Sanjay started his career in Silicon Valley in 1992 & spent over 7 years at his first company, working in different roles across – Sales, Customer Support, Engineering & Marketing. He then worked with Xerox & Portal Software in US before coming back to India in 2003.

From 2003 to 2011, he had several experiences most of which revolutionised entire ecosystems they were part of, right from mChek, ZipDial, Ezetap & Aadhaar Team (at UIDAI).

Finally in 2011, he started Angel Prime (now Prime Ventures) which invests in early-stage entrepreneurs to build great companies.

Some of his portfolio companies are Moneytap, Ezetap, Happay, and Kredx among others.

In this podcast, Sanjay shares his experiences & learnings from being on both sides of the Startup ecosystem – An Entrepreneur & a VC.

Watch all other episodes on The Neon Podcast – Neon

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

Notes –
00:38 – His journey from a small town in Karnataka to Silicon Valley & finally becoming a VC
04:04 – Part 1- Experience & Learnings in Silicon Valley (from working in Sales, Customer Support to Engineering)
05:55 – Working with Xerox
08:40 – Coming back to India and working with mPortal & mChek
11:20 – Realizing of being ahead of time at mChek
14:08 – Successful Startups which Controlled their ecosystem like Paytm & those which rode the Ecosystem changes like PhonePe & GooglePay
16:49 – Part 2 – Working with Aadhaar (UIDAI Team) & Experiencing the formulation of Aadhaar
19:56 – Part 3 – Bringing together previous learnings & starting AngelPrime (currently Prime Ventures)
22:51 – Conceptualising ZipDial while being on a flight
25:10 – Validating Market Fit in less than $100 at ZipDial
28:45 – Building Ezetap – Being on the Merchant Side
30:45 – Being the First Sculptor of the Company
34:16 – Formulating Market Specific Preferences as a VC
40:00 – Importance of being Honest & Open with your VC Partners
44:57 – There’s No Completely 100% Right or Wrong situation being a VC
47:59 – Being a Founder in Late 30s or 40s
50:37 – Having 360 days of frustration & 5 days of glory as an Entrepreneur

Read the podcast Transcript below:

Siddhartha Ahluwalia 00:00

This is Siddhartha Ahluwalia, welcome to the 100xEntrepreneur 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 primevp.in Today I have with me Sanjay Swamy, Managing Partner, Prime ventures. Welcome Sanjay to the podcast.

Sanjay Swamy 00:35

Thank you Siddhartha. It’s great to be on the podcast with you.

Siddhartha Ahluwalia 00:37

Sanjay, we would love to know more about your journey. You have been a Bangalorean right from your growing up days. How was it going back Bangalore 30 years ago?

Sanjay Swamy 00:46

Long Story, I actually did not grow up in Bangalore. I am a Kannadiga but I grew up in Orissa till I was 10, Dad was in the Air Force and later HAL set up the mega engine factory there. So, grew up in a very small town till I was 10, then moved to Bangalore and then did my school here at St. Joseph’s Boys High School and then undergrad at UBC Bangalore, and this was in the 80s. And then after that towards the end of the decade, I moved to France for two years, did a master’s in flight control systems in Avionics in Toulouse at the National Aerospace school called SUPAERO, then went to the University of Washington Seattle, got a second Master’s, and then worked in Silicon Valley for 11 years, came back to India. And then I’ve been here since the last 15-16 years. So, that’s been sort of the journey but as a Bangalorean and as a Kannadiga really enjoyed living in Bangalore in the 70s and 80s. It was a pretty small town. Indiranagar which is now seen as the hub is where I you know, I grew up. Parents build a house and our family thought we were crazy to go that far out because for most local Kannadigas Jayanagar or Basavanagudi is the core or Malleshwaram. You could get from one end of Bangalore to the other at any time of the day in 40 minutes max, I used to ride my bicycle to school from Indiranagar, come home for lunch in 12 minutes. I don’t think you could expect to do that in 12 minutes unless you’re in an airplane. So it was a great time to be in Bangalore. Obviously, the weather has always been one of the best in the country and that’s still the reason why people love to keep moving to Bangalore. I moved out of India in 1987, came back in 2003. And it was night and day. Whitefield was not considered to be a part of Bangalore and many people jokingly might not consider it even today. But it really wasn’t seen as a part of Bangalore at the time. It was close to Bangalore and now the city has expanded, the population has grown 5x, there’s been a lot of change in the city sort of unrecognisable, and in many ways, unfortunately. But it still remains the culture of welcoming people from all over. And sort of the climate is of course hard to beat anywhere in the world. And so as a city that combines the best of the breed from a tech perspective as well as the weather as well as the locals. Many people come to Bangalore and they don’t bother to learn Kannada because they don’t need to. Let’s put the strength and the weakness of the city in some ways because everybody feels at home as soon as they walk in, but also I think, the locals sometimes are little resentful, I would expect but I think it’s a lovely place. And for me, it’s home. So I’m thrilled but it is a very different city from where it was.

Siddhartha Ahluwalia 04:04

Tell us about your experiences and work in Silicon Valley.

