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Episode 56 / March 15, 2020

Rutvik Doshi, Managing Director, Inventus Capital Partners

hr min

Episode 56 / March 15, 2020

Rutvik Doshi, Managing Director, Inventus Capital Partners

hr min
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Rutvik refers to himself as an “Accidental Venture Capitalist”, coming from a Product management & Software Engineering background.

He’s an IIT Kharagpur alumni and later did his MBA from INSEAD. During his early career, he worked at Broadcom Inc. & Google.

In this podcast, Rutvik shares his experiences & learnings of building relationships with founders, scanning through potential investments & more.

Notes –
00:35 – Accidental Venture Capitalist
03:50 – Being a part of Inventus Capital Partners
05:50 – Investing in PolicyBazaar & RedBus.in
09:14 – Scaling & Diversity in HealthifyMe
12:35 – Filters & Criteria to scanning potential investments
15:43 – Being a mentor to the founding team
22:30 – Giving 1st Priority to Founder / Business & then later check on the Market
32:10 – Common traits among founders who’ve scaled 100x
36:45 – Fine line between Conviction & Stubbornness in founders
37:55 – Challenges while fund-raising as a VC

Read the full transcript here :

Siddhartha 0:00

Hi, 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 Swami. 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 primevp.in Today I have with me Rutvik Doshi, managing partner Inventus India. Welcome to the podcast, Rutvik.

Rutvik 0:18

Thanks, Siddhartha. A pleasure to be here.

Siddhartha 0:20

We’d love to know more about your journey of growing up in IIT and then how you landed up in Inventus.

Rutvik 0:27

Okay, So I am an accidental venture capitalist, I don’t think I’d ever imagined or planned a career in venture capital. So, let me talk about a little bit of how I landed up here. So I grew up in Calcutta, wanted to do engineering, was fascinated with science and engineering as a kid. So I ended up studying and preparing for IIT like many other aspirants, got into IIT Kharagpur spent four years there. Post that I went to the US I graduated during the dot com boom, so, It was 1999 when Silicon Valley was booming, every other day new dot coms were being created. And they were growing at a rapid rate of what we now have known as a dot com bubble. So it was easy to go into the US, was fascinated by those startups, joined a very early stage startup over there, which was in the networking space, spent roughly two and a half years there in that startup, was a software engineer. Towards the end of the startup, I think the dot com bubble had burst. Many of our customers had started going bankrupt. And thankfully, we found a home too, we got acquired by Computer Associates. And then I spent the next four or five years at CA. And so that was the first phase of my career, which was largely all-around focus on software engineering, focused on the early days of the internet and early days of web infrastructure side of things. Did my MBA, went to INSEAD to do my MBA there was a One year program. That’s what I wanted to do. Post that got into Google. And I was a product manager at Google, spent four years at Google. And it’s with Google that I decided to move back to India. And in 2007, Google was set up a product and engineering office in India. And I moved here and was part of the product team at Google. So that was roughly a decade worth of career or slightly more than a decade-plus of a career in software engineering, Product Management, consumer internet, and all of it was around the internet. Did a startup after that. Did that for a year and a half, didn’t work out. It was again, the early days of e-commerce and deals so had a startup called Taggle, where we were trying to do daily deals, a Groupon style company which pivoted into e-commerce, but we soon realized that required a lot of capital which we didn’t have and didn’t work out. So I was trying to figure out what to do next, was talking to a lot of people in the ecosystem. Inventus was thinking of raising the next fund at that point in time, and adding to the team, got talking to them. And that’s how I ended up becoming a VC. They said, Why don’t you try it out for a few months? I said, Okay, let’s try for a few months, I spent six months in what is known as a dating period between them and us. So I became started sitting at the Inventus office started working with them looking at deals, realized this is a career I may enjoy doing, and decided to become a VC.

Siddhartha 3:26

And you joined as a Managing Partner?

Rutvik 3:28

No, I was not. So I joined as a principal. It was January of 2012 when I joined. I think somewhere around 2015, or maybe 16 is when I became a full-fledged partner.

Siddhartha 3:44

And how’s your journey been with Inventus?

Rutvik 3:46

It’s been a fascinating journey. I enjoyed the whole early-stage venture investing career. Have a bunch of great partners. We get along very well. The energy that gives you from meeting early-stage entrepreneurs, keeps me going intellectually very, very, very satisfying. Because you have to keep yourself updated on a daily basis. You have to keep yourself in the know-how of what’s going on what’s not going on in terms of the latest business trends, latest technology, trends, everything, and at the same time work very closely with entrepreneurs. So that’s the satisfying journey.

Siddhartha 4:30

Since you joined how many companies has Inventus invested in India?

