245: How Venture Capital Funding is Changing | Devendra Agrawal (Founder - Dexter Capital)

[00:00:00] [SPEAKER_02]: Hey Devendra, welcome to the Startup Operator Podcast. Thank you so much for making the time.

[00:00:03] [SPEAKER_02]: So I have to ask your thoughts on the budget.

[00:00:06] [SPEAKER_00]: I think this is a landmark budget.

[00:00:07] [SPEAKER_00]: I would probably compare the way famous movies like Sholay or Ndhajapna came in.

[00:00:12] [SPEAKER_00]: People did not appreciate it and they didn't appreciate it.

[00:00:14] [SPEAKER_00]: Indian real estate is the most expensive in the world.

[00:00:17] [SPEAKER_00]: It's cheaper to buy a flat in New Jersey City compared to what is in Kulgaon.

[00:00:21] [SPEAKER_00]: Saving taxes are not made in richer.

[00:00:22] [SPEAKER_00]: Your shram, your parishram make you richer whether you're a salary class or a non-thriller.

[00:00:27] [SPEAKER_00]: Taxes are not unreasonable.

[00:00:32] [SPEAKER_00]: 06209 being startup founder was extremely hard.

[00:00:35] [SPEAKER_00]: Capital was not available for startup founders.

[00:00:38] [SPEAKER_00]: I would go and pitch to H&I's or businessman of Jaipur and talk about venture capital,

[00:00:46] [SPEAKER_00]: talk about entrepreneurship and you would not believe Roshan.

[00:00:49] [SPEAKER_00]: I would get blasted.

[00:00:51] [SPEAKER_00]: Who's the meeting?

[00:01:03] [SPEAKER_02]: Hey Devendra, welcome to the Startup Operator Podcast.

[00:01:06] [SPEAKER_02]: Thank you so much for making the time.

[00:01:07] [SPEAKER_00]: Thank you Roshan.

[00:01:08] [SPEAKER_00]: Thank you for inviting me.

[00:01:13] [SPEAKER_02]: So Devendra, you've been investing for the last almost 11 years, 11-12 years now.

[00:01:20] [SPEAKER_02]: And in that period of time, startups itself have gone from something that a few people did

[00:01:28] [SPEAKER_02]: to now being mainstream.

[00:01:31] [SPEAKER_02]: There is a television show, multiple television shows in fact and pretty much everyone knows.

[00:01:37] [SPEAKER_02]: Whether it's landlords or father-in-laws, everyone knows what a startup is and so on.

[00:01:42] [SPEAKER_02]: And a lot of people seem to be interested in being a part of this whole startup by itself.

[00:01:47] [SPEAKER_02]: How has investing changed in the last 11 years for you?

[00:01:53] [SPEAKER_00]: Yeah, so I think let me give a longish answer.

[00:01:57] [SPEAKER_00]: So I've been investing since last four to five years as part of our micro VC fund extra ventures.

[00:02:02] [SPEAKER_00]: I've been advising companies to raise capital as part of the company Dexter Capital, which I

[00:02:07] [SPEAKER_00]: started 11 years. But I have been, I would say an active observant of startup ecosystem since 16 years

[00:02:14] [SPEAKER_00]: since I started working with a factory called Olympus Capital.

[00:02:18] [SPEAKER_00]: And I'll give you a few data points.

[00:02:20] [SPEAKER_00]: In 06, there are only four to five inch capital fund in India,

[00:02:24] [SPEAKER_00]: which is Axel Partners was Subruta Chalbogar,

[00:02:29] [SPEAKER_00]: Erasmus, Helion, SAF, etc.

[00:02:32] [SPEAKER_00]: Raising capital was very hard.

[00:02:34] [SPEAKER_00]: You would not believe Bessemer invested in an EPC company called Shirami EPC.

[00:02:38] [SPEAKER_00]: They invested in a Bessemer as like world's most popular venture capital fund.

[00:02:43] [SPEAKER_00]: They invested in a company called Oriene Green.

[00:02:45] [SPEAKER_00]: This is a renewable company.

[00:02:46] [SPEAKER_00]: They had not invested in that time and they had like five to six partners at that time.

[00:02:49] [SPEAKER_00]: Similarly for other guys, in 06, your story, which is the most popular platform did not exist.

[00:03:00] [SPEAKER_00]: So that started in 2008.

[00:03:02] [SPEAKER_00]: VC Circle was run by a guy called Sahat, cyber media launched a magazine called Dare.

[00:03:07] [SPEAKER_00]: And the startups that time was unfortunately never got the capital like

[00:03:11] [SPEAKER_00]: Telil Brahma or OutGroo. Those were being built.

[00:03:13] [SPEAKER_02]: Telil Brahma especially, right? I mean think about like the kind of innovation that he did

[00:03:17] [SPEAKER_02]: in a pre-internet sort of a world.

[00:03:21] [SPEAKER_02]: I mean with those feature phones basically.

[00:03:25] [SPEAKER_00]: Exactly.

[00:03:26] [SPEAKER_02]: Amazing.

[00:03:27] [SPEAKER_00]: Yeah, so even like the in-mobie guy was building that moves.