Sanjay Swamy 04:08

So I was in the valley from 1992 to 2003. My first job actually was in the startup founded by Naren Gupta, who is the co founder at Nexus. And Naren has been a longtime mentor and friend, I guess is the right word. He’s just an amazing person to be associated with. So I worked from 1992 to 1999, seven years in my first job, it’s probably one of the best things I did, a long stint in my first role. And after a period of time, I started in customer service and training then I moved to sales, then I moved to engineering. Then I moved to international business development, and then I moved to marketing. So, finance and HR being the only two things that I didn’t do in that company. In hindsight maybe those are the two most important ones from a VC perspective. But I really saw a lot of the customer facing roles, and I also saw what it took to build really high quality software. And that part really was the formative years for me. So I still advise youngsters in the first role, spend a lot of time if it’s a high quality company, and if you’re getting growth and opportunities to do different things. Obviously, as an engineer, one tends to stay in engineering, but if you have the personality to go out, meet people, talk about technology to them, it’s actually amazing to be sort of an evangelist, which was the role I had, for the longest time. I then spent about a year and a half at Xerox PARC. So, this was the time 1992 to 1999 where every day there was somebody coming up with the new business plan, and it was the dot com era and everything was very, very exciting. Everything could only go up and up. And the Internet era sort of hit me and I got a call from a friend who had joined a small startup team at Xerox Parc. Xerox Parc is famous and legendary for building some of the most amazing tech products. Legend goes that Steve Jobs came here and he saw the operating system that Xerox had built for photocopy machines. And then he said, well, this is how I’m going to build the Mac. And we were in the Digital Rights Management Group that Xerox is trying to turn into a business. Eventually, I had the privilege there of engineering spin out in the joint venture with Microsoft, got to meet Steve Ballmer. And it’s a very exciting time 1999-2000. But it was clear that wasn’t going to be housed inside Xerox. It was going to be spun out, and then I joined a Silicon Valley, post IPO startup called Portal software, which was a darling of the telecom billing space, worth I think at $1.7 billion had really shot up and learned how to bring technology or billing software to the media entertainment industry, drove the sale of a multimillion dollar contract and probably the only company to have collected more than a million dollar in revenues from Napster, we got to meet Shawn Fanning at the time. So it was a very exciting time to live and work in the valley in the media entertainment industry, in supplying technology to them or got to work with Sony Pictures, all of the big names, brands that we keep seeing now of course is pre Netflix era. Then I got laid off, right. Portal was going through a downtime and they decided to only focus on wireless. And so I came in with a three quarter million dollar PO and the CEO said thank you very much. And you don’t have to show up tomorrow and then it really hit me that if you’re not in control of your life, a lot of strange things can happen. And the entrepreneurial bug hit me. But also the India bug hit me at the time. So one of the things that happened was, of course, I took a break hadn’t been to India in a while, my wife was working at a startup that went IPO. And we just been heads down working on and all of that. So came back to India in 2003. Thinking I would come on a holiday, and then you know, people say in the US, you always have the n plus one syndrome, you always say I’ll go back next year. I’ve had the n plus one syndrome in India and then after that, now, back to staying here.

Siddhartha Ahluwalia 08:40

And tell us between the time you know 2003 to 2006, before you join mChek as CEO.

Sanjay Swamy 08:46

So actually, when I came to India on that first vacation, I took an auto and I was asking the driver Time Kya Hua? And at that time Reliance just launched with Rcom and he pulled out his phone and read of the time to me. And that was the aha moment where it hit me saying he has a connected terminal in his hand. And that’s when I said, well, you know, we got to come back and live in India and see what’s going on here. And literally a mobile version of PayPal was sort of the concept that I was thinking about, I came back to India. And as I was literally coming to India, one of my friends reached out and said, I’ve got a team in India, I would like somebody to help me lead that team, can you mind spending some time with them. And so that’s how I joined a company called mPortal, spent about nine years with them, and then decided to do something more sort of product oriented. There’s a Valley startup called Ketera, which is a Kleiner Perkins funded startup in the procurement space, setting up sort of an arriba on demand, sales force that done that to CRM and they were trying to do this for procurement and they hired me into set up the India operations and we went about it quite differently because I had never built an engineering team I just briefly worked in an engineering team in all my years, I’ve never written code. So, I set up like a business guy would, everybody was putting ads in the papers for J2ME, Instruct, Java, J2SE or whatever it was J2EE, I put a photograph of a motorbike and said, hey, one of you could win this thing, right? So we tried to do everything differently. And we built one of the best teams out there. There were probably about 15 startups that have come out of the first 30 employees. I joined Ketera over the years. One of which I co founded with Amiya at ZipDial and Valerie from mChek days, but during that entire stint, this itch to do mobile payments was something that I had always had, and I had been introduced to Rajesh Jain who is of course legendary as an entrepreneur and investor in India. And DFJ was funding mChek and spinning it out of a little world, and they had asked him to go invest. And so that’s when he called me and said, Hey, do you want to come on board? So fast forward to middle of 2006, after working out the transition with Ketera, I decided to join mChek, initially as COO, and then very soon became the CEO because the founder decided to go back and do something else.

Siddhartha Ahluwalia 11:21

So tell us about the mChek journey. you were ahead of your time. And at what point did you realize that this journey is a little ahead of time.