Rutvik 4:34

So since I joined 18 companies is what we’ve invested in. So yeah, we are not what you would call a prolific investor, which does 10 investments a year. We are the two to three or maybe three to four investments per year kind of thing. We are very thoughtful in what we do, carefully examine companies, understand the company, understand the product, understand the founders, understand the market before we make that investment, and like to get involved a lot with those companies when we invest in them. So focused, concentrated portfolio. But hopefully, we’ll get many more hits than many more failures is the belief that we have.

Siddhartha 5:24

And I believe you have led six companies’ investments.

Rutvik 5:28

Yeah, I think I would be slightly more than seven or eight out of this 18.

Siddhartha 5:37

What are the best-performing companies that have been out of the fund and out of the one you have led?

Rutvik 5:41

So of the fund, I think, some of the investments that we’ve done as inventors, I think the two most famous ones that people would recognize are RedBus and Policy Bazaar. Both are iconic companies in their own way. Red Bus was done prior to I joined Inventus, but it’s probably one of the most successful startups in the first generation of companies that came out of India. It proved that you could build a business in India, which was solving a uniquely Indian problem. This whole problem of intercity buses and big disorganized didn’t exist anywhere else in the world where it came at a time when most people are investing in copycat models of the US or not even China, US-based copycat models. It was an indigenous Indian problem and did very well for us as a fund. And not only as a fund, I think, for the ecosystem, we believe at least I personally believe that it started the trend of exits. It was the first large exit in the internet eco-space in India. Compared to the unicorns of today, in terms of valuation, in terms of numbers, it looks small, but I think if you put yourself in that timeframe, it was defining moment. It made everybody believed that, hey, you could build a company and you could exit. And every stakeholder can potentially make money from it. And I think post RedBus exit, which was in 2013, we saw a large number of investments started happening, the large number of exits started happening, and companies growing at a rate faster than ever before. So that’s the first one. The second most famous investment that we would have made from the Fund, which happened after a joined was Policy Bazaar. We invested in 2013 when it was just a small comparison website for insurance. We’re one of the early investors and the company has grown phenomenally well since then. And right now is the market leader. And probably proud to say that, we have lots of unicorns of these countries, you know, but it’s probably one of the few responsibly run unicorn companies, which I think has all its economics in the right place, growth in the right place, and we are hoping that it will generate phenomenal returns for our fund and will also give a big boost to the ecosystem just like RedBus did.

Siddhartha 8:07

I remember talking to your Yashish lately and out of the last 400 million raised most of it is in the bank.

Rutvik 8:14

Yes. So it’s a profitable company. So, before it started raising these mega-rounds and becoming a unicorn, it was already profitable and it was growing. So it was not profitable without growth and profitability both whether the economics are phenomenal. And largely, cash helps it accelerate growth, and which is what I believe late-stage funding should be late-stage funding happens when the company is proven that it’s sustainable. But there’s still massive headroom to grow can accelerate it faster. And that is what, you know, all this funding is going to help policymakers are doing they’re going to accelerate faster, probably diversify into probably newer lines of businesses. And that’s how it will keep growing. So we are very confident and bullish about that.

Siddhartha 9:02

You have personally led iconic companies like HealthifyMe.

Siddhartha 9:05

Yeah. So if I were to look at what I have done, I think the two companies which have scaled very well for me HealthifyMe is probably one of them. One of the first fitness apps to come out of India, and we’ve seen it grown tremendously, I think it’s grown, probably 20X or 30X since the investment we led into HealthifyMe. It started off as simple food and calorie tracker, built a business around, helping people lose weight by providing a services layer on top of it. And off late is transformed into an AI company, where given the large sets of data and the large user base as it was able to leverage all of that to automate a large part of its operations, automate consumer-facing services. And now It’s probably has reached the most exciting phase of its growth, in my opinion, where the tech is enabled it to kind of scale in financially with very, very low capital expenditure required. So very, very proud of what HealthifyMe has achieved and what the Tushar and the team have done over there. And the other company, I think which just scaled very well for me is UNBXD, which is a B2B SaaS company that also started in around 2013 timeframe. We were one of the early investors over there. It was the first wave of companies trying to look at the US and see if they can scale and it can sell into the US and I think that company has also scaled very well. But today 98-99% of its revenue coming from the US market, so you may not hear about it in India, okay, silently sitting here and building the products and selling from here, but it’s all action for that is happening from the North American markets

Siddhartha 10:52

So, Inventus usually enters the late series A stage?

