Episode 48 / January 19, 2020
Sid Talwar, Lightbox Ventures
In 2001, Sid founded Evolv, a vocational training company funded by Singapore Technologies. Over the next 6 years, he built it into a business that trained 20,000+ people annually across 200 cities in South Asia and the Middle East.
He later sold it to NIIT in 2007 but continued to lead the internal teams in adopting new technology as a transformative force in education and vocational training.
Post that, after being associated with GSF India for about a year, he Cofounded Lightbox Ventures in 2014.
Some of his portfolio companies are Furlenco, Embibe, Dunzo, Cleartrip, and Bombay Shirt Company.
In this podcast, Sid shares his experience of helping Entrepreneurs solve & avoid mistakes in their Entrepreneurial Journey.
00:36 – His Journey of helping Entrepreneurs Solve & Avoid Mistakes
01:58 – Invest in Few Companies at a time to understand them better
04:03 – Top Exits from Fund-II
07:34 – Building relationships with Portfolio Companies
10:40 – What kind of businesses is Lightbox trying to promote?
18:39 – Investing in Embibe based on the Aditi’s conviction as a Founder
22:54 – Investing in Furlenco after getting to know Ajith Karimpana In & Out
26:34 – Challenges in building a subscription model in India for Furniture
35:42 – Thesis behind recent Investment in Nua
39:18 – Advice to Entrepreneurs while Pitching to VCs
Read 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 firm led by Amit Somani, Shripathy Acharya and Sanjay Swami. Prime is often the first institutional investor in category creating tech startups in FinTech, SaaS, healthcare and education such as MoneyTap, Happay and mfine. To know more about Prime, visit prime.vp.in Today, I have with me Sid Talwar, Managing Partner Lightbox Ventures. Welcome, Sid, to the podcast.
Sid Talwar 00:34
Siddhartha Ahluwalia 00:35
Sid, we love to know more about your journey, how you started as an entrepreneur, what motivated you to become an investor?
Sid Talwar 00:42
Well, I sold my business, worked with the entity that had bought my business. And after that, tried to think about different things I could do and decided with my friend, that the best way of using the knowledge that we had acquired through working for ourselves, we could help others trying to go down the same journey, not because we would understand their business better than them, or understand the market, that they were entering better than them, but we would understand the journey. And we could help them not make the same kinds of mistakes, or not feel as lonely, as perhaps we did as we were going through the journey. And so we went down this path, thinking about how to best solve for the different issues entrepreneurs face, rather than necessarily purely trying to become financial investors.
Siddhartha Ahluwalia 01:58
And you invest in only 2-3 companies a year. What’s the reason for that?
Sid Talwar 02:04
So, we have a very concentrated portfolio. That’s right. But it’s not investing in two or three companies a year. It’s more like investing in a very few number of companies per fund. So, our last fund was $154 million, and we invested in eight companies. Our current fund is over $200 million, and we will be investing in up to nine businesses. So now whether we invest in those businesses in one year, two years, three years, that is really up to our ability to be able to find deals we want to work with. But it’s very very concentrated. And the first reason for that was our, our need to want to help founders, founding teams, management teams, and the only way we thought we could really do that is by having a first of very few number of companies to be able to help, because you can only have that much time to devote. And if you don’t devote the time to understand businesses well enough, then you will definitely not have the ability to be able to help anyone in that business. If you don’t have the time to be able to build a relationship with a founder, which is more than asking them how businesses going, then their ability to want to talk to you, put faith in you, or relay things, they wouldn’t normally relay to you, diminishes. So, we decided that a concentrated portfolio allowed us as investors to invest much more time with our portfolio companies.
Siddhartha Ahluwalia 04:03
And talking about your portfolio companies, what are the top three or four companies from your fund one in terms of exits if you can share.