Sanjay Swamy 11:31

So I think that’s being complimentary to me. I’m sure we made a lot of mistakes. And if I look back now, and all the things I’ve seen startups do, I think I would attribute a lot of mistakes and things that we did not do right. But having said that, it certainly was very ahead of its time because I don’t think India had the infrastructure for it. Without Aadhaar for example, opening an account was very time consuming. This was a phase, where we were still on the feature phone technology stack though mChek was a SIM card based application, it still was dependent on SMS and SMS delivery and things like that. And we were trying to build a two sided network because you needed to be on mChek in order to accept the payment, and you needed to be on mChek in order to make the payment. We were riding on visas, interoperability rails, but it was still a very, very early days in the Indian market. Mobile penetration was growing. And that was the primary focus of the operators, right, just get mobile’s out there as much as possible into a land grab on the market share. Banking was still sort of a niche product then. And the idea of using the mobile to bring people into banking was seen as a long term thing. But, it was one of those where I look back now and say what were we thinking, we thought we could pull this off in 18 months as a startup with 5-10 million dollars of funding. In hindsight, it’s taken 15 years and we’re still sort of scratching the surface today as much as UPI has had a great run in the last three years and Paytm prior to that, as well, we’re still sort of at a very nascent stage. So, I think certainly timing wise, we were way of overestimation. But having said that, it was also very complex product. It required partnerships at a very different level to get us an application on the SIM card of a telco is next to impossible. And we had it on 300 millions Airtel and Docomo SIM cards that was something incredible for a startup to pull off. So, we clearly had something very unique there that they also believed in at the leadership level right, these permissions to even experiment with this go all the way up to the very top in such company in such situations, but we also had to partner with VISA, with the banks and we had partnerships with HDFC Bank, with ICICI bank, State Bank of India. So, we achieved a lot in sort of cultivating and educating the market, but clearly, it was a large ecosystem play and not something that a startup could do. And if you notice later on, the startups that have succeeded in the space worldwide, haven’t been the ones that have tried to do it all in an ecosystem play. Either they’re taking control of their destiny, like in the case of a Paytm. Or, you know, the ecosystem play was done by NPCI, by the government and then the startups like the PhonePe, and even Google pay and all the others that have come, have ridden on top of the ecosystem play that was being done by the government. So, we were trying to do it all in a small startup. And in hindsight, we were being perhaps too ambitious, but it was a great journey. I think every day I spent there, I really was waking up in the morning saying, I just can’t wait to get to work and it always seemed like we were at the cusp of doing something really spectacular and the prize was really worth winning as has been played out over the last few years. And that used to be always the fuel and the motivation. And at some point after four years of trying really hard, it was clear that that wasn’t happening anytime soon. And a lot of the infrastructure issues still remained as much as we had tried. And that’s when I felt it was time to move on.

Siddhartha Ahluwalia 15:23

It was essentially banking on SMS

Siddhartha Ahluwalia 15:26

Banking on a secure SMS. To this day, I maintain is the most secure form of mobile banking that’s been implemented in the world because it was on the SIM card, the SIM card is smart card. It is like a hardware security module in your pocket that has never been tampered with or broken. All these issues where you say, somebody was on vacation and someone went to Vodafone and said, give me a new SIM card and produces a fake ID, none of those were possible on technology that is embedded on the SIM. So, I think it was a very superior technology. And it’s unfortunate from that sense that the world did not get to benefit from it. It’s happened in small places like in Estonia, for example, the whole country’s national ID system still runs on the security of a SIM card. But also technologies move forward, right? I mean, with cloud based solutions, and you know, with AI and all of this, right, I mean, ultimately, security is a very expensive thing. And what you try to do is make sure that the fraud that’s there is below a certain acceptable limit, no system has zero fraud. So at some point, you make these trade offs. And I think we’ve got a really good solution now today, where the upside is really high. And the fraud is within limits and is managed through risk management.

Siddhartha Ahluwalia 16:50

Then Aadhar happened. Tell us how that journey started.

Sanjay Swamy 16:54

So, my journey with Aadhar was kind of interesting, because when the program was announced, I was still at mChek. And I wrote a blog on MediaNama, which ended up being one of the very well read blogs on why perhaps the SIM card should be used instead of a smart card. And after I finished my stint at mChek, it was still February 2010. And, I wanted to take a year off. But I did tell my wife, look, I will reach out once to the UIDAI team and see if I can help in any way. And obviously, given the fact that I had tried to help with opening bank accounts in the large numbers, that experience and with the mobile becoming a larger part of the future for the country, I had some first hand experience that was kind of relevant. And so, then met the team and happened to meet Nandan and he said, well, if you have a few months before your next thing would be great if you can help in some ways. As some of you may know, the Aadhar program Nandan had brought in about 15-20 people from the private sector as full time volunteers, some as little as three months, some lasted four to seven years. People like Pramod Verma and Sanjay Jain and Vivek Raghavan who worked sort of behind the scenes and really tried to just define the right architecture for it, but there are also people who came from all over the world and participated in the research of how should the number be designed so that it doesn’t have the risk of how should I say in any assumptions one can make from the number and so on. So it was very scientifically done and the best brains are from around the world came, not just Indians or Indian diaspora, but from all over. And so a few of us had the privilege of being full time involved with the program, some were pro bono, some were actually employees that was in the pro bono category, and worked as volunteers with the UIDAI and really with one goal in mind, just define and help facilitate and do what’s best for the country in the long run, and it’s amazing to see how this group of people could constantly work together, putting aside all differences who may have been competitors in private market or in our professional lives earlier. But it didn’t matter, there was only one common goal. And looking back at it seven years later, or now, nine years later, it’s just unbelievable to think what has happened. India has, essentially enrolled the country of Singapore every week non stop for six years in a row, or the country of Australia every month non stop for six years in a row to get it to in over a billion users now. So, it’s something it was a point in time I happened to be sort of connected to the program. It was a privilege to be a part of.

Siddhartha Ahluwalia 19:55

So I would say the first part of your journey in India the mChek got you fascinated and curious about mobile payments, and the Aadhar journey gotten you the bug of scale. And then you combined both of them to start Angel Prime.

