Siddhartha Ahluwalia 1:09
Hi, this is Siddhartha Ahluwalia, your host at Neon Show and Managing Partner at Neon Fund, a fund that invests in the best of enterprise AI companies between US-India corridor like Atomicwork, SpotDraft, CloudSEK. Today I have with me Aditya and Prateek from South Park Commons. Welcome Aditya and Prateek.

So glad to have you today.

Prateek Mehta 1:31
Excited to be here.

Aditya Agarwal 1:32
It’s a pleasure to be here.

Siddhartha Ahluwalia 1:33
I think South Park Commons is not traditionally the VC fund at this point, right? Where the funds focus on zero to 100 journey. You are from minus one to one.

What is the minus one stage? You know, I’d love to start there.

Aditya Agarwal 1:48
You know, when the idea behind minus one came about when I was leaving Dropbox and, you know, prior to, you know, Dropbox had just IPO, but I was in a very lucky position where I’d had three good success stories, right? I’d had Facebook, where I was a very early engineer at the Dropbox, which kind of came in when they acquired my company, I was CTO there, and then I’d also been involved on the board of Flipkart for a good four or five years. And so about 2017, when I was trying to like all of these, you know, Dropbox’s IPO, Flipkart had just entered a transaction with Walmart, I was trying to figure out what to do next with my life.

And in that time period, it was very interesting, because I had a lot of the options. I was very lucky. I had a lot of great options that I could pursue, right?

I could go start a company, you know, fundraising would be easy. I could go join as a senior executive at kind of a fast growing company at a number of offers. And then I also had the chance to go join as a partner in a bunch of blue chip funds, right?

And what I found myself realizing is that all of these were the paths, they were amazing, but it was a well known paths, like people who have done what I have done, these are the paths that kind of the world and Silicon Valley kind of give me, I found myself thinking, what about the parts that are not quite as common? Like, what do I not know? Like, what, how do I kind of like understand where the opportunity because, you know, it’s interesting, because as entrepreneurs, you always want to find the places where not a lot of people are looking, you don’t want to go and do the same thing, right?

So in that vein, what I realized is that instead of jumping into do the next thing, I wanted to take some time to go and explore, let me go find out what is happening at the frontier of technology, what are the people building in garages, like what are the crazy things happening in the research labs in the frontier kind of like, you know, smaller startups. So what I realized, so that was my first thinking, which is, I just want to go explore. And my second aha moment came when I realized that I cannot be the only one who is kind of in between things, right?

Because if you look at our careers today, they’re quite different than, you know, my father’s career, like Silicon Valley, even here in Bangalore, a lot of our career is like we take, you know, whatever, two, three, four years, we go and go for a mission. And then after that, we go figure out what to do next, right? So I realized that in between these missions, people needed some time to go explore.

So the early days of Minus One was basically let’s go find like 10 people for all in this in between journey. So I went and I found, you know, somebody who had just sold kind of their company to Cisco, I found one of the very early employees of Stripe, I found a couple of people who had just gotten their PhD from Stanford, and we’re now figuring out they spent seven years getting their PhD, and they were now figuring out what to do. And we basically set up a learning club.

That’s what we called ourselves. There was no South Park Commons, there was no MinusOne even kind of terminology. And this learning club would do three things every week.

The first thing that we would do, and this, you know, a lot of this is still inspires SPC today, right? The first thing that we would do is that every week, you had to build something and demo it to everyone else. And I start with this because it is very important that for us, we are a community of builders, right?

And this is a little bit different than being a community of just learning for the sake of learning. For us, you learn so you can build. So every week, you have to build something with velocity with speed to demo to everyone.

That was the first thing we did. The second thing that we did is that we would pick a topic that was interesting, and we would all kind of like learn about it together. So we would pick say, this is kind of amazing, but in 2017, we would pick something like deep learning, right?

We would pick SMR, small modular nuclear reactors, we would pick water technology, we would pick how do you do hacking? How do you essentially like engineer cells using CRISPR, right? And so we would basically pick a topic.

And then what we would do is that everybody had to read a paper or a journal, and then come and educate everyone else. And then lastly, once a week, we would invite somebody really interesting in our network was doing frontier things and ask them to come speak to us. So you know, in the early days, someone like, you know, like a Vitalik Buterin, who was just building the ether network, who obviously became Ethereum, someone like a Jennifer Doudna, who was doing groundbreaking work on CRISPR, they would come to a small kind of setup and just speak to us, right?

So, when I think about Minus One, and what we are today, a lot of these elements remain, right? A focus on essentially like frontier kind of like exploration, a focus on essentially meeting and talking to like really interesting kind of people to kind of jog your creativity, and lastly, a focus on building, right? So these are the three not stars when I think about our community today, whether it’s in SF in Bangalore, or in New York, this is what we organize ourselves around, kind of a focus, not immediately on building companies, but a focus on exploration to then kind of build companies after that.

Siddhartha Ahluwalia 7:02
And how does this, you know, the funding come in, in the picture, which sounds very noble, like getting a bunch of builders together, and giving them tools, access, you know, in a community.

Prateek Mehta 7:16
Sure.
So, you know, when people are exploring together, and I think there’s a bit of mythology from the valley as well, that as the community started coming together, people who were, this is not a learning community only. So there is a very clear exploration on what do I want to do next. And depending on who you are, the kind of superpowers you have, the kind of lived experiences you have, and what you’re currently curious about, you will progress on a certain vector, which might be around an opportunity that you’re excited about, it might be a problem statement, it might be a customer problem, or it might just be building something interesting and figuring out where it will go.