Sid Talwar 04:12
So, our fund one was actually a secondary purchase which was originally Kleiner Perkins and Sherpalo. But our first fund from a blind pool perspective was what we call fund two. We’ve had one exit Embibe, which is an Edtech play, which we sold to Reliance. Outside of that we have not exited anything. It’s a 2014 vintage fund meaning, we launched it, raised the capital in 2014. So it’s not been that many years either. And, you know, and our belief is that we wouldn’t necessarily want to sell businesses so early in their lifespan. If we could have held on to Embibe, we would have. It wouldn’t have been our desire to sell a business of that nature being led by a founder of that nature. But it was in the best interest of the business. It was in the best interest of the future of what we believed would be education in our country, led by that business. And so it was on us to do the right thing by the business, which is why we sold it.
Siddhartha Ahluwalia 05:44
And in terms of the companies which are in valuation, the top three who would they be?
Sid Talwar 05:52
We don’t really look at our businesses like that. First of all, when you have 100 portfolio companies, you can say, some companies are doing well, some companies are not doing well. We’ve reinvested in these businesses. And so obviously we look at those. For us, we are a small family. And we believe that unless everyone in that family does well, the family will fall apart. We are joined at the hip bone, every one of our entrepreneurs, and we continue to support them, because we know what they have the ability to be able to do because we spend so much time with them. And so we will continue to invest and reinvest in them because we know where that money is going to go. And so, there is no top three companies in our portfolio. There are top eight companies in our portfolio, and each of them are given an equal amount of attention by one or the other partner that is responsible and then cumulatively by the entire organization behind them. So, we don’t look like that. We don’t look at failure. It’s not that companies might not fail or will fail. But we don’t think of it in that respect. And also, at any given point in time, any one company might be in a very different circumstance than another. But that doesn’t mean that the other company won’t reach similar heights over a period of time. So, we don’t think of life like that.
Siddhartha Ahluwalia 07:35
In terms of your partnership with companies, how do you think in terms of your exit cycle when you have to return your money to the LPs? How long can you be a partner to these companies?
Sid Talwar 07:47
Well, we have a 10-12 year fund, 10 years plus a couple of extensions. And we try to invest as much as possible in the beginning of the fund. So, we have a relatively longer period of time to hold that investment, but quite honestly not long enough. True businesses take time to build. And, that’s one of the things I think you can only know if you try to build one yourself. Right? And nothing happens with shortcuts. Luck only helps you if you devote the time in the business.
Siddhartha Ahluwalia 08:32
It takes decade to raise a child as well as a decade at least to build up a business.
Sid Talwar 08:36
Actually, that’s interesting comparison. It takes 18 years to raise a child until they go off to college, and in most cases, 21 years until they graduate from college. And I think that’s how long it takes to build a business. So, I didn’t think of it from a child standpoint, but actually, it’s neither a decade for a child nor a decade for a business, a truly successful business will take 18 to 21 years to truly find stability and where its potential is. It’s unfortunate that we get in so early in the company, support it during the times that it needs to, but are not able to because of the timeframe allotted to us truly see it at its most advanced, stable state, which is very far out in many cases. But having said that, we’re not in the business of trying to get that. We’re in the business of trying to help in the early stages of its development, grow the business, build a business, with the right set of virtues, right set of how to manage their culture, how to think about their foundation of the financials of their business and how to think about what it will mean to be able to create something that’s going to make a difference. And in our case, we invest in businesses that go to India, that sell within India, how to build a better India. And I think that’s what pushes us more so than getting to that steady state.
Siddhartha Ahluwalia 10:41
You mentioned about a lot of values. So, what kind of businesses are you looking to build? You mentioned about Bharat, serving Bharat, but are there specific domains which come from top down, where you are analyzing each and every sector, the gaps in the market and then finding right companies for it.