[00:03:31] [SPEAKER_00]: I would say I would break the journey 06 to 09 being startup founder was extremely hard.

[00:03:40] [SPEAKER_00]: Capital was not available for startup founders.

[00:03:43] [SPEAKER_00]: And if I just take the example of my batch, I graduated from 2005.

[00:03:45] [SPEAKER_00]: I don't remember a single guy including me who wanted to become an entrepreneur either

[00:03:52] [SPEAKER_00]: because his fashion name or either because it's valuable.

[00:03:54] [SPEAKER_00]: One of the guy I know, which is one he's seen it to be became entrepreneur two years later was

[00:03:58] [SPEAKER_00]: her pre-then, her pre-then before who built Co-Cubes later in a book.

[00:04:04] [SPEAKER_00]: So it was pretty hard to become an entrepreneur.

[00:04:09] [SPEAKER_00]: I think thanks to few people like Ankith and Benny who founded BLEP, BLEP card and few people.

[00:04:15] [SPEAKER_00]: And I would thank two people.

[00:04:18] [SPEAKER_00]: I call them father figure for startup ecosystem.

[00:04:20] [SPEAKER_00]: One is Sanjeev Hiksandani who funded policy buzzer I think in 2008 and then geometry in 2010.

[00:04:28] [SPEAKER_00]: And another gentleman who is not Indian, but I'm really little indebted to him.

[00:04:33] [SPEAKER_00]: Lee Fixill.

[00:04:35] [SPEAKER_00]: So imagine right, Ola Bhavish is my junior from hostel three years.

[00:04:38] [SPEAKER_00]: I'm of five grad.

[00:04:39] [SPEAKER_00]: He's 08 grad.

[00:04:41] [SPEAKER_00]: His first round I think was probably four to five evaluation.

[00:04:44] [SPEAKER_00]: He's not capital.

[00:04:45] [SPEAKER_00]: I think he would have gone to every VC in the country and Lee gave him a five million check

[00:04:51] [SPEAKER_00]: when his traction was not, which by any means consists of heaven and check.

[00:04:58] [SPEAKER_00]: So if you think venture capital industry and valuation, these two are not even today well

[00:05:06] [SPEAKER_00]: understood in country.

[00:05:08] [SPEAKER_00]: Venge capital or venture capitalist job is to provide capital to entrepreneur to build something

[00:05:14] [SPEAKER_00]: when opportunity that could exist and unfortunately captured.

[00:05:19] [SPEAKER_00]: Let's take the example of Lee Fixill where he gave 10 million to Flipkart guys and on Flipkart,

[00:05:26] [SPEAKER_00]: I would want to tell when he gave a 10 million Flipkart at that time there were maybe 8 to 10

[00:05:31] [SPEAKER_00]: other startup which are larger than Flipkart fashion.

[00:05:33] [SPEAKER_00]: You raise like 48 million dollars by like so-so-co etc.

[00:05:36] [SPEAKER_00]: Let's buy raise capital from Hylian.

[00:05:39] [SPEAKER_00]: So it's about capital should flew to the best entrepreneur who can capture an opportunity

[00:05:45] [SPEAKER_00]: which doesn't exist and the capital should be adequate.

[00:05:48] [SPEAKER_00]: If you give inadequate capital, the entrepreneur probably won't be able to build.

[00:05:52] [SPEAKER_00]: So he did not give like half mil to me.

[00:05:53] [SPEAKER_00]: He would have gone half mil to him.

[00:05:54] [SPEAKER_00]: He would have you maybe why should I take him?

[00:05:57] [SPEAKER_00]: He insert 10 million check.

[00:05:58] [SPEAKER_00]: He would have given two million check to Binion.

[00:06:01] [SPEAKER_00]: These guys they all taken right.

[00:06:02] [SPEAKER_00]: So he gave that capital to build from 06 to 09 when the capital was absolutely not available.

[00:06:10] [SPEAKER_00]: This has changed significantly now.

[00:06:12] [SPEAKER_00]: I talk about when I started building Dexter from Jaipur,

[00:06:16] [SPEAKER_00]: I would go and pitch to H&I's or businessman of Jaipur and talk about venture capital.

[00:06:23] [SPEAKER_00]: Talk about entrepreneurship and you would not believe Roshan.

[00:06:27] [SPEAKER_00]: I would get blasted post the meeting where all these guys, all these guys who are like gray-haired

[00:06:34] [SPEAKER_00]: and seasoned guy was made money would blast me and they will tell when the famous venture capital

[00:06:38] [SPEAKER_00]: in Tia to town is Vulture Capital because these promoters don't want to give a single right.

[00:06:44] [SPEAKER_00]: They want this to want to cut.

[00:06:45] [SPEAKER_00]: They make money.

[00:06:47] [SPEAKER_00]: I have no respect for Tia to consider entrepreneur but they make money by cutting corners on taxes.

[00:06:52] [SPEAKER_00]: They make money by some time ensuring that they don't pay them into some time or by ensuring

[00:06:58] [SPEAKER_00]: that the team is not sort of paid the kind of pay they should be deserving.

[00:07:02] [SPEAKER_00]: Right?

