Episode 54 / March 1, 2020

Rahul Chandra, Managing Director, Unitary Helion Fund

hr min

Episode 54 / March 1, 2020

Rahul Chandra, Managing Director, Unitary Helion Fund

hr min
Listen on

About the Episode




After completing his MMS from BITS Pilani in 1993, Rahul entered into the Investment Banking domain.

From 1997 to 2006, he was part of Walden International as an Investment Manager. It was the first Silicon-Valley based VC Firm to come & establish a presence in India. This was when Rahul experienced Venture Capital & Angel Investing from a close perspective.

Later in 2006, he cofounded Helion Ventures with a $140M fund size, which has since then made over 135 investments across Finance, Healthcare, Logistics & Agri.

Some of the Portfolio companies are MakeMyTrip, Bigbasket, RailYatri, and Ezetap among others.

In this podcast, Rahul shares his experiences of finding & nurturing Indian entrepreneurs for the past 15 years.

Watch all other episodes on The Neon Podcast – Neon

Or view it on our YouTube Channel at The Neon Show – YouTube

Notes –
00:38 – Sharing his Journey via his book – The Moonshot Game: Adventures of an Indian Venture Capitalist
03:10 – Working as an Investment Banker in 1995
09:05 – Cofounding Helion Ventures in 2006
22:10 – Starting multiple VC firms/funds from Helion
25:15 – Traits of founders who build great companies
28:22 – Three core reasons behind Investing in Bigbasket
32:30 – Taking tough calls as a VC based on your experience
38:50 – Giving synthesised advices as a VC vs a Canned-one
44:44 – Starting Unitary Helion Fund
45:17 – Building products for middle class by design & not by accident

Here is the full transcript-

Siddhartha 0:00

This is Siddhartha Ahluwalia, welcome to the 100x Entrepreneur podcast. This episode is brought to you by Prime Venture Partners, an early-stage VC fund led by Amit Somani, Shripati Acharya, and Sanjay Swamy. Prime is often the first institutional investor in category-creating tech startups in FinTech, SaaS healthcare, and education such as Ezetap MyGate and mfine. To know more about Prime visit Today I’m with Rahul Chandra, founding partner of Unitary Helium Ventures. Rahul, Welcome to the podcast.

Rahul 0:36

Thanks, Siddhartha. Thanks for inviting me. It’s great to be here.

Siddhartha 0:39

Rahul, first start with your book, The Moonshot Game, how did you come upon the idea that you know you need to write a book about venture capital, which is usually not a well-known topic outside the startup circles.

Rahul 0:53

In fact, this is probably the first book which actually takes you through an inner journey and you know, some of the thought processes behind investments which are public in India, obviously, this is the first book by a VC in India. What got me to writing it/ was, of course, you know, so many years have gone by I’ve been looking at investments which have either failed or have grown to become very large companies, very prominent companies in India. And I thought that as Indians, we share less than we need to, I think the learnings are growing exponentially. And the benefits can also be exponential if people start sharing their journeys more frequently. And I see that a lot in the West. And maybe there is a correlation between the progress and the speed of progress in the West because of this sharing that happens on a more regular basis. So one was certainly, you know, seen a lot in the last 15 years. And also, one attempt that I wanted to make was to humanize the life of a VC. I think, unfortunately, we say No, maybe 1000 times in a year and yes, maybe 20 times a year. So it’s a pretty sad place to be saying no to so many people who are doing good stuff. But in the process, I think there is less understanding of how a VC evaluates businesses. And, you know, when you actually talk to a VC, I think the point I wanted to bring out was, they’re probably as clueless as anybody else. You know, it’s not like, you know, they have a crystal ball. They’re trying to decipher and learn with you and also take a leap into the future along with you. So, imagine that a founder is able to convey during that initial meeting and what then that causes the VC to quantitatively convert that into an opportunity. I think some of those you know, thinking patterns that evolved in my head is what I wanted to share.

Siddhartha Ahluwalia 2:59

Before diving into anything investing, let’s talk about your journey about growing up and how you landed your job in VC.