Sanjay Swamy 20:12

Yeah, so I would say mChek also had hit some pretty large scale. I don’t think there’s any mobile payments company yet that had the distribution that we had achieved that we were on 350 million SIM cards. But you’re right, absolutely, achieving scale is not the easiest thing. And the Aadhar program also help think scale right from the beginning. And I think that’s something that even later on as an iSpirit volunteer working with the team on you know, India stack and things like that. We’ve only been thinking about, can we impact 200 million people, right? The entrepreneurial side is very different actually because you’re starting and right now, you’re just thinking what the first customer, the first paying customer how do we get 100,000 or a million users if it’s a consumer play and so on. So the zero to one play is actually the most exciting part, at least for me, because everything is possible, right? You can have a business model that says, I’ll take no money now and make it up later I can charge money now. You can change games, everything. Product also, there are no boundaries that you define, right? You say, well, this is what the target customer is. And this is what the product should be for them. And you know, you go with your gut feel or your intuition or your market research, and eventually you refine it. Another VC had once told me, it’s like a sculpture, that you keep refining it. And you know, you can’t just say this year alone, you work on the head and the right arm and then figure it out. You have to actually do it holistically. But, clearly to me at the time, doing another startup was one option. But I really felt I enjoyed the zero to one phase, and not so much the 1 to 10 phase and I was probably not very good at it as well but if you’re doing a startup, you need to be able to do that and go the whole journey, and I felt my time would be better suited if I worked in the very early stage. To my good fortune, Shripati and Bala who were also volunteers at Aadhar and I knew Shripati, we had done an angel investment together and so we got to know each other. We had a very similar mindset. We’ve all felt that this is the phase we really enjoyed and so that’s why we said let’s start Angel Prime together. I had already started ZipDial and both as co founder and as an angel investor and also started dabbling in Ezetap building some hardware around it. So ZipDial, we ended up being angel investors in the company also. And then for Ezetap, we said, hey, how about we do this more formally and raise a fund, our pool of capital and, do this across multiple companies, and that’s when Angel prime was formed. So this is in 2012.

Siddhartha Ahluwalia 22:51

And I believe ZipDial was a plan you discussed on a plane with Valerie.

Sanjay Swamy 22:55

Yes. So during my mChek days this very young, smart American lady reached out to me and said, I am interested a lot in mobile payments, and I’ve been hearing about you in India, I’d like to just come and work with you, I’m gonna quit my job at eBay. It was the easiest interview I’ve ever had. And turned out to be an amazing person, super motivated, came here genuinely wanted to learn about India about emerging markets and, work sincerely here. Our work ethic was something I used to keep saying can you replicate yourself, you know, three times and then three times again, because that’s the caliber of work was just amazing. And on one of our trips to Airtel or something that on the way back on the flight, we were discussing, tap and pay and things like that. And suddenly I said, hey, I think we could do some of this stuff on a missed call. And so she came home that weekend, we sat down and we thought about 70 or 80 different things you could do with a missed call that were not being done with the missed call. And then we kind of had shelved that. This is sort of an advice I give all entrepreneurs, when you have an idea write it down and put it away for some time and then see if it keeps bugging you non stop. Right? And that’s when you feel well, maybe there is something here, right? Because no matter what you do, you’ll start seeing use cases that keep increasing. And so after I left mChek, she was still very motivated, she was still at mChek at the time and she said, hey, we need to give that idea an opportunity. And coincidentally, you know, one of my early Ketera employees, Amiya, had also reached out, and said, what are you doing next? And I just told him, I have this crazy idea with a friend of mine. And he immediately responds, That’s a great idea. So then let’s put it to test. So we just quickly did something and Val said let’s launch this on IPL day. So, on the first day of IPL, we launched a poll it was called the Indi polls and Ashish Sinha at Plugged in, which is now NextBigWhat, what was kind enough to cover us. Ashish and I had actually worked together at Ketera and he gave us a little coverage and we suddenly started seeing, you know, people are actually using the service. And there are some amazing things we tried to growth hack our way. But ZipDial was launched, in fact, Amiya had fractured his left hand. So it was literally coded single handedly. And, and then we just put it out there on a $20 quarter server on Slice Host. And so we validated complete product market fit for less than $100 spent in this thing. And that’s when we said we will trade a company here, there is something here, right? And so it’s interesting, you know, validating product market fit can happen without a lot of money, right? And of course after that, what does it take to scale it is there really a large market opportunity, all that can has to be done with a lot more research, but PMF can actually be established very, very quickly. So the ZipDial journey actually got a little more serious because once we put out there was World Cup soccer in 2010. And the matches would end at 3am. Amiya and I would watch all these matches. He would just update the latest score. And every morning people who dial a number and they would get the results of the World Cup because it was too late for the newspapers also to include the results there. So it just gives them the result on SMS. One day we both sort of accidentally slept off and didn’t update the score. And we got a bunch of irate people calling say, what happened to the score. Actually, people were depending on this right and that was the moment we said let’s go in whole hog and then we put in some more money and raised one from angels and from Mumbai angels at the time. And then world-cup cricket happened, the first day of the India Bangladesh match Sachin and Sehwag both scored centuries in Dhaka, and we hit 4 million calls on ZipDial. By the time we had moved on AWS. And Amazon called us who are you guys? all of a sudden you have 4 million server hits and probably more, we just couldn’t handle the load. And then India, of course, won 2011 finals and ZipDial was like up, up and away at that time. But by that time we had started realising business use cases. Gillette wanted to use us, P&G wanted to use us for sampling and things like that. And later on, coincidentally, during the 2014 elections, both the political parties actually used ZipDial quite extensively to reach out to the masses, and the integration with Twitter happened. And so more people are brought into it. So that was part of the ZipDial journey. But it was clear at some point that it could be an interesting company, but probably not a long term spectacular company, at least that was the common logic. And we hadn’t raised a lot of money in the life of the company, we’d raised a little over 2 million. So when Twitter came by, and it turned out to be the right exit. Everybody got a solid return. So, big takeaway for me from the ZipDial case was if you don’t raise too much money even a mid sized or relatively small exit can be very meaningful to everyone, the founders, all the angels got you know 10 times in four years, the last VC got 2.5x in four months. So, it was very attractive to everyone and the founders did very well. So I always tell founders also don’t be in a hurry to raise and raise and raise, just because you have access to the capital. Be sure that you have a business you can build here because sometimes you get trapped and you raise too much money and at outrageous valuations and you have to grow into that valuation and it’s okay if you’re going to grow into it in 12 months but if it’s gonna take you four years to grow into it then you have a problem.