[00:07:03] [SPEAKER_00]: But they will call Vulture Capital and I will give an example.

[00:07:05] [SPEAKER_00]: Ola and Oberti say that they are making losses and they are closing.

[00:07:07] [SPEAKER_00]: I don't disagree with that but when you build a startup,

[00:07:11] [SPEAKER_00]: that's what is likely to happen in 8 or 9 out of 10 cases.

[00:07:16] [SPEAKER_00]: Yet the value get created.

[00:07:17] [SPEAKER_00]: The good thing is today lot of I would say platforms or our pure like venture catalysts,

[00:07:25] [SPEAKER_00]: we found a circle go to these cities, hold events and holds so people will come

[00:07:31] [SPEAKER_00]: and give capital.

[00:07:32] [SPEAKER_00]: Some of them actually have become angel masters.

[00:07:35] [SPEAKER_00]: Some of them become evangelists in this thing.

[00:07:37] [SPEAKER_00]: TIE has a great contribution toward this city.

[00:07:39] [SPEAKER_00]: So I see now the ecosystem has evolved a lot.

[00:07:43] [SPEAKER_00]: Capital is available at every level.

[00:07:45] [SPEAKER_00]: While I know, given I hear on this daily on the creep that

[00:07:49] [SPEAKER_00]: VC don't give money or they don't give money easily etc.

[00:07:52] [SPEAKER_00]: But ecosystem has evolved a lot compared to what let's say a winner from this.

[00:08:02] [SPEAKER_00]: So anyway, my show founder or Ashish or let's say the Vijay,

[00:08:06] [SPEAKER_00]: the kind of headache that they have to go to raise capital in that time.

[00:08:10] [SPEAKER_00]: I don't think that on to have to face though on to have to do good stuff.

[00:08:15] [SPEAKER_00]: What still is lacking that has been addressed a little bit is that the funding is still not

[00:08:19] [SPEAKER_00]: available for real innovation, deep tech, the way it would have been available in Silicon Valley.

[00:08:25] [SPEAKER_00]: A few fans like Spatial Invest, a few deep tech fund,

[00:08:29] [SPEAKER_00]: Capital or Sienna, they are trying to address that or a few individual H&I's

[00:08:33] [SPEAKER_00]: are trying to address by putting capital.

[00:08:35] [SPEAKER_00]: Oral ecosystem is a lot more favorable to become an entrepreneur.

[00:08:39] [SPEAKER_00]: Failure is not stigma.

[00:08:41] [SPEAKER_00]: You can still get married if you are an entrepreneur.

[00:08:44] [SPEAKER_00]: It not the question,

[00:08:45] [SPEAKER_00]: How to get married and which is a real pressure that you have on you as a founder.

[00:08:54] [SPEAKER_00]: So all that has changed I would say.

[00:08:57] [SPEAKER_00]: Another thing that has changed significantly which you test upon is

[00:09:03] [SPEAKER_00]: if you talk about two sort of people who hold real money Indian corporates,

[00:09:07] [SPEAKER_00]: if you look at Infosys or DC is like 10,000 of this many setting idols.

[00:09:14] [SPEAKER_00]: Or if you talk about a lot of family offices, none of that money was ever going into startups.

[00:09:21] [SPEAKER_00]: The reason was not going to start was very obvious.

[00:09:25] [SPEAKER_00]: A, they are earning from stock market.

[00:09:27] [SPEAKER_00]: B, they were earning from real estate.

[00:09:29] [SPEAKER_00]: I think 2016 when Modi G brought monetization,

[00:09:33] [SPEAKER_00]: well that's still a debate.

[00:09:34] [SPEAKER_00]: There is positive more at Negadev Me and I don't want to take a side.

[00:09:38] [SPEAKER_00]: At least that changed one thing that real estate is not the game changer,

[00:09:42] [SPEAKER_00]: return generating machine it used to be earlier.

[00:09:44] [SPEAKER_00]: So that money started flowing.

[00:09:46] [SPEAKER_00]: The second thing started also happening with Sebi's change in like Sebi brought some reforms

[00:09:53] [SPEAKER_00]: and angel fund in 1213 AFs and then 2019 angel fund.

[00:09:57] [SPEAKER_00]: That money started flowing in and we see a lot of family office get created.

[00:10:02] [SPEAKER_00]: Dexter capital had strongest relationship with family office in the country.

[00:10:06] [SPEAKER_00]: We work with a lot of family office like Northam 60 family office or Annanmangra family office.

[00:10:11] [SPEAKER_00]: Now these family office are actively looking to invest in startups.

[00:10:16] [SPEAKER_00]: Even like people like Mr. Ashish Kachodiaji or Mr. Mokul or all these guys are now

[00:10:21] [SPEAKER_00]: actively looking to invest in startups and that's extremely positive change.

[00:10:27] [SPEAKER_00]: This buzzard actually incentivize these people to invest and start more earlier.

[00:10:31] [SPEAKER_00]: They used to mostly invest in funds and they would use the co-investment and double down.

[00:10:36] [SPEAKER_00]: Now these family office A doing direct investing, investing through their trusted circle.