And in that context, as people spend time in the community, as a staff, we also have a lot of surface area with them. And we know what they’re building, what is the kind of ambition, creativity, generativeness, and the urgency with which they’re exploring. And as they come to their own personal conviction that this is what I want to be building for the next 5, 7, 10 years of my life, as if their interest and curiosity overlaps with ours, we are happy to come in.

And typically, what we do is we commit a million dollars to a team at the pre-seed stage. So 400k at the pre-seed stage and at least 600k at the seed. We also have a seed motion because what we’ve realized is that we are, by way of quality of talent, we’ve been able to attract really great talent who is wanting to build something extremely ambitious.

And some of them will possibly raise larger amounts and there we also come in with seed rounds.

Aditya Agarwal 8:54
Yeah, it’s interesting. I want to perhaps add on to Prateek’s point at the end there about building something ambitious. Because in the early days of SPC, you’re right, there was no fun, it was all, you know, me being noble, right, me and Ruchi being noble.

But the motion was, that’s like you know, ultimately we moved out of our living room, we got a building in San Francisco in the South Park area, hence the name South Park Commons. And in the early days, people, it was very hard to get into SPC. But as people got in and after some time, they would start companies, I would write an angel check, and then I would introduce them to people in my network.

We did that for one year. And then we found something quite interesting. We found that the quality of the companies coming out of SPC was just consistently a lot higher.

And now quality is obviously like a somewhat, you know, ambiguous term that has many different dimensions to it. And I can get into what we look for. But the one quality that we found is that people are building more ambitious ideas with more depth, right?

And in some ways, this isn’t surprising, right? Like if you kind of give people some time to really figure out like, what are the interesting ideas and you create an environment where the focus is not on what is the first idea that somebody will give me money for, as opposed to what is like the biggest idea that I can think of, the chances are they’ll start more ambitious companies, right? So when we saw that happening, I saw this happening consistently, which is when we then started the fund.

So the fund was started about 18 months after we started the community. And the goal of the fund now is that as members come and they spend time with us, we will fund the ambitious ideas that they come up with.

Siddhartha Ahluwalia 10:34
And when you listen, entrepreneur or a to be entrepreneur signs up with SPC, there is no commitment that they have to pursue an idea. It’s a space, right? That you give them based on selection.

Aditya Agarwal 10:46
Correct. Yeah, this is actually a really good point. One of the things that I find, if I’m being very honest, is that not everybody should start a company.

Yeah. Right. And I think that our environment when somebody comes in to join the community is that you should start a company if you’re willing to go through 20 years of pain, right?

But sometimes, honestly, it’s better to go join the company that’s actually taking off. So a number of our companies end up finding their early co-founders or founding team members or early engineers through the community itself. And I’m very proud also that, for instance, in San Francisco, we’ve had people from SPC go on to take on political office.

So like one of the San Francisco Board of Supervisors actually came through SPC, a number of the leading labs of AI, they had the first few people go and join them through SPC. We’ve had people write books, we’ve had people become content producers, and we welcome that, right? It’s actually great.

Because a lot of the times when people come to us, we say that your goal in coming to SPC is to find your life’s work. That doesn’t have to be a company. It very well might because that’s a vehicle through which a lot of us express ourselves, but it doesn’t need to be.

Siddhartha Ahluwalia 11:53
And in a year, let’s say how many people join, how many end up starting a community or starting a company through SPC?

Prateek Mehta 11:59
Let me, I think the answer is different for different geographies, right? So since we are here in Bangalore, I’ll talk about Bangalore, right? Because in SF, the density and the number of people wanting to start up might be fundamentally different.

So if you look at, and I’ll just qualify, I think that the question that you asked was very interesting. The previous question is that, you know, we think of this as a learning community, but it’s also a zone of excellence. So the bar on talent is very high.

The selection rate for the community is less than 1%, right? So by way of number of applications that come in and the number of people who actually get an access to the community, right? So the access to the community is either by invite or by application.

And the reason I said zone of excellence is on one hand, we’ll have people who’ve been there, done that. We’ll have season founders, we’ll have season execs from companies which have been the success of a lot of companies that we see out there today. We see young and crack builders who are extremely talented, gifted, fearless.

And we also have people who have achieved excellence in some field, right? For example, one of our members is actually Somdev Devvarman, who’s India’s top-ranked ATP tennis player ever, right? And he’s exploring something in the future of sports with his co-founder, right?

That’s one example. We have a bunch of PSBs exploring something. So the idea is that excellence and ambition go hand in hand.

And can we have people getting inspired from each other? So I wanted to prefix that and then come on to the number of people, right? So in the last 15 odd months, we’ve closed for 17 members who come into the community.

A typical duration of membership for us is about six months. So people come in and we do, people come in, they stay on for a give or take six months. For us, the success metric at the end of that membership is that whoever the person is should be at a point of conviction.

And the conviction might be, I want to start a company. It might be I want to join somebody else on their mission. And you know what, as founders and builders, we’ve all gone through hard phases in life where you actually need to rest and recover.

And the conviction might be that I need more time to rest and recover. And all three of them are good outcomes from our perspective. Right?

Of course, if you’re starting a company, we’d like to have a look.

Aditya Agarwal 14:17
Yeah. You know, one of the things, it’s interesting. This is a good problem to have.