Siddhartha Ahluwalia 28:48

and then you also in parallel started Ezetap.

Sanjay Swamy 28:51

Yeah, Ezetap was sort of lessons learned from mChek don’t try to build the entire thing. Just build one side and expect the other people will build the other side which means that Ezetap was on the merchant side of accepting payments, we have Happay and Niyo which are on the consumer side or on the business side of making payments and mChek was trying to do both sides of it and later on, I realized there’s no need to do both sides of the network. Somebody will build the rails of interoperability and right on it. So, Ezetap started off little after square and but we knew right from the beginning that we wanted complete encryption and things like that. So, it was way ahead of what the market had and in fact what square had also at the time, we were first to launch the encrypted max stripe reader on a feature phone. And India was going through this e-commerce boom so for Flipkart and later Amazon, for the delivery boys to carry a card on delivery instead of cash on delivery was an attractive starting point. So we had built a lot of the prototypes. We’d caught something working and that was Bhakta and myself. And then we sort of formalised Angel Prime and we had funding and stuff. Bobby, Abhijit Bose was a friend of Bala and Shripati. I knew him from his NGPay days as we used to compete. We talked about it and seemed like he had all the right passion and motivation for it as well. And he immediately understood the opportunity. So, we got together and we started the company and invested in it. And in fact, for a long time, there was a four bedroom house in Koramangala which had a ZipDial sign on it, but the unknown fact is that the fourth bedroom was actually Ezetap. So, that was those of the early days.

Siddhartha Ahluwalia 30:46

How did you realize that that this is the structure that you want to continue, be the first builder or be the first sculptor of the company. Form the idea and then along with the founders take it to a journey to a certain level and then let the founders continue it.

Sanjay Swamy 31:04

Yeah. So, if I look at how we have evolved, that was the right thing to do, perhaps in 2011. But the market has evolved a lot. And Prime as a fund now has evolved a lot to primarily being a venture capitalist with companies which are formed by founders, we still do the occasional incubation as we have done over the years, but mostly we are investors now, and I think that’s how the fund has evolved. And also, the market has evolved. So I think at the time, the maturity of the startup ecosystem, the scale of the startup ecosystem, the understanding of how to put the company together, how to get it structured right, put an ESOP plan in place all of these things were very nascent in India, there were a few but it was still very, very early days. So at that time, we felt that we needed a much more active hand holding type of a model and in many cases also, we had the experience of seeing some stories play out that some of the younger entrepreneurs here had not seen. So even if they came with the passion and the motivation, as we brainstorm with them, we felt well, you know, you could build on this and evolve the idea to be something more robust and with more moats and things like that. So, in the early days, that was the right thing to do. Over a period of time, as the market is evolved, and the founder ecosystem has gotten more mature, and people have worked at Flipkart and Ola and Paytm and Fresh works and the larger players here, second generation entrepreneurs, or at least founders who had previously worked in the startup that has seen growth have come out some of these lessons may not be that relevant anymore. Or people who have had their own unsuccessful startup. I never use the word failed startup. I always think you learned so much that it’s not a failure, but the company may have been unsuccessful. But there are a lot of lessons learned as I would say I learned from my mChek experience. So that maturity has improved a long time the ecosystem is built up, the legal system has built up, finance and accounting and all of these have improved. And society started accepting startup as being a first class citizen from an employment perspective. So a lot of humorous anecdotes there, people who can’t get a bride because somebody says, oh, he’s working in a company that I haven’t heard of. So those are no longer the case, or less important. So now we have evolved into saying, look, we’ll still work with early stage because that’s where things are still being formed. And it’s a lot of fun there. And the value of our first hand experience in as you know, along the way, Bala decided to become an entrepreneur again and Amit Somani joined Prime so Shripati, Amit and myself as partners, we felt that we can give a lot of quality inputs and value because of our experience, and this is during the fun formative part of the company and beyond a certain point scaling actually is, in some ways independent of the business. The product market fit is very dependent on the domain. So that is a more challenging and exciting part. And we have a lot of respect for people who are great at helping scale companies, but that’s not who I am. And it’s not who we are.

Siddhartha Ahluwalia 34:16

So, Prime evolved from a thesis of your interest in building product focused companies, technology focused companies, and interest towards FinTech and SaaS. Tell us more about how did you form this clarity that you want to only invest in product focused company. You had incubatee companies like Urban Ladder where you didn’t put money but the founders worked out of your office.

Sanjay Swamy 34:38

Yeah, now you’re starting to make me feel bad about some of the things we didn’t do. Of course, Ashish and Rajiv are amazing founders. And in hindsight, it probably would have been an amazing investment for us as well. But our relationship with them was very different. We just said, Oh, we like you guys. If you need some help, feel free to use our office and I remember sitting in a boardroom and tutoring Ashish on payments and payment gateways and wallets and all these other things. But we actually never considered investing or they never considered taking investment from us as well. We just have always been friends. And we even discussed their seed round that they were doing without necessarily even thinking that this was something for us. Largely because we have never been big fans of people intensive, operations intensive businesses. They are a different DNA. And we never saw ourselves as being the experts in that. Again, deep respect for people who pull those off, businesses like Dunzo, and Swiggy, and so on. They are amazing businesses, as financial investors, we would have probably done very, very well. But we have a little bit in our mindset that says we are not just a cheque, right, we have to actually be able to add real value to the founders. And that’s why founders come and work with us at Prime. It’s not just about getting the money and I think pretty much all the founders we work with would have been able to raise from elsewhere as well. We’ve been very fortunate with the founders that we have. But the question is, can we add real nonlinear value to their business in our thought process and stuff, and in those types of business we wouldn’t have. And that was the reason we didn’t invest in some of the companies that we would have done very well as financial investors. But I don’t think we would have felt we’re doing what we think what we set out to do. So, our culture had always been in living in the valley working in the 90s. And then coming back to India, when you think about technology and product and saying, there is probably a deep amount of investment that has to be done in the early days, but once you establish product market fit and then you hit escape velocity, then it’s incredibly nonlinear in growth, and you don’t need to keep pouring a lot more money beyond a certain point to fuel that growth. And so these are some people call them gushers, right? That’s what we’re all striving for, rather than businesses where you have to constantly keep re-acquiring and re-acquiring the customer. So that is just the philosophy is something that we were comfortable with. And I think all three of us Amit, Shripati and myself have come from that background. And and I think we want to stick close to our roots.