Sid Talwar 11:01
So, first of all, we invest in technology companies, which is a very broad word. There are all kinds of companies that are technology companies. But if we break it down, I think we’re investing in companies that are using technology in some way to build their business. And hopefully, the technology that they use, gives them an advantage, either economically, or through some sort of brand benefit that allows them to compete against others. So, technology is very big. We like to invest in businesses that are targeting India. Because we’re here, we don’t live in Singapore and Dubai and London and Hong Kong, and come into India and fly out. We live here. Our kids live here. Our families are here. They go to school here. We shop here. We go out here, we order food here in, we travel to work everyday here and travel back. We’re trying to invest in businesses that are trying to make India a better place. Now we’re not altruistic in that. We want to make money also. But there are so many things that companies can solve for to make India a better place. And we can define better later, but India a better place while making money out of it as well. And I think that’s a very big part of how we think about a business. What’s the value outside of just the valuation of the business growing over a 10 year period, if this business does grow over that period of time, How will it change? Whatever part of the country it’s trying to change? And what kind of impact will it have for the people that are involved, for the environment around that etc. And finally, the majority of our businesses, work with consumers. Some of our businesses more in the recent past, have also started looking at small and medium enterprises or MSME businesses. And to a large extent, the reason is because those communities are so large, they’re almost like a consumer in that sense. But that’s really the kind of businesses that we’re looking for. We’re not looking for a particular sector. We’ve invested in brand companies across food and furniture and jewelry and, clothing. But we’ve also invested in marketplaces like education, cars, and so on and so forth. We’ve invested in a little bit dabbled in healthcare so we’ve gone across . There are two ways of analyzing a space. One is that we go out and say, Look, what is it like in financial services? We haven’t really done anything new in financial services. I’m not gonna use FinTech because I don’t understand what that word means so let’s stick to financial services. What is it in financial services that’s needed? Let’s talk peeling this onion to really understand it, rather than just going after whatever comes our way. So, that we can understand that this is what excites us about this. So, we can then start looking for businesses in that way. And we do that. And the same side of people come to us and say, Look, we have analyzed this space. This is what we believe is needed, then we ourselves will take that and say, Okay, now let’s analyze this space ourselves. And truly try to understand whether this makes sense or not. And we’ve done this many times. And you will notice that we’ve really gone against the grain on a majority of our investments. So, most people invested in furniture marketplaces, we invested in a furniture subscription business that owns the asset. Most people invested in food delivery businesses, we invested in a brand that wasn’t even a cloud kitchen with there was no such thing as a cloud kitchen, converted itself into a what today is a cloud kitchen and then build that out in a manner that today it is the largest cloud kitchen business in the world and so on and so forth. In the used automobile space, we entered that market after hundreds of millions of dollars had already been invested. So we were like, the 20th or 30th player. 20 people doing it, every major global investor was in one of those businesses. It’s very scary to put a small amount of money in a company. But when we peel that onion, we understood the difference between what we were creating, and what was already there. Today, 99% of the companies that existed at that time don’t exist anymore. And so many many different examples like that we can use. Point being, unless you really slice dice at a granular level, what is happening on the ground in any one industry or space specific to where either a company is taking you or if you are trying to find what company to look out for, only then can you truly understand what the problem is. And that takes time. I can’t give you a term sheet in 15-20 minutes. I don’t know enough about an industry like that. I can’t read newspapers alone and try to understand what’s happening in one industry or the other. It takes an effort of trying to truly understand and grasp why certain things happen in India. And whatever happens in another country might be an interesting thought to look at but will not be a blueprint for how to fix an issue on the ground here as nothing that’s happened in India will be a blueprint for another country in the future., let’s say somewhere in Africa. We’re very unusual and so are they. And we need to solve what’s stopping anything in India from being able to grow? Or to be better or to improve and so space is very important. Very long answer to a very short question. We do our own spaces. We don’t care what the space is. We’re agnostic. is that concerned? We will dive into spaces we are interested in. But if a company comes to us from a different space, we will dive into that space also, if we find that idea interesting,
Siddhartha Ahluwalia 18:39
and how did you come about education and Embibe? How did that happen?