We have a lot more demand for what we provide, and unfortunately, we can sell, right? We strongly believe that, you know, it’s interesting to think of it like, hey, SPC, we have a great bunch of investors and so on. And yes, we’re awesome.

But we really think that our North Star is high talent density. The best ideas come when you’re able to engage in deep, high bandwidth conversations with the other members. So our focus on talent density is so that anybody at SPC can talk to someone else at SPC and leave feeling like, wow, I learned something.

They stretched my idea, or they helped me validate or invalidate. And our strong belief is that that happens in often like, kind of like intimate environments. Right?

So kind of some of what we think a lot about is that we want to serve more people. Like to Prateek’s point, I’m really proud of like the 1% acceptance rate. But I know that there are some people in there that like, you know, like, this rate for us, but we just don’t have capacity for it.

But at the same time, we are very, very, we’re very attuned that like our community should feel like, you know, intimate, like people should know each other, they should be like, if you’re here, you should know everyone else who’s kind of in the community. So we think a lot about that.

Prateek Mehta 15:39
And I think the extension of that is the way in which staff also ends up interacting with the community, because every person is different. And the assistance or the support that they might be looking for might also be very different depending on their own circumstances, right? And high quality bespoke support cannot be provided at a scale.

Aditya Agarwal 16:00
Completely agreed. Yeah, I mean, and I think we can share the numbers, right? In the last one year, we’ve been very, very, it’s been amazing to see like, we’ve had roughly about 70 community members, 70 to 80 community members join us in SPC Bangalore.

I would not have expected this when honestly, when Prateek and I were joking about this when we first kind of started last, you know, last October, maybe I was telling him Prateek, get to 20 members, man. So like, it’s been amazing to kind of see the progress, but also like, I would say the Bangalore kind of ecosystem’s desire to be part of kind of SPC. And we’ve had roughly 15-20 companies come out of it, which we’re very, very excited to be partnering with.

I’ve met most of our companies on this trip, and this is remarkable to see the range of things they’re building and kind of what they’re excited about.

Prateek Mehta 16:46
I think the 20-70 kind of divergence, you know, is also very interesting, because, and we often joke here that, we think of ourselves also as a startup, right? And we behave and smell like one, you’ve seen the office, right? So we actually believe that we are at the PMF stage, right?

And when a company is PMFing, it’s really hard. You want to make sure that your quote unquote, customers are having a great experience. As a staff, you are struggling to make sure that everything is kind of…

Aditya Agarwal 17:22
You’re always stressed.

Prateek Mehta 17:23
You’re always stressed, right? And you’re like, you know what, what am I…

I know this is a friendly podcast. So what am I falling short on?

Aditya Agarwal 17:30
Yeah. I mean, we’re doing so many things we can be doing better.

Prateek Mehta 17:33
Yes, 100%.

Absolutely.

Aditya Agarwal 17:34
Yeah. Yeah, it’s quite interesting.

You know, like, I’ve been in technology now for about 21 years, and about 14 of them was spent kind of building Facebook, my own startup, then Dropbox, and then 7 as kind of an investor. I do investing, but I don’t think of ourselves as an investment firm. We are a small, nimble organization that is trying very hard to kind of serve our founders in what is a pretty intense period in their journey.

And we are constantly evolving. I think this is the most fun part of what we are building, which is we are constantly thinking about what does the ecosystem need, like what is same and what is different about the AI world. And I’m sure you see it a lot, right?

There’s a lot of things that are similar, but there’s lots of things that’s different, right? Like, you know, the ecosystem is… I always find it very odd that we want to invest in like a rapidly shifting ecosystem where we expect founders to be at the frontier, but we want to run our VC firms as kind of being like these old, almost like, you know, set in constant stone kind of organizations.

I’m just like VC firms need to be like evolving even faster, right, to kind of like, keep up with our founders.

Siddhartha Ahluwalia 18:44
And you know, how has AI been changing the way that you invest, first of all? And the second is the companies that are getting built, because earlier, a lot of focus would have been on building products, or building products has become, I would say the easiest part. The hardest part is what to build, how to serve.

Aditya Agarwal 19:04
There’s so many layers to that answer, right? So I will start with some and maybe Prateek can go into it. Maybe I’ll talk a little bit about the domains that AI is affecting, right, and how it kind of affects kind of like the investing landscape.

The first one, I think is very, very positive, which is that when you have a platform shift of the magnitude of AI, right, I think what it does is that it gives entrepreneurs a tremendous amount of like energy and enthusiasm to tackle sectors that they might not even have thought, right? Today, like, honestly, all of us have used Google for the last 20 years happily, right? It’s the world’s best search engine, and I use it like 100 times a day, right?

And nobody kind of thought that like, yeah, you know, we haven’t really seen anybody try to take on like build a modern search engine forever. Today, they are like three, and you can use OpenAi, you can use ChatGPT, you can use Perplexity, you can use a bunch more like verticalized search engines. So I think that’s just one example.

I can point to healthcare, I can talk to more consumer apps, look at the insane amount of innovation in consumer hardware, in kind of robotics hardware. These are all areas that five years ago, nobody was tackling. And the reason why we are kind of seeing it happen is because AI is providing just immense, not just technological capability, but I would say founder kind of like founder vision, right?

And I think so this is why like, in one perspective, it’s an amazing time to be an investor, because it’s leading to this explosion of creativity and possibility. That’s the first thing I’ll point out that AI is dramatically expanding the scope of what we are looking at. The second one I’ll say is that, you know, often in the early stages, a startup doesn’t work for a long time, right?

