our founders, the way it manifests itself is that we are extremely founder-first. And if you spend a day at Sequoia, you will realize that founders are at the core of every action, every decision we take. And it reflects very well in our mission statement, which is we help the daring build legendary companies from idea to IPO and beyond. That’s our mission statement that is what drives us. And it’s also something we are really proud of, we want to be the 4 am call for our founders, they should feel that we are their partners, and be open to sharing the bad news and not just the good news with us. And that’s the reason why we are willing to go an extra mile for them and be a long term thinker for their businesses. And lastly, the unique thing about the culture is our focus towards doing the right thing for employees. I talked about that in the beginning, how everybody’s extremely invested in making sure all of us succeed. All of us get the right exposure we learn, and most of all, enjoy our lives. Siddhartha 5:17 You could have stayed back at Havard, you know, joined the US firm. What made you come back to Sequoia India? Ishaan 5:22 Well, it’s a two-fold answer, I think the first decision was to come back to India, I believe in the Indian opportunity. I believe that the next 30 years of our lives are going to be very, very different from the last 30 years and create very, very large opportunities, businesses, new sectors, and I want to be a part of that growth story. And coming back to Sequoia was an easy answer. I loved it so much in the beginning, for the three and a half years before. I didn’t have any other ideas. Siddhartha 5:56 What’re the most important things that you have learned working here? Ishaan 6:00 Learned many things. Maybe the most important of them is being open-minded. See, I’m an engineer by background, and the Indian education system teaches you to be right. You’re always gun for the right answer. That’s how you score marks. That’s what you are taught in maths and physics. But when you start doing investing, I think the biggest thing I have learned is that nothing is given. There’s no perfect right or wrong answer like in maths, it is instead complex chemistry of decisions you make on a daily basis. And there are many ingredients that impact the final answer. And it’s full of exceptions. In our business, we are more often wrong than right and it is extremely important to keep an open mind and be willing to change your mind when counter data and facts present itself. That has been the biggest learning and these facts and data points come from any directions. It could From a team member asking a question that I had never thought of before, it could be to a founder who presents a very different take, have a different perspective on a certain sector and how it’s evolving. It could be a customer reference call with somebody explaining how they use the product, which is very different from how I originally thought it would get used. So that has been my biggest learning, be open-minded. Siddhartha 7:23 And what are your other learnings? I would say key learnings that are part of you? Ishaan 7:27 The other big learning for me has been to always be long term focused. Every decision we take every question we ask, think about the long term and think about the 5-10 year implication of everything we do versus the immediate next quarter next year implication and it’s very easy to get caught in that because that is measurable. Right? You take a decision today in three months. There’s an implication of that next year financial, there’s an implication of that, but in this business, as partners with entrepreneurs, what matters is the long term, the five years and the 10 years because that’s the timescale we are looking at when we’re trying to create enduring companies along with our partner founders. Siddhartha 8:13 What are the sectors you look at Sequoia India currently? Ishaan 8:16 As Sequoia Capital India, we invest across a variety of sectors, including consumer, financial services, FinTech payments, education, enterprise software, and healthcare. And we would have more than 10 companies across each of these spaces. And given how India’s growing each of these sectors is growing very fast and are presenting opportunities to create very large businesses. Siddhartha 8:43 And what are the sectors you specifically look at? Ishaan 8:46 Within this, I focus on Consumer which includes FMCG brands, retail, consumer, internet, content, and giving. And the second space I look at is financial service that is NBFCs, FinTech, and payments for us. Siddhartha 9:07 And can you tell us more about the macros of each sector which excite you as an opportunity? Ishaan 9:12 So let me keep it as two large buckets. One is Consumer and one is financial services. In consumer, India is probably looking the best it has ever in this area, and it’s driven by a few macro trends. We now have 500 million-plus internet users. The data is at the cheapest, consumers are consuming it every day more and more, and Indian consumers on average are richer than they have ever been. This concoction together is presenting a phenomenal tailwind for many other sectors I mentioned in the space to create businesses and the nature of these businesses is also changing. To keep to pick an example, if you were creating an FMCG brand 7-8-9 years ago, the only way for you to do it was a traditional FMCG fashion. However, today, the way these brands reach their consumers, market to their consumers, or distribute to the consumers has completely changed. The micro marketing is a big trend, you are using platforms like Instagram, YouTube, as compared to only TV marketing, you are using all the e-commerce channels including your own website as compared to the general trade and modern trade that those are the only channels available. And this is creating a pretty interesting opportunity to disrupt the FMCG brands of yesterday and to create a very large company over the last next 10 to 20 years. Similarly in financial services, I think financial services in India are still a very under-penetrated space. People are consuming more. A lot of this is leading to people taking more loans of different types, whether that be housing loans or personal loans and again, as the medium of consumption is changing, and coming more online, it is presenting opportunities for people to serve these consumers in