Sid Talwar 18:46
So, Embibe was a very interesting company. My partner Sandeep had met with the founder first and then the two of us met with her,Aditi. I think we were just blown away by both her the vision that she had for the education space in India. But more than that, just her own energy. And when you’re making investments very early. The one thing is the most important and people argue one way or another on this, but any business plan is more of a guideline. You’re not really gonna Oh, why didn’t you read this number? Why’d you hit that number and the chances that one will have to pivot figure something out, is very high. And so if you’re going to invest, be on a plan or invest behind a market because you’re not sure if the plan is going to work or not. You’re taking undue risk, or at least risk with multiple x factors involved. But if you invest behind a person, which is what we do a lot, and Aditi was the first person we invested behind as well, in our fund. You know that that person will figure things out no matter what happens. And you’re betting that that person is going to make a success out of whatever cards are dealt to her. And Aditi is one such person. You can’t get to know that person over a cup of coffee or when they come and present in a room in your fund. Right. You have to spend that time with it. We spend so much time with Aditi. I think over and over again, she showed that she doesn’t have all the answers. But she will go to the ends of the earth to find those answers. And she will not give up. And I think that was the crux of how we decided to go after her and try to convince her to take our money.
Siddhartha Ahluwalia 21:27
So it was the reverse case.
Sid Talwar 21:29
So, it’s always a reverse case. And I think it’s important as a founder to also think about as a marriage. It’s not that you’re just pitching to a fund, but the fund should be pitching to you. And I think we tried to make sure that the founder knows enough about us. So that expectation management happens both ways. And I’m not your boss, because I put money. It’s bad enough that by virtue of putting money I am on your board rather than by virtue of just being really smart about what you’re doing. So I think in that sense, we want to try to spend as much time with the founder and the founder hopefully wants to spend as much time with us to make sure that we’re compatible, that we agree with the kind of personality that we’re working with and long term. So, we try to do that a lot. And absolutely we will pursue and try to convince founders that not only we are the right fund for them, but if given the opportunity, we will be there for them as much as they are there for us.
Siddhartha Ahluwalia 22:53
And was this same case with Furlenco also while you are thinking of an online subscription business for furniture produced in your own factories?
Sid Talwar 23:03
Sure. So we were not thinking of furniture or subscription at all, I’ll be honest with you, we’d seen a bunch of money in furniture just by virtue of reading newspapers and, seeing announcements from companies like Pepperfry and UrbanLadder and several others. But, we, Ajith, the founder actually reached out to us, and it wasn’t a technology business at all. But we decided, Okay, let’s slice and dice this industry, let’s understand what the need is. And this is a great example of that. And you know, quite honestly, from the time that Ajith actually came to us, to the time that we finally made the decision,and the money went in the bank was almost eight to 10 months. In that time, we would have met Ajith, God knows how many times, in our office, in his office, over Tea, over lunch over dinner. Many of us, me one on one. We went for drinks. We talked about life. We talked about India, we talked about experiences, we talked about family, what’s important to us, what’s important to him, what’s important to me. We got to know each other. We flew together on airplanes. And it gave us an ability while we were working on deciding whether for Furlenco was the right model. And Ajith was the right person to move that model forward, gives an opportunity to know each other. For me, to pitch to him as much as he was pitching to me, for us to know that we could work together. I think, It’s a difficult business. It’s a tough business. That’s why you don’t see that many businesses like this. There are very few. Globally, there was no call for this business. There’s nothing to look at and say, Oh, this will be this of India. For Furlenco was an unusual idea and for the first time being launched, and that also in India, very unheard of. And so, one had to kind of figure out well, how do we even know what the market we don’t know what the market is? That’s great to figure out a market when you know the market or people say, well, the market is good here there was no market. So how do you know what the market is? We are to specifically believe that we will figure this out and Ajith will figure this out along with his team, and so absolutely, it’s exactly the same for Furlenco more so because we had to believe that we would create a market. It’s exactly the same thing with Rebel Foods as well. It believed that they would create a market where people would order from Cloud kitchens and not from recognized brands that were offline that they would normally have gone to from the restaurant creating that market.