Like it’s just kind of up and down, up and down. Like you see some kind of like glimmers of something working and then kind of not working, right? And so it’s quite, it takes a long time for something to work.

But then when it works, it starts kind of taking off, right? It often takes off quicker than you would think. What we are seeing is that in AI, that whole cycle is accelerated.

So in that first part, which is kind of like the, when you’re kind of like groping around to find product market fit, I find that that pathfinding process for startups today is a lot faster. And this is because of what you said, because like you can build a lot quicker. You build something, you try to position it, you go talk to some customers, they don’t like it, you build the next thing.

Instead of taking two months to build it, you build it in a week, right? It’s all possible. And so you find that pathfinding part is actually a lot faster.

And then the second one, which is when it starts working, it works a lot faster, kind of like the rate of, I would say, when our companies start working, they just go through an immense amount of growth, which is very interesting from an investment perspective. Like if you think about the way that a lot of traditional Series A investing has worked, it assumes that people will stick around the Series A stage for like a while. And I think today, startups don’t stick around for a while, right?

Like you go from being kind of like seed stage or like, you know, a little bit after seed to Series B quite quickly. So I think a lot of the investment landscape is kind of shifting in response to AI being an accelerant. I can get into how AI is affecting us internally.

But Prateek, I don’t know if you have anything to add there as well.

Prateek Mehta 22:25
I think I’ll just add like one point to this, which is that across the board, when you look at, historically, people look at what is getting disrupted, what is getting solved at a faster, better way. I think we are at that point where things are changing so fast, there are a bunch of very interesting new experiences are getting created, which were thought almost not possible in, let’s say, a few years back when we would have possibly discussed them. But today, literally things which are boring and hard, whether you look at the way governments interact with people, whether it’s consumer AI experiences, a lot of people had given up that, you know, distribution is all with larger guys, what are the new experiences going to come out?

And suddenly you see an explosion of new form factors coming out, defense and space tech, you would have thought that the amount of cost and the effort that it takes, it’s almost going to be hard for smaller people to do something interesting. But now a lot of interesting things are possible just because of the rate at which things are getting accelerated. And the frontier of possibility itself is getting to move.

Siddhartha Ahluwalia 23:35
And you were saying how has AI impacted you internally?

Aditya Agarwal 23:39
All across the board. If you kind of think about, you’re also an investor, so hopefully this will resonate. But if you kind of break down the act of investing, if you break it down into like, okay, I need to go find people, amazing people at the top of the funnel.

Then from those set of people, I need to go find people who are resonant with our kind of investment theses in our investment area. So then kind of like, how do I then support them, right? Like when they’re actually a portfolio company or they’re in the community, how do we support them with early go to market introductions, introductions to engineers, like post kind of like fundraising support, right?

And then with marketing as well, obviously, right? So all of those areas, we kind of decided about 18 months ago that much like we want to invest in AI companies. And all our companies today are able to get a lot done with fewer people.

We need to be as AI forward as all of our companies. So in each of those areas, we’re actually investing quite a large amount of, I would say, tooling, functionality, process, also like AI, just like pushing each other. You’re going to be like, why are you doing this manually?

Have you thought about using an LLM? That’s a great example, right? We wake up every morning to kind of like a long list of like all our interactions that our kind of our staff members have had that just to keep each other up to date so we can help them.

Now like AI summarizes all of that and kind of is able to call out like who can potentially help who. So it’s very interesting. I think that our productivity in terms of our team has gone up like massively.

I also want to give a special shout out to actually our technology team or kind of our global technology team is actually based out of SPC here in Bangalore. And they’ve done a phenomenal job of like kind of like helping us scale. So it’s been amazing to kind of see how much we are investing and honestly, it’s fun for me.

I’ve probably written more code this year than I have in a while. But a lot of it, Siddhartha, I think it’s a mindset shift, right? I think it is a mindset shift to kind of being like technology as investors, like we’re not used to thinking about like kind of like building technology or building tooling, right?

But a lot of our investors have operating backgrounds, they’re all technical. So a lot of it is like actually changing your mindset, which is I’m doing things like this. How can I automate?

How can I augment? How can I kind of like simplify, streamline all of what I’m doing so that it allows me to spend time doing things that cannot be augmented via AI. And there’s a lot of that also, right?

But you have to change that mindset. And so we are, you know, all of us are pushing very hard.

Siddhartha Ahluwalia 26:13
I’ll share one example from our own experience. So we recently invested in third time founder who have exited both their previous companies to two public companies in the past. And we asked them, you know, after the investment that why did you choose Neon over the Tier 1 VCs because in the past two startups, you had Tier 1s on your capital.

Aditya Agarwal 26:35
Give yourself credit.

Siddhartha Ahluwalia 26:37
They said that, you know, the last $500 million funds, you know, that had invested in the past companies, the partners come from a preacher mindset that, hey, this is how things should be done. This is how SaaS should be built. And the thing that Tier 1, everything is rewritten, we want somebody to work with us to figure out because we are figuring it out, right?

And we don’t want answers.

Aditya Agarwal 27:02
This is so good. I mean, something you’ve said, this is actually a big part. I mean, Prateek alluded to this earlier, but I believe a lot that organizations run on all the small signals that you send, not kind of like the high level values and then the values are important.

Values and principles are very important, but it is almost like the implicit signals that the environment and the other people send. Why do we, why is our office, I mean, you know, for those of us watching, our offices are not fancy. We’re the least fancy VC office you’ll go to.