[00:10:42] [SPEAKER_00]: Some of those family office actually are creating their own teams the way Northam 60 family office

[00:10:47] [SPEAKER_00]: created or some of these guys are now partnering with first time fund managers

[00:10:55] [SPEAKER_00]: which is another tweet that we debated and being either co-GP or an incurring investor

[00:11:00] [SPEAKER_00]: whichever it works with them to launch newer funds.

[00:11:03] [SPEAKER_00]: So I think the capital flow that's happening in country is a lot greater.

[00:11:09] [SPEAKER_00]: In this one region while there was a death of capital at Series B and Series C and Series D level

[00:11:14] [SPEAKER_00]: post that 2021 meltdown, capital flow was pretty ample at seed per seed stage.

[00:11:22] [SPEAKER_02]: I don't know if people fully appreciate how big a deal it is that family offices are coming

[00:11:32] [SPEAKER_02]: into the startup investing world rate because I mean a lot of these folks are they made their

[00:11:39] [SPEAKER_02]: money through the typical Lala type of companies rate which as you mentioned,

[00:11:43] [SPEAKER_02]: I mean they have very conventional business wisdom needs to be profit generating from day one.

[00:11:49] [SPEAKER_02]: Now explaining this concept of building something of value that might make losses for

[00:11:54] [SPEAKER_02]: a few years and then like make profits and have economies of scale at a later point in time

[00:11:59] [SPEAKER_02]: may not happen. I mean that's a huge shift for someone to recognize, wrap their heads around

[00:12:06] [SPEAKER_02]: also and these were folks who typically invested in fixed rate of return or maybe put some money

[00:12:11] [SPEAKER_02]: in the markets at best public markets at best real estate gold and markets in that order.

[00:12:18] [SPEAKER_02]: These people actually coming into the startup investing world I think is a remarkable change

[00:12:23] [SPEAKER_00]: really remarkable. Absolutely so look every country goes through its own set of changes if you

[00:12:28] [SPEAKER_00]: if you see the history of Silicon Valley it started in 1960s when people in tech side

[00:12:33] [SPEAKER_00]: who came together and started building tech company like this thing and they became the

[00:12:38] [SPEAKER_00]: venture capitalist there because they saw the IPO boom etc. If you see NYSE it's like 200

[00:12:44] [SPEAKER_00]: old year institution. Similarly BSE is 100 year old institution but BSE for whatever

[00:12:49] [SPEAKER_00]: region stuck in the old till that Hashir Mehta scam happened and then NSE came and then NSE really

[00:12:55] [SPEAKER_00]: pulled the stock market forward right build the trust in the people. I think there's a real trust

[00:13:01] [SPEAKER_00]: among HNI's today in Indian economy first and Indian entrepreneurs and earlier I think it was a

[00:13:10] [SPEAKER_00]: taboo to lose money at two end either by investing you can make lesser money

[00:13:15] [SPEAKER_00]: you invested in Sourap you can make 80 rupees that was well understood but people were extremely

[00:13:20] [SPEAKER_00]: hesitant it can become zero now they understood venture capitalist class key out of 10 investment

[00:13:27] [SPEAKER_00]: that you're making if you want to make let's say 3x return just take the math right if let's

[00:13:32] [SPEAKER_00]: say take 3x return so even if 4 becomes 0 and you had an equal waiting investing if your

[00:13:39] [SPEAKER_00]: fifth company actually becomes 10 beggar or 15 beggar 20 beggar it will make 3x or 2x or 4x

[00:13:47] [SPEAKER_00]: on overall portfolio depending how you look at and that is now understood by these people

[00:13:53] [SPEAKER_00]: right so I think that money is started to coming in in various shape part money is coming in

[00:14:00] [SPEAKER_00]: going to venture capital funds part of money is coming direct investing some of the people

[00:14:05] [SPEAKER_00]: are big new investors and there's a very very big thing right because any economy fundamentally

[00:14:12] [SPEAKER_00]: if you take which our Prime Minister also talks if it's dependent on local resources that's a lot

[00:14:19] [SPEAKER_00]: better so today we have best labour India has the best demographic dividend in the world

[00:14:28] [SPEAKER_00]: people are talking that India would become most populous nation was already become most

[00:14:33] [SPEAKER_00]: populous nation only and it will continue to grow we would have capital which would be easily

[00:14:40] [SPEAKER_00]: available technology on public side we are ahead the only thing which was a more of challenge with

[00:14:44] [SPEAKER_00]: land land was very costly though that is also getting addressed so I think I think India would

[00:14:50] [SPEAKER_00]: run ahead in next 30 year like anything and all the country would would really appreciate the way

[00:14:57] [SPEAKER_00]: India would grow in next 20 30 year and a big driver of that would be recirculation

[00:15:03] [SPEAKER_00]: of domestic capital which I call capital formation and and that puts really really

[00:15:11] [SPEAKER_00]: if you if you just take the example right if you see like nearly hundreds of angel

[00:15:16] [SPEAKER_00]: minister which is Sachin Bani Kunal Shah or snap deal founders titan recently the story came out

[00:15:22] [SPEAKER_00]: where they made around like whatever 100x or 200x in urban clap all these guys are investing