Rutvik 10:57

Yeah. So there are no public definitions of what a series A should be or what a pre-series should be and things like that. We’ve tried to keep ourselves very fluid and not stick to a definition of what series A should be. We operate from grounds of perspective. So we look at companies, which are showing signs of a product-market fit, but may not have fully established product-market fit but have shown signs and have some early revenue or some traction on it. Because we strongly believe that your product is good, I may feel that a product is good, but the proof is when somebody writes a cheque for it. So if a customer is willing to write a check and pay for it, then yes, there’s proof that your product is delivering some value. So that’s the stage that we come in. So hence sometimes it feels like it’s late series A but in our mind, that’s very fluid. Pre-series A, series A doesn’t matter or late series also doesn’t matter, as long as there is some sense of product-market fit, there’s some early traction and it is building a capital-efficient business model. Hence, you know, we will not do a series A which is a 10 million late series A, but if the business model seems to be capital efficient, then yes we like it and we will do it.

Siddhartha 12:20

So, as you mentioned capital efficiency, product-market fit, what are the other things Inventus looks at, you know, in companies when it decides to evaluate or invest?

Rutvik 12:28

Yeah, so, the other things are very standard and very common to most other venture capitalists. Most of us look for large markets, most of us look for business models, which can scale rapidly within large markets. So, we also look at those two as the first filter and the first criteria. Second is the team, you know, building and developing comfort with the team is extremely important for us. Given that we are not prolific investors, we’ll do 20 investors in a year but I want to do four or five investments. And we work very, very closely with the founding team. It is extremely important for us to build that comfort with the founding team. And that comfort is mutual. So it is not only building comfort, but the founders also need to build comfort with us. So we take our time in between the first meeting or the first introduction to actually when we take a decision of making the investment, to get to know the founders a lot and ensuring the founding team also gets to know us a lot. And we built mutual comfort with us because in this business, making an investment is one thing, but we are going to work along with hand in hand with the founders for the next seven, eight years. So it’s very important that there is respect for each other and there is an understanding of each other. So we take our time and we spend our time. We sometimes lose deals because of that, because, you know, market demands that you need to move fast. But our experience has shown us that we’ve more often lost money in those deals than made money. I would rather take my time. And if I were to lose a deal, I lose a deal, but I take my time and make sure that there’s full comfort with the team before going ahead.

Siddhartha 14:10

Rutvik, can you tell us more about the average cheque size of Inventus and what’s the ticketing for the follow-up rounds?

Rutvik 14:18

So, the average check size varies. The first cheque that we may write is in the 5-20 crore range. It is the first cheque that we will write. This is at the series A stage or the pre-series A stage. The round size can, however, be anything so the round size can be one to $5 million sizes and we are happy to bring co-investors along with us or co-invest along with someone. In fact, most of the deals that we’ve done, we’ve always had a partner investing along with us, it could be a co-lead situation. All we have led it and we brought a partner along with us. So that’s the cheque size. And we have a strong reserve policy. So, in the journey for the next 4-5-6 years, on an average, we reserve at least one and a half times the initial amount invested for follow on rounds and that’s the average number. So, winners obviously end up getting more, and losers will end up getting a little less. So, companies that perform and companies where we believe there’s a strong potential we continue investing in those companies.

Siddhartha 15:32

So it’s been seven years of investing, Rutvik, for you. What do you think are your strengths and weaknesses as a VC?

Rutvik 15:41

That’s a tough one. When I joined the venture capital industry, I used to think that incorporate the world or startup world, you get feedback instantly, right? So I did something at the end of the quarter or the end of the year, I get to see my results. And I know what has worked or what hasn’t done to work. In the venture capital world is a very, very long term cycle. You don’t have those instant feedbacks. When I joined, I used to think that I will know my strengths and weakness within five years. I will know what has worked and what has not worked within five years. Now. It’s for seven years. And I have come to believe now that it takes 10 years to really understand what has worked and what has not worked. But that’s the reality of this business. And having said that, you know, in my opinion, I think the strengths that I bring to the table has been building a strong relationship with the founding team, being able to play the role of mentor to the founder, I think that is one aspect of venture capital that I did not know before getting in. But that is a role that I’ve started playing a lot and have enjoyed a lot and And I feel very happy that I sometimes end up being the first port of call for many of the founders that have invested in, be it 10 pm in the night be it midnight, they are not hesitant to pick up the phone, speak to me. A lot of times, they speak about all kinds of things, you know, sometimes most of the time it’s professionally related about the company about how do they manage things are they want to bounce certain things off. But several times it’s even been personal issues, where I’ve been working with the founders. So that I feel proud about that makes me believe that I have been able to make a connection with the founders makes me believe that I’ve been able to deliver value beyond just the cash that I gave to them. And I’m playing a role or playing a small part in helping those founders grow from a small startup to becoming a CEO of a large company. So that’s where I think my strength lies. In addition to that, of course, I come from a product engineering background. So I do spend a lot of time with on the product strategy side of things where it plays naturally to my strengths. Weaknesses, this business also requires a lot of hustling around, you know, a lot of being on the streets, trying to find that deal compete with others to get those deals. I don’t think I’m great at some of those things, you know, I’m more comfortable post-investment rather than pre-investment phase. Let me put it that way.

