Transcribe
What puts you off straightaway when when you see an entrepreneur pitching or tell us? Outright arrogance. I can't stand it. It's like a lot of people especially there was a time last year that we were getting a lot of entrepreneurs who were coming with half big business plans and they were hoping that they will be able to raise a lot of money just because of their pedigree and they had absolutely no clue about their business. They also had no clue about what their customers think and they didn't bother spending any time a meeting their customer. So I it is a very big turn-off for me. Did I just say okay that company is making millions of why can't we are working in the same sector perfect. That's pretty much the logic that they come and come to throw you and that is the thing that you don't want to you want to see through it and say okay. I respect your view there. But here is why I think it will not work. And and by the way, I'm very happy to be proven wrong. What is there? You know half the time I will be wrong. So yeah, please go ahead and prove me wrong. It is that's not a problem with me, but don't say that you would be unwilling to listen to your customers or good advice. Again, that's awesome. So let's move on from that. So after like let's say, okay you're impressed with the idea you impressed with the entrepreneur. Oh just before I ask the question. So are you an idea guy or are you a jockey guy? Do you invest in a horse or jockey? I don't understand this do you invest in the bus or bus driver? Okay, so it is always about the entrepreneurial J. We are in early stage specially seed stage investing a lot of businesses will be made or broken by just having wrong people set at the steering wheel. So it is always about the jockey or the bus driver or anyone else. No doubt. Okay. So then if you think you know a tank or a large Airplane you still need you need a very sane very forward-looking guy at the hell. Yeah, absolutely. So then what is now question is so tell us once you once you are happy with idea and entrepreneur and everything else what happens I mean, what kind of deals do you do is it called angel or seed? I don't really know. So in India how we Define seed is that seed typically comes after Angel? Okay, some strange reason that's how the nomenclature is. And and so we do seed which is typically around after some angel investor have already invested in your company. We typically do between 500 k to 1 million kind of rounds and we typically like to take Pole Position which means a lead position in every round that we lead. Okay, plus we tell entrepreneurs that while we are investing. Let's say half a million to your company. We still have kept more than 2 million in our reserves which we will come give to you after you show some progress. So basically you will not have to look for any follow-on funding in case you're doing well and if the Venture Capital industry is thinking otherwise Okay, so and how do you decide the valuation and early-stage startups? So valuation question is almost entirely market-driven Jay in such a B stage companies. There is no standard way of valuing. However, as people who invest as a day as our bread and butter we have a fair sense of what the market is going to give an entrepreneur and we just have to match it or made it slightly better. To be able to give them a good deal. Usually that works and you know, our partners have a much better idea about valuation, but it is there is no science to it. It usually just what Market is giving to run to the right. Okay. I had something or ask you anyway. I mean people think that it's easy for to raise funding if you are from IIT, how how big is that? True? So there are two parts to this question Jay. I will qualify saying that it is definitely easier if you are raised if it is definitely true that more I-80 ends are able to raise money than an average, you know, nit trichy guy however in my experience and by the way in our portfolio, there are five companies from IIT Delhi alone. There are two three companies from IIT Bombay and so on so we have a lot of very unfair the condition of IITians in our portfolio founders But let me tell you that it is not because we have any special favor towards IIT guys it is mostly because the kind of the level of ambition of an average IIT entrepreneur is very high as compared to tier 2 student and that makes a ton of a different that kind of peer group that they have is remarkably stronger in terms of Entrepreneurship. So it kind of gets down into the kind of funding people do but it is not usually because there is a bias some people do have a bias. At least I can say about myself. I don't have it. But it definitely I've seen that there is a significant quality gap between a NIT trichy guy or in IIT Delhi guy or an average. There are obviously exceptions to that rule. Great. Let's see there is a it's about the quality and I believe I mean getting Into an IIT is not an easy task, right and IIT by the definition itself. They got into IIT it proves how you know how determined they are how hard working they could be. I think that's that takes a lot of your boxes already, right? So it's not really in India. If you know, I have been an NIT Trichy it it takes a lot of effort to even get into the tier two colleges, you know, one of them I was at like nit trichy. It's not really IIT, but still one of the top institute's however, the what the campus does to you and the kind of peer group that you form and the kind of Benchmark that you have of success are dramatically different for a person who comes into an IIT campus. especially the old IIT campuses great the Alumni network. Yes Alumni network. Also your your peer group. Your seniors juniors are people that you have seen in college in Hostel, you know fooling around that can awesome great Arpit moving on from there. Tell us. I mean, why did you become an entrepreneur you are working for a company called computational research laboratory T