Siddhartha Ahluwalia 26:34
And during this process of when you are saying you’re creating this market,
Sid Talwar 26:38
they were, I did nothing.
Siddhartha Ahluwalia 26:40
You as equal partners to the founders with more strategic advice and experience, as you said, you bring on the table. Isn’t it scary when you are building a subscription market in India when it’s never been proved before?
Sid Talwar 26:56
Absolutely. I think it’s very scary. Most people won’t believe you. And I think, Ajith will be the first to tell you, we’ve gone to talk to so many different investors, and the early years, everyone was massively skeptical of any business being created like this. But who is going to take this rent? Who’s going to subscribe to this furniture? Well, I don’t know why I wouldn’t do it. So why would anyone else do it? This is a general mentality. And I think, this is where I hope and what we wanted to be able to achieve as a fund as well. Of course, Ajith be the right person to ask, or any other founder our portfolio, but, it suddenly starts becoming very lonely. You’re like, Oh, my God, maybe I’m not going down the right path. And as an investor, sometimes you feel it and as a founder, sometimes you feel that and it was really the relationship that we had with Ajith, where whenever he was down, we would be like, Listen, no, we’re here, man, don’t worry, it’s going to happen. And sometimes we were like, Oh my god, what’s going on? He’s like, I’ve got this, don’t worry. And we were together. And it’s interesting, Aditi and Ajith, they’re single founders. And so, their ability to be able to lean on anyone else is much more difficult, because they’re more working for them. And I found when I was an entrepreneur, I was a single founder as well. Sometimes, it’s scary to say what you feel to someone who’s working for you because you don’t want them to get scared. Not because they won’t support you, but you’re mentally scared to say anything. It’s your fear. But when we hope that as a fund, we’re able to build a relationship and rapport with founders where they can share with us. And we equally can share with them without either of us making a judgment on the other and that takes time. It doesn’t happen overnight, or by virtue of you giving money or by virtue of you have a cup of coffee together once or once a month, or once a quarter, or maybe having a drink, if you’re in town. It is a planned exercise of continuously trying to work together to build a relationship, a real relationship, because no one can fake this. So, I think, I hope that we don’t lose that.
Siddhartha Ahluwalia 30:16
But don’t you think 8-10 months, let’s say in Ajith’s case, is a long period of time when a founder is cash trapped for capital?
Sid Talwar 30:25
I am sure it is.
Siddhartha Ahluwalia 30:29
And in most cases, the founder wants the capital because his first motive to interact with a venture capitalist, not to partner but the capital to come into the company that he can do what has to be done?