This is actually the case here. Our San Francisco office is also not fancy. Why do we do that?

It’s because I want us as a team, but also the people that we work with to realize we are in the same struggle as them, right? Like it is very disorienting when you’re like a seed stage founder who is struggling and thinking about cashflow to go into like a very fancy office and then be like, how will this person understand my day to day struggle, right? You come to SPC and I’m just like, to this day, like, you know, we expect there is no one to do it.

Like we expect people to come in and do it because that’s what startups do. So much in the same way with AI, how can I tell a founder that you should be so AI forward if we are not doing it, right? Like it’s actually insane to me.

So like, it’s not easy to implement AI, right? Like it’s easy to talk about it, but when you get down to it, how do you make it truly effective? Like the way to do it is that you actually do it yourself.

So you have a visceral understanding. So I could not agree more. And today with AI, nobody actually knows the answers.

Nobody has like all the recipes set. Nobody has all of the templates set. So the right mental model is to you have to go out there and start trying things.

And then you’re also in the learning process along with your founders.

Prateek Mehta 28:45
On that point, I’d just like to add an important part of being an investor today, I believe is being curious about what’s changing out there in the world, right? And because as founders, the only opportunity that we get is because something is changing in the world. And that opens up a door of opportunity and that we possibly can force our way through.

And that’s also the reason why when we invest, we’re not talking about thesis and, right, this market is going to go this way. We’re talking about access of curiosity, which is something that we publish every six months. And we talk about what are the broad areas where we believe things are changing.

And there might be some opportunity that might be coming by. And what we request for is also curiosity from our founders, when they come and share something that they are curious about, we are happy to get excited about it and then hopefully come in as investors.

Aditya Agarwal 29:31
We often say that at SPC, when a member meets another member, you should not like a better question. You know, the common question is, what are you working on? What’s your startup idea?

And instead we say, let’s reorient it to actually say, what are you curious about? What are the big open questions that you have that you’re pulling on that you’re trying to get some amount of insight that then can get translated into an idea or a company. But right now you should, it’s more about curiosity and great founders have immense amounts of curiosity and depth actually.

Siddhartha Ahluwalia 30:00
And SPC in the US has, in the Bay Area especially, has existed for the last seven years, right? What are the some of the known companies that have come out of SPC, if you can share some of those journeys?

Aditya Agarwal 30:12
Yeah, yeah, absolutely. One of our companies, thinking back to like fund one, this was some of our earliest companies that we’re proud of, like great companies based in. So this is kind of one of the leading kind of like AI inference companies that really kind of built out a great product that is allowing enterprises to really kind of like deploy a variety of kind of models within kind of like their applications.

And you’ve seen phenomenal growth. They recently kind of raised around, are valuing them at like, you know, multi-billion dollars, like I think a $2 billion valuation that, you know, I think has been announced publicly. Another one of our great companies is Render.

So this is kind of building a modern kind of like essentially, a platform as a service kind of app. So basically, instead of building on bare metal, kind of like on the cloud services, you can use Render to manage kind of your compute and your data, your database and so on, also doing phenomenally well.

Another one of our early companies is Pilot. So this was started by Waseem, Waseem, Jessica, and Jeff, and they’re basically building out, they started doing this a while ago, but what would AI-enabled bookkeeping look like, right, like from scratch?

We also have in our portfolio Gamma, which is one of a very fast growing company, which is, imagine if all slides were built using AI. Some other companies that is that we have one of the world’s leading video foundation model companies, Luma AI, started by Amit, Amit Jain. Profound is a great example.

Profound is a company that is basically, everybody, frankly, like most modern ways of searching are through LLMs, right? So now the question is, how is an LLM kind of, how are you showing up in an LLM query, right? Like if you’re Nike, if you’re one of the big brands, like you really care about what does Chat GPT, what does kind of cloud, what does Perplexity say about you?

So what is the form of like modern, you know, AEO, answer engine optimization, and they’re doing phenomenally well, right? They’ve kind of gotten funding. After us, it was a combination of Coastler, then Kleiner, and then Sequoia did the most recent round, right?

So what I find interesting, so we have, and then we also have had probably like four foundation model companies come out of like essentially SPC four or five, actually, are kind of doing everything from general purpose, kind of like open source models to more specific models around essentially everything from computer aided engineering to essentially like emotion based kind of like models. But we have a lot of, I would say AI kind of, I would say lineage within SPC. But again, you know, like what’s interesting is that when we funded a lot of these companies, when these people joined South Park Commons, they were figuring out what to do.

They had the core kernel of talent and ambition, which is what we look for. But it took them like, you know, three, six months to figure out like the exact manifestation of that ambition.

Siddhartha Ahluwalia 33:14
And how did the timing of SPC India work for you? Why not earlier or later?

Prateek Mehta 33:20
Interesting.
Okay. Like, I’ve said this a few times in some other audience, but happy to, I think from our perspective, right? One of the things that most founders want is the right timing, right?

And often it’s serendipity. But maybe Aditya can talk about the original story a little more. But yeah, maybe why don’t you share?

Yeah, then I can get into it.

Aditya Agarwal 33:47
You know, it’s interesting.
It’s a good question. I would say that there’s been a lot of bottom sub demand for SPC in a number of different global locations. Before we started SPC here in Bangalore, probably the places where people were really kind of asking for it would be London, would be Paris, would be Bangalore, a little bit in Southeast Asia, the Gulf as well.