[00:15:28] [SPEAKER_00]: because they were entrepreneurs they are more empathy towards entrepreneurs

[00:15:31] [SPEAKER_00]: so there's a size of pool of capital anyway who have benefited from that cycle 15 years

[00:15:37] [SPEAKER_00]: and we have capital which you as you mentioned old school entrepreneurs or Lala entrepreneurs

[00:15:43] [SPEAKER_00]: right they are also investing so I think overall it's a big bone for our country that that

[00:15:49] [SPEAKER_00]: capital is flowing what government or our finance minister did yesterday is ensure that people are

[00:15:56] [SPEAKER_00]: more incentivized to invest in startups or or listed companies right how do you think the

[00:16:05] [SPEAKER_02]: power balance between founders and investors changed in the time that you've started investing

[00:16:11] [SPEAKER_02]: right I mean or rather means since the time you know startups and so on like 15 16 years

[00:16:16] [SPEAKER_02]: I think in the early days given that the funds itself were very scarce the power balance

[00:16:24] [SPEAKER_02]: was shifted more towards the investor side I would say right but you know we saw what happened

[00:16:30] [SPEAKER_02]: with 2021 and so on and so forth and tiger coming in and writing a checker day type of thing right

[00:16:36] [SPEAKER_02]: but today I feel like you know the the power balance is slightly towards the middle

[00:16:41] [SPEAKER_02]: right in terms of investors and founders still skewing a little more towards investors obviously

[00:16:47] [SPEAKER_02]: because they are the guys giving the money anyway but it has come more towards the middle right

[00:16:51] [SPEAKER_02]: how do you think the attitudes of you know investors and founders have changed

[00:16:56] [SPEAKER_00]: yeah I think when we if I talk about attitude you also need to break up the segment on

[00:17:02] [SPEAKER_00]: them because a person who is building a growth-based company is also not a young company

[00:17:07] [SPEAKER_00]: which tech company is also an entrepreneur similarly person who is investing growth which

[00:17:12] [SPEAKER_00]: is what we call a practically is also investor which capital so I would say power balance

[00:17:18] [SPEAKER_00]: fundamentally the five digit define would always would always gravitate towards

[00:17:28] [SPEAKER_00]: entrepreneur in longer term if I take an absolute like 30 or 50 or 100 year the reason is

[00:17:35] [SPEAKER_00]: because it's on to know who is creating a wealth and all the VCs and PEs are just a

[00:17:39] [SPEAKER_00]: student of money of somebody who has given them responsibility so I let me just give

[00:17:47] [SPEAKER_00]: a very fundamental thought here right and that's where that's where my company dexter

[00:17:51] [SPEAKER_00]: is being built on the very very same principle right everything that we see in the around

[00:17:56] [SPEAKER_00]: the world whether it's banks whether it's bond market whether stock market venture capital

[00:18:01] [SPEAKER_00]: practically everything is nothing but different kind of product to solve only one thing the trust

[00:18:10] [SPEAKER_00]: this economy has been existing 5000 years and will exist for 5000 years two thing will remain

[00:18:15] [SPEAKER_00]: always same there'll be people who want money there'll be people who need money money needs to

[00:18:20] [SPEAKER_00]: channel from people who have money to people who need money banks was a system stock market

[00:18:26] [SPEAKER_00]: system right primary market gators money and secondary market gass man right so the lectures

[00:18:32] [SPEAKER_00]: so venture capitalist or practical investors I'm in the capitalist myself and on to my

[00:18:36] [SPEAKER_00]: side I need to realize I'm just custody money so a due respect needs to be given to entrepreneur

[00:18:42] [SPEAKER_00]: now the thing what happens is when you segment it out then things getting more clear

[00:18:46] [SPEAKER_00]: so no crack practically side on the edge all with the king

[00:18:51] [SPEAKER_00]: unpacked beside you will see partners doing the meeting with the coming down and meeting

[00:18:56] [SPEAKER_00]: on the next at their office even post investment all due respect is given even if they let you

[00:19:02] [SPEAKER_02]: own place because the founders are at a certain scale right I mean the reason is because founder

[00:19:08] [SPEAKER_00]: have this very big thing that if I don't take money my survival is not dependent on you

[00:19:12] [SPEAKER_00]: right that's a big question and founders are also experienced they know how to handle

[00:19:16] [SPEAKER_00]: they're done b2b sales they have built company they handled senior people right they know how to

[00:19:21] [SPEAKER_00]: handle folks as well so practically anyway the equation is in favor of entrepreneurs when I used

[00:19:28] [SPEAKER_00]: to work with the lumpers I know even before asking MIS or sending question to MIS I would be extremely

[00:19:35] [SPEAKER_00]: careful and caution how to how to word those things or even the meeting how to conduct ourselves

[00:19:41] [SPEAKER_00]: we would sign n dn no question asked before taking any data from the company if company

[00:19:45] [SPEAKER_00]: actually sends me an email did I need to delete it forget n dn did I need to do that I would

[00:19:50] [SPEAKER_00]: actually go and delete it right so that's the kind of equation that used to exist in faculty versus

[00:19:55] [SPEAKER_00]: on why venture capital the equation doesn't exist is in India first of all capital balance was not