Siddhartha 18:40

This is a long journey as you said seven years doesn’t feel enough.

Rutvik 18:45

Yeah, it doesn’t feel enough, because of the investments that I’ve made so far from the eight investments. I’ve had two exits.

Siddhartha 18:59

Which are those?

Rutvik 19:02

There was a company called Aasaanjobs, which was bought over by OLX. About the second exit, all the paperwork is signed, everything is done, the money is being wired on Monday. So I will disclose the name next week or it will come in the papers. So the two exits that are happening, both have been cash exits. So that I’m happy about, you know, didn’t have to write off anything. From a venture capital point of view, probably not phenomenal returns, but from where the business was and where the founders were in the journey, I think we made okay returns, we made more than our money, but founders also made something in the process. So I’m happy about that. And the other company which is still scaling, so it’s been seven years. You have a portfolio where some early companies, I will get to know how they’ve done in the next three, four years. Some of my early investments, the middle order performers, they have started getting exits. So that is good. But for the ones which are scaling are still scaling. So, at the end of the 10th year is when I’ll find out the companies which are scaling like HealthifyMe and Unbox, what kind of returns they deliver.

Rutvik 20:23

And obviously you want to hold them as long as possible.

Rutvik 20:26

Yes, So, companies which are performing and scaling, you need to have a lot of patience to keep hold on to them. Not only patience but also a strong belief that this is going to happen. So, yes, there is data, but your gut and your conviction on a specific market, on a specific founder, on a specific product play a huge role. And that, in my opinion, is the biggest driver of success in the venture capital business. So if you look at some of the other successes like what Tiger. Tiger is considered to be one of the most successful venture VCs in India. They invested and poured money into e-commerce when people were still skeptical about it, but there was no data but those gut conviction and belief. Once you have that gut, conviction and belief and you hold on to it for a significant period of time, it pays off. So, Tigers has proved it. Some of our investments like Policy Bazaar, etc, they were not proven when we invested. We held on to it, we were convinced about it, kept investing. And I think they’re proving on and so I’m also similarly convinced about some of the other companies that could I sit on the boards of.

Siddhartha 21:37

For yourself specifically, talking about, you see market first and then find entrepreneurs or companies?

Rutvik 21:45

No, it’s the other way around. So, I started off with the market first, when I got into the venture capital business. I used to think that ‘Okay, let me go and find the next big hot. Food technology is the hot thing or this FinTech or something else.’ Very soon ( and soon as relative to venture capital timeframe, that is in the first two years) I realized that I actually don’t know much about markets. And the more time I spend in the venture capital world, the lesser and lesser I will know about which market is gonna happen first. The reason being, I am no longer in an operating role. I no longer go and meet customers, I no longer go and meet companies and try to understand what their problems are. I am only interacting with founders. And the founders are the ones who are going and meeting customers. We’re potentially meeting every stakeholder in a specific industry and coming out with problems or coming up with solutions to those problems. That means by definition, I have a second degree connect with the market and if I have a second degree connect with the market, every other attempt that I make in predicting the market is purely an intellectual exercise and nothing else, it’s not reality. So I took a call. And this is not only for me, but this is also for everybody within the firm, we’ve taken the stance that we do not understand markets, we are two degrees separated away from the markets. Any attempt that we make at predicting which market is going to be the next hot market or the next e-commerce or something of that sort, is like throwing a random dart on the board. So let’s not waste our time doing that. On the other hand, let’s meet as many founders as we can. And that is something that we do, we meet as many founders as we can, and try to understand the founder and understand the business from a bottom-up perspective. Does it make sense? so the founding team becomes the single biggest entry point for us and if we build that comfort with the founding team and whatever the founding He was talking about from a business point of view from a market point of view. If it’s making sense, then we go ahead and of course, we do our full due diligence on market and understanding the potential of that market or the size of that market and the scalability of that market before making the investment. So, it becomes the founder of slash business first market second approach. So far, we think it has worked for us. And I’ll give you examples. You know, when we invested in HealthifyMe, I think it was not that we were looking for a health platform or a health tech company, Tushar came along, Tushar and I kept interacting for almost a year and a half before we made that investment in HealthifyMe. And they were solving a specific problem and seems like a genuine problem. I could relate to the problem. I got comfortable with the founder, looked at the data, seemed that month on month basis, there was something magical happening because of which they were gaining traction, something magical was happening because of which users kept coming back again and again and again, existing users. So that’s when we decided like something is going on here. Great founder, great product, and looks like something’s going on. Let’s go and study the market. So that’s when we would go ahead and decided to study the market, study the competition, study the characteristics of what is happening here and not here. And of course, there is a lot of gut calls involved over there also, because, these are new markets which have been developed, and then we go ahead and make that investment. So that’s the philosophy that we’ve approached, most investments that we’ve done, have followed that approach rather than saying that Okay, let me find the next company in the used car space, or let me find the next company in the social e-commerce space or the B2B commerce space or things like that.