Laboratories, right? Yeah. Yeah. Sorry. My tongue is not very well this morning still. This is a research lab here. Yeah, so you Working there and after that you started academic Ventures, but why did so the straight answer to that is that I this idea was in my mind for a long time and I was working on it in parallel and the timing coincide. The timing was very curious. I was sacked from a job and I've written about this in public domain. It is a blog post about it. And I you know, it was in 2010 six years back and it was not an easy experience for anyone to be sacked from a job out of the blue when you're not given a warning not even asked her explanation and just asked to go and not come back which is kind of disheartening. It didn't hurt me so much because I already had this idea and started working on from the very next day sat on Friday and from Monday morning. I did my first sales call for the new business so it kind of worked out but because this Idea was with me for more than an hour and a half years that I started up. Okay, so you're started out of kind of necessity. I would say. I would have started in a few months later anyway, but the timing just happened to be that. So yeah, so tell us what they are going. It was a fantastic thing to happen to me. I started following my heart and you know it is I was also to some extent scared but when this happened I said what worse can happen, so let's start Okay, did you have some commitments by then like family? So I didn't have a family really by I was not married. However, my family was not in favor of me starting up so early at this age but because I was sacked from a job. And you know, I could go back and say, you know, this is the worst thing that is the thing that you wouldn't expect but it still happened. So if I'm starting up the worst thing to expect is that it will not work out which is an even known to us. So, what's the big deal? Let's start that's a great one way to convince your family or parents. Yeah. But I think it is today. You know, I think it was the best. It was a very good thing to happen to me that I started out. I qualified following my heart and today I'm really happy. I'm not sure if I'll be happy in that kind of a career bar throughout your journey, right? It's been more than about. Sorry. It's been about 10 years. Yeah. Okay and tell us what is the one of the toughest? First Challenge worst moment you face so far. Interesting worst moment in my professional life. Yeah. Mmm. So the worst moment of my life was in 10th standard. I'm not sure if you have flat to count. I was expected to be one of the Toppers of the board certainly the topper of my school and because of some strange reason which I still don't know I got very abysmally low marks. However, that will not count here is as professional failure. Yeah, I mean since you began with pragyan, yeah, tell us the worst moment should be this one. I think the worst moment should be when I was sacked from my job out of the blue no explanation given and CEO know basically saying that I don't want you to come on Monday, you know, we will give you a one month package, whatever and you just go so does it is hard dating? I think no one that is never pleasurable. I'm not sure what he meant. To get there, but I was certainly left a little stranded also questioning yourself as to how did I allow it that to happen? So, how did you cope with that? How did you cope with a sacking from the job? So Jay at that point of time I was I don't know. It was at that point of time. It didn't hurt so much. Thankfully I when I came out of that meeting which was always obviously a disaster. I was not even allowed to speak after I came out of a meeting it was I was relatively peaceful and you know, there was this smile on my face because I knew that I will now get this chance to pursue my dream which I have been pursuing for more than one and half years. And therefore it was like an opportunity. Straight out of that meeting. You know, like wow, I think this good thing to happen to me. I don't know it was not a difficult to cope up with it. Although if I look back at look at my career graph. It seems like the biggest failure but I was surprisingly content. Okay, and then you started out that is a good thing again. Yeah, I started it was all on my mind and I had to startup. I would have done it few months later and I started up in just happened. I think I don't know it was I'm not boasting. I don't want I don't like boasting but I don't remember having a very bad feeling about it. Okay Arpit since we are talking about challenges, right? I have a question for you in your portfolio of companies. Do you have some companies which didn't take off or which didn't do as expect as you thought they would do. Yeah, they're always company, which don't do as well as we expect them to do. Why is that? Why does that happen? Is it because of knowledge of an entrepreneur or is it because of the market maturity or See why a start-up works or doesn't work is not just a function of the entrepreneur alone. The fact that entrepreneur is the driver in the driver seat. So he is he should take the blame, but he always does take the blame. However, that is never the real answer the fact that every one of us has a role to play. Also matters, you know as investors. We have a role to play. We must have given them some wrong advice. We might not have cautioned him when he's going the wrong direction, etc. Etc. There's so much that we should take the blame on we might have pushed him down in the wrong direction a board meeting Etc. There's always some degree of market dynamics with changes in favor or against you. And you really can't change it but there is a whole bunch of environmental factor that a start-up is part of for example, if there is a travel startup which was looking which is basically burning a lot of money to buy growth certainly if the funding dries up the startup is fending for itself because it has no cash whose mistake is