INSIDE THE MIND OF INDIA'S BIGGEST INVESTOR AND WHAT DOES HE LOOK FOR?

Welcome to the barber shop we have avnish Bajaj the founder of Matrix Partners India one of India's best and largest Venture Capital funds they've backed businesses like Ola off business country delight and so many more unleash welcome to the show thank you so much for taking the time [Laughter] but people are invited to start Nazi you know I could say inspired to do Something in India I just wanted to get rich quick person is shaped by the first 18 years of their life then by the most recent seven years of their life [Music] what makes

a founder of founder is two things one powder set goals and generate resources second that they are unable to Transit welcome to the barber shop uh actually this is not the physical barber shop but we have come into the lion's den I have With me rayvanth who you have seen before but for those who have not revanth is the amazing founder of Mosaic Wellness uh I'll let him introduce himself but was a board member at Bombay shaving company and a dear dear friend and today we have avnish Bajaj uh the founder of Matrix Partners India

one of India's best and largest Venture Capital funds they've backed businesses like Ola off business country delight and so many more and Founders All Over people like Me who have not raised money from Matrix partner despite trying many times and people like everyone who have raised from them uh speak absolutely uh you know in voluminous uh prayers of of avnish and the fund so welcome to omnis but before that revanth you should reintroduce yourself to the barbershop audience Mosaic Wellness uh started about three years back when apart from big big Sequoia and elevation Uh backed

us and have been trying to build a business since then before then I'll spend some time in vcm uh spent almost six years at Rebel Fords as an entrepreneurial students and welcome and welcome to amnesia's kindly agreed to do this and thank you for uh this time giving me a full seat versus uh yes see we are now actually co-hosting uh you saw with Rahul goes in the the episode within so we're trying different formats if you guys have ideas about how we Should do more of these conversations please let us know we're all doing

this for the first time uh all ideas will be absolutely welcome amdish welcome to the show thank you so much for taking the time uh and uh of course we've spoken about the barbershop before but in order to take a step back I think one of the fundamental uh mindset so if that's happening in young India is getting enamored by the concept of Entrepreneurship Um and you see a lot of people who want to be entrepreneurs that is capitalized for the Indian middle class has gone up it is now not something when you started Bazi

for example it was a very offbeat thing to do for the regular person but today earning a startup is a calling card you know you you get a certain amount of social status there are Financial rewards that people have started understanding uh when it comes to being a Founder uh but we are still Sticking with the country behind the course uh recent uh Reports say India needs to create a million jobs a month over the next 10 years we are at 25 of that so there is a 75 Delta that still needs to get done

and through the barbershop what we do is we bring in people like you um and Raven and we we actually tried to explore entrepreneurship so that my personal objective is at the end of this episode if even one person who's Watching this news okay I'm going to jump the fence and do this next that's victory for us so thank you so much for taking the time and I wanted to start off this podcast by asking you a simple question [Laughter] what product category was he doing he was doing it I think wellness and Healthcare like

I don't know sexual Wellness so anyway first of all thank you for Having me uh I I think what you're doing the goal of what you're doing is this very inspired uh we are all big indiables we want I'll just want we believe in in the story and what is coming uh but I do worry about employment um and like you said even if one person gets uh gets converted hopefully there is generic under 2 000 jobs so very excited about about being here uh one thing I will say you know in this Context of

Entrepreneurship you you were ever joking offline about the age Gap and all of that so you were born maybe 19 87 37 hours but all of you guys are children of the liberalized India yes uh I grew up in the not liberalized India and at that time my father was in central government so business used to be actually a bad word um and it used to be associated with corruption it used to be associated with uh essentially a lot of driving Government all of that stuff right also greed right great actually that's a very good

point it's a very good point it was against the value system it was against middle class values educational so actually when I quit my job to come back to sarbazi that my dad was supported but he was like what are you what are you smoking right uh so I just think we criticize a lot maybe sometimes rightly our country but look at where we are 26 whatever 30 years later right and Today we are talking in a lot of things we are in almost same level we used to say we are 10 15 years behind

China we are you know 25 years behind behind the US look at how pretty things have developed and today yesterday we had a AI uh session for for uh which was conducted by our Founders what is happening in the U.S what is happening in China is happening here now so I Think we should just be just living in my view we should count on blessings and we are not privilege to be living in these times we're very excited to be here amazing nobody you you dodged very smartly the question I feel very mad life I

actually thought Founders person I am like the question was was set up for me to fail what did you see in him that you didn't see me you know as we go you know as you Continue the conversation but on The Matrix uh Outsider office the first thing is we are founders first everywhere right it's your I hear it's your Wi-Fi password there are a lot of things right uh what is it and you have seen Manchester capital for now more than a decade like almost two decades now um Every founder is different at least

the ones I Meet myself there is no archetype uh different things work on different people and you you guys have evolved into a fund over the last decade or so which kind of invests very early whether I have very few data points but you seem to have understood um what clicks yeah around us so I just wanted to ask you uh what do you look for or is it just gut how much of it is gut how much of it is science I think it's it's a little bit of both but let me back up

a little bit on the logic of this right so by the way the the global narrative because you said when there are firms probably the firms who have made the most money in the world that have been set up to fund of markets and there are people even like Warren Buffett and who says show me a good team a a great team and a bad market market wins show me a bad team and a great Market market wins so actually this is not conventional wisdom but I think a lot of those adages were maybe 2020

what what came into Force 20 25 years ago 30 years ago if you look at the last two decades what are the most valuable companies that have been created right Apple inflected when Steve Jobs came back Amazon pisos Google under the founder so this founder LED Facebook was not the first uh social network inside right so our belief and hence by The way coming back to the original question and trying to rescue we had a so we believe the best founders navigate the worst markets and create new markets and every VC would want to back

a great founder and a great Market that's easy you don't always find that so when you have to make a choice we make the choice here so that's the logic of it why we came up with this uh second is a little bit of emotion or a lot of it is emotion of it a VC's job is not That exciting other at least for me personally if I don't can't sit there and interact with you guys Market I'm not making the business happen so for for us to derive energy and as Matrix we really derive

energy from uh from interacting with the with the founder so I think that's I wanted to set a little bit of context on why and that actually interestingly we had a positive point of view on the market that they were thinking about A negative point of view on the market that they were more inclined towards and what happened was exactly the opposite so but then we said we want to be in business with these guys and and I still remember I think it was pre-Christmas evening whatever trying you know we said we just know it

as it turns out that sexual Wellness thesis versus the rest of it turned out to be very different right so best Founders navigate uh one of it so I think that's The context of how we were there now coming to how do you pick it's very easy for me to say and try to look cool by saying it's an art it's got free and we have great gut feeling our great gut feeling is better than you all got to feel today references track record uh some of it is the nature of the interaction you would

be surprised to know how many Investments have happened or that have come out in the news for The wrong reasons where those issues had shown up in the founders past including in crypto I'm not just talking about India if you look at all the people who in the last three four years blew up crypto Empires go look at their history many of them were under SEC investigation in the lot of them were Traders SEC investigation is that character doesn't change so a character Joe I think there is a science to it there's A method to

it and I think some of that is spending more time if I were to ask you about character of any of your friends I think you'll have a pretty good um pretty good view how do you compress that into say 20 15 to 20 hours of interaction and trying to figure out what this person's life has been and how do you capture Data from that and form a pattern and I think that's something if you take he's like by the way if you take your example I still remember when we met uh your background from

McKinsey all the people from all the people internally who knew you would you know none of that with his Rebel you know spoke to jaydeep all of that so I think that that's the science joke so if I may sort of double click there's a science to understanding and getting to understand what the Architect says and the art is what architect to actually back is that what you're saying but if you look at you know one of the things being discussed uh actually I have been quoting Sam and Whitman for the last five years and

now obviously quoting him will be very cool so he said and whenever y combinator he said a person is shaped more by the first 18 years of their life than by the most Recent seven years of their life I've fundamentally believe that so if you see even I think in our International where were you born where Were You Raised one of the family background what is this and then you kind of Follow The Journey and say yes I'm very clear but became hungry driven this because of an environment then what did I do with it

right uh so I think but well there are intrinsics and which is why we Actually say hunger hustle uh open-mindedness curiosity it is that if you if you know what you're looking for then the questions you ask will give you those answers right um last ten twenty percent which is actually a different type of bird feed will I enjoy we three of us were sitting inside and fasting and giving yarn about things which maybe we shouldn't be but uh we enjoyed it yeah and I think that Life is too short and me in business with

people that you're I think that's the most most beautiful part of these relationships is uh uh like just to give you context uh the round was closed so obvious being kind when he says that uh there was a lot of thesis and a we just had an interaction where I think we just enjoyed those two hours and I think it takes Some of those meetings to figure out that again I think that is the last 20 I think not enough people take decisions that way yeah I think there has to be that element of will