Rahul 3:07

Sure. So, it’s been a while. But I think what really led to it is I was in Bombay, and I was working with an investment bank. And the time was 1995. Markets were actually very slow. And I discovered this animal called private equity because, at that time, they were very few sources of private money. And they were, of course, a few funds sitting in Singapore and maybe one or two in India at that time, which led me to then start exploring what private equity was all about. And I was as a result of my job also meeting some of the investors, current chairman of Warburg, he was in India from Hong Kong, looking at investments back then he was looking at Asia. So things were really early. But what it did was to pique my interest in what was something so alien in India, public markets were underdeveloped. And here was another very exciting investment path which was to actually come into private companies. The journey from that point of curiosity then led me to actually approach a firm called Quantum, which was representing a US VC firm called Walden. Walden was the first VC firm to actually set up an India focused fund along with Japanese investors Nicho $30 million fund investing $1 to $2 million in Indian companies back in 1996. So this was when most people actually did not know what VC was. And a lot of the meeting went into just explaining that we are not here to give you debt. We are people who will take equity risk and as you can imagine things were really really early when I go back and look into my life and see how I kind of made myself comfortable getting into something so unchartered back then is probably my childhood, which was spent in Dehradun. It was a quiet quaint town back then. And it was obviously like for most of us, very secluded. Window to the world was through books and magazines. There was no TV or phone. And I think my theory is also that if you are forced to imagine, I think that really helps. You know, it helps your power off, you know, thinking stuff, and because you’re reading about it, or you’re hearing about it, and then you create it in your head, you’re not getting fast food, or actually seeing it play out. So that seclusion is what I attribute to curiosity, which was, I think, very strong growing up in Dehradun about the rest of the world and what’s happening. And I think what I followed is a path of just wanting to know more about stuff, which is more horizontal and getting to know about the world. And I think the second thread I followed is, again, when I look back, I have seen that as a pattern, there is a need to be very optimistic about things that have a very good chance of failing. And that sense of optimism, I think goes back to, you know, to inherent qualities. To be able to believe in startups which have 99 ways to fail and one way to succeed, to be able to then come and invest capital in them. I think people need to have a very strong sense of optimism and that also I traced back to you know, things I picked up as a kid. So, coming back to Walden, I think that was an interesting conversation I had with my boss back then, which was, hey, am I doing the right thing getting into VC? What is it all about? I’ve heard vaguely about Silicon Valley, and I have no idea what you know what it will do or how it will play out in India. And we are talking 1996 thankfully, my boss who was based in Palo Alto in Silicon Valley, gave me good advice and said, you will not regret this because I was making a choice of moving from public investing to private investing. So 1996 I did take the plunge and I’ve been Investing in tech since back then.

Siddhartha 8:03

It’s been 25 years. Wow.

Rahul 8:05

Yeah, I’ve seen a lot. You know, three cycles, I think most people even ignore because those cycles were so small and insignificant. It’s almost like India got a fever when the valley sneezed with the dotcom bust. But there was a fledgling VC ecosystem back then. A lot of the names actually, a few of the names you hear now, were born back then. Some of them, interestingly, have chosen to become PE firms, like Westbridge and Chris, but they did start originally as VC firms taking tech risk. And, you know, and a lot of firms, of course, did not survive. So, yes, it’s been a long journey. And, obviously, the world has changed and like I was saying, there’s just so much that has happened, I felt compelled to put it down in a book. So that was what came out in the Moonshot Game.

Siddhartha 9:04

And how was the journey from 96 to 2006? before you started Helion?