Siddhartha 25:50

But don’t you think like one and a half years period is a long time. Tushar would have got $15 million cheques in that period of time.

Rutvik 26:00

We got to know Tushar and he had raised just seed money. He was part of Microsoft accelerator when I first met him. So, of course, his company was very early from our investment point of view. He had a product or he had a calorie tracker at that point in time, and I will not say that it had emerged into a product. And he was building a product, he was not ready for a series A, he was building the product, but he did not have a sense of what the business model he could build out of it. But we kept talking, we kept understanding what product is building, we would exchange ideas with exchange thoughts whenever we would meet once in a while, and that’s how we built comfort with Tushar. And so when he was ready for raising his next round of capital, we were there and we were able to engage and write the cheque. And I don’t think that one and a half year period when we were talking. He was not investment ready from a series point of view. I didn’t have the fear that somebody else is going to come in and invest in. And even if somebody else would have come, because of the relationship that you start developing and building, you’d get to know. And if I need to react faster, I can do that. So that’s one of the ways, kind of you’ve worked with our founders. Even Currently, we are investing in one such company, where we are in touch with the founder for almost six to eight months and build comfort with each other before actually making the investment. So yeah, we start tracking them sometimes early. And we stay in touch with those founders for a 6-7-8 month period sometimes. In Tushar’s case, It was longer, but not every company, we spent one and a half years, it’s just because Tushar got in touch with us while he was still in the accelerator.

Siddhartha 27:48

So let’s talk about two data points here. For HealthifyMe, how did you identify the product-market fit? They were very close to hitting or already hit. Yeah. And how did you know that the timing of the market is right because these are the most important characters?

Rutvik 28:04

So few things, we looked at. When HealthifyMe came out of the accelerator, they were just a calorie tracker. And they had built a great product from a usability point of view but I was also not sure whether can you actually build a business, especially in India, from an app that is helping you track calories. You’re not selling any service, you’re not selling anything? How will you ever make money was unclear to me also. And it was unclear when the company didn’t know at that point in time that how they’re going to make money. Once they had a sizable user base where enough users were trying to track their calories or food habits. They started experimenting with various business models, stumbled upon a business model where they would have coaches on their platform, who would then start guiding and nudging users that, hey, today, it’s fantastic that you are tracking your calorie here. But by the way, please don’t eat rice tomorrow, or instead of three Rotis, have just one Roti, instead of that go for a five-kilometer walk in the morning, those nudges is what they started doing and users started loving it. And, and more and more users came back. And so we saw that data. And that data was kind of convinced us and they were experimenting with making users pay for it. And users were willing to pay for it. So all that data was right in front of us, which gave us a sense like not only a product, people using the product, but a business model is emerging out of it where you are able to put a layer of services on top of your core product. And that’s when we decided to dive really, really deeper. And then, of course, we look at a lot of data in terms of user data, in terms of sales data, in terms of the month on month growth data, marketing data, etc. to convince ourselves that something is happening here. And of course, this is a series A stage. So data is incomplete, data is imperfect but it’s like a jigsaw puzzle, you put five, six elements in and you look like I’m going in the right direction, maybe if you put 10 other pieces the puzzle will get completed, but you don’t have those 10 pieces right now, but you put those five pieces and a picture is emerging out. So that’s what starts emerging out at a series A stage. Then we went around understanding the market, you looked at what the market is today, by the way, the culture didn’t exist at that point in time. So there were gyms in India, but very few gyms and concentrated in large urban areas. Even if you look at a city like Bangalore, you would see gyms concentrated in Koramangala and Indiranagar, but not necessarily the entire city of Bangalore and a similar situation across the country. That means if somebody who wants to become fit, they do not really have access to gyms so there are latent demand and the latent need for it, but there’s no access for it. And going digital seemed like an obvious intuitive way of being able to reach those users very, very fast. So that’s the market study that we did. The other market study we did was we looked at companies like VLCC etc which were already in the weight-loss business. VLCC filed for an IPO at that point in time. Their data became public, so we were able to look at their data and understand that there’s a massive demand for it that is growing on a yearly basis. So that’s how you build comfort on the market. So this is just an example of what we did. So that’s a consumer company in a B2B company. On the other hand, you build a sense of the market by talking to existing customers and potential customers of the B2B SaaS company. So that’s what basically helps you build comfort around that.