I enjoy spending time with this person for the next 10 years and it's big it takes 10 15 years to build a good business in India uh is this something that would be highly encouraged but just on the previous Point as well do you think in a market like India unlike the US which is a little shallow I know it's deepening but founder versus Market therefore becomes more important like in the US you can get away with not only that yeah 100 but not only that in the US and I'm that it I'm saying in

the way it is both fire Founders and install CEUs by the way a I have very early like 14 15 years ago when we started that's not what we want to do I have been a founder I'm saying it very openly uh it's not what we would enjoy but that's also the mindset there to market the founder won't change and I'll tell you even in India I've had uh chats with some investors where the point of view has been different and the point of view has been you know if this doesn't work out then X

and my viewers if this doesn't work out we are done right uh and and then I'm ready to I would rather A night often investment then take a company away from offer so you think professional CEOs is not a good idea for him well if the founder wants them so so if you look at what has happened in uh in Daily hunt Vino got an um and they're of course Heroes and they're like brothers and they feed off each other right I think it's wonderful and I think actually if you ask me another flip side

I think Indian Founders don't recognize it because that was invested so much power in that company that if they don't want it didn't want my understanding if they don't want didn't want them to succeed and he brought in process because these guys would not let anybody complete us and you know all of those days are all well covered yeah actually on this right I think And I'm very I'm very uh sure that 0 to 1 1 to 10 10 200 hundred two thousand Journeys require very differing skill sets similar inter index but different operating skill

sets so for example at the stated which we are now or where you are process and talent are crucial eighty percent answers going to market cost us way more today than the wins that you would get with the same approach five years it doesn't work and Yeah for us to break that and start doing things a lot more smartly yeah without compromising on agility but now without compromising One Direction either yeah requires a very different mindset I struggle with it so I can imagine Founders realizing that okay I was great at this what I'm mediocre

at this I think mediocre and this yeah actually my obligation to bring in someone great in this video however I feel the ecosystem enters the way we are raised like I think even the way Founders are treated yeah the ability to say I am not sure I am the best at this can someone else come in and do yeah it's not an easy conversation with the boy like what we do to do it for example yeah would have required a lot of Courage yeah and self self confidence uh vulnerability vulnerabilities have confidence trust me How

to do it yeah I mean when the question is what are you so agree uh and by the way I've been told I have to plug Matrix movements also so we have been we have an episode called org 3.0 uh which is on Matrix moment so what to just to put a framework around this right zero to one or one oh one to ten or two and ten to Infinity uh or three what does it take hustlers Hustlers who can think into second phase thinkers who can manage hustlers in Third phase okay so now I

actually believe the best Founders people like you most of the companies that are scaling well whether the fountains whether it's a natural skin or an acquired skill Founders are able to do it what makes a founder of founder is two things one founder said goals and generate resources they don't take resources and generate goals right second that they are able to Transit they are able to Transcend in that transcending these positions the answer may turn out the Wiki boss right uh to your point is it easy I would say it depends it could be either

very easy or very hard depending on what are you building towards if you're building an institution for the next 20 10 20 30 years it's very easy if you're building for yourself then it's very hard right so I really believe that's uh that is probably where Um I think the challenge is theoretical understanding of that situation and openness and potentially even doing it versus practically seeing it play out is where they should I need somebody and let me bring somebody in and let me bring the best talent so let's say you are saying even that

is not let's say behavioral change required once the person is inside is where my role still 70 80 will fail because I have seen this play out in some companies and I've had uh somebody tell me the a saying which is all right after the fifth yeah which founder you will have fun with uh and now you've invested in probably hundreds um and for long periods of time uh give examples of people who you had a point of view on when you issued a term sheet and win the first Investment and then that point of

view change significantly over a period of time when people have come back to surprise even food or bad way both but maybe the book good because that might be um so they say you know that iceberg is the tip of the whatever the tip of the iceberg who indicators and by the way when we were starting Matrix The founder of Matrix in the US excuse me he told me when you think something is wrong just assume it's thousand experts right and I think on the negative that has definitely played on definitely Plato anytime we have

also dot some bullet spaces that meaning you know saw some things said no the deal may have been very hot in the market for two three years we were feeling right so And we are able to spot it from a distance generally what are those things like what what erratic Behavior Uh actually revisit the person's office it tells you or not say more about that culture like you know there are offices are walking where people's faces are drawn well now this is a little bit more nuanced and the ones that are easy to spot you

just feel the hierarchy you you can feel that that energy level is different people are not Necessarily uh interacting so that's a cultural Point um the nuanced one is you actually can spawn happiness in an office versus stress mmosis um and clearly the ones that that are great leaders and this is the 10 to Infinity phase right where people are able to attract I think people are surprised on the upside the upside ones uh so we have this framework he falls in the framework and You will now experience founder people who have seen it they've

seen Cycles generally um you know they are doing even better than expected but you kind of met on that that they will surprise on the outside right so the younger ones the first time for entrepreneurs are much higher beta yeah sometimes I for me for example now that we are doing a lot more Angel text and so on For me I think even small things like choice of words yeah makes so much difference like so much different like for example if someone is using I a lot more yeah a single thing yeah never do suddenly

and then use I like to I'm the kind of person who starts double guessing he asks a personal value system that I have yeah key you know but sometimes you want a Founder who's a lot more adults yeah those are the things that make them Successful but uh and that's that's the Shanta on that no so I observe the same thing but I don't judge it because I think on zero to one I think the problem is I am that person who is saying I graduated into saying me because that's what they will need in

trying to Infinity well I'll tell you one other who said how people what they use how they're doing the stuff like the the office the people who are serving them DM government How are they treating them right uh and you can see that you can see that some will some will be like very you know so yeah those are long bites there's also one more thing I think over the last few years a lot of and maybe this is just uh a you know a magnifying lens on sung one-off stories but there are a lot

of stories of Founders behaving in ways that um that that just defy basic governance Right and it private equity for example has for for a long time growth stage and new leadership private Equity has faced you know this kind of issues with other companies Venture Capital did not or we assumed that the kind of founder cool there was the kind of the first 18 years yeah would be the kinds where uh it would not happen but there is a lot of that coming out and do you think this is a these are watershed moment where

there is a need For Founders to be to be kind of coached on majority governance Etc you just thinking just in flash in the pan situations which will almost match so no no absolutely uh there's a need of the R I think the needles here this man told me 18 months ago he yeah she was sitting in my office and I said oh so he said I don't know how you will Dodge it right now I don't know any of your companies but some of those that By the way come out in the market later

um we took it very seriously but let me again step back a little bit I think first of all on the founder level separate indent from immaturity okay uh and and so in my view and I and the second part is I think investors take a lot of responsibility for this they were people in 2021 competing with term sheets saying not really required if I have a problem forget me and let me in my image Right so I think what happened was and these are things that and I have a little bit of a perspective

it says that let's this is normal see the reason technology markets are disruptive in they are not linear by definition they go like this so this is part of this right okay now the question is what connective action do you take so for me the zero to one one to ten and ten to Infinity in late 2020 to uh q1 of 22 got compressed One year so that's what we also must say I I still remember when he said it was August 21 in the middle of the bubbles so I'm actually very grateful for that

because suddenly we said okay any company more than 10 million we need intel a lot of recipe so today it is uh immaturity can be fixed with coaching maybe uh some of it is like I said you Hive it okay either it will be or it won't be but intent and this whole front And only the they should be enough chess and balances that you are catching and by the way my big learning that's when you realize that internal audit is actually what you need right and so now but now in the VC Community there's

enough recognition and enough discussion let me let this happen also uh and it cannot because that you know no audit can catch it by the way yeah all the best investors What infuriates me about this and whenever whenever I see Founders or I read about Founders doing it what infuriates me is that you have the most to lose yeah when your when your company starts going down or if you have harm your company it's it's literally akin to harming your own child how can you financially harm because if logic was to play out yeah no

one should do it yeah no one should put enough let Me let me challenge that so what about Vijay mallya what about Native Modi so the reality is offline behaviors are coming online until NCL thing came in I used to joke that all the npas on the on the books of the max are is equity in the pockets of the promoter because they will just siphon on the money foreign equity [Music] Already send the expectation now you spoke about due diligence which are P would do before investing a large check I think our ecosystem is

quite young and more than immaturity Outlets I would say that no Oneness and I'm sorry I'm putting this on you but the owners of how to shape this ecosystem has to be in the early large farmers who would buy to instill processors and say that you know this is how you should Think about uh leveraging Capital this is what this this can be a list of news but this is clearly a list of doors and we have to go on the same page yeah all of the absolutely my father had told me long back when