that definitely entrepreneur could have thought better. Definitely the investor could have not advise them to do this definitely other investors could have cautioned them. against it and definitely someone could have started the fundraise quicker earlier or maybe the market could have continued to be better for some bit of more some long bit of time so that they will be able to raise money all said and done. It is not a single factor that you can blame on it is a whole bunch of things and is almost always very complex, which is why I very strongly believe that failure is not just a failure of one person. It is also a failure of the entire. ecosystem Okay, it's a failure of entire system but entrepreneur takes the blame and it should most of the times it's cool. The he doesn't mean he's basically the one who says, okay, I owned it and therefore I will get out of it, but I will do whatever it takes. However, he is not the only person who could have done anything about it. Okay, great. So how often do you get emails from some of your portfolio Founders saying you're not mature enough to have a meeting with I am not matured having the degree never I have not got any such email. However, you know what you're referring to, right? No, actually housing.com. Oh, really? Unfortunately, I have he I would have never interact. I'm never interacted with him unfortunately. I would have loved to find out what kind of person he is because he's definitely done something that we write and therefore there is something that we can all learn from but I know I've rarely had such an instant. There's also you know Jay What happens is I think we all human beings as we do it. We all kind of reinforce our value system on everything that we do so, you know part of my value system got reinforced into this interview. It also gets reinforced in the entrepreneur that we invest in. It also gets reinforced onto the kind of decision. We take everyday, so it is because of the blooms value system. I don't think we will ever have a situation where we would invest in a company like that because that kind of entrepreneur with just simply not cut will not make the cut on a cultural basis. Neither. Will he like us nor will be like him and that will be the end of the relationship. I think why does that happen after raising so many rounds from the same investors and the situations like that not I mean, yeah situational. What does is it? Because the Entrepreneurs doesn't have enough skin in the game or is he wanting to take company in different direction? What's the reason? Could be the reason. See again. I only reacting to what I have read in the media and which is not in very elaborate. And then also not very balanced So to that extent I will temper my argument but whatever I have heard or known is that there was a remarkable degree of exuberance in this particular person. However, that exuberance was seen as positive by a lot of the incoming investors. And when you see that as a positive you obviously evaluated but still see at positive. And therefore you want to you should be able to live with it. You should you're willing to live with it plus what best our best investors do is if they can see that there is a quality in entrepreneur, which is largely positive, but can be very negative. You basically start preparing for the to manage the risk that this can throw I don't think they were able to create a team around Rahul which could have tempered the way he acted. And you know, they basically allowed him to reinforce his own value system on the entire team into the entire company so much so that I hear that people who have ever worked with housing.com have actually found very difficult to find jobs for no fault of theirs, but you know, the they just are seen as people who will not fit into a culture into any other company. So its unfortunate I think inevitably you will come to this judgment after looking at a situation that every person has their strengths and weaknesses. If the investors have bought into the strength, they should have also manage the risk that the weakness is true. It is a job of an average investor to that extent the investors failed in their duty to their investors of and as far as raising. The lot of money is concerned. If you get in deep pocket investors in your cap table early most investors would continue to invest into a company that they have spent any money in and that is bound to happen. So they are basically playing to their book there is nothing wrong in being able to raise a lot of money and by virtue of raising money itself doesn't mean that the entrepreneur will become mature right you basically more money is given Into the company, assuming that the existing investors have done some very basic sanity check and put some governments and balances in process. Absolutely and that explains why some startups are struggling and why others are doing well, so and fortunately for the guy he managed to raise funding from Flipkart Founders again. Oh, yeah, I think I think there is nothing wrong about this person. The only thing that will I will come back and ask people is why did they fail to see the early signs of what was not going well. Absolutely great. Arpit my last question on the business side of things. What is the best advice you have ever received in business? Talk to your customer. It is always worked with me and I keep giving out this very generously to every entrepreneur. I meet that the entrepreneur the job of an entrepreneur is to solve a customer's problem and you can't serve solve customer problems until you know, the customers yourself have a personal feel to it. A lot of entrepreneurs try to solve the problem sitting in air-conditioned offices. It is not the right place to be you should go and meet as many customers you as you can that is the kind of advice. Someone had given me or someone had given some other in entrepreneur long back and that has stayed with me great advice here is save talk to your customer.