Siddhartha 32:11

It’s been seven years journey. And you must have some data points accumulated for yourself, what are the traits in some founders who scale 50-100x whereas there are other founders who even put their 100% but are not able to scale?

Rutvik 32:28

We ask that question a lot ourselves internally. Few things that we’ve seen, which is common across most founders are founders who’ve scaled. First and foremost, they have a deep conviction in what they’re doing. A lot of times you’ve seen founders who come in pitch to us. And you can see through that they’re trying to pitch and create a story which they think investors may like. And that is absolutely the wrong way to do it. And you’d be at least instantly are able to gauge that this founder does not have deep belief or deep conviction in himself or herself, but is trying to build a product or build a business which will make others happier, which will make others buy but it’s not coming from within that deep conviction. So that’s the first thing and there are the other founders that are super successful. They’re okay, meeting 50 investors and getting 50 Nos but will want to partner with the 51st guy who understands that business and, and rides along with the same conviction that the founder is coming with. So that deep conviction is super important. The second is, there are resilience and grit that comes into the founders. Founders that we’ve been successful even before raising series A sometimes. They’ve faced many times near-death situations and are able to pull up from those near-death situations. It is a function of the deep belief and deep conviction that I first said, because they’re so convinced about the thing, that even when they’re at near death, they know that this thing is going to work, let me hustle my way around, to pull myself out of this near-death situation. And they’re able to do that very, very successfully. And so they go through that multiple near-death situations. Without a deep conviction, once you reach that near-death situation, you’re most likely going to die rather than being able to pull yourself out. So those two are very strong qualities. Third quality which we’ve seen, but it’s very hard to gauge during the initial days is that the personal growth of the founder has to be at a rate which is faster than the growth of the company. So now you’re investing at the time of our investment, it’s 20 people or 25 people company, there is no organization, it’s flat. The founder is usually doing everything at his own pace and is in complete control of everything. But as the company grows, as the business is growing, the founder needs to transform into becoming a Doer to somebody who can manage with numbers, somebody who can start thinking okay, instead of how can I do it? Who will be the best person to do it for me? Instead of thinking of Okay, let me go and figure this out myself is able to define metrics as to okay what are the metrics which define success or failure for this and then lets the other person go ahead and drive it. So which requires the founder to be able to grow at an exponential rate and has to be one step ahead of the company. Because the founder is at any given point in time is building for the next 24 months. So you’re one step ahead of the company, you’re one step ahead of what the organization’s needs are. And that means you’re growing yourself consistently, year on year, quarter on quarter basis, very hard to gauge that, you know, we sometimes think that this founder will be able to grow, but many times, companies do not succeed because the founder is not been able to grow. And there are examples of that not only within our portfolio but across the ecosystem, where the company goes beyond what the founder’s ability is. So these are the three big things that make a founder successful.

Siddhartha 36:42

You mentioned about the conviction, that conviction is sometimes stubbornness. Does that make some founders blindsided to the market or customers?

Rutvik 36:51

Yes, it does. It’s a very fine line between conviction and stubbornness. stubbornness means that I’m not willing to listen. Conviction means that I know that directionally, I’m right but I’m willing to listen and add on and absorb all the best practices and, whatever is right for the company and the product and to accelerate myself in the direction in which I’m going. So there’s this distinction. Stubbornness means that it’s my way or the highway. Conviction means that, yes, I think directionally, I’m right. And I’m not willing to change my direction, but I’m willing to listen and absorb and add on to everything that will help me accelerate in my journey. Stubbornness will not take you very far, but the conviction will take you far.

Siddhartha 37:51

Coming on the funding side, congratulations Rutvik, you have raised over 400 crores for fund three for India. Tell us about the side which people don’t know, about the challenges of raising this fund? What has been your journey?