I was in McKinsey I told me you can make enemies as many as you want never make the government one if never bribe never Dodge tax never do anything where hand on heart if you have to go and present to the assembly in the US or You don't do it in the India yeah and you cannot put your point of across and that is stayed with me very closely now now that's the bar I put now but thankfully I had someone who had the experience of running their own company and so on but something 21

year old from IIT from a family which has been in service yeah we may not have had that yeah so sometimes I agree with you I think the ability to kind of put down what governments has to be what the bar Is in McKinsey for example yeah we had I joined the firm in 2011 when the whole rajat thing had just broken out yeah so we were hammered we are about values and what they are right and what is wrong yeah but and I think that shaped a lot of the way Iraq but sometimes young

Founders I don't have exposure and so absolutely we have to do this and by the way we are doing as a VC Community I personally am very grateful for two driven for flagging this at a Time where in the middle of the bubble we became clear by end of 21 please but I will come back to hey and I don't know what role we all play in this that recognize that this will happen this is the world of financial services is greed and fear there is greed okay Bernie Madoff will happen um all that like

I can give you so many examples All that stuff happened here uh way back you would these things will happen the question is is the ego if you look at I don't know if you saw the uh we crashed show yeah immaturity yeah right so uh in some of the most developed markets of the world then you have seen FTX right I actually think um I actually like I said I don't know the answer is I I have learned to start to Take it in my stride and say what is systemic and it's okay because

it also comes with the positives of disruption and what is something where you can intervene so now if you look at all the fraud that was happening by the uh of whatever the traditional businesses using back Equity I think the government did a fantastic year of putting in this bankruptcy court and nclt had lots of checks and balances and you can't you don't do some of this And I think that's where self-regulation of some sort in common no absolutely but going back to your your how did how did Matrix start and how do you how

what was the journey like from founder to internet founder to now founder of a venture capital fund one of the most successful uh over a long period of time in India uh it took a long period of time to become successful oh it's so cold so cold but the talk us through that I Didn't have one enough to kind of just kind of timeline technology I I hope it's actually instructive for people because I think at various points one has to go through a decision on what next so I went through so my I am

on record saying uh when people ask me why did we start Mazi you know I could say Inspire to do something in India this there I just wanted to get rich quick I was 27 28.com bubble million dollars and the question was I still remember Where I was working with my wife and I said if I don't work you know we will make X in those days Converse a year in just interest and we don't have to do anything and she's like well there's no chance right so you better figure out so where is this

I don't know if you and I spoke about this but there's this framework with hindsight with later on it's called okay which is a Japanese framework and and my own framework at the time was passion Skill set opportunity where do I feel passionate do I have the skill set for it is there an opportunity to perform wealth creation or generally fulfillment guys basically that but it adds meaning and impact purpose right so for me I had because I had made some money I made about 20 Angel investments in 20 4-205 something like nah very early

and one of them paid off uh actually one was founding investor of cleartrip which Shot up very quickly so already saw some success had been very exhausting how long was that Journey four years for it um so it had been very exhausting there was no Market we had offers by by the way from some of the VCS who would have given us money and if we had taken it then who knows what would have happened uh because Flipkart and all that right so uh but didn't have the energy was tired realized that the Domestic internet

Market was still very far away realize that the cross border was the way to play with Services didn't want to do that no passion no skill set even though there was opportunity then said okay if that is not what I want to lose and how do I become an entrepreneur I considered becoming a professor oh really yeah but no opportunity passion who knows about those kids right so I actually apply This framework across well then is in retrospect are you applying very very actually when Matrix was started in 2006 it was with this and that

I have a passion the skill set I didn't know but having invested in uh these 20 companies the founders used to call me and I wasn't on the board and they would have separate meetings with me right whether I can pick or not they're saying and then in that we made money Also very quickly so felt that this concern can be developed actually opportunity was questionable at that time so Tech was not happening so our Matrix India one was a consumer opportunities focused okay so if you look at a look at it more a lot

of our investments are offline uh W was one of the Investments so very little only daily hunt and quicker were in Tech or the ones that worked h23 was in tech um and then of course so that was the Thinking and then after that I would say for the first five years it was unclear whether it was the right decision was five six years all of us by the way Excel was a little bit later all of these workers Matrix Nexus elevation Sequoia Diego and uh helion and coloring of the first group seven eight so

or everybody all everybody's 2006 fund is Nothing so right but what happens and I was always very intrigued as to what happened in 2005 six that well I think even Axel was then eventually I think so what happened in 2006 that suddenly uh uh I mean Sequoia was always there uh this one I think the way is no so I'll tell you what happened even though the exits were small there were a bunch of exits okay so make my trip in public okay uh um no we made a ton of money in that uh elevation

then what is Bazi was An exit there were like a bunch of these exits so people said India marketing India opportunities there so uslp started looking at Indian U.S and we started looking at Indian this is even though that India's shining phase was over but there was this thing that India has the next China people and that China was exploding right 20 years later we're still saying India's an action I think we'll put in some ways we do Differently but better um so so that happened and uh so the first one you know everybody had

different strategies and you were investing like I I remember or when I talked to Varun or Vikram they were saying that we used to do large almost growth sticks we were a bad Market consumer PE firm so uh so we uploaded very well for us some some companies did well for us 2011 we raised our next fund 2012 is when there was this inFAMOUS or famous actually Mary Mika report she was used to be at Morgan's son if it said mobile internet is crossing desktop internet in India and that was the next moment because and

by the way Snapdeal was doing very well connected that was causing a lot of people but this report by itself must have created 2013 billion of Market whatever Market yeah because everybody Got excited it's very interesting if you could actually outline the last 17 years of venture since 2006 seems like they were inflection points that would bring what we call step jumps yeah there's not been actually incremental terms always been step jumps I think 14 I remember the billion dollar investment into Flipkart and we had 15 there was a big bubble 1670 again it went

down 18 years started Coming back obviously post covert there was now again there's a m yeah and every time I see if I see all three phases it's a four phases now because I was not there in five six to see this yeah seems like oh India's arrived there's enough yeah money to be made in India I really like what you said there's always uh greed yeah in in financial right so this is a great opportunity and then there's this yeah and there's only over no it's not as Good as we thought then again it

goes back up with some infliction going but this is the you know the traditional view in uh actually I asked uh I asked one of my phone and lighter note I asked the founder of Matrix what advice you have and he gave a long story because I'm very successful it was meant to be a story about so when they when he died in the opponent it said buy no Sinai so the issue when this is Yeah so that's the challenge that's the challenge but again I think these are the cycles like today if you ask

me and I'll come to so let me actually ask you guys a viewer question and you can also uh answer so why is this time again not the same as before where it's just a false traction and again it now it has crashed I think inherently the which is why I like how you think which is one Founders first you have to back People to change their behavior or learn from mistakes and every cycle the smartest or the most hungry people pivot and learn and do something better and if you've seen two or three Cycles

your learning accessories actually compounding right so I think that compounding in fact I think Kunal says this and all right that is not the use of experiencable number of experiences That you've seen so when I was talking to like GV also about three four months back and you have also mentioned this that people who have seen the 15 16 Bull and Bear they are have actually just been fundamentally early to navigate the current situation yeah so I just think a lot more investors as well as Founders and operators are learning how to just navigate these

cycles that would be my so that's your problem what about the market no I have A very different view yeah I think all of your business skills uh scaling a business from 100 to 300 nothing like I don't think it's a sizeable business at all so I don't think our businesses affected by microeconomics till we are a thousand ground business yeah right my view is whether they like it or not we are at the mercy of from Capital uh access standpoint the mercy of LPS yeah all right when covered It then money was printed money

was printed inflation went up inflation went up interest rates went up to control economy interest rates went up people had different access to government boards so private private valuations kind of went down ability to invest in private markets went low and that spillover came to India now so and then then that results in different like of manifestation of that Hypothesis now let's look for profitable businesses yeah one way there is now a capital is there yeah but deployment pressures are such that you have to have opportunity costs matches so now if that is if the

underlying thesis has changed from public markets have boomed and are public to private ratio is to 2. and 2 has become 1.5 find more assets And then whatever that's all capital flows I think I that's my belief the two Founders there are pessimistics but that's exactly what I'm saying that people who have seen Cycles like the oh yeah let's go to that point yeah just don't be in a situation to raise Capital right yeah that's what the experience would teach you that you're the founder correct also as an investor what he said right like and