Rahul 9:08

So, Siddhartha, that journey actually was a very deliberate attempt to go to where it all started, right? I kind of made up my mind that VCs do what I want to do in life. And, every day it was becoming obvious that it’s a lot of fun. And, you know, when you’re sitting in India, you know that you’re in a distant, offshore location where things are still very early. You do want to go and actually put your feet in Silicon Valley where it all you know, happens. So, in 1999, I actually moved with Walden to their Palo Alto office. And it was a big shock, right. So I was sitting in, I was thinking I’ve kind of learned a lot in India about how VC is done. And what companies should look like. And I got to Silicon Valley, obviously expected a steep learning curve, but that was much deeper than I expected. Companies all around were actually deep tech because the valley is a lot about filling gaps. And it was very much the lower layers of the protocol, we’re talking routers, and this lab equipment and even components, in a way you’re doing chips for just faster processing of data. So, you know, right from the data layer to upwards, I think the valley was at the forefront of building the equipment and the infrastructure that then led to the future effect of broadband and internet on the rest of the world. So I was there at that point when things were just being made faster and cheaper. So the internet just became more widely used. For example, one of the companies I was closely involved with, was using satellites to drive broadband. And they were building the home equipment to receive broadband signals. And you know, this was a team across the board. They were chipsets that were going into these which, you know, companies like Broadcom were building which had a lot to do with how you process faster data traffic. So there was certainly a construction happening in the valley which if you now look back was the foundation layer for what then got done, which is broader and wider internet access, and people building what was you know, called killer applications at that time to drive that usage. So chicken and egg why do we need fast broadband now, you know, in 2020? We, of course, know that, but back then, that was a fundamental question, which is why do we even need faster internet because we have our emails working fine. So, thankfully that people didn’t stay with that question for too long and faster the internet was built and the next 15 years was all about running faster things on that. So 1996 to 1999 till 2006, I was in the valley investing in companies there. And then 2006 I moved back to India as a co-founder of Helion where the four of us Sanjeev, Ashish, Kanwal and myself, we had raised a $140 million fund marking almost like the second start of building the VC ecosystem in India. I think Nexus came about a couple of months after us, Matrix in the following year. And it was Fund-I for everyone in 2006 and 2007.

Siddhartha Ahluwalia 13:03

So, Rahul, what was starting up Helion back in 2006? And what are some of the 100x companies that you have backed?

Rahul 13:10

Yeah, I think 2006 again, just to put the context in place, was very different from now, the main difference was India was still struggling with what would drive wider adoption of the internet? There was this question of, you know, laptops cost a lot, will Indians be able to afford it? There was no phone and I mean, no smartphone insight. And the chicken and egg of you know, broader connectivity was always playing on our minds. Everything we looked at had to have an omnichannel, call centers were the main customer acquisition, engagement channels. And slowly and surely, I think the change was happening but for four years until maybe 2010. It was absolutely not like a certain thing that there will be so much penetration of the internet, things were growing very slowly. So the lens through which we are looking at companies in those three, four years, in the beginning, was very different. Right? We are trying to anticipate a market which was not yet there, we want to be technology investors because we’re coming from the valley yet in India, the ways you can become a company that is, you know, the mass company is growing exponentially and those elements are not there. So, it’s a challenging time. And they’re looking at us saying is that vital element of, you know, how do you acquire customers and how do you take services to customers? So it’s a big quandary for a VC because you know, of course, you want to invest in companies that will end up growing fast. So we started taking bets every first bet we took was a very promising company, you know, fundamentally made a lot of sense. It was called JiGrahak, a great entrepreneur, you know, thinking product first. But in an ecosystem, which was very hard to actually roll that product out to a wider audience, and just the sweat and effort that went into getting that product into people’s hands was just sucking the energy out. It was costing us, it was taking time, and just hard to show traction. And back then, a million users just seemed like a lot of people are not unlike now where you quickly run up to two to 3 million users and the internet helps just such rapid adoption. The business was simple. It was talking about how you transact on smartphones as I said, the logic was very sound. People will adopt smartphones because they want to transact and we were not successful. Because, again, the idea was great, the timing was wrong. I think that the team tried its best but just didn’t work out. And almost at the same time, we backed a company called Makemytrip, which was, I think way ahead of the competition even back then. Thankfully it has retained that lead and it was making itself widely available through an omnichannel, it was available at a neighborhood corner store, it could be a service that you could call in and it was everywhere. I think people just prioritized it like a train ticket. And they were making an effort to book their tickets through Makemytrip. So, the friction in the ecosystem didn’t impact as much as it impacted the other companies. Makemytrip turned out to be the big winner as we all know. I think again about the last pieces of India. So, B2B companies doing nonsexy outsourcing work were growing at rates that were so right and so attractive in terms of generating r. So things were obviously very different back then, Siddartha. And the turn really happened in 2011. We view

Siddhartha Ahluwalia 18:35

What were the companies in the latest stage of 2011-2016 that Helion backed especially you take a call on?