And we were obviously humbled by the demand, but we are very, I would say, conscious of quality. For us, it’s very important that every member at SPC had a great experience and we try our best to ensure that. So I would say that obviously being from India, I’d always wanted to do something in Bangalore, but it was also just hard to imagine doing it at the quality level that we wanted without having a deep understanding of essentially the local, I would say, the Bangalore ecosystem.

Because I don’t want to do things at 70% quality level. I want to do them at like, if you’re going to do something, I want to stand behind it with 100% of our brand and quality. So I was kind of in that zone of like, yeah, we have opportunity, but I don’t know how to pull this off in a way that I would be happy with the result.

I actually credit Binny Bansal for giving me a big push. So this must have been about actually about 18 months ago, probably like February, March of 2010, 24. When he was visiting me in San Francisco, he came over for lunch and he was like, why aren’t you doing this?

And I said, Binny, listen, I want to, but I’m just worried about the quality. And I don’t know if I know enough people on the ground who will actually help me. So to Binny’s credit, he gave me a lot of essentially confidence.

He’s like, hey, okay, I think your concerns are real, but I will actually help you find the early team. I will help you with a lot of the operations, the logistics, and you have me and my team’s support in doing that. And that kind of gave me, I would say, like the confidence that like, okay, you know what, let’s give it a shot.

I don’t know what I don’t know, but let’s give it a shot. So from that initial, I would say, from that initial kind of like burst of, I would say, possibility, kind of really came about one year ago, which I would say that the big turning point for us here was hiring Prateek, where I think that like having somebody with his, I’ll give you some compliments. It’s a rare combination of being technical, being an operator, he’s obviously like operated at like, large scale, being a founder, and kind of like, I would say, loving the startup mindset.

This is a rare combination to have. Most of the times people can satisfy one or two of those. But a lot of our, you know, like, I would say, Ruchi and I have the same background, like, you know, as Prateek in terms of starting companies, scaling companies, investing, loving technology, comfortable with the ambiguity of early stage companies.

So once Prateek came on board, I think is when we really hit the races, went off the races. But Prateek can tell you a little bit more about the early days.

Prateek Mehta 36:59
Yeah, absolutely. You know, when we started jamming early on, I did the regular bottoms up thing as a builder, right? So, in this space, broadly, we exist, as I say, internally also exist in the service of founders trying to go after really ambitious problems.

So then you want to figure out whether there are so many interesting people who might be wanting to jam and do open ended exploration. Because India as a culture is a culture where smart people are supposed to have answers and not questions. They are supposed to have clarity, not confusion.

But the reality of a founder’s life is that early days, you have a lot of questions and you have a lot of confusion. And at times a little bit of trepidation about, you know what, am I in the best position right now at this stage in my life to be solving this or not? And all of us, because you’ve been operators and founders earlier, we understand that.

It’s a visceral understanding. It’s difficult to put in words, but you understand because you’ve gone through that. And as I was looking through this, I realized that over the next five, seven years, we’ll have real high quality talent.

Founders who’ve gone through the rodeo once, wanting to come back and build something far more ambitious this time. Seasoned operators who have built startups which have been successful, have tasted success. And often success teaches you far more than failures.

Failures have high anecdotal value, but success teaches you like no one else. And so many people who’ve seen success and tasted success. And so many people who’ve seen financial outcomes that de-link their short-term professional adventures from their personal financial needs or whatever aspirations that they might have.

With that, and plus young people who’ve seen all of this happen. And suddenly you have like belief in terms of the way they want to, the kind of problems they want to go after, and the urgency with which they want to go after. So when we looked at numbers, and I still remember doing a basic sales navigator on LinkedIn, I said, possibly over the next five, seven years, there are going to be 2,000 to 5,000 people.

And maybe if we get like a small percentage of that, hopefully we’ll dominate that, but maybe then it’s not too bad. So I said, yeah, of course, this is the time to build. And look, it was a hypothesis.

And once we get in and we started building this out, suddenly we realized that there’s so many high quality builders who wanted this space. And then slowly, and as he says, we hit the races and it’s been a fun ride.

Aditya Agarwal 39:30
Yeah. It’s interesting. I think one thing I’ll kind of highlight from what Prateek said, which is that I think different people have different points of view on this.

So this might be a little controversial, but I’m going to go for it. I think there’s one belief that people think that, listen, the number of great entrepreneurs is ultimately small. And you can’t make more of them.

There are only so few Elon Musks out there and the VC industry’s job is to go, I would say, find the 10 or so people who are going to change the world. There’s probably some kernel of truth to it, but I tend to fall more that I actually think there’s a ton more talent and ambition out there that we have not unearthed. And because entrepreneurship is also about exposure.

It’s also about making people believe that entrepreneurship is not something that someone else does. You can do it. You can just do things.

So I think that the biggest thing, I’m very proud of a number of different things that we have done here in Bangalore. But the two things that I’m like, man, this is awesome is that number one, people here buy our core, I would say, philosophy that come and explore. It is okay to admit you don’t know what you’re working on.

That takes a certain amount of courage. And I think I’ve heard it from all our members. Like, yeah, we’re in the minus one stage.

That’s a great stage to kind of go and figure out what there is to work on. And number two, the amount of talent in India is incredible. I’m interviewing, Nandan is coming to us.

Nandan Nilekani is coming to SPC today. And I was reading up a bunch about what he has said recently. And he’s like, why can’t there be a million founders in India?

Why can’t there be a million startups? Right? And I think it’s a really good provocative question.