I hope it's okay if I say this 2021 when We used to chat please ask me would you invest in this company IPO I said no and imagine I am telling my board member that his favorite company I'm not going to invest because I think it's swollen or the fact when I would ask him are you selling in this market so the biggest problem is we have to be inherently go against how the market thinks and it's very hard to do that as human no I completely agree so for example my Company in 2021 would

have raised money at at least 50 higher valuation than what I will raise today now it's not it's not about League or not yeah the question is will it be fair to my investor then that will be fair in 2012. actually so again like I said the two founders of cynical or pessimisticated optimistic so yes fundamentals and their sentiment correct I think sentiment is driven by Capital flows I am actually much more bullish about the fundamentals and you know there is now a phrase I used to say it's the digital public infrastructure right so now

if you go back and see what's happened over the last seven years up I came I still remember when the mother is my credit that time you have to rebuild out what razor paid in later even the payment Gateway because the acceptance acceptance rates of 55 1995 were right so you had UPI coming Correct you had Broadband come in a modernization taught people how to use the uh where you know all this payment uh Gateway all of that you had every citizen having so good and mobile architecture then you had GST coming so to me

and and I don't know if I am over optimistic or if you are too pessimistic because to me these are things that have compounded put the icing on the cake because my wife who was never by the way registered On Google does that today everything is all made that is not changing that's not a bubble okay so the fundamentals have changed right the problem is the sentiment screws up the fundamentals so everybody buys growth Amazon then um you know at one point they were good forty percent or whatever 35 percent then one pulled away so

That wise growth upfront correct and therefore every time we go through these things one or two years look like now the question is are they bad because there was no underlying fundamentals or are they bad because unsustainable practices would put on Norco great fundamental correct for the first time in my life I feel is the net that fundamentals are very strong and unsustainable practices in the well-run companies Foreign um although he and I have this point of view which is a little bit maybe not as encouraging for people but it's a truth which is there

are too many bull market entrepreneurs in the market right now so people who have 2017 plus 18 plus 2017. oil change and all the liquidity all of that key what if you look step function to step function 2016 versus 2023 take out the capital Indian Market has deepened or what correct fully has Depend a lot now people since right so it comes through some much more optimistic I think the market has the fundamentals of the market have truly inflected I think that digital stuff is really on fire it is creating opportunities to build companies and

uh one of the things we had told our investors is that we are investing in you know digitization of in existing GDP not incremental digital character all the me to be businesses I mean you Don't see those have in China you don't see them in the US yeah because we are leapfrogging a poor hard infrastructure with a world-class soft impression are you very good you're absolutely right and one example which is very recent you'll enjoy this coming from the food industry which blew my mind if you watch the IPL you will see a lot of

this sting card have you seen this thing that no okay so sting is a energy drink which is under the Pepsi umbrella In India it's one of the few drinks that has gone from premamizing a main skew to 125 bucks from 99 to 125 bucks so it is amazing it is 10 years back yeah went to 700 meters as a strong hypothesis on why it happened so if you talk to the paper gold paper boat so that's their business but now sting came in sting is one-fourth the price of rainbow yeah it is the largest

cold drink in India it has gone ahead of Sprite and thumbs up Wow from certain estimates but guess the cohorts sting is a half the caffeine one for the price tax third promise the cohorts are 15 year old and 17 year old 10th and 12 standard kids who are buying this by three to four times in day yeah okay and daily wage almost who'd substitute their lunch with a stink so that their second shift so fire energy with fire those are the two but they're buying it yeah and then And unlike boss do you write

the consumer Market is deepening but for every category Indian business you thought I don't know if you guys saw this you know how much the luxury car well you guys everybody saw the Apple Numbers apple is as premium so I'm saying I do believe but because that promise has been made so many times we wonder a lot of things like I don't know Whether I'm sure you found a public markets you you follow it very closely I don't know when you saw the ethos IPO he poses that uh a luxury watch you see detail stores

are written right so one thing about them is always and the average selling price of the aov in my first store is 1.8 lakh rupees wow there's a thousand crore business the stock price has gone up 70 says IPO in this market 70 upside in one year okay six quarters Maybe Do you know the Thousand crores they say 80 Business comes from 500 families it's a B2B business could you imagine foreign foreign was to bring all the luxury Brands to India oh really invested in a company called brand marketing India so we brought Gucci Ferragamo

uh actually Calvin Klein FC UK and um whatever you lost our shirt actually we made our money back all the measuring Brands lost Money right and ultimately we exited that but basically now again I think the pessimism comes from sometimes fatigue of having seen the story before when I'm at least I feel even matching patterns to China that is happening yeah and the only indicators that Mercedes sales increased 27 year old year that's completely and it's a it's on their highest base when things start accelerating of larger bases you Know something is happening correct that

that is so I think the market is leaping I actually am very happy to hear this data point because I worry that the market is which is why you but when I look at none of the companies now in the portfolio are actually charging premium prices right when I go in a search for the gummies that I eat I this is the highest price but it's of the best banana because of mine people Indians Are always known to me I think that's it and that is very good for all of us uh because other you

can't make money yes which you're absolutely right when we when we entered when we entered our company and the wisdom at that time was find a big Market maker I met Mr Rakesh Kapoor the CEO of recruitment Visa till 2019 yeah it's just an amazing guy like he was like Versus first principle problem solving consultant hand yeah I mean I have actually done enough of what advisor I want from what kind of investor and you can see a clear difference in the optimism not an X operator slash uh and this is a bold call right

go into a small market and create it yes because the usual pattern matching will always tell you go afterwards yeah yeah and I Think as you were speaking I was just thinking when Market is good when GDP is going to go from free in the afternoon over the last 75 years of your existence you are going to do 2s on that in the next 10 years better think or what not bad consumption heavy but I'll tell you one of the other reasons I'm very optimistic is the some of the reforms that have happened lack money

has gone out of the System our tax revenues are increasing 30 percent year over year when your mother when I came back it was like a real shock to me when I realized that India's tax revenues one less than microsofts so I'm like the entire 1.1 billion people subsist on Less on wealth or the countries you know influx is less than the revenues of Microsoft and the time in 2000 so it was a huge shocker by the Way that's not very different right now uh I I think our 35 percent I think our tax revenue

will be 7 800 billion yeah 800 whatever so some of these companies Apple for sure has more so but anyway the point is last four five years that's how it's been compounding and therefore you see all the infrastructure changing therefore so these are the this is the classic multiplier effect of GDP if if people are going to you know live better And you know we'll talk about ease of living and he's doing business all of that you will just see this compound now the question is does it I was actually worried that covet would be

a negative external shock yeah uh it turned out to be a big positivity uh in terms of not just the digital I'm saying between Culvert and the China issue India has benefited and India has done the right things to now benefits the first billion in our Geneva took 67 years yeah the Next billion to get the next billion to getting four yeah next million might take one now here and then we are actually in the month yeah indoor adding a billion dollars yeah yeah and so you know um Bill Gates uh says this that we

often overestimate in the near term and underestimate in the long term overall I'm not just saying this set that that I'll actually think it's it's going better than anything Although a lot of this comes out in so we celebrate startup growth a lot yeah right well if you see some of the laugh of course the jio story is amazing yeah a very publicized and so on yeah I met Amit singly at Asian paints three four weeks back you'll see Ovation bills these guys are just what I mean the the rocket ship that companies every every

year India is building one half crore houses they're building on half crown houses every year okay Secondly India is now paying the repainting their houses instead of once in seven years once in four years so the doubling Home Market though immediately right third is now now that that company is now thinking instead of share a wall how do I take share of space yeah so I'm getting now do you know that they have this thing called Beautiful Homes where they're getting into Furniture Administration and wallpapers and some Beyond just playoffs and then our 2000 Crore

business [Music] see if you look at the U.S almost all the companies are professionally bankrupt right of Asian parents are actually very professionally run concave or the family is involved and actually I think for us all these promoters are all very sharp you know all the time of the old world promoters they are so good and their environment is uh is going to capture share from the standards they Are they are very very uh Nimble actually okay yeah in this also the good news is he was just telling me if somebody's been chasing him for

investment then right they are all spotting this as an opportunity investors are a little bit uh slower or whatever or more careful these guys are very very sharp in sporting and like what happened with jio in covet like who would have thought and it is yeah 15 days and day one day three yeah Unbelievable are you seeing are you seeing some of the early effects in terms of across categories uh in your um or Industries in your in your portfolio are you seeing consolidation happening because that's one of the immediate you know when 15 20

years in yeah start seeing mature Industries where now condition starts happening so consolidation is of two types one is uh Startups acquiring startups and the other is you know two women right which is Old World so I mean it's public news one of our companies oziva was acquired by by well we sold our state to it sure I actually think it's a big positive uh my colleague Vikram used to often say this that in India you have to be the talk decide as a company and founder in execution top decile to have a shorter venue