Rahul 18:42

Alright. So I mean, 2011, I think Flipkart was born, we were beginning to see more entrepreneurs who were building products that could be mobile-first, or it was built for solving very specific consumer needs, entrepreneurs were getting more, you know, a rifle shot in their approach and the companies we started seeing where the early versions of e-commerce companies in India. If people remember there was something called Big shoe bazaar or what became YeBhi which was like an online fashion company, spend a bit of time looking at that. They were a slew of payment companies even before Paytm became a payment company. It was just a recharge company. So, the number of payment companies I would have seen back then, begging for a use case was phenomenal. I think payment was a large vertical that had appeared at that time. And then I think in 11-12, we also looked at a company called LetsBuy which was an online commerce company for purely consumer electronics. Again, the thesis was that everyone wants to buy a mobile phone. LetsBuy was just going on that demand curve. And a lot of consumer brands did not have enough distribution in India to distribute consumer electronics. So, companies like LetsBuy got funded at that time as well.

Siddhartha Ahluwalia 20:21

So through LetsBuy, you ended up having a stake in Flipkart.

Rahul 20:24

Yeah, that’s right. I think the Chinese eCommerce market was going to pay another time. I think a lot of companies that had a run-up in value and excitement suddenly realized that three to six months in China where everything crashed, you know, rounds were being done at a 40 50% discount to the last one. And you know, like in 2001, you know, the valley sneeze gave India fever. I think, in this case, the Chinese sneeze gave India a fever. So there was a lot of existential question that occurred in that timeframe, which was how much capital does an e-commerce company eventually going to need, is that kind of capital available in India and should VCs take selective bets instead of investing in a lot of eCommerce companies. A.t helium we chose to go the vertical commerce path. We felt we had missed on the horizontal commerce opportunity. And we were backing companies which were specifically focused on fashion or consumer electronics. And what then became challenging was in this environment of you know, realizing that the cash needed for eCommerce was something not available with Indian VCs. Tiger was just beginning to come in. I think they wrote their first check-in for their e-commerce pursuit. They wrote the check into Flipkart. Things were still very early on and unproven that they’ll be enough capital. So there were mortalities or all almost like a choice of which company is going to make through that first door because only those companies which could access the deep pockets were then making the cut beyond 2012-13.

Siddhartha 22:15

Helion is almost like the PayPal mafia of India Venture Capital like it led to multiple VC firms and all are doing very well in their respective sectors. What was the decision that made all the different partners start different firms?

Rahul 22:32

I guess it probably was a place that valued talent. I think it valued quality people. We were seven partners at peak. So the culture in the firm was, I guess, a very open discussion around most investment opportunities where people were expected to participate in every opportunity that came along, heavy on learning and on governance as a VC firm, I had come from the valley and I had not seen the kind of governance in the valley as we tried to build in Helion between a partnership that was trying to be honest about what was really happening in the portfolio, making honest conclusions about companies that we already made investments and felt that we had made a mistake, acknowledging that mistake when they follow-up rounds came, and then you know, being in that way, cognizant of the fact that yes, there is some capital needed to support companies, but then being very conscious that there are certain companies which are not going to make the cut and some that will, that was purely driven by a culture of answerability. And yeah, and I think some of the other things we did was pursued, founder first culture as well. So we were one of the early firms to conduct surveys where the partners would get evaluated by founders. They would take feedback from founders who the partners would have dealt with, and asked them, you know, if the interaction was where they felt like they were heard, they knew they were valued as founders. And at the end of the year, we actually knew how we have done in that year, right, because like I said in the beginning, we, as a VC firm, we say 1000 Nos, it is not a popularity contest, yet. We want to be a firm where people add value in a conversation. So I think the reason why there are so many firms that came out of Helion is really the kind of culture that we had, which valued honesty, transparency, and discussion. And, even people who were associates and analysts, today actually are in various forms and doing very well.

Siddhartha Ahluwalia 25:13

Rahul, you have observed founders, worked with them for the last 25 years. What would you say of the traits of those founders who really break out or build 100x companies or from the rest of the founders who try their best but luck is not favoring or not able to make it.