different ways, whether that be through digital, personal loans that be through credit cards, or that be through creating marketplaces for financial services. And similarly, the payment methods have changed completely. I think the number of options consumers have today to make payments is again, the highest has ever been, in addition to the credit card and debit card. We obviously have UPI, and there are many, many companies offering that we have “pay later” solutions and there are many companies coming up with different formats of that and that is giving rise to many payments businesses that are providing that infrastructure to their merchants. Siddhartha 11:50 Can you tell us about the consumer investments you have made since you came back to your growth role till now? Ishaan 11:56 Sure. In the last three, four years, we have invested in many consumer internet businesses. I think one of the most recent ones of that is MamaEarth, which is going after the thesis that I just mentioned being a digital-first personal care brand for the consumers. And the founder Varun comes from a very rich brand manager background and has taken a very different take to this market something we have not seen before. And we are very excited to partner with him. A few other investments Sequoia has made in the consumer internet space would be a business like Eruditus, which is an education business, which is focusing on this consumer to help them do higher education. But without taking the break and going to us for that, but there are other bringing those Ivy League tier-one us education brands, closer to the consumer, allowing them to upscale. Siddhartha 13:00 I know it cannot be templatized. But few of the things you can draw from your consumer investments, what are the qualities the founders had, which you can think more in common, where you are making the investment and the decisions that have proved right, based on that? Ishaan 13:18 Well, you said it right. It cannot be templatized. Every founder is different and special in different ways. But I think some of the common themes, which we have noticed, are an extreme passion for what they’re doing. And many times it’s coming from personal experience. And many times the business evolves over time, but the route of starting that business belongs to a very, very personal experience for these founders. I think the second is a very long term focus. Looking at the business, in terms of what it would look like 10 years 20 years from now, and focus Seeing your decisions in terms of people you hire products you launch, how fast you grow, which markets you go into, only based on what you want your business to be in the 10 and 20 years. And third, I think very, very regularly, the best founders who have created enduring organizations have shown extreme empathy. They are very empathetic to their people, they are very empathetic to their customers. And that helps them continuously improve their organization and prepare it for the next leg of growth. Siddhartha 14:38 So now coming on to financial services, what are the key micro trends except you know, the thing you mentioned that there are more options available to pay? What has been, you know, driver of today’s India financial services, infrastructure, and where do you think is going? Ishaan 14:54 I think one of the amazing drivers for the Indian financial services ecosystem has been the initiatives that have been taken by the government and by RBI by NPCI, UPI presents itself as one of the most forward payment infrastructures. We have now seen the account aggregator model, which is providing a democratized layer for financial institutions to access consumer data in a more seamless fashion. So I would say that is one big tailwind that is helping the sector grow. I think the second is just more and more availability of data. I think consumers and institutions alike are present on digital platforms more than ever before. They are leaving a larger footprint about their own data online than ever before. And this is allowing financial institutions to actually lend to them in a much better fashion because they’re able to understand their consumers in a more rich fashion than just looking at their bank account and then transactions? And I think that’s a very interesting trend we have. We have seen many companies are using this trend in different shapes and forms to build their underwriting models. Siddhartha 16:15 Can you throw more light about in a deep manner on the companies at Sequoia India or that you have been a part of the Investment Committee, or you are a part of the board now? Ishaan 16:24 We’ve been very active investors in financial services. Recently, we have invested in three offline NBFCs namely Five Star finance, Aptus housing finance, and FINOVA financial capital. Five Star and FINOVA are MSME lending businesses, while Aptus is the housing finance business and a common theme across all three is that they have been run by extremely experienced founders who have focused their strength on serving a specific class of consumers and building a culture of strong underwriting, which has led to a very high-quality book creation and a set of the second set of companies. We have invested more recently, our payments businesses, which include Razorpay, which is an online payment aggregator, and BharatPay, which is a significant market leader in the QR payments space. Both of them are growing extremely fast and have a lot going for them. And we are extremely excited to be partners with them. The third set is more marketplaces in the FinTech space, companies like CREDx, who have who are taking off-book approach towards lending and enabling lending by working with many financial partners. Moneytap has done something similar. There are more hybrid approaches, so as to say, but these are the few companies we have invested in recently. Siddhartha 17:57 Can you show me more light on Razorpay investment what was your thesis when you’re making that investment? And there have been so many payment gateways, so many payment B2B solutions, what made you invest in one mode? Ishaan 18:09 Well, first of all, payments have been an extremely positive team for us a Sequoia Capital globally in India, starting from Prism payments back in the days, which was an ATM, company, then Pine labs, Citrus, and now there is a Razorpay. So, it is a sector of high interest within that. What excited us about razor