Krish And everything else will either lose money and maybe top quartile may make some money and everything else will I think that has changed because and by the way and we should again all take we feel good about this you met the Asian paints guy if you look at some of the people working in these old world businesses who are analyzing markets watching Trends over there that's all the sharpest brains are absolute right and they are timing At five years ago so they are seeing this chain so that also tells you that something has changed

right so uh so in my view now what has changed is I think talk quartile can go public talk next 10-15 percent you will still get a good exit and if you break a decent business you will get acquired you will get acquired the question is do you own some customer that somebody else wants so people are not buying effort these Companies thousands of girls they're not buying your Revenue okay they are saying do you plug a hole in my portfolio around my customer or some customer that I want right that has to be the

filter which is Basic Value creation right do you really have a 10x experience uh for some of them but absolutely uh consolidation is also happening within the the startups but I I find that is less exciting for connect because that's swapping one paper for another paper Neither of which whose value I know okay uh that's a lot of confidence a lot of refineries [Music] because this is in the talk for quartiles Exposition set top design so that's not there companies but um a lot of the larger companies in our portfolio have like all businesses and

Acquisition machine they must be doing 50 a year but it's generally for cash and very small and it's plugging a hole in its vertical integration actually as she says this very well I will never buy Revenue I'll buy much right so never because and and his thought process if I'm buying revenue for the wrong reasons wrong reasons but actually the inside is great I'm generally acquired acquiring a competitor and culturally will never be Able to take it because we've been fighting for the same cost if I'm acquiring vertically I'm generally acquiring a supplier or somebody

and selling to an extra synergistic relationship I thought it was a well most M A fails because of culture but on the consolidation piece do you think one of the deterrents for that especially for the Venture backed ecosystem yeah would be the enormous amounts of cash raised by companies so I'm not saying it Will necessarily so uh yes absolutely and I think people should have realistic expectations I just put out a tweet this morning saying it's all it was all notion and on the way up it's all notion on the way down I said now

you know that investors have a protection of what is called liquidation references and by the way I've I found out that some of our some Founders didn't realize that so they would not they would know in a good way they would Not be entertaining things that they should because they would they were thinking that my investors will lose money because I did then then the reality came out I think it's interesting that you mentioned the liquidation preference act a lot of the viewers would not know uh some of these terminologies and I think it's important

for because the objective of the show is to Get more entrepreneurial entrepreneurship at least for future entrepreneurs to know on what side of terms to sign up for and whatnot and uh we've been lucky I'm good investors will give them good jobs but uh at least I have seen enough uh in the last 10 15 years where uh liquid Stacks technically have you know uh been detrimental for Value creation for you know either early investors or for Founders as well or esops even worse yeah do you want to Explain total about lakecraft and what are

the options I'm asking I actually think it's irrelevant which is why which was the point I was making earlier so liquife is if I am putting in X let's say I'm putting in 10 Rupees at 100 rupee post money valuation so I get 10 percent so that's clear that's why Oman equivalent ownership but I'm not actually getting common stock I'm Getting preferred stock and preferred shock is lick ref that's how you get it so if the company is liquidated I first have the right it's almost like a debt I have the right net without interest

where I have the right to the first 10 Rupees so if that company was sold for 20 I would not make just 20 of 20 I would actually make my 10 back correct yeah yeah so that's how that's how liquif works when I think revamp was Telling me is that you know there are a bunch of companies that there are so that's a standard what is called 1X liquidation prefer okay then there are Google is or not uh one is what is called participating preferred what is meeting prepared which is called double dipping which is

I'll make my money back and then I will take more money from what is left so if you take just the example we took I would get the 10 Rupees then I will also get 20 of the 10 Rupees that's left correct and I'll get 12. then there is something else which is called uh senior liquid liquidation preference and then you can combine these where it's senior senior May 2x4x so now let's say another investor at invested let's say at even 200 rupee price and they want five rupees five percent but they had a 2X

lick pref senior what Does that mean they have 20 rupees sitting on top of my 10 Rupees sitting on top of one of the founders equity which they get frustrated so it's 2x senior so if the company sells nothing even I get nothing so my view is and uh you know one of the most famous investors in the world uh it was a guy called John Doe who was a line of Perkins who is I mean he's retired now so clear trip you were involved in investing together By the way we are not participating preferred

which was the you know I had Noble dipping I didn't even know what the terms I'm actually mixing two ones but first let's connect so in those days basically the amateur races try to optimize all the season he seems realize your door and will come to the of John doors participating preferred um so I had to go and renegotiate uh when The chips were now with my with my investor so I've been on both sides um then in with John Lord and I was you know I was technically working with him and Sandeep Murthy on

the clear trip investment he said no you don't make money on terms you make money by getting into the right businesses this is the difference between Venture Capital which is a reward business and a power no business and private Equity Private Equity do need these stocks correct because they don't want to lose money then you know IR versus a Canada business so I was telling him that no investor worth their salt has these terms now at the early stage in the later stages what I have found is uh some people try to slip it in

we have a simple uh approach it's a it's a very thoughtful formula called nfw No effing way So so he said don't take the money but you know we have not there is they have never agreed to it uh I think sometimes this is what happens these are all structured beats this is when founders are trying to keep artificially High evaluations uh and now I'm raising money at 20. whatever whoever put in money at 100 gets the same St yes State as if they put money at 20. never happens that is also an FW top

card for Founders I don't Even want it because I know it will dilute everybody the company will go nowhere so what happens is what is on a weighted average which is most likely the case the price the new price will be very close to that by definition but some production um so I do I fundamentally believe that you don't make money on top spiral upon off topics I shouldn't I can actually put it out there uh the VCS are starting To talk to each other and collaborate and our goal is actually to make drums better

not worse and just come to Market because same deal which is right I think we should be like that is the is there a central body like that in India which will sort of at some point of time but is it as we tried this three years ago four years ago Um and then we realized what the aif guys needed uh versus what we needed was different and that created an ivca tends to be more eif and by the way that all of that is changing I'm just giving you the chronology then amongst the VCS

we tried and then we realized that everybody was at a different stage in their evolution of this he gave matters um so I think we will see some kind of convergence it doesn't have to be Central what is beyond a point because You know how foreign we know very clearly then the business has to have Revenue which is two times of capital registered it yeah always yeah if the business is not there or you know you don't have a line of sight which is absolutely clear point to point yeah then don't raise the money yeah

otherwise you are putting the company in a capital pressure yeah but that matches easier for Consumer because it's you Have a line of sight and yeah growth is in some way predictable given no touch points and launches but in other Industries like SAS for example or in elect EV for example can be very difficult to do so how and also like a lot of Founders are told raise as much as you can when you're getting it yeah which goes completely against the philosophy of making sure that you are raising smartly with the mutual equation for

everyone the audio Balance is I'll give you first let's go to the first piece so when you said it's an interesting thumb rule you said uh Revenue two times off um what's the gross margin of your business from 60 60 percent right so there is a rule in general of saying eight to ten times we can go through a lot of detail it's also on matrix it's not why that makes sense so the multiple in my view is eight to Ten times that uh eight to ten times gross margin so what thousand months correct so

now you have a 10x of what you have raised as capital as a menu correct you know what the benchmarks for this are in the global markets yeah next is the newest wow it has to be 10 to 30 x and all Enterprise SAS businesses are accurate 30 years that's how Venture Capital used to be to your point before these you know the free money engine time came so all of these are gone now Right but that is the mature group the consumer High Capital intensity business is 8 to 10x and up to 25 30

amps if you look at some of the yes IPOs in the US were Venture capitalists spent a lot of money it would be in that Ridge um now in so that's the answer and I think if you apply that to India in the consumer businesses the numbers are 3x 4X if you look at the large Market have like amount of money they have raised versus their current valuations instead Three four x maybe two three x now I again move to the earlier point of ownerships and all that that we were I think that's also because

the markets are not legal you are artificially trying to create markets right so I'm very I'm more optimistic about the future which is why what you are saying now becomes border [Music] so actually one of our Founders I was chatting with That made this point earlier so I think it's a rational Behavior when money is free why wouldn't you take more correct right and why would you go spend as much as you can when money is more expensive you have to think about it differently I think and uh this overall thing on valuation I I'm

completely with you and I think he's doing it in his businesses another Founders who have seen Cyclones it will focus on valuation they focus on valuesh And there is multiple you can keep raising every 18 ones two years single digit dilution single digit I'm pounding like that as opposed to trying to get a vanity role done and get get a great valuation I think that is the right congoles are understanding used to be part of board meetings we end the first and only investment for them in India and this subsidious fires they said your investing

is exactly like a Colgate to a pest because [Laughter] it's a bank no one has seen that kind of money in your personal life you've not had those salaries and very few of us come from families and that money was available yeah seeing 150 crores in the bank yeah makes you feel a on top of the world yeah be under pressure to start deploying because now that means and the clock is now taking care yeah and then you start doing things yeah but then Again you are of the belief that great Founders create markets yeah

and to create markets you have to put money in the markets no so or to that point actually if you look at and some of the most seasoned Founders now talk this language which is actually music to my ears if you listen to the god of them Warren Buffet Journey now you know close in their 90s or 100 who have seen really skilled companies over decades I think one and sorry to pick on that Point but I've always thought about this and maybe this is the show to say that do you think that a lot