Siddhartha Ahluwalia 37:11

You have invested in only 25 plus companies in the last eight years, and almost zero failures. Have you been too careful in investing?

Sanjay Swamy 37:19

You know, I cringe when you use the word only 25 companies, it’s a scary thought. When we started out with ZipDial and Ezetap and we will have one or two more. I never thought we were going to have someday look back and say we’ll have 25 companies in our portfolio. And again, as I said, I never use the word failures. We’ve had one company that we shut down very early, but other than that, yes, we’ve had. I think our model basically involves working very closely with the founders and understanding the deep context and we have a very unique model that all partners work with all the companies so even if I might be the lead partner on say Niyo, Amit and Shripati are equally involved and quite actively involved as well. So, our philosophy has always been that for founders, if you put the founder first, for founders, it doesn’t matter to them that you as VCs have a portfolio. They’re only interested in their company, right. And so I actually think that we want to see all of our companies succeed, and we have to try our best to do it, some will do much better than others, and some will do moderately well, some will not make it. And that’s life in this business. But, really, some of the things, typically the founders, I think we’ve been very fortunate for the founders we’ve been able to get to work with and I think we’ve done a great job of identifying some of them, or most of them. In the early days we have worked close enough with them even before we make the investment decisions to Know that there is a large market size. So, you know, we’ve rarely taken market risks. But there are a lot of execution risks. And I think what ends up happening between the company that hits exponential growth versus relatively flat growth is we may have missed time the market, right? Or there may have been some execution risks or execution, things that didn’t go well, right. So, timing is, of course, everything. You know, at the end of the day, you know, all these companies are good companies building great products, the success or lack of it is really determined by timing. Timing, luck plays a very big role in what might have been a good idea. Or you might bump into an investor that’s willing to do follow on capital and some might not. So a lot of these things also play an external factor. I would not be bold enough to say we’ve not had any that won’t make it. But we’ve been fortunate so far, that companies are doing quite well on almost all of them and we’re pretty excited.

Siddhartha Ahluwalia 39:59

So my question is around the investment process. All four partners, including Raj, have to vote in. It’s not a majority vote, it’s all partners have to make a yes for an investment. So that’s where is it being too careful. You can go away with false negatives.

Sanjay Swamy 40:17

So the short answer is actually, that’s not true in the we do have a system amongst ourselves. And there have been cases where we have invested where maybe not everybody was all in maybe nobody was vetoing and that’s an internal process that we have within the IC. I think the most important thing that we’ve been very lucky with all three of us here and Raj Mashruwala is a great mentor and a partner Emeritus in the fund, but very, very active. There is complete trust within the team to speak one’s mind. Right. It’s very important in the partnership that ultimately we are all adopting, this is not Sanjay’s child, Amit’s child or Shripati’s child. This is our child. So, we have to be very honest with each other. Now there are three things you can do. One is you can say, Look, I’m all in, I love this company, and I have no reason to not do this investment that makes sense. The second is you can say, Look, I’m not all in, but I’m not out either. I’m not against it. Right? And you know, that happens rarely. And then the third is, look, there’s no way we should be doing this. Now, that might be an opinion. And it might be right. But as long as you’re willing to talk through it, and you can understand the other person’s point of view, one of you might change your mind or might not change your mind. But important thing is intellectual honesty here. And that’s the most important, we’ve been very fortunate with that. The other thing is this is a business where we have to be associated working closely with the founders for seven years at least. So it’s very important to not go in with any trepidation. So that’s why we try to to make sure that everybody really appreciates this business and is excited and is all in. Because you don’t want to be in a situation where you know people are in doubt and are still going ahead. That’s the worst thing that can happen. In fact I would rather someone say look I’m completely against this but if you want to go ahead you go ahead because that person is also given a very honest opinion, then you can make a business call but I think what has also happened for us that’s been very interesting is actually we are very different people, Amit, Shripati and myself. I think, when people were to just see the three of us you think that we completely hate each other, we’re completely different and there’s no way that three of these people could be working together because they’re completely different. Right? Shripati is Zen master, very simple and straightforward, common sense, logical in this thinking.Amit is super when it comes to the product side of things, he can really see a gem when most people would not realize it. And he knows a lot about what it’s going to take to scale businesses. He’s probably the only General Partner in India that actually was on the management team of a company that went IPO with MakeMyTrip so he’s seen that kind of scale. I like to keep thinking very maverick and out of the box. I don’t look at spreadsheets, back of the hand, is this business seems to make sense. And my gut tells me the people are good, that’s good enough for me. Raj has seen it all, lived in the valley and so on. So all four of us bring very different backgrounds. So first to agree on something, it’s because we’ve looked at it very differently. It’s not common thinking it’s actually very different thinking that’s come to the same conclusion and venture capital is a business where you cannot live with false negatives, we will always have false positives. So Urban ladder, TaxiForSure, several of these we saw them before anybody else did, we might put them in the false positives category, right? We should have probably written the cheque, but we didn’t. But what we can’t have is the false negatives because those you live with, right and I think that we have been pretty careful about and we’re really excited about the portfolio. We’ve got companies like Niyo, MyGate, KredX, Moneytap, Happay. Of course, Ezetap from the early days and some of the newer companies like OTOcapital, sunstone and a few of the other ones, mfine, really exciting companies. So we all know that there are companies that we would have loved to have had that we don’t have, but at the same time, you have to make sure that the ones you do start working with you absolutely adore and love and that we’ve been very grateful and fortunate about