[00:20:03] [SPEAKER_00]: there there were let's say people who are provider of capital in terms of number of people

[00:20:10] [SPEAKER_00]: who are pride of capital were few pre-2009 there was like five or six species then maybe number

[00:20:14] [SPEAKER_00]: went to 2030 and the number went to maybe 80 hundred now maybe let's say 300 400 right that's one

[00:20:22] [SPEAKER_00]: second India culturally has made b2b closer difficult if somebody doing b2b business in

[00:20:30] [SPEAKER_00]: us is closes faster than India because India culturally had this habit of if I'm in a power

[00:20:34] [SPEAKER_00]: equation I would love to negotiate I would I would take my pound of flash drive because

[00:20:39] [SPEAKER_00]: this is my opportunity so I think that sort of culture it's a culture behavior I call

[00:20:43] [SPEAKER_00]: that happens a lot among the VC so people who are who become VCs or people who are not

[00:20:50] [SPEAKER_00]: cheapy GPs are more empathetic towards on through because they have gone through the pain

[00:20:54] [SPEAKER_02]: they also have more agency also right I mean they can no I it's simple because VC has gone

[00:20:59] [SPEAKER_00]: GP has gone through more pain in fundraising himself so he understand that pain right

[00:21:04] [SPEAKER_00]: but the person who has come to join a venture capital firm from let's say consulting firm

[00:21:08] [SPEAKER_00]: or an IB firm or a fancy degree he thinks he's on the shoulder and I have right to ask

[00:21:14] [SPEAKER_00]: few questions because I'm part of VC firm right so I think that happens a lot however I would say

[00:21:19] [SPEAKER_00]: so venture capital you would see this equation in this thing this equation would always be in case

[00:21:25] [SPEAKER_00]: of founders who are doing really really well these founders build company heads down don't

[00:21:34] [SPEAKER_00]: talk a lot I'll take I'll I'll tell let's say this company called pilgrim is built by one of my

[00:21:42] [SPEAKER_00]: senior firm IIT Bombay on rock area is I'm in the bad and I invested in company at a seed stage

[00:21:48] [SPEAKER_00]: when it was really an idea in Heather I get every week two calls from investor to talk about

[00:21:54] [SPEAKER_00]: the company every time I talk to on rock he says the one that I'm building I don't want

[00:21:58] [SPEAKER_00]: to speak to investors now and Mr. Wants to talk to me you can make an introduction more than

[00:22:03] [SPEAKER_00]: happy to have a copy whether I will talk business or not I'll decide right and there are tens of

[00:22:09] [SPEAKER_00]: companies that exist in the country today which are being chased by on this I remember this company

[00:22:15] [SPEAKER_00]: browser for stack the founders on a junior I did not even know them one year junior not even know

[00:22:20] [SPEAKER_00]: them I got ping from every VC offered VC every practically firm

[00:22:24] [SPEAKER_00]: that I did not know right I even reached on LinkedIn etc. they never entertained right

[00:22:33] [SPEAKER_00]: that happens so equation fundamentally is in favor of good quality on this let's define it

[00:22:38] [SPEAKER_00]: but if you let if you take an ecosystem level given there are too many people chasing

[00:22:42] [SPEAKER_00]: like a lot of VCs we can say equation seems in favor of VCs especially in our current market

[00:22:47] [SPEAKER_00]: where wherever funding is not easy 2021 market was different because it was not a very unusual

[00:22:53] [SPEAKER_00]: market these market coming like once in 30 years kind of time frame where because of fundamental

[00:22:59] [SPEAKER_00]: things happening at other level which I call butterfly effect right some changes happening

[00:23:04] [SPEAKER_00]: your ecosystem so it was JDI RP which is the mode because of COVID because people did not know what

[00:23:11] [SPEAKER_00]: to do and whether world will survive so people went little bonkers to reduce the rate and

[00:23:16] [SPEAKER_00]: keep the rate lower at for extent time which create the inflated flow in the capital market

[00:23:22] [SPEAKER_00]: and that also show the how shallow the venture capital market in terms of capital supply like

[00:23:26] [SPEAKER_00]: if you just if you just increase the supply by few billion dollars suddenly just like tight

[00:23:32] [SPEAKER_00]: just swells so I think that happened in 2021 where capital was changing left right center to

[00:23:38] [SPEAKER_00]: entrepreneurs and this thing another thing that happened is more a feature market all markets

[00:23:43] [SPEAKER_00]: like venture capital or stock market auction market I'll give an example auction market

[00:23:49] [SPEAKER_00]: movies that we used to in the movie right art cowl that I believe all right so auction market are

[00:23:56] [SPEAKER_00]: always sway and auction market would sway based on the local demand supply that exists at the time

[00:24:02] [SPEAKER_00]: we have the price up or down that happened in the 21 because it was an auction market by definition

[00:24:09] [SPEAKER_00]: capital started changing few entrepreneurs so and then I started between price and terms and

[00:24:14] [SPEAKER_00]: that happened in long term things will in balance and it gradually showed towards

[00:24:18] [SPEAKER_00]: on the same is my core dream that while I'm a VC can it shift towards on the small and more