Now, like, why not? What is the true limit to kind of starting a company? And I’m just optimistic that we can play a part in that.

Our goal is to kind of enable like every great entrepreneur out there to go through that exploration journey and to figure out something awesome to build because I think that’s how society moves forward.

Siddhartha Ahluwalia 41:31
And the other thing is that, you know, how do you find the talent density in India versus Bay Area? Because obviously, like you could have been stuck to Bay Area, not open another headache of traveling to India four times in a year. Right?

Why do it? Right? Because the talent density first and the quality of the talent.

Does the talent here match of the best builders in Bay Area? You can be honest about it, right? Because our audience would love to know how to improve.

Aditya Agarwal 42:01
Yeah, you know, it’s a good question. I tend to maybe this is something that I need to reflect on. I tend to not live my life as a series of like, hey, is this the absolute best thing I can do?

So like, I think it’s quite a hard question to answer, right? Like to run the counterfactual, um, of like, hey, is this like the absolute, like, I don’t know, but I know that coming to India, what I am convinced about is that there is sufficient technical depth and sufficient, I would say, ceiling of ambition. Right?

I am confident about those two things. Like it’s incredible, man. Like on Saturday, we had an event here called basically oriented towards younger builders.

And we had like 300 people show up. Right. And yeah, a lot of them were pitching ideas that were like, I’m not 100% sure about, but there were some ideas and I’m like, this is incredible.

This person is building like, you know, um, automated kind of like defense against like, essentially like, you know, drones to kind of building out like a real time sequencing thing for like allowing kind of like, you know, um, real time detection of like certain pathologies. And I was just thinking that I’m like, who knows like what will work, but the ambition is there, right? As a VC, my job is to make sure that at least at South Park Commons, like what makes me excited to be in India, it’s not a headache to be here, but it’s a long flight, but I love being here.

Um, it’s really like the level of talent and the kind of like the ceiling of ambition. I’m confident that it is in India. Now in terms of constructive advice, like, and I tell this to all our members, like I say this every time, there are probably two things that I would kind of tell the audience.

Right. Number one is you like, do not like, I think you don’t need to have a permission of like, sorry, a culture of permission, right? Great entrepreneurs don’t ask for a permission.

They ask for forgiveness, right? Like you just go do things, right? Like it doesn’t matter.

You don’t need anybody’s approval. You don’t need somebody to kind of tell you like, yes, you can do it, right. It’s much better to do it.

And then you come and show people, like, Hey, like, do you like this or not? So I would push people that like, don’t, don’t, you don’t need permission. Like great entrepreneurs don’t need permission.

That’s the first thing. And the second one is like, I, and this is particularly about AI. I strongly disagree with the narrative that a bunch of people have that India can’t do AI.

I think that’s, I think that’s ridiculous. I think we have seen enough examples from some of our members, some of the companies that they are starting that India actually has absolutely the level of talent required to be able to build amazing AI companies that the AI specific AI small models that the AI kind of like, uh, verticalized kind of like experiences. I don’t think that we suffer from a lack of GPU or from a lack of capital.

So I would say that just go out and do it. Like I’m seeing enough examples of people being able to do it that like, I’m confident that they can.

Siddhartha Ahluwalia 44:50
So I’ll share one example also there. We are visiting Jaipur for a friend’s wedding. We met one of the founders who is running a clothing brand for a hundred crores, approximately like $12 million. And he said that he has halved the support team and wants to give the other half like 16 members in support team taken down to eight and the other eight members he’s finding role for in the company because there’s not a culture of firing.

I said, what happened? We started using a tool, you know, created by two founders sitting in Bangalore.

Aditya Agarwal 45:18
Amazing.

Siddhartha Ahluwalia 45:18
And it completely has built autonomous customer support on all the channels. Right.

And then say, you should speak to this company. We eventually ended up leading the round and the customers are sitting places like Jaipur. So you can think of right.

India tier two or three doesn’t invest in AI proven wrong. The customers are ready. I think we are going to see an inflection wave where more and more of this is going to happen.

Aditya Agarwal 45:51
I mean, it’s really to build upon that. I would actually, one of the amazing parts about AI is that it’s actually a truly democratizing technology, right? Like, you know, the foundation models that people can use via an API sitting in San Francisco, you can do the same thing, right?

Like the same open source models you can download and you can run them, right? Like if you want to build a small model, like using a small amount of money, you can get access to the same credits that people get from like, you know, honestly, like it’s amazing that Amazon, Microsoft, Google give these credits allows people to go and start experimenting. So I think that the narrative that India is in, like, it’s insane.

In fact, I actually would say that India might actually be one of the leading kind of consumers and utilizers of AI API functionality in the coming years for all of the reasons that you have said. So I’m incredibly bullish.

Siddhartha Ahluwalia 46:41
Yeah, another thing to point out and I’ll take a few more examples. This clothing company is generating $10,000 more of more revenue because of this tool. And yesterday I talked to somebody in HDFC in lending department.

And they’re saying that they for a company that we are doing DD for, they’re saying earlier companies were built to provide tools for underwriters. Now we are looking for an AI underwriter.

Aditya Agarwal 47:04
There you go. Yeah.

Prateek Mehta 47:07
Absolutely. You know, one of our founders here, he had a belief that the world’s entire training data set and the way voice models have been built, have been built for American audiences, right? Because most of the data is online is out there.

90% of the English is American English. The cultural expression is American. But that doesn’t serve the rest of the world, because the way voice shows up is in real interactions.