Siddhartha Ahluwalia 44:57

Prime has been very unique in thinking, when nobody saw MyGate as a billion dollar play, you were very heavy backers all in MyGate from the day one leading the first two rounds. How’s this thinking developed? and What’s is the process behind it?

Sanjay Swamy 45:12

So I think there’s no right or wrong answer in venture capital. And there are different strategies. We know, obviously very well known funds here that do a large number of small cheque, and then double down on the ones that do well, right. We took a philosophy right from the beginning saying we’re all in or not in. So once you have that philosophy, now the way you look at a business to come to that consensus for us, it’s not a question of, you know, let’s okay, it’s a small cheque anyway, doesn’t matter. It’s the fact that our chequebook has very limited leaves. And so we’d be very careful about which ones we write. And that’s how we have approached it. So but once you’re all in, then it doesn’t matter. Then of course, you’re all in it. So how do you evaluate the businesses from that perspective, what’s the background, I mean, every VC you know, we have a lot of respect for how they do things. We just have our philosophy. I always tell people, look, I’m an entrepreneur, I happened to be as a startup, I’ve launched a venture capital fund called Prime along with Amit and Shripati. Every startup does things differently and we as a fund do things our way. It’s what works for us we think, and it doesn’t have to work for other people. And we’re all different and I have tremendous respect for the scale at which a Sequoia or an Accel, Lightspeed, Matrix and people like that, Nexus all these larger funds. For the size of fund we we are comfortable with and the stage we like to work with. This is a philosophy that works for us. So that’s it. Once we’re in, we want to have no doubts that if a founder has a problem at 3am and calls any one of the three of us we’ll do our best to to help them.

Siddhartha Ahluwalia 46:56

Sanjay, when do we see prime having a 300 million chequebook?

Sanjay Swamy 47:01

Never? That was an easy question.

Siddhartha Ahluwalia 47:04

Why is the reason for that?

Sanjay Swamy 47:05

Well, we have a philosophy that says an early stage. And with the approach we have. We are limited by our bandwidth. So as it is, as you said, 25 companies, you said only and I said wow, we’re 25 companies that we’re working with. So, I think we have to be structured very differently. I don’t think the issue is not so much about being able to raise 300 it’s being able to manage and deploy it. And that’s not who we are. That’s not how we have set out to be. So, unless we fundamentally change something about what we stand for and how we go about it, I don’t think we will never need to get to that stage. I shouldn’t never say never. But it’s very unlikely unless we fundamentally change how we work.

Siddhartha Ahluwalia 47:59

And Sanjay, some of the portfolio companies which you have the founders in their late 30s or early 40s. what do you think because you have been a founder in your late 30s or early 40s what advantage these founders have.

Sanjay Swamy 48:12

So earlier I used to say that founders are either 40 years old or in their 20s. We’d never saw a founder in the 30s. That’s changing a little bit in India today. And I think the logic for that was when you’re young you say “hey, I don’t know anything about this. Let me figure it out. And I think I can do a start up to do this.” And you have the beauty of, in some ways, lack of fear, lack of some amount of knowledge, which is a good thing because you’re not biased by rules that say, these can be done these can’t be done. And you always have the ability to be more aggressive because you say I will always get a second chance and in your 30s you’re building your career in a relatively stable, you’re probably married with a young children planning things that you need to hit some financial security goals and so it’s hard to actually leave in the 30s. In fact, I have most respect for founders in their 30s, who give up high growth opportunity in the professional world and say, I want to become an entrepreneur. And then in the 40s, you know, years like oh my god, I’m 40 years old, I always thought I was going to be an entrepreneur, In fact, in the US also, they say, the largest number of founders by age is when you’re 39 that is like before 40, I wanted to become an entrepreneur. So each have their strength. So, later on in life, certainly you have a perhaps a business network, a domain expertise, you know, why you is a very easy question to answer, right? I literally wrote the book on this, and these are the gaps that I see in the industry. And if I had this, this and this, I have all the business connections to make this happen. So when you’re looking at entrepreneurs in their 20s, it’s about you don’t ask the question, Why will you succeed and others won’t be because it doesn’t make any sense. And I have the raw energy and the power And the desire. when you are in your 40s that becomes a more relevant question. Why will you succeed? And they better have a strong answer to that, typically, because that means they’re building on something that they’ve done in the past. So that’s the other thing. For in your 20s, you could be working at Swiggy in foodTech and say, I’m just going to do a FinTech startup.There’s no reason by your past apart from your hustle. And maybe tech skills has got any reason to do with what you’re going to do, but when you’re later in life, it typically your past would have had a role to play.

Siddhartha Ahluwalia 50:36

and Sanjay, in the startup ecosystem especially, you are called the FinTech guru because everybody in FinTech at least comes to you initially before starting a company for advice or Aashirwaad.