[00:24:26] [SPEAKER_02]: will be ever see a 2021 market again for that another code needs to happen

[00:24:34] [SPEAKER_00]: so if a war happens look world is very smart right like Darwin had said hundreds of years

[00:24:41] [SPEAKER_00]: ago that survival instinct right so as a humanity has a real instinct will kick in central banks

[00:24:46] [SPEAKER_00]: extremely powerful right they know how to how an incentive mechanism humans extremely powerful

[00:24:52] [SPEAKER_00]: with mr. Mr. Nirmal sitram you just today right so they know how to gravitate the market so

[00:24:57] [SPEAKER_00]: without that kind of thing I don't think that would happen and another thing I want to

[00:25:01] [SPEAKER_00]: comment is it's also about penetration impact like Japan has kept zero interest and

[00:25:06] [SPEAKER_00]: negative interest for the longest time did not really happen right because economy is

[00:25:10] [SPEAKER_00]: extremely globalized today so it's not necessarily that

[00:25:15] [SPEAKER_00]: let's say if entire world become global and I have all the world become developing economy

[00:25:20] [SPEAKER_00]: whether then even Jedi are people being a factor question mark what do you

[00:25:27] [SPEAKER_02]: what do you make of all of these founders who picked up you know money at ridiculous

[00:25:32] [SPEAKER_02]: valuations in 2021 right and they now have to play a different game right whereas

[00:25:39] [SPEAKER_02]: it was all about growth at that time I mean now they have to think or perhaps for a year

[00:25:43] [SPEAKER_02]: I mean they've had to think about profitability sustainable growth so on and so forth so people

[00:25:47] [SPEAKER_02]: are okay growing 20 30 percent a year if you're closer to profitability right I mean if you're

[00:25:54] [SPEAKER_02]: if you're reducing a burn and if you are near break even or even slightly profitable it's a

[00:26:00] [SPEAKER_02]: huge what is I mean it's a huge up right so this difference right in approach

[00:26:09] [SPEAKER_02]: so how do you feel about founders having to play a different game right now and

[00:26:15] [SPEAKER_02]: you think these founders should listen to VCs in order you know in figure out what the business

[00:26:20] [SPEAKER_02]: priorities are how should how they should run their business because the same VCs were saying

[00:26:25] [SPEAKER_02]: a different thing like you know three years back right and today they're saying a totally

[00:26:30] [SPEAKER_02]: different thing but of course I mean everything is like as you said market driven but what would

[00:26:37] [SPEAKER_00]: your advice be for these founders so first let's come to the crux of the problem the crux

[00:26:42] [SPEAKER_00]: of the problem that happened in 2021 and I'll define the problem the problem that as you said

[00:26:47] [SPEAKER_00]: where company raised at very very high valuation where their numbers did not

[00:26:53] [SPEAKER_00]: justify the valuation so I consider part of three three element of the problem one the VC

[00:27:01] [SPEAKER_00]: community itself number one which includes a new VC which are leading around and existing VCs

[00:27:07] [SPEAKER_00]: second founder though I'm quite empathetic to founders so I would call for lack of better

[00:27:12] [SPEAKER_00]: term let's ignore end founders right and third a media so when you have a country as Kunal

[00:27:19] [SPEAKER_00]: has defined which is status driven country right where you seek validation raising money at higher

[00:27:24] [SPEAKER_00]: valuation become validation for founder it became that flex they become this thing they become their

[00:27:29] [SPEAKER_00]: celebration it became the status in the society which was mostly ignorant that look what you

[00:27:35] [SPEAKER_00]: are doing is actually can bite you back let's talk about VC community so no one talks about it

[00:27:42] [SPEAKER_00]: maybe it's a much one podcast which is talk about it but VC community has very poor was

[00:27:47] [SPEAKER_00]: interest it's not necessarily the company that you invest in you have to exit if you can actually raise

[00:27:54] [SPEAKER_00]: new fund a bigger size fund which would brought to 2% fee right that is making good money for you

[00:28:03] [SPEAKER_00]: without delivering any exit for LP and that 2021 market did that the third is the structure of

[00:28:10] [SPEAKER_00]: wait just go back to the previous point because yeah I'll go to previous point so VC community

[00:28:21] [SPEAKER_00]: up rather than generating revenue or profit maybe more incentivized to show markup

[00:28:27] [SPEAKER_00]: because markup ensures so let me explain the VC because markup ensures that TV PI which happens

[00:28:34] [SPEAKER_00]: for 4 year of the or for 6 year of the fund which is you used to raise next one TVP is

[00:28:40] [SPEAKER_00]: basically what are the portfolio value today compared to investor capital was a DPI which

[00:28:44] [SPEAKER_00]: is a distribution that you provide to LP right so TV PI is the number that's looked by institutional

[00:28:49] [SPEAKER_00]: LP's like let's say OTPP or the lot of institutional pension funds and shares company

[00:28:56] [SPEAKER_00]: so that is what they look at right if your TVP is going through roof you would raise

[00:29:01] [SPEAKER_00]: new fund I'll give you math if you raise a 200 million dollar fund that's 200 million

[00:29:06] [SPEAKER_00]: dollar for new fund is 1600 crore on 1600 crore you are making 32 crore per annum