Sid Talwar 30:40
I absolutely agree. And I think Furlenco was an unusual case in that. It was one of our early investments as well, right after Embibe. And it was something that, again, asset heavy, capital intensive from an asset standpoint, you’re not spending the money on Google and Facebook, you’re spending the money holding the asset. You have to own the full stack, deliveries on you, warehousing is on you. What is this market? All those things came into play very early. But I think one of the things that’s important is you have to do your homework, but you have to be aware of the timelines contingent on the founder, and and the company. In Furlenco’s case, luckily, it was a smaller business. And so they were able to continue to manage. But we were very aware of that. And so we did take a little bit more time. And I’m glad that we did because I didn’t want to say no, but I didn’t know how to say yes. Because I wasn’t in ready to say yes. And we worked towards finding the answers we needed to move forward. I think people underestimate how difficult it is to truly evaluate a business when most things are x factors. It’s not about just financial models. You’re trying to understand a very emotional state of a consumer. And that you need to triangulate in a very different way. Now, I think we’ve gotten better at it, but certain things take time. And, I think, one of the big things is managing expectations. When a founder comes and let’s say I’m speaking to that founder. I think one of the things I always say in the very beginning is I can tell you no very quickly. But saying yes is going to take me some time. These are all the things that I am planning on doing to be able to support you. Now, absolutely, you might be speaking to 10 other people, and they might decide to fund you first. And I completely understand that. But until I’m able to get this sorted, I’m not sure I can move forward. In this period of time, I’m going to spend this much time with you. I hope that the time that we spend with you adds value to you. And that’s something that we measure ourselves on, whether we invest in a business or not, if we’re spending time with that business, we hope that we’re able to add value to them so that our discussions are meaningful for them. Something they can take home and say, Hey, you know what, they didn’t invest. But these are the four or five things that they did that I’m really grateful for. And that’s something that we think about, and are very adamant about for ourselves, rather than what we don’t want to do is lecture. What we don’t want to do is tell people what we think they should do. That happens quite a bit. What we don’t want to do is listen to our own voice rather than listen to them. And I think that comes also because we’re entrepreneurs ourselves. We’ve been on both sides of this table. Our first instinct is not to give advice. Our first instinct, our second instinct, our third instinct is to listen, ask questions, more clarification sake, not to dilute what’s being told to us. That’s really important to us. It’s important to how we evaluate business.
Sid Talwar 35:01
And what have been the recent two three investments and what’s your thesis behind those?
Sid Talwar 35:55
So, I think the most recent one that we announced was Nua which is in the feminine care space. And our thesis there was, it’s a brand, currently selling sanitary pads, but will, over time perhaps expand to other products in fem care. And our thesis there was that these brands exist today in the market and are sizable companies, are part of FMCG businesses, larger FMCG business I have are, each doing thousands of crores of business, but none of them really trying to think of how to innovate the product. None of them really trying to do anything to help benefit their consumer beyond providing that product. And is there some way of changing that market of changing the perception of the product, and of adding more value to the product. And what we found that Nua was doing was not only selling a product, but changing the conversation, making something that was normally very taboo in our country, very open, and people were responding. And people responding to that conversation and making themselves available for that conversation, which gave them a much deeper connect to the brand. And Nua was able to take both that connection as well as any feedback from their customer to continuously think about at a very young age, how to evolve their product, and what else to do with their product. And some things are very small, not being done and some things are much larger that may never get done. I mean, can we imagine what phones would look like today, if Steve Jobs wasn’t around, probably look the same these ACs look today, right? I mean, for the wall, from where to where split air conditioners are exactly the same in that timeframe. So, it takes a certain kind of person to sit down and say, Look, I can change this. I can make this change happen. We’re looking for that person. And in Nua’s case, I think we have found that person saying, look, we’re going to make a change in there. It’s as much about the conversation and education as it is about the product, and no one’s doing that. And here’s a company that’s bringing those two things together in a way that’s being accepted, which is huge.
Siddhartha Ahluwalia 39:08
And the last question for the podcast, Sid, I know you hate to give advice. You prefer to be on the listener side than on giving advice. But what common mistake you see entrepreneurs while pitching to you and what advice do you give them to build their business in a more sustainable manner?
Sid Talwar 39:25
So, there’s no two minute tagline to answer either one of those questions. I think, when you pitch, you have to be honest with yourself, don’t pitch to a crowd. Don’t try to think of things that someone else wants to hear. Because then you’re going to build a business according to what they want and not what you want. So I don’t know what you should say or don’t say, but whatever you do say be honest to yourself. Be honest to what you believe. Everyone won’t believe it. Most people will say no. That happens to everyone. But it’s better to be honest with yourself and get a no than be dishonest with yourself and get a yes.
Siddhartha Ahluwalia 40:24
Thank you so much for giving time.
Sid Talwar 40:26
All right. Good luck.