And this has a factor of cultural factors, there’s emotive factors, there’s the way you enunciate and intone, right? So all of those things, they show up here, in here and now, and in the future where all of us are living alongside AI agents or found factors that we currently can’t possibly even articulate and imagine, right? We will, his belief was that can we create something which is fundamentally for the rest of the world.

So he started building voice foundation model. And in the true Indian spirit, I mean, extremely frugal, and extremely, I would say, from a technical smarts perspective, possibly right out there, right in terms of the top experts out there. And they have trained at hardly any credits and possibly the entire model runs on one GPU, right?

And it, by the way, that’s not the most interesting thing out there is that if you look at all the leaderboards, like Openweight, they’re number two out there, and doing better than literally all other models out there. And even on the global scorecard, they are in the top 20 now, right?

Aditya Agarwal 48:46
Yeah, it’s really interesting. I mean, maybe to give some of the listeners some inspiration. One of the things I agree with you what you had said earlier, that AI makes it a lot easier to build.

I don’t disagree. I think that’s very true. But AI is also a little unique in that relative to a lot of the technologies that we have all learned how to use, it actually requires a somewhat deeper foundation in actually like understanding the math behind it, some of kind of the linear algebra.

And I think that a lot of the folks coming out of India actually have a stronger base understanding of those things. Honestly, you ask the average CS graduate in America to understand like, you know, matrix, you know, kind of like matrix math, advanced linear algebra, kind of like to understand kind of like how these actually models work, they would struggle with it, right? I actually don’t think that’s the case in India, right?

If you are able to kind of like apply yourself. So I think we have a lot of like natural strengths that like people should kind of like feel confident about and kind of just like swagger a little bit, you know.

Siddhartha Ahluwalia 49:44
I think the other shift that has happened is AI has shifted the balance or the tilt towards more towards technical builders.

Aditya Agarwal 49:51
Yes, 100%. And this is awesome. This is why it’s such a great time to invest.

Siddhartha Ahluwalia 49:57
Yeah. My last thing, you know, before we conclude the podcast is, so there’s a saying that software has already been eaten. So what are the new frontiers of value creation?

Obviously, we discussed about AI. And, you know, existing sectors that are waiting for disruption. And the second thing which has been common, you know, discussed is, is this the year of agents or decade of agents?

Aditya Agarwal 50:20
Yeah, I can start. I won’t talk about agents. Everybody talks about agents.

But I’ll talk about an area that I’m very, very interested in. It really is about the intersection of the physical world and AI, right? I think that if I take a look at a lot of like the tailwinds provided by, you can talk about foundation models, but also obviously like vision language models, kind of like perception planning and so on.

I feel as though like a lot of like the core capabilities required to actually have either small scale or full humanoid robots are deployed in either homes or kind of like in a manufacturing settings. It’s really starting to come into focus, right? We have done a number of like, you know, I would say investments in kind of like that robotics, drones, foundation models for the real world, physical sciences and AI that I’m very excited about.

In some way, it’s an extension of AI, right? Like if AI is able to now kind of go from pure digital domains to kind of like physical domains as well. I think the world could be very, very interesting.

Now, does that happen in one year or a decade much like your agents question? I don’t know. But you know, the cool thing about being an early stage investor is like you have a decade, you know, to kind of like your companies to kind of grow up.

Yeah.

Prateek Mehta 51:30
I’ll answer this a slightly different way. Because I think as people who’ve been reading science fiction for a while, I think a bunch of those things are coming alive. Now, I remember reading 2001 Space Odyssey.

And, you know, that’s a different kind of a book. But I often wonder, you know, 2001 is gone. It’s been about 20 years since then.

But many of those things have never materialized, right? But you know what, a bunch of those things seem to be unfolding right in front of our eyes right now. And all great science fiction, it just opens up what are the multiple things that are possibly going to happen, right?

And I would say today, anybody who’s building or investing should possibly go back to some of those books who inspired them from the first place.

Aditya Agarwal 52:08
So glad you said that. I mean, perhaps if I’ll add one more thing before we finish here. All of us, founders, SPC members, investors, executives, it’s very easy to get lost in the game.

Like, you know, kind of like, how do we start, build, scale, invest in companies? Every time I find myself going too deep into the game, I take myself a pause for a second and remind myself, we live in a magical time. We live in an insane time of capabilities, how we think of them as computers, but these are actually just like core things that humans want to do to build interesting things, to interact with each other, to communicate.

We live in a magical time to be alive. And I think it’s important to kind of remind myself of that anytime I get super deep into just like the investing game, because I feel really fortunate and kind of like privileged to be here, not just in SPC overall, but especially here in Bangalore, like what a great time to be alive, like to be able to build things.

Siddhartha Ahluwalia 53:08
And I firmly believe, right? Like, SF Bay Area has shown that infinite value creation is possible with companies like OpenAI, Anthropic, reaching like half a trillion in ZipTap. And so I think similar trend would start happening in India in some period of time.

We don’t know when.

Aditya Agarwal 53:25
Sure. I firmly believe.

Prateek Mehta 53:26
Completely. It’s not an if at all.

It’s just a question of when.

Siddhartha Ahluwalia 53:29
Thank you so much, Aditya and Prateek. It’s been amazing, recording this podcast with you, learning from you and enjoyed this conversation.

Aditya Agarwal 53:36
Same.
I learned a lot from our conversation. Thank you for taking the time.

Prateek Mehta 53:39
Thank you for having us.