Rahul 25:34

I think because your question is great, and I want to answer it with something which resonates. I think my one-word answer to that, Siddhartha, would be transparency. And I think founders who follow an approach of transparency with their employees, with their co-founders, with their investors, I’ve seen that that is a reflection of, you know, just honesty and acknowledgment of whether the shit is hitting the ceiling or things are going great. But at any point in time, they keep a consistent standard of transparency. I think acknowledging a mess, is a trait of a good founder, right? Because then people can help, they can ask for help. And where it is always, you know, let’s cover it up. And you know, let’s present a very, you know, normal picture. Let’s not take help from our investors. Let’s not really call out the situation. That’s when things start becoming harder to deal with when you know, I think the environment turns for every startup. It’s a constant war that a founder undertakes every morning and goes to work, because the environment completely changes, I think. No days ever similar for a founder. So for me, I think consistently, what I’ve seen is that once you are funded, and you’re running a startup, I think it’s very important to keep a high degree of transparency across employees, co-founders and investors. Now, of course, you know, there are other factors. The most important thing I’ve seen is the timing. I think in the last 20 years, I’ve seen the same ideas coming in the heads of very smart people. And, of course, the product looks different every time. But the problem they’re trying to solve is quite similar. The world doesn’t change as much as we think it does. Founders have ideas that look very similar to what happened maybe 10 years back, six years back, three years back. What works at that point, takes a company to the stratosphere is really that point, that idea just had everything going for it. So I think for an idea to work, I think, the timing is most important.

Siddhartha Ahluwalia 28:22

You mentioned timing. You are backers of Bigbasket from very early days. And there were a lot of grocery startups previous to Bigbasket. How did you identify that’s the right time to solve for, for example, in Bigbasket?

Rahul 28:37

Bigbasket actually was a business model where everyone remembers Webvan. Webvan was a classic, you know, colossal failure. And it was very embarrassing for VCs because it just stuck that such a high profile company failed. So getting into online grocery actually came with that baggage that there have only been disasters along the way. And it’s very hard to make money. And because margins are so thin in the grocery that, you know, the businesses cannot be self-sustaining. And this is, you know, still a time where gross margins and contribution margins were, you know, actively being considered. So, big basket, I think there were three things. One was that the founding team had done two startups before, I think the kind of challenges in a hard business like grocery, we felt was best handled by a team, which had been there, done that. So the gray hair really helped in taking a problem acknowledging again that it was a hard one and then doing something about it. So we were assured, to some extent by the experience of the founding team. Second is, there were examples of companies that were breaking out not in India, but outside. There were companies that were going public in the UK, which were doing similar businesses, of course, the density in London is totally different from a density in a bigger city in India. But we felt that you know, there are ways to create margins in the grocery business, you know, as you mature, there are certain things that you can do to add to the margins in the business. And the third was, we felt that, again, like true for everything else, the build-out of the formal sector is going to take its own sweet time, and there is an opportunity for a better service for people to start consuming groceries from, which was hassle-free, convenient. And, you know I think the modern nuclear families would tend to, you know, value time over going to the, you know, to the grocery market, choosing the right vegetables or you know, on a more regular basis, the value over time was increasing versus the value of a discount or a better price. So we fell from a demographics perspective, it was certainly a big city phenomenon. It was started in Bangalore, and we could see patterns where people in Bangalore were beginning to order it more frequently. There was loyalty in the customer base. But these three factors were the experience of the founding team, the fact that in overtime we looked at businesses which had added to their margins, and the third was just the changing demographics of the customer.

Siddhartha 31:36

You shared earlier in the podcast and also in your book that VCs are also humans, and they are as cool as anybody else, which people think you know, they are a different breed altogether. What are the challenges or hardships you have faced a VC which most of us don’t know about?