of our building operating and investing principles are based on some learning from the West yeah where the markets are just very different like just on this thought I love it I always think of myself as I am the CEO my job is capital and location yeah again I know we are saying the market will expand but I think it's Fundamentally like okay let me think you may be right like just you know I remember this tweet from uh I'll mentioned this on the previous shows remember TJ had said that us made n200 because we have

to do three more zero to ones yeah the Innovation cycle requires the CEOs bandwidth a lot more yeah in those markets that big bumper growth has is possible so they are probably fine-tunity versus here we have to do bigger things you may Be right that here you have to do both like what are the big Nets I have to take not just Capital yeah I may may or may not rather but what are the big strategic bets to take and Captain is secondary or generate the capital yes if the markets and a lot more blocking

and tackling my stimuli required yeah like if I think about them for example that's what we read before it average founder in a great Market would be a tank the box in the west well we are saying great Founder and average like like in in in his case for example one sharing form across one distribution channel would have given you ten times the revenue compared to your very own open five more lists four more colors correct four and more fragrances foreign right [Music] and the gestation is 12 to 18 months and after that you get

it and by the way the Public market are you showing this to me right and in various ways have you demonstrated yeah I would say it's a good point that when you are in the I think like let's say this is not learning because it's cash it's something we look at some proxy of that but after um all the discussions I was telling him like oh it was a big positive Awakening which was yeah You like diluted growth we like non-diluted growth we are okay with less growth if it is not valuable correct right so

that I was saying what about this trend that Trend what does that say like which company resident show me the company show me the last year finances last three year financials then I will tell you whether so it's all bottoms up it's all and up the reason I'm bringing this point up Ultimately that is the dream for most Founders Capital markets are capital allocation from there so are you seeing so for me like for example going publicly the thing I'm not sure about for you but because you've kind of seen it on the other hand

and are you seeing more and more people found us feeling we are company profitable when I'm making it and make it into a cash fitting business and keep it private for as long as Possible the Mars so whatever the episode which we have just released today you will run out so yes but above 500 million dollars uh of capital to be raised in let's say to exit people you will tap out on private markets so you you may have Runway but when companies reach five six seven eight ten billion dollar valuation you tap Founders if

they if you down or they'll have access to Capital only the companies yeah that's what I'll say how Will you answer your investors a lot of them are doing pure secondary when you learn about that's what uh next round when you need a billion dollar exit across investors you will tap out see a property that's 10 billion so my personal view I would never want to be public if I was running a company I don't think I'll have a choice I mean I thought these these Chinese but you're not looking companies Permanent Capital huge Advantage

sha is dissolved you don't have to not answerable to you truly your boss I mean obviously you have a board but essentially is not I think that so she was like okay in a public market you have your bosses are the public shareholders there's no preferential treatment yeah they're both shareholders development here No pause yeah that's it the amount of effort then goes into keeping a company if you ask a lot of the folks who have gone public in the last five years from the new economy companies let's call it that I think privately a

lot of Founders will tell you that their ability to think long term and take long-term bets is now under hugely ordering water pressure no Yeah I think I think John Doe only had written this article about how the quarter on quarter pressure which Wall Street puts on companies is the biggest biggest determined to growth and Innovation so you know I'll give you a contract given that is the conventional wisdom uh if you look at how Google went public Facebook went public by the way Defender he had returned and was uh uh memo I'm not going

to do he refused to go conference calls he said I'll do it Once a year right when he was going public we were medium in Delhi he was happy I mean he opened the market uh in that time when so if you talk to the public marketing list they give you 18 months okay so when from the time you are going public they have priced you of 18 months typically 18 months that will be on F5 25 September 22nd right so calendar or June something like that right so their view is A consistent repeatable business

right um so so and then they look at the possible project in the future we you know yeah again like I said if I was running a company and I had unlimited access to Capital probably I mean look at the people who have that loan must they can private SpaceX in private um what somebody was telling me I think it Was on one of the other home impoders that you know space size goes oblique the work you want by the way the bubbles what was happening in all markets but liquid bubbles only happen obviously so

when when you see all the people who are now can you imagine guys the richest in the world that's believe it but otherwise all their opinions you know so um so so that's when but I think there's a lot uh in the hopper on the digital goodbye foreign So uh because company ipu scale McDonald's or financial secondaries also would have been possible investors second second Miss and same argument right that if there is enough liquidity in the private Market so what's the what's been the most um heartbreaking uh Moments of being romantic happiness in India

when you see formulas making avoidable mistakes and you tell them unless you do it and and you know that it's going to be some wrong with the company because we will never exercise Obito right we consider options as coaches in person by the way in some cases and one was going to happen 18 months ago I told the founder this is a better Company I think it's everything is uh potentially you know not not the right thing to do what is your company that by the way will never know I'll give it even that the

founders company you don't see ourselves so at night sometimes in Western nurses are not aligned right so heartbreaking ones are very talented founder very deep Market got product Market fit going or good execution going got misdicted uh I just Sell for influence and then then just do all the wrong things I hope you get unsustainable business all of that and then they'll lose the market option you cannot want to wait for you too right so and you can see it coming you can actually see it coming and you tell them if you're going to see

it coming negative surprise it was unavoidable it also happens when that's you put in a faster growing business bucket actually you both are Awesome but one one is like unfair cost of living wills and that's just it and again coming back to this founder empathy um you just feel that um you know it's one of those I wish you had listened I don't know if anybody never tell them right so I think that's the reading between the lines you're looking back to all the conversations just because You know and also by the way and so

this is the most heartbreaking how many times has that happened to you in 15 years 15 17 offline this is many times many times um online businesses also actually quite a few times um but online yeah or online there's also quite a few times and then it came out very fast too right uh but this is where we come to what the profile of the founders has changed right offline Businesses even the experienced ones do this because they just think differently online business is generally the inexperience for us to do this The Experience run does

it lead to a disintegration of relationship permanently well well uh it is done right to be founder first in a situation where you're seeing you in you're in the passenger seat of the car being driven by someone else going off a cliff and you can see it Yeah and you're still saying hey I'm not going to veto this I'm not gonna jump out the car yeah but by the way my relationship with you will always remain no you don't say the last piece either right that's my relationship will be unaffected whatever I will tell you

um where I think I'm just thinking through his life where the intent of the founders you could never question Those relationships terrified and and I'm thinking of one founder who was always one of our favorite Founders and is again very close to us when the intent was never enough no it requires a tremendous amount of maturity to do that as an investor I'm sure because the amount of I've only Founders understand it's taken me a long time to understand how much pressure an investor takes yeah on your behalf with very limited control yeah on what

you do With their money you get better one at compartmentalizing or there is a science to managing this also which I don't think is practice you know which does come with eight and greater and uh we don't mark up most of our company to to their prices and carry them at Big discounts and then we see get down only another people to do your LPS and so on yeah you said pressure in case foreign Management if you have enough winners the issues you can't do that if you don't have enough stat if you have enough

winner then you have a track a record then I would say all the top tier visas in my country we manage advice and therefore your judgment is also not clouded you are not giving advice places and opening investor without a camera and when you see things done you're also very interested about marking them now Like below cost so I think that that's one of the nuances like cross principles Bond management so that you don't get I I'm telling you again with this even in our portfolio all the time where some somebody may have been carrying

it on a very different press than we are and the advice is it screw it on past hit the next round and do this do that to him that's the and then the founder is strong ER solving for fund economics is a very painful thing that I can yeah that I completely feel bad but I think that's the corollary then happens I think most Founders realize this when there is three different rounds done obviously at three different prices and you start seeing the advice changing between them yeah I mean it's the same but the early

stage four persons let's say in the money at 15x the second investor is at 5x and the Third investors at 1X correct well advice is obviously going to be different how does a Founder optimize for what is always a very very tough uh tough piece but I think that's one another podcast so that why no so in that situation we generally have have it a little bit easier because we would not have marketed to 15. we may be sitting at five or six yeah yeah and by the way I I mean I know you guys

think like this I personally agree That's how Congress will be thinking this is not the senior responsibility taking money right don't take money and then say updating it so on the on the you know a little coralary to what chanton was asking do you also feel sometimes that yeah you found her but you are capable of doing a lot more I think that would be happening a lot more times than the first it has changed now and I'll come back to that by the way I Feel about that about myself like that as a founder

of a buzzy right it was like if you hadn't sold you know whatever would have happened whatever but I tell you what I realize which we apply in the U.S secondaries are a big number okay now that change during these 2017 to 21 days but founder secondary is frowned upon like anything I think it's wrong I think Founders should be given some secondary And give us a second and then they want to build because otherwise that especially for younger Founders for me that first million two million is very tempting right I didn't brought in that

completely agree with you I don't know why we don't do it yeah there are some conditions I believe that have to be there given just given the conversation we had around founder you know just the founder ethos right yeah one of the companies would have a Track record number two there should be more capital on the table than the company needs correct the company has first right third is that along with the founder there is a significant amount of ESOP Senior Team early investors Etc everyone participates in that excess Capital more than the company needs