pay was the vision of Herschel and Shashank. I think you’re right that there are many businesses in this space. But their approach to this category is extremely unique. And they are extremely engineering and product-focused when approaching the problem of payments and keeping the merchant and the merchant’s consumer at the center of problem-solving, which has allowed them to come up With very unique upgrades in the space, which includes reducing the onboarding time for the merchants significantly, if you’re a merchant, you don’t have the time to spend days and weeks trying to bring online a payment method and recipe reduce that time to few hours from few days. Then they have also gone to launch innovative payment products such as enabling payments to links, helping their merchants reduce frauds, on cash on delivery through their products like Third Watch to increasing their customer satisfaction by enabling instant refunds. And then most recently, they have launched a new banking product for their merchant customers. So this innovative product engineering vision that Harshil and Shashank have is what excites us to be partners with them. Siddhartha 19:56 Something off the topic we’re living 2020, every week we hear a Neo bank opening up. What’s your take on that? Will these guys will be in the next three to five years? Ishaan 20:09 I think it’s an extremely exciting space. If you look at Indian public markets, the largest share of value lies with banks. Many of these banks, such as including PSU banks, are very traditional, were created many, many decades ago. And I think there’s an opportunity to create banking systems, whether full-stack or riding on top of the banking infrastructure, which is way more consumer-centric, which is able to serve today’s millennial consumers and, also the corporates in more advanced technology fashion, and I think many of these companies will choose their niches, their group of customers and cater to their needs much better than banks and create very valuable companies are not just in next three to five years, but companies that will endure and become very large businesses over the next 10-20 years. Siddhartha 21:13 And why do you think that every consumer sector needs a different Neo Bank? Ishaan 21:18 I don’t think every consumer sector needs a different new bank, but different consumers will have a different set of consumers who may have different needs. For example, the top 1% consumers of India may need a very different product than say the blue collared worker of India needs and there is a chance that when many companies go after the same space, there will be companies that take different routes and become extremely successful, strong and deeply entrenched in that consumer segment. The good thing is that there are many such consumer segments which are very very large, and that presents the opportunity to create more than one company in this space. Siddhartha 22:04 What are these customer segments according to you? Ishaan 22:07 Yeah. So for example, there’s one which is, say, blue-collared workers. There’s one which is the top 1% of India, there would be one segment which is, say, freelancers in India, there’s a gig economy segment, which is growing day by day in India. This is on the consumer side, then on the merchant side, there are many small companies that you can target to provide a very different solution, catering to their needs, which the banks are not able to solve. Siddhartha 22:38 So, across these nine years at Sequoia India, what has been the key to decision making, especially at the growth stage, how does that process work? Ishaan 22:48 That’s an important question. The decision making is at the center of everything we do. So we have spent a lot of time and a lot of hard work in making sure we create a culture decision making, which is a fine balance between conviction and consensus. And the reason that these two are very important together is conviction helps us identify outlier opportunities. Conviction is defined by the ability of a few individuals to articulate an investment thesis and paint the dream case to the full group. This is extremely important because if we were not to follow this and only be consensus-driven, we could reduce our decision making to only the lowest common denominator decisions, which everybody agrees to. While we have seen in the past that some of the best investments Sequoia has made have been driven by the conviction of a few than consensus of everyone. But that said, we try very hard to balance this with consensus and what consensus helps us with is it allows us to benefit from the combined wisdom of the group of the people who are part of our team. If we were evaluating an investment opportunity in the content space, my partner Rajan, who used to be the head of Google in India and Southeast Asia, is best placed to provide his perspective on the space on the product, on the company. And we would be delighted to understand his views and that is most important. I think this is the knowledge that consensus-driven decision making allows us to leverage but at the end of all of this, every decision we make is a team decision. So, by the time we are done with our discussions and debates, and the decision is made, what is most important for us that is that everyone who walks out of that room is fully committed to that decision, irrespective of what our original individual stance was we are focused on making sure that we make that decision successful as a group. For us, it is about discussing the pros and cons of an investment. And coming to a common answer of Do we believe the risk-reward equation is favorable? And it starts with a lot of debate, a lot of questions. And by the end of it, there’s a very common answer as to where we want to be. And that has been the philosophy of decision making for Sequoia Capital India. Siddhartha 25:39 In your time at Sequoia India, how have you seen the Indian startup ecosystem evolved in the last nine years? Ishaan 25:46 Oh, it has evolved so much. Well, one way to think of it is, if we were having this conversation exactly 10 years ago, in January of 2010, Flipkart and Zomato would be extremely young companies, maybe two, three years old, and Ola, and OYO and BYJU’s would probably still not be born. Fast forward today, each of these businesses is an extremely successful large company and defining the tech ecosystem for India. Now put