Rahul 31:54

Yeah, I think the VCs, unlike founders, are in this isolation chamber again, where there is transmission being received about the good news and the bad news that’s happening to their portfolio. But then they’re supposed to just make a call from that isolation cell. Right? So it’s very frustrating to actually sit there and process that information. And I think emotionally be ready to, you know, to either suggest solutions or just digest it because, you know, the benefit that a VC has is that you know, when you look at 10-year cycles, you know, from a seed to an IPO, your lens is looking at a much longer timeframe than a founders’ is. The founder is probably looking at, you know, the next financing or, you know, maybe the end of the year. So, you know, as a VC I’ve learned to discount disasters because I’ve seen so many. So I think that’s a helpful learning I’ve had, but amongst challenges in my investments in some of the companies, which one of them was hit by a regulatory change, and that was an overnight disaster, which actually took out most of the company, almost leaving it, you know, very close to fading away. In fact, most of its peers were swept by that big change. And the problem was that we had actually committed a large amount. So it was one of the biggest cheques we had written. And, just in one night, it was very clear that the company is not going to return that money. Chances of you know, recovering from that was very low. I took it quite badly, of course. Because I had made a very strong case for going over and above what a normal check size was, taking an exposure, which I thought was meaningful. So this came as a shock. And again, this was at a time when I was still seeing my early shocks. And it was very traumatizing. Right. So, basically, $10 million was a large cheque from a 140 million dollar fund. And to see it, just disappearing was very painful. Luckily, of course, you know, and again to, you know, kind of give me that learning that, you know, time is very unpredictable, that company actually came back and had an IPO. So, when I look back, of course, the company was lucky and the founder was amazing at continuing to work at it, but you know, just at that point, it felt like the world had ended.

Siddhartha Ahluwalia 35:03

You’re talking about Makemytrip?

Rahul 35:05

No, no, actually Makemytrip has had a very smooth journey, partly because of the way the company was run. And of course, it kept its leadership position, but this is a company in the microfinance space. So over time, of course, as I said, it’s fully recovered. It’s got a very strong balance sheet and now it’s a public company. So I’m very thankful for how that company was able to come out. And we’ve been able to make money on that which justified all the pain.

Siddhartha Ahluwalia 35:37

So VCs also have sleepless nights as founders have?

Rahul 35:40

Sometimes we get calls at midnight as well, for all kinds of reasons from founders. So I think it’s an interesting exercise where I am on a vacation, maybe in December, nobody else is around, and I get a call at 11.30 in the night. I’m speaking for the next two hours with the founder. A lot of it is sharing in the situation, of course, there are situations where it is war room where the board gets together and it’s always good to have a VC who has seen enough disaster and challenges in their VC careers to be with you and in these war room situations but you’re there basically staring at something which can be a big wall in front of the company and you’re either trying to tell the founder, the best course of action according to your past experiences or looking for what you can bring about in terms of, you know, maybe a financing is gone wrong last minute, the company has two months of cash left, and it’s unlikely that they will be around happening anytime soon. And then you have to take the consensus decisions from your firm, you need to make sure that you are very sure that you’re recommending some more capital to come in at that point. And this is a company you really believe in, because there is no validation happening from outside, right. And those are tough moments. Because that’s really when as a VC, you want to be sure that if there was no other dollar coming in from the rest of the world, will you still put your last dollar in that company? And that kind of belief, I think, in companies very important for VCs to build. Right? I think I have done it in the past where I’ve looked for external validation from other investors coming in, I mean, a big valuation coming from a third party is always solid validation. But you know, it doesn’t happen all the time. It could be where, you know, the company’s run out of cash, but you still believe that company has the metal to actually go forward? So those are things where I think VCs have to make very tough calls.

Siddhartha Ahluwalia 37:48

And what do you think, thinking back your strengths and weaknesses unique to you, as a VC have been?