X company raise one one point four x because you have for 40. I can tell you I think those are great Rules the the additional no ones are given number two which means that you have a business model that's okay correct right any you may have enough Capital correct but you wait no still not have a business model that's working because I'll tell you what I'll tell you the very person and everyone so has been a big part of it for our company I think that of all the people who have helped build Bombay saving

company Raven and Mr Ravini companies they want there have been probably the most buying distance in terms of helping out in 2 am calls uh distress calls vulnerable calls I want to quit calls because I genuinely felt really understood but I was discussing this with them see the day the insoft got liquidated but the I have physically wanted to measure the breadth of the shoulders of my senior team when they walked into a meeting with investors after that yeah Or in a board meeting it was not about aggression yeah it was just in now we

are not subservient now I'm a shark who has tasting blood yeah now see how I swim for you yeah yeah I'm not hungry anymore or at this point what the words you just use swim for you right and that's the and that's what investors Miss Boss we have this huge board in our office I would love to go to in our office yeah is soft and all of that yeah every day It's one of the most powerful things but now it's real yeah now three rounds of liquidated enough it's real people can subscribe there's an

hour process for it yeah I think it's a very valuable thing but you're right the business has to deserve it yeah and the investor should never feel like okay someone else took this before it was rightful to me yeah yeah right I think what I'm finding is in year two itself like you said no business has a Track record this ESOP liquidity has come actually not found on liquidity but this in the market isop liquidity has become because their peers are getting yes yes now these are all bull market phenomena so I think 23 24

people are looking to keep their jobs so agree on principle but those rules have to be for completely and again the discussion because founder selling yeah he's like actually do you not believe in the Business yeah no boss my salary today is half what I used to make it beginning seven years back so now that I believe so much in the business I don't want to sell it correct but so therefore this is just two correct I love him I will never get I actually would prefer to not at my PNF yeah I'm happy to

hit point five percent dilution to be honest yeah I would rather do that yeah and sustain but that Max is difficult to explain sometimes maturity is not there again Nikhil override six senses some I don't know whether you work with them his pushes on this habit just spot on like again Public Market guy right yeah he doesn't call me a Founder he calls me promoter and for a long time debated this uh quite a few times I'm in my view actually I have a slightly different point because especially what he mentioned on what public market

investors want if you fundamentally think about Building a sustainable business then the business should not dilute after a certain point right absolutely so if it's possible for Founders to take Market com right then and if the piano supports it then that should happen because if you can actually avoid dilution in fact stock based compensation I believe now it's you know like you would see a lot of us companies where public investors are shying away from Uh companies that have very large stock based uh compensation because it just hurts the I mean you don't see it

because it's you know ey comes in and says in the end networks you have the confidence in a piano but when we are doing a monthly Mis it doesn't figure anywhere um sustainable businesses long term always need to think Equity dilution because value creation is always an equity right cool so every time you Dilute you know that's I think but the corollary is that if you think Dairy skin creates a mental Comfort or what we call psychological safety for Founders to just go for bigger things that could be a possible reason to uh uh well

I think as companies grow and I think of in fact uh I don't listen to their view but like we as Founders take much lower comp than what the board is also sanctioned yeah absolutely and his Question is why and the only pushback is let the company become sizable where that that doesn't to be a signal right to your people I think that's the other thing yeah you can't you can't take comp yeah and then give it for 20 other PDF how do promoters do it at 25 python grow businesses do it how do they

do it they also not three four crows only they will draw ice address older ones they used to take profit Share yeah then when they realized profit share cut 20 25 times multiplier but that's where that's where incentives language goes back to public markets I will you if you want enough of your business I'm devoting you with such a big multiple there correct why are you doing this in this long-term thinking yeah so critical beyond the core to cross fixed com What will you spend on all right guys nobody you should talk I think I

think this dog based compensation may not be obvious to anybody yeah and he's the first guy in a portfolio I remember and in many ways he does many of us very sad I think we need to start measuring it because it affects PMS yeah so essentially we don't think of it as cash because we've created the ESOP tool we say we are giving stock options from the Zsaw what happens is when we exhaust the ESOP move we go back to the board and say hey we need one more person okay when that's diluting everyone correct

so when we are giving we're saying because early stage is very you know you should have employees and you should give a lot of stock options right but goes back to the principle of capital allocation we don't count this as capital allocation but this also is capital allocation because it impacts Yeah so one way to do it is so um every big four big file in pipe you are two show it in the p l in the end of the audit they can actually give you a full year uh that this is what every month

if you want to count it and you could actually put on the Mis and see the actuals yeah I just don't shoot over 500 you see yeah all tensions segment adjusted ESOP adjuster uh Branding adjusted for us also for example for us now cash requirement is 20 higher than arabinda loss okay yeah but if you look at high performing businesses yeah like connected and concrete for example cash is 30 higher than ebinda if you have a good margin profile yeah and you are smart about the way you incentivize yeah you wreck it for example okay

every employee in recruitment Visa is incentivized on Three things growth of Revenue growth of profit networking Bank everyone's who cares about boiling to me so that completes the whole profit machine just because incentives are aligned I just feel that if everyone does this including that Earth level and at a cash level then the company starts twenty seven percent one of this uh again going back to the bubble practices and the one to ten so you saw in Um when just Top Line was getting awarded well nobody businesses working capital the top line is exploding working

capitalism okay the fraud ones which are also thinking about tripping and all that right so I think this balance scorecard uh the good news is come back into fashion some of the companies that we were talking about yeah which went down we were clients of some of the logistics companies so I knew a year and a half so for me market Is a big indicator I knew even now before and some of the founders of friends key something is wrong because you know why what was the indicator Finance was known for this for a long

time it's by Design yeah yeah smart businesses in this country but why would you take money from a bank or nbfc if you can take it from your customers and suppliers and give negative working Capital that live smart business practices now it should not cross the line but if it is getting done with I think people don't realize and again in the black world the fact of cash discount getting cost all of this this is I'm not that's how it's not connected right and we need to understand working people only focus on the piano what

it is and people say a balance sheet book yes for example you've just like six months Back started working with d Mart without fail four different purchase order yeah can you imagine four different purchases everyone else is falling apart how healing we are not managing for margin we're managing for cash yeah we manage your cash you will manage my margin yeah because you'll give me the best value for my consumer yeah I don't mind giving you cash on time for that because I mean that's just the smartest one and it's predictable for you another it

was still Living because of course but he's making sure my cash switches might be good before everyone else for this consumer is great that's why you're getting categorization that's why you're doing it absolutely [Laughter] that's interesting and how do you uh how do you now see I you know I'm not sure if it's Public Enemy we may not release it to the other thing But in private conversations raising a new fund super positive about the country going forward I want to ask you two things one is I think you have genuinely built you are a

Founder yourself which is not so common in Indian mental capital A lot of mental capitalists consultants and bankers and so on and would you are a Founder exited successful and built out of comprehend you're finding people like that karun For example the founder uh Rahul who now joined was a Founder bringing a culture of operators Founders into Matrix so how do you think of talent in the larger Capital Management and capital deployment Venture Capital deployment industry how do you do it for for your fund yeah um and how do you think about Founders for the

next decade two decades yeah in terms of thousand this is something that is religion uh for me and for the firm So coming back to the opportunity and I I think I'm gonna I'm gonna almost keep saying it so many times and I'll unveil it for for it to happen so we have this concept called M35 which is what does matrix look like in 2035 what does the market look like in 2035 hopefully GDP of 10 20 call that nine ten trillion if you look at the pet so today that that is 3.5 trillion if

you look at globally the penetration curve of tech market cap into the GDP so Typically people will say is how much of that should be in digital if you track U.S who went up to 42 China went up to 35 I am saying 25 30 so you have two two and a half trillion of market cap today that is 175 which is five percent uh if you include all the private companies and the public companies above 150. that's the size of the opportunity it comes once in a lifetime for people America may maybe one one

was that building generation Which was post World water working when the whole U.S was built quote unquote industrialization Germany went through Japan went through it then the tech gave another film to everybody.com and it's continuing for us it's happening at the same time the real world and the digital world is getting built at the same time so I actually think it will surprise on the upside because we haven't seen this happen Anywhere else maybe a little bit enjoyed so Alibaba has more I think uh was driving more retail than any of the largest chains uh

in in German very soon that's happening in India also right so I just think the opportunity set is massive now we said before that you have to take accountant so Market looks very interesting but we have found a source we are going to take so we want a disproportionate share of Founders the best Founders in the Country what market cap that creates I'll take a point but I just wanted this or we as a firm wanted disproportionate share of the best Founders uh in the country now if you have to do that what kind of