Rutvik 38:09

What many people don’t realize is that the fundraising journey for venture capital is also equally hard. Just the way I said a startup probably take seven or eight years to establish itself. A venture capital firm actually takes 25 years to establish itself. If you look at the most established names today in the industry, like a Sequoia or Accel, they’ve been around for more than three decades, and that’s why they are established. Whereas most of the funds which are homegrown within India today are at best, a decade old. So, compared to Accel and Sequoia, probably a third of our journey. So we are not yet as established because as I said, the journey is a 25-year-old journey. And in that journey, you have to raise funds consistently from LPs that means you have to go out, tell a story, that there is a great opportunity to invest in India. So give me your money. But by the way, when you give your money to me, or the LP gives the money to me as a VC, you will have no control or say where I’m going to invest in what I’m going to invest in. You have to blindly trust me, you have to blindly trust that my judgment is going to be great. You have to blindly trust that post-investment, which is you know, where my judgment came into place, my ability to work with the founders is going to be phenomenal. And I’ll be able to help the companies grow. You have to blindly trust that these companies can potentially generate a phenomenal financial return. Once you commit your money with us, you won’t see it for the next 10 years because this is a very Illiquid asset class, and you won’t get to see anything for the next 10 years. So, telling that story to someone and convincing them to part with their money on blind trust, where they’re not going to see a return for 10 years is extremely, extremely hard. And hence, to raise a fund of 400 crores or whatever size it may be. Size actually is immaterial, your size comes out of the strategy for the fund, but whatever size you are raising, unless you’re a 25-year-old VC firm, it’s a one and a half to two-year journey where you go and meet and pitch the story to maybe 500 or 600 potential investors and are able to convince 30 or maybe 40 out of those 600 investors. So it’s a very, very low conversion rate out there to invest in your fund. So it’s a similar journey, like a founder to go and convince and can pitch, pitch, pitch, pitch, pitch, one person said yes, again, go and pitch pitch pitch the second person said yes, and keep doing that till you get 30-40 investors to build up a fund. And you have to repeat this every two, three years, just like our founder is doing.

Siddhartha 41:09

So, this fund is from India or from abroad?

Rutvik 41:11

So, the history and the background of Inventus is that it started off as a US India fund, where the fund was largely raised in the US, the India team that is myself, Sameer and Parag, the three of us managed India investments. And we had partners in the US. Manu, Kanwal, and John use to manage US investments. Half of the fund was deployed in India, half the fund was deployed in the US. We did that thing for the first 8-10 years. It was a great way to get started because nobody was willing to invest in India at that point in time. So you could raise a US fund and say that hey, by the way, here’s a US fund. Here is a fund which is investing in the US but it is also investing in India and you know, kind of gave comfort to a bunch of investors. But after 10 years, I think, India as a market has evolved. Venture capital is an established asset class in India. So, people start, from an LP point of view, looking at specialization. You want to say that okay, is it an India fund or is it a US fund, you know, those questions start coming up. And it was also the right time for us as inventors to kind of evolve to that next stage and create an India specific strategy and a US-specific strategy that is independent and distinct with this own team and own identity. We share a brand name, we’ve shared common roots and common philosophy, but for all practical purposes, they are separate funds. So, we started raising this fund independently. And because this is India specific we also tap into the domestic market to see if LPs would be interested in investing in India. Very, very pleasantly surprised that there is a strong appetite for investing in this asset class in India. We got good momentum and we rode that wave and rode the momentum. And 75% of our investors are actually from India at this point in time. So, very, very happy about that.

Siddhartha 43:01

That’s a huge confidence in Indian entrepreneurs.

Rutvik 43:03

It’s huge confidence. So, I think this is a sign that this asset class and the startup as an ecosystem is evolving. It has reached a stage where people are willing to believe that something real is happening over here. It has also reached a stage where if you have domestic money into the fund, that means five years down the line 10 years down the line when this money gets realized, it will stay within India and recycle again rather than it going outside India. So I think this will get the ball rolling in terms of more money coming into the Indian market over a long period of time.

Siddhartha 43:41

And you said you raised, specifically close to 400 crores, you could have raised more because Inventus has a brand name. Why was this strategy?

Rutvik 43:52

So, what we’ve done for the last 10 years is we’ve invested in the way you defined it as late series A, early series A, somewhere in that stage where you are investing one to $3 million into the company, you’re investing into capital-efficient companies. So, that is a strategy that we follow that is what we do best. And that is where we as a team believe we can generate maximum returns for us. So, for us, I think building or developing a strategy where we can generate a significant multiple of capital within India, it felt that anywhere between 300 to 500 crores are probably the ideal size, where over the next 5-6-7-8-9 years you will be able to deploy it and generate substantial returns out of it. Anything more than that requires you to have a well developed public market or a well developed M&A ecosystem to be able to generate returns. That’s the feeling that we have. It’s not that it will not happen it will happen. But I think we’re still five years away from it. And we are tapping into, you know, creating an India only fund which we’re tapping into investors who are first-time investors into a fund like ours. So you need to be able to execute a strategy where you are confident that the market is ready to generate returns in that strategy. So for a very large fund, I’m not sure whether the market is fully ready to generate those, you know, 5x return for an LP yet but for a small fund, you can do it. Hence, that was a strategy that we chose, and that is what we are executing towards. So that’s the way these investors will probably come back and stay within this ecosystem Otherwise, you will lose them within one cycle.

Siddhartha 45:46

And now coming to a more personal side of yours, what is your routine look like, your personal side and work side?