this in context of the fact that India is a much deeper market today than it was 10 years ago in terms of the number of consumers who are online, digitally savvy enough to consume online and have more money available with them. And that there is more capital than ever before available for the founders who are trying to tackle the problems of these consumers. I think we have not seen a more exciting time than this ever before. What has also changed is that the first set of fantastic businesses of India, like Uber, Zomato, Flipkart, Paytm, BYJU’s have provided us with a terrific set of next-generation entrepreneurs who have the benefit of having folks such as Sachin Bansal, Binny Bansal, Bhavish, Kunal Shah, Deepinder, BYJU’s as inspirations for them. And at the same time, many of these successful founders, we know have taken out a bunch of their time to act as mentors as guides to these young founders. So that’s special and very different for the Indian ecosystem. Now, the second thing, which I alluded to earlier is the access to capital. It’s no hidden fact that the Indian startup ecosystem is booming and that attracts a lot of capital, which is great for the founders because there are more choices than ever before, to raise capital from at every round whether that be the seed, Series A, growth round or an IPO round, which is a challenging fact for us because we have to continuously innovate and think about how we stay ahead of everyone else to be the investor of choice for our founders. Siddhartha 28:13 And what are the challenges and opportunities you face as a growth-stage investment advisor compared to earlier? Ishaan 28:21 I think two big challenges we face is one, there are so many high-quality businesses that it is extremely hard to pick where we focus our energy on and choose to partner with. And the second challenge is that these amazing founders have many choices, in terms of the investors they can take capital from and make their partners and we are continuously thinking and focusing on how to be that partner of choice for founders. And trust me, it is much more difficult than it was back in 2011. But we have taken some very specific steps to make sure that we are more than just capital for the entrepreneurs. For example, we have a very, very rich portfolio services team going across spaces like finance, legal, technology, and human capital. Anju, who’s part of our human capital team has been an HR leader for businesses like VISA and Dell and Aniruddh on the same team has led human capital for the last 20 years. And these are extremely important resources available for our founders, with sometimes we feel can be more important than the capital itself. I think on the opportunities side, it is the best time for us to be a growth investment franchise in India. The number of companies that have scaled today. is probably 10 times more than what it was five years ago, we believe is the opportunity we have as a Sequoia Capital India franchises across early-stage and growth-stage investments because the companies of tomorrow will be larger and get to that stage at a faster pace than it has in the past. Siddhartha 30:22 So, you are a growth-stage investment advisor at this moment. So when you are evaluating a business, what is the right time for that business to be known to you? It could be x million dollars of revenue or having so many millions of customers. Ishaan 30:42 Siddhartha, I wish we had a perfect answer for that. Unfortunately, we don’t, and we discussed this quite often as a group as well. But the truth is different businesses have different metrics that are important to achieve product-market fit. And product-market fit is what is most important for us as growth-stage investors. But what we like to do is that we don’t want to wait for this moment to come, we would like to be in touch with founders and companies at a very early stage and stay in touch, see how things are progressing, how their business is growing, and when they think it is the right time for them to take growth capital, and we believe that they have achieved product-market fit is the best time for us to engage and partner with them. Siddhartha 31:39 We shall come into a little personal side of yours. How do you build your day up? How do you split between learning and interacting with a portfolio founders? Ishaan 31:48 It is different depending on the situation, but typically, a day would be split in say 30 to 40% times with portfolio founders, and there is no specific time for it. Interestingly, different founders have different time preferences to discuss matters. And it could be early in the morning and some founders are late-night experts. So it could be that. Another 30% time is generally spent on meeting new companies, investment valuation, and the rest is mostly focused on learning. Typically, the endeavor from my end is to keep the early part of the day for learning for meeting people from the industry, and then spend the rest of the day on things I mentioned before. Siddhartha 32:43 Ishaan, under 30% of the time you mentioned you have for learning what does it look like? What are the resources you tap into? Ishaan 32:49 Well, there’s a variety of it. I think the most important one is meeting people from a variety of industries because they are the experts in their sector. It could Include in the financial services space meeting, folks at banks at large, NBFCs, it could mean in the consumer space meeting product managers, engineers, business leaders. But that’s probably the most important source of knowledge and learning for me. Apart from that, it is just staying up to date on what is happening in the world in different spaces that I cover. What’s happening in the US what’s happening in China, what may be even happening in Brazil, where is the innovation coming from? And apart from that, reading about more functional areas, such as what are the best ways to build product teams to build engineering teams, to when is the right time to expand to new geography. Each of these things comes handy when we are trying to work with our founders or evaluating new investments. But the sources of consumption of this are quite varied. Siddhartha 33:56 Thank you so much, Ishaan, for sharing your wisdom, your knowledge and your experience on the podcast. Ishaan 34:01 Thank you for having me Siddhartha, it’s a pleasure.

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