Rahul 37:56

You know, I started off as someone who’s not come from an operating background, so I’ve spent so much time thinking, looking at startups and spending time with founders. And I value my time spent in the valley where I really understood technology better than if I had been an operator. So I’ve come to VC with a handicap, which was not to be an operator. But so that question was actually a very common question in the valley, which is what makes a good VC? Is it an operator or is it a Non-operator and I think the world has enough examples of both. At the end of the day, I think the role of a VC is the full stop button for even an operator to stop thinking like an operator. And as long as you have the empathy to actually think like a founder, you can overcome any handicap. And I think the time you spend with founders understanding real situations, right, not one step removed from an entrepreneur, which is usually going to lead to giving advice, which is so off the charts that most founders should actually ignore it. Keeping the context and keeping the reality in mind and being able to give useful advice to the founder. I think that is the end test for VC. And for that, you have to keep things very real. Right? You have to be actually factoring in a lot of your learnings from the past, right? I think experience and time spent and I value again, the time I’ve had with so many founders and startups where I think the strength is I’m able to now process a lot of my past learnings and it leads to a mental framework, which is always Flexible. For me, the constant reminder is that every situation is different and I need to then apply what I’ve learned in a more synthesized manner versus just giving canned advice. I think the world is always striving for efficiency and giving standard can advice is very time efficient. But it’s also sometimes not usable. So I think from an ability to look at the past 15 years of situations, war rooms, fundings going bad, or you know, pressing the pedal on growth. Those are things which are sitting in my head, and being able to make the right combination of those learnings and giving the most relevant advice to founders at that time is what I think I am able to do better now. in the last 10 years, I’ve spent a phenomenal amount of time with great founders. Obviously, you have to be a sponge, like I said in the beginning curiosity is really key for a VC to do better. And I think that curiosity is what leads you to absorb and you know, what are the strengths from other founders and pass it on to you know, to the others. So, I think the strength that is now with me really is this long experience of seeing a lot and then being able to still remain flexible for that situation versus becoming this candid advice giver, which would be very impractical advice in most cases.

Siddhartha 41:39

And what do you think about the weaknesses par?

Rahul 41:46

I think the part which always is intriguing and hard for me to judge in consumer companies, it’s very hard to tell if there is real traction or not. And in India, especially, one thing I’ve come to rely on and I think still working on is how to use data to be able to predict better or to actually judge better if there is some traction that is going to stick, or is it just temporary. So the path I’m on really is to fix that, using some data, to be able to understand, whether the product-market fit is happening or not, I think the external help or the indicators that helped me I’m trying to build those, which is to understand whether talking to consumers will help or for that product, you know, taking feedback surveys, will that help? And to rely on the product thinking of the CEO, I think that would be something that would also lead me to make a better judgment on whether that product is going to evolve with changing consumer needs. So I think that vagueness in backing consumer startups, unlike a B2B startup where you absolutely get a fair idea from an enterprise customer of the need and value for that product, I think it’s very hard to get feedback from 10,000 users, 20,000 users. So I think there is a lot of judgment in consumer products that need to get back. And, I also have another handicap, which is I like to spend time with the founders before I invest. So, I’m not very good at making snap judgments with one meeting. I generally tend to spend, you know, several meetings before I get to get inside the mind of a founder to start extrapolating, what would be the choices that the founder would make in different situations because it is such a long journey. It’s very important to actually spend that time with the founding group understanding founder dynamics, or the transparency levels we talked about, or the product thinking that the founder brings to the table, I think those are some things I prefer doing. You know, obviously, given pressure situations, if there is a very compelling deal and there is pressure, then, I would react fast, but, given a choice, I would really like to spend a decent amount of time with the founders to understand how they want to build this out.

Siddhartha 44:41

Rahul, let’s come on to a journey of Unitary Helion, what are the thesis of starting this fund, what’s the fund size and how much is the ticket you are investing in each company?

Rahul 44:51

Yes, so looking forward to actually deploying from this new waking unitary and the thesis has been put together based on past experience and learnings. So I think the key trigger was that in India, the largest markets are those that belong to middle India. And it’s very difficult to build a product for top tier India and then re-customize it for middle India because the customer profile is significantly different. So, we’ve seen scale actually get stalled, because either you run out of the market because you’re catering to a small segment of the population in the metros. And, that’s the user consumer who’s been oversold. There are a few of them. And we believe you cannot build scale companies with consumer bases which are small. In the past, I’ve invested in companies that have gone to middle India by design not by accident, but by design. And I’ve seen the scale and the gap that they are filling. Actually, markets are so large that you do not need to spend a significant amount of money to acquire customers. There is so much unfulfilled need that you could be along with five other companies and you would still not be running into each other, the markets are that large. Understanding that middle India consumers have a very different approach to consuming products and services. They are in a cycle of adoption, which is very different, where they go from, you know, the initial phone use to consuming it for information and entertainment and then moving on to commerce, how and when they will use that. And this thesis then led us to, what is the largest market share of middle India, those four areas became our core areas for the thesis and those are financial services, healthcare, mobility, and Agri and food. So we want to concentrate on these four areas, $2 million to $4 million is the first check size that we will write, we have invested in two companies, which reflect this thesis. And we continue to do more of this. It is, of course, very exciting because you have a thesis, which is really a framework and then we start seeing companies that demonstrate that basic idea, you see the expanse of the type of solutions that can come into this thesis. So we are excited because we’re actually finding a lot of quality startups that are going after this opportunity as well. So we are excited. We have our hands full right now. We are excited to make more investments in the next three to six months. And hopefully, in a couple of months, we will be able to share more of what we have done and more about the thesis