Rutvik 45:51

So, I try to keep a balanced routine. Of course, work is never-ending. There’s always more work to do. But last few years, I’ve tried to spend as much time as both at home with family and kids, I have two boys who are teenagers now older one is 15 and younger one is 13 years old. And in another few years’ time, they’ll be out in college. So try to spend as much time with them as possible. Try to help them become young adults. So that’s on the person’s side. I spent a lot of time with them. And on the other side, work side I think it’s a mixed bag again, on any given day you’re doing multitasking. The venture capital job is multitasking. Morning, you are probably, meeting to entrepreneurs, afternoon you are dealing with, you know, a company of yours which is in a hyper-growth stage. Then the next meeting, you’re dealing with a company which is facing a cash crunch, then you’re trying to deal with the next company which is helping in hiring or you’re negotiating terms with someone. So, by the way, that is the toughest part of a venture capital job is that you’re constantly context switching. And you have to be able to handle that context switching efficiently and not affect what is happening in your previous meeting with the next meeting. So think about a situation where, if I’m dealing with a founder or portfolio company, which is facing shut down, and you had a very, very tough conversation about Okay if you’re facing shut down, you need to layoff people you need to cut costs. You did that conversation, which was not less than half an hour later, you’re coming in listening to a pitch from the next entrepreneur who’s trying to present his or her life vision and has put in everything for that one hour into it, you have to give you 100% in that in a very, very optimistic frame of mind. So that context which you need to be able to do very, very rapidly. So That’s the tough part of a VC job, I would say.

Siddhartha 48:04

And how do you avoid biases, for example, you said, you know, one of your portfolio companies might not be working out and the new person who’s coming out, you might say, Hey, he is doing something similar to that. Let’s shoo him away.

Siddhartha 48:17

So that’s why VC is not an individual business, but a partnership led business. Individual biases exist, and they creep in all the time. And those biases creep in, because of my personal experiences, biases creep in because of being blind around certain things. So you always, whenever you listen to a pitch, if you’ve liked it, or even if you have half liked it, you ensure that you discuss it within the partnership. And that’s why, VCs have that infamous Monday morning partnership meetings, pretty much every firm has it. And that is one way in which you kind of get rid of your biases. So you discuss it with your partners and if collectively everybody thinks the same that means no. But if the one or two other people within the partnership who think no, no, no, there is something to it, or they may be able to point in a direction which you have not looked at, can minimize the biases, biases always exist.

Siddhartha 49:16

So at any point in your VC journey, did you felt lost?

Rutvik 49:21

I don’t think so. Thankfully, no. I think so far things are going well for me. Things I’m still optimistic and bullish about this profession and, the fund and the startup ecosystem. So so far, I’ve not felt lost now.

Siddhartha 49:39

Because you might have thought, you know, Hey I am coming from a product management background at Google which is one of the best places to be at and now uncertain times?

Rutvik 49:54

No, I think I’ve made peace with uncertainty. I’ve made peace with the fact that it will take me 10 years to realize whatever I’ve done is right or wrong. So once you make peace with that uncertainty, I think you don’t feel lost. And you have to be self-motivated all the time. Otherwise, you can’t succeed in this profession. You have to wake up every morning, self-motivated, optimistic that let me go out and do one work.

Siddhartha 50:25

So, what’s the inner drive or purpose because definitely money is not? for most people who don’t know the game of VC business on the listener side that you might have been making more money in Google and here you will not see that for 10 years.

Rutvik 50:41

Yeah, absolutely. So ,the VC business is about delayed gratification. The external perception is that you’re probably making a lot of money. But that’s in the long run, probably yes. But in the short run, getting a job at Facebook or Google etc. will make you more money from salary over there than what you’re doing the VC job. So I think, it comes back to that conviction and belief in what the founders are doing. So, you know, you’ve kind of bought into that conviction and belief of the founder. And hence you are okay with that delayed gratification. So founders come in with the belief that here’s a great idea, great product, you know, this will become big. you bind to that belief, and hence now you also start believing the vision that founder had, and because I’m also believing in that, I’m okay with the delayed gratification. It doesn’t haunt me that. Yes, there’s always that thought that what if none of the investments work out? What will happen to me? It’s not that I will become poor, or I’ll be on the streets, I will still be okay. Maybe not as well as what I would have been if I had stayed on at Google. That’s okay. But if it works out, I think the sense of achievement and the gratification is going to be far greater.

Siddhartha 52:08

Thank you so much, Rutvik. It’s been wonderful to have you on the podcast.

Rutvik 52:11

Thanks a lot.

Siddhartha 52:12

Any last parting words for the founders who are listening to the podcast?

Rutvik 52:15

I think the only thing I would say to the founders is to believe in yourself. And that belief in yourself is what is going to make it or help you drive towards a lot of successful outcomes. And so stay true to your belief. That’s all I would want to say. Thank you, Siddhartha.

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