people are doing it do you want Consultants which by the way I was a mechanical and you want to make this whole life but obviously a Founder is going to donate better to somebody Right so by the way if economics also a Founder if you look at our new team whether it's Sadat CV bunch of them are all uh you know nithin own coming from the operating so we are trying to say massive Market opportunity we want to be in business with the best Founders the best way to get into business with the best Founders

is have two things one people who have kind of been Founders or operators themselves and do some kind of Domain expertise I can't teach him anything or you about about b2c but it should not be the opposite which is I'm expecting or we are expecting in bond waiting and how to do things which are not realistic and if somebody is from the domain it's not high level yeah yeah it's they know what they're talking about second also it becomes easier to I believe going forward this is not going to be a business where the Venture

capitalists Choose the founders debacle I think the founders will tune The Venture capitalism and I think that's a very big shift that's coming and I think that's underway and we have seen that over the last couple of years in that situation again building the form with that that how do we get into access to and into business fit around the best song so that's how we are thinking about it it's like Talent internally is how how do you Think about that because it's such a small really a much smaller team for the amount of capitalism

that the other thing you everyone represents the fund in a very large setup very board meetings yeah founders of Personality yeah example right how do you think about building talent in Venture Capital when there is no no but that the operators coming in that's less of an issue I'm telling you yeah yeah absolutely dude You're just talking about you know kind of pranay came he was at freshworks for seven eight years our SAS Founders immediately took a liking they would rather hear from him than any of us right Akash has come he knows him was

actually one of the uh references uh so Akash comes from a so they are already sees it Founders want to listen to it they actually want to listen it's a natural I think Normal I'm not saying but normally you're a little guarded with namasters investors I mean what happens is this innate ability to relate and give comfort I think that at least I see that with him because he's Beyond uh because and it's easy for me for it for example if I ask him something about his massive and his vulnerable over about it what will

happen is if somebody is coming both from the domain and Operating they know where the skeletons are hidden so they will empathize with you and say again right and that just creates a different Dynamic versus dating putting your best foot forward but we are also the kind of profiles where the itch to kind of go back into the into starting I'll have to ask them in one minute yeah At some point this might be a stable thing now but a lot of them have been through that at least at Matrix so you're right and this

is something we try to test at entry to say about switching and um 2018 I'm like everything around me is exploding I I remember passions can said opportunity and purpose now to actually be an entrepreneur because internet is finally happening of course by investors Because I found my purpose and my purpose my life's work is to work with Founders not to be a Founder The the enjoyment I get from I hope I make him back but I'm very clearly enjoyment I get from it I will not get it this clanity can't say was it a

momentary thing I wanted over a period of time and not to give him too much credit but it's by working with I would say now a lot land set of Founders it's compounding with time correct and then You start saying you know in a more the uh candidate way one of the VCS had told me okay there are just two types of Founders red button green button I said what does that mean he says he used to swipe if green to take the call Red to not take the call which which Founders are you in

business it's a very simplistic way so green button is a lot of fun it actually and personally just intellectuals in the discussion three of Us were having inside how many places would I'm not saying we are very interactive I'm just saying just the opportunity to do these things and he was just sending you know founders of site because tribal discussions and I don't want to sound too corny but we are helping build the nation I don't want to be we are part of this we are privileged to be part of digital nation building correct this

will happen only In this next 12 13 years some optimization Innovation it will still be a great Market but this is where the plumbing is being put in and this is not building decades or an enabler on just because the the horizontal stimulation is just higher you know just the nature of different types of businesses [Music] he told me I have 20 years ahead of And I suppose [Laughter] I'm very clear I think the days of uh retirement all of that now what one does may change over a period of time but to stay sharp

you know to live long one of that actually one of the things that in ikigai that book is that these Japanese people live longer because they never attack they keep them some music using it somewhere something that they are passionate about absolutely I think what Changes over period of time is control of time accountability in terms of you control accountability yeah it becomes more to self than to anyone else yeah time becomes more for yourself than you are and but you still obviously spend yeah most of your time you have to just stay stimulator wait

and physically fit amazing amazing any more questions I'm gonna retire you guys can continue like for me like a lot of Founders Generally since then they will yeah will be more relatable they have those sense of certain industry for example I do feel that my understanding of them is a lot more now than it was six years now for sure because of the Consulting matter I will be able to do it well I do feel now and it's listening to you then the reverse migration or Venture capitalists especially at the senior level who become Founders

because You know they're ability in their access to Capital Access to networks and access to one of our biggest wins uh is is a venture capitalism yes um we have invested in so many there's jodo with the there's DSLR many um so absolutely um just one point on this retirement thing remember the question is what will you do what when you retire and why don't you do it now and this was something like that I think can you Believe it will work night better work life absolutely so to your point on VC I mean the

number of co-investments we have done is I mean so the idea of retirement is from a retirement aspective capitalists so one I like actually was what shantolo mentioned which is that and there has to come a point in time where you're doing it for Pure enjoyment and fulfillment yeah see today you may not you are you're saying you're doing It for enjoyment but in the end you carry the expectations of every team member who has joined with MPI yeah and foreign foreign [Laughter] uh you know when you have a lot of stakeholders yeah it does

um the sense of responsibility yeah changes yeah and you want to lean with it yeah I will tell you just this morning or last night I read something And it is very aspirational I don't know any of us will never get there so it was again about Warren Buffett and channel they just had their work and anything whatever and this guy uses a word that I have now forgotten what it is um comfortable nonchalance they are just in there special word and he's like 400 no pressure they are there they're having their Seas countries in

the annual meeting and having the Coke now in that kind of life then there's no I agree it is in such Frugal that that so that's in my view retirement correct that's all right where is just for it then it just doesn't take effort effort peace at some point I think in in some ways it's because you know events are brand we run a health business and expectations yeah you can manage because you said I don't give any expectations to anyone yeah no no design So I think in that sense you have to reach a

stage where I think retirement exactly that you were doing things for pure passion yeah um I'll tell you this point you made about time there is that saying let me ultimate wealthiest time yeah and I don't know what's the chicken and egg of it but some of my friends who are doing the best and whatever for everything they have done something right because That in our lives we I personally have no very little control I think just on you know because I know it's getting a little dreary and serious but if I if I think

about gen AI yeah yeah I think it's gonna offer fabulous opportunities for people to explore their passions without the burden of raising too much capital or having too many employees and it's going to be a fabulous next 10 to 15 years to see if we can uh so I think truly if you think about how technology Enables Improvement in everybody's lives this is the next phase and I think that's super exciting you know uh and again lucky to be in living in such time yeah it's a bit of a problem for someone like you because

lumac 10 Founders 100 Founders 500 Founders it's it's very unclear of how the capital allocation to projects versus because we never take that kind of a Call we just say if that 50 talented Founders in the space sure if they are five sure and they're zero okay another will feel bad but yeah and I was at the same thing at the golden period of our country is coinciding with the prime of Our Lives yeah on the same time of country that is demographically in the best place to kind of reap the right yeah this opportunity

will not happen again Yeah at least before I think uh before we sign off I know you know you have a hard stop but people who watch our podcast are people who come and listen to Founders like Raven are people who genuinely are supporters of the ecosystem want to be participants are already are participants of the ecosystem or maybe employees are Angel Investors that's who they are um but any final words of you to them in terms If there's someone on the fence any word or advice what happens if you fail in this even when

we are in digital nation building that is going to last decades you are only going to compound your skill set the sooner you enter right because it is a compounding business all of a suddenly first around we make some mistakes and then next time hopefully we don't make we make other Mistakes so to me I actually look at and um I mean the best example is my own son like I would never encourage him like all we talk about is entrepreneurship right and by the time he is able to do it it'll be maybe you

know halfway through this journal um so I just think that is I see this as zero downside on only upside in an exciting privileged position where every day like you know we are going to win um we are going to be kneeling with new And new things and exciting things which even in the society that we live in increasingly is getting associated with that chapter right so even that upside of saying I still remember when I was doing buzzy.com and.com became dot gone and I used to be you know what people used to say yeah

[Laughter] look at this now what is that in the downside I think we have I had come here With a lot to discuss with everyone then I discussed preparation and we've only gone through twenty percent the laws on uh on on privacy in India given the two thousand four kids yeah you've not even scratched the surface of your Bazi experience uh around being uh you know being a father and a founder of one I think we've spoken a lot about the ecosystem in the country so I think we should do a barbershop cross Matrix Moments

2.0 and then 3.0 also that but I think for this uh this one avnish and Raven I hope you had fun even though the mirror watch won't do much foreign had an amazing time for the last two hours thank you I've never done a podcast which has been this long yet free-flowing yeah so thank you lots to learn from you and him I always learn from the word with him thank you so much Then I have a have a hamburger thank you very much thank you sir thank you thank you