Sanjay Swamy 50:48

Guru, in this case, means old guy. It doesn’t mean anything else. I just been in this business from long before the concept of FinTech existed, been doing whether it’s been payments with Happay with business expenses and things like that. And before with EzeTap in payment acceptance. So I think for me financial services, from India’s perspective is heavily underserved, and technology and coupled with Aadhaar and whole India Stack, eKYC, digital signatures, UPI and consent framework and all of these things, not to mention GST and so on. We suddenly have sort of a three things, one is cloud and smartphone, Second is all of the India stack piece and the third is the underserved market here. And there are huge opportunities, I think, still, to build large companies that can be very, very profitable and fundamentally will uplift society. It’s just not for the sake of profit, but you can be hugely profitable and dramatically improve people’s lives. And I think entrepreneurs, ultimately, everybody might think in saying, If I go in here, I’m going to make a lot of money. But the ones that succeed are the ones for whom the mission is substantially more important, that they really feel that they’re making and improving people’s lives. Because as an entrepreneur, you’re going to have 360 days of frustration and five days of glory every year, and in the leap period, with 361 days of frustration, you don’t get that extra day even in the leap year. So what makes you wake up is yearning for those five days when the highs are so high that you know it trumps everything else. And for that to happen, the mission has to be really, really strong, right? It’s not about you know, the financial outcomes at all right? Most entrepreneurs I think beyond a certain point come from hardworking, honest upbringings and money beyond a certain point doesn’t matter. What really matters is do they succeed in the mission? So to me, that’s a very important piece. And I think in India, financial services is a huge opportunity where we can improve people’s lives. So this morning, for example, the electrician had come and repaired like a broken this circuit breaker and I told him, can I send you money on UPI? And he said, I don’t have any apps. I don’t know how to do it. I said, you have WhatsApp on your phone? He said, Yes. I said, What about all your colleagues? He said none them do this? So this Saturday I said, You know what, I’m going to conduct a class, I’m going to teach you guys how to use this. I don’t care whether you use Google pay or phone pay or whichever app you want to use. But you should be capable of doing this. And that was the most valuable thing I could do. Sure I’m going to repay him for what for the work he did. But I think we all have these opportunities, and I think this will materially move his life. My 83 year old mother was granted mobile payments for 13 years now. So she only keeps hearing about this over the morning cup of Chai. But she uses Phone Pe. I installed BHIM on her phone after it came out. And after two weeks, she said, No, no, please remove it. I just want to use Phone Pe because I can do so much more. And she uses it, her brother who was 13 years younger he turned 70 and she sent him birthday gift on this phone and somebody else owed her some money said, I’ll come and meet you and return you the money and she was like, No, no, no, just wire me the money. You’re welcome to come meet me, but not make this the reason. So I see that. And I always tell people, if you have time with your elders, please put them on the internet. Have get them a smartphone teach them a little bit because they actually have the time and the desire to learn actually, but they just probably struggle with learning, right? So I feel this whole area of FinTech financial services will massively improve everybody’s lives in India. And you know, and you can build very large companies doing it. So it aligns both the impact as well as the financial upside potential for startups. So why would you do something different?

Siddhartha Ahluwalia 51:09

I have the privilege of working with Sanjay at Prime, which is what I have observed about you is, you have the depth as well as the childlike curiosity. How did you able to maintain, you know, even if you are in your mid 50s.

Sanjay Swamy 55:31

Most people would say he is immature, but I really appreciate your putting that in positive light. I think when you lose your curiosity, you’re dead. In fact, I took a selfie with my 93 year old uncle, and posted it on Twitter and somebody commented, you know, the curiosity in his eyes is amazing. And I think for all of us, the moment we lose curiosity, life’s not worth living. I think they’re the most exciting thing is all the new stuff that’s happening around us. It’s awesome to see, right? I mean, the fact that in my generation, I’d write a cheque or go get a demand draft, and all these funny things, right. And today’s generation doesn’t have to go through that or never saw a cassette player or never saw perhaps even a CD. Right? That’s great. That’s change that’s happening. It’s bringing the world closer, a lot of good comes out of it sometimes comes at a very heavy price, and we need to look out for that as well. But generally, the change, you know, I mean, I remember going and studying as a student, and once a week, my mom would call me because I didn’t have enough money to call her back, even when I did, it was $3 for the first minute and $1.66 per minute, and you know, you forgot what you wanted to say and you saw the clock ticking, right? Today, you don’t think about it at all, you know, and you can pick up the phone and do a video call on WhatsApp and you know, it’s virtually free. Right? That’s great, that allows people to try to travel to do what they want to do rather than be constrained by all these artificial things.Technology is helping a lot, we have mfine, for example, that’s doing these doctor patient video consultation and so on. And eventually, of course, you still have to get the prescription from the doctor formally and all of that so to comply with the law. But it’s amazing to see how quickly the AI is able to learn the patterns and suggest to the doctor ask this question ask that question. And we’re getting to the stage where at least technology is going to help assist the reach of some fundamental things that we’ve been denied in the past. India has less than 10,000 cardiologists, for 1.3 billion people which unfortunately is going to be the you know half the tech capital of the world. That is to achieve even the same depth as the US does in penetration. We need 10 times this number, and we only graduate 250 new cardiologists a year. So that’s not happening in any of our lifetimes unless we use technology. So it’s a very exciting time in India, whether you’re doing healthcare, whether you’re doing consumer internet, whether you’re doing financial services to leverage technology, leverage the beauty of the India stack, the health stack, and all these amazing things that the government is also very forward thinking and is promoting. To build large successful startups from scratch in short periods of time there is access to capital, which was the other thing that was missing in the past, and also, at the same time solve fundamental problems, right. So that’s why I tell people if you’re not yet doing a start up, what are you waiting for?

Siddhartha Ahluwalia 58:46

Thank you so much, Sanjay. It was wonderful to have you on the podcast.

Sanjay Swamy 58:49

Thank you Siddhartha. My pleasure.

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