Siddhartha 48:09

So, with the current fund, you will be investing in 10-15 companies by 2021?

Rahul 48:16

Yeah, that’s about right. So our average pace would be six to seven companies a year. And we have done two, but our plan is that in the next three years, we should be at 18 to 20. This is not counting any seed investments that we might make, these are actually series A investments. So we could have a slightly higher number, but yes, the pace should be about six to seven a year.

Siddhartha 48:41

And currently, you have seen like many cycles of the founders, you know, come and go, what is the quality of the founders in 2019-20, which you are bullish on still starting almost your third journey in venture capital.

Rahul 48:58

Calm, composed and ambitious. I think these are the three words I would use to describe the founder of 2019. I think the ambition part, of course, is consistent. Of course, the number has grown. But in terms of co-founder dynamics, I think people who have seen the chemistry not work out are being more careful about who they do their startups with, who they want to be partners with on the long journey. So, we have seen co-founding teams come together with more thought. We are seeing the ambition leading to markets outside India. We are no longer restricted to thinking of this as a purely Indian business where the Indian expectation and constraints exist. So people are going to US markets much sooner. Of course, the composure of being able to maneuver startups and raise capital faster, I think that is certainly in play because the sources of capital have changed. If I again, go back to 2006 to now the first check would come from a VC in 2006. Now, it could come from a family office or an individual or a group of angels. So, getting the first check is not as hard and many more people are now getting their first check. So, there is certainly a broader community that has happened or funded startups with some capital from somewhere. So, the other aspect we’re seeing is that there is a lot of knowledge sharing not just about which VC is interested in what area, which is the best way to raise your series A, but also learnings about failures, communities are helping, the knowledge is getting shared amongst different groups. So they’re coming with a fairly good sense of, you know, what mistakes not to make. So, I think my expectation is that the time to Series B is shrinking from what it used to be because the execution is superior because people are making fewer mistakes and doing more right things in shorter time frames. So, this is, I think, a natural evolution, where ecosystems develop on maturity as more and more happens, I think people just become more aware of what to do. All of them also are coming from experiences and other startups. So I think that makes a ton of difference working in companies that are high growth. They just come with a lot of momentum or a sense of how quickly this journey has to be undertaken. So,s and sharing information I think the 2019 breed of entrepreneurs are in a very good place with the right set of learning and also, of course, capital that is far more democratically available than it used to be.

Siddhartha 52:27

Thank you so much, Rahul. Ending on a lighter note, you look like a 25-30 year old really, except a few grey hairs. What’s the secret of your health?

Rahul 52:38

Thanks, Siddhartha. I’m sure it’s changing. Yesterday somebody I met said Oh, I thought you look very young in pictures but you are not as young as you look but know no secrets. I think, health-wise, I would advise everyone to actually avoid sugars, processed food, and younger India actually being very careless about what they eat, wherever I go, food courts and where I can see a lot of people eating, I think there is most of the stuff I cannot eat because it is so processed or has so much sugar. So I worry about finding food for myself, but you know, my general avoidance is whatever is processed. So, and I think the rest is what I said earlier, which is how much stress do you take from each disaster situation. Keeping your sense of optimism high, I think knowing that there is light at the end of the tunnel, companies will survive, businesses will do well, things will turn for the better. I think that a sense of optimism keeps everyone positive, keeps me positive. And I think that sense of positivity is very energizing. So I hope you can say this same thing in the next few years as well and I hope I keep the young look going.

Siddhartha 54:04

Wonderful. Thank you so much for being on the 100x entrepreneur podcast. Grateful to have you.

Rahul 54:10

Thanks so much, Siddhartha. Great to be here.

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