[00:29:18] [SPEAKER_00]: I have my 5 partner 10 analysts who who bought the salary 1 crore 1.5 crore whatever right even

[00:29:26] [SPEAKER_00]: then you will make 10 15 crore of annual income tell me which founder make that kind of money on

[00:29:32] [SPEAKER_00]: 10 year basis right so that's one community that happened there right the second so these valuations

[00:29:39] [SPEAKER_02]: being marked up because existing investor is newer funds basically exactly another the

[00:29:45] [SPEAKER_00]: structure the asset class itself when you raise a fund you need to deploy that fund within three years

[00:29:52] [SPEAKER_00]: so there's a deployment pressure tell me if you run a bank right should be a deployment pressure

[00:29:59] [SPEAKER_00]: on hdfc bank because the think of that interest in the subfinem

[00:30:04] [SPEAKER_00]: right so that's basically the thing right so management fee 2% is fine but that basically

[00:30:11] [SPEAKER_00]: creates a deployment pressure so a person who is raised fund in us because of jirp which is 5

[00:30:16] [SPEAKER_00]: billion 10 billion million fund that we saw of tiger or 100 billion fund of masa right the guy has

[00:30:21] [SPEAKER_00]: to deploy because it doesn't deploy there's no there's no way he can justify this thing right

[00:30:27] [SPEAKER_00]: so that's another pressure so it created the time sort of pressure right so the second and third

[00:30:32] [SPEAKER_00]: is though I should keep friendship but I keep demonizing them is media are media just started

[00:30:39] [SPEAKER_00]: creating heroes out on the thing right people who have built company out of outer labor and hard work

[00:30:46] [SPEAKER_00]: rather than I would say these all funding celebration unicorn you see 2021 article and media would

[00:30:55] [SPEAKER_00]: create hero they would they would do award shows etc right so these are three things which happen so

[00:31:00] [SPEAKER_00]: if you see let's say a 91 partner and his tweets he would continue to eat I would tweet

[00:31:08] [SPEAKER_00]: this is this thing what happening is not sort of right right but unfortunately the happen the good

[00:31:14] [SPEAKER_00]: thing is that the economics is self-cresting correcting system it ultimately had to correct

[00:31:18] [SPEAKER_00]: people get why so people will get why sir right a lot of people lose money so some of the LPs

[00:31:23] [SPEAKER_00]: let's lose lost money but it would happen it would make somebody's career to fantastic let's say

[00:31:28] [SPEAKER_00]: or current get a fantastic agent by shoes and he's chilling in Goa by shoe obviously is not

[00:31:36] [SPEAKER_00]: because current but for all his follies and I'm struggling right so some people would have

[00:31:41] [SPEAKER_02]: humongous benefit actually Mr. Moondah spy also got a big bonanza from by juice right

[00:31:47] [SPEAKER_00]: Moondah spy should be created for creating by shoe so before 2015

[00:31:53] [SPEAKER_00]: by shoe was a great teacher fantastic teacher I come from a coaching class this thing and he

[00:31:58] [SPEAKER_00]: was always a little teacher what happened now to 2015 whether by shoes fault or as an extra

[00:32:02] [SPEAKER_00]: fault I am known to comment on that right but are in capital was the fund which invested before

[00:32:08] [SPEAKER_00]: anyone figured out in in in them before 2011 and 13 and then it was not even as popular

[00:32:15] [SPEAKER_00]: and that the power of family office I always tweet though all the VCs are a friend and I

[00:32:20] [SPEAKER_00]: have to do business with them on Dexter capital side and Ibiside and venture capital side I have

[00:32:23] [SPEAKER_00]: to go invest but India's first five to six unicorns were not catered by VCs and VCs existed

[00:32:28] [SPEAKER_00]: then to and six exist current VC policy was created by Sanjeev Chandani

[00:32:34] [SPEAKER_00]: geometry was created by Sanjeev Chandani times internet is delivery was created by Times

[00:32:38] [SPEAKER_00]: Internet by shoe first investor and on our VC was are in capital

[00:32:44] [SPEAKER_00]: in Mobi first made not in capital key capital Sasha or a Mumbai English investor but he had to

[00:32:49] [SPEAKER_00]: go to KPS KPC be to get capital and then then have to run to Softbank so our VCs were

[00:32:55] [SPEAKER_00]: conservative if you see the example I probably if I if somebody gives me question I can get more

[00:33:01] [SPEAKER_00]: examples as well where all these were created by VCs make my traverse created by VCs outside

[00:33:09] [SPEAKER_00]: flip cut and Ola were created by VCs outside so you see that real this taking did not happen

[00:33:14] [SPEAKER_00]: because India was not India never learned to take risk or in your own will never take to risk or

[00:33:19] [SPEAKER_00]: LP or GP you are running never sort of let's say took the risk in the companies we see that

[00:33:27] [SPEAKER_00]: changing now now we see somebody like Nexus taking full on I'm like how to usually admire

[00:33:33] [SPEAKER_00]: the kind of conviction they're shown in JAPTO and JAPTO is the father of U.KOMOS industry

[00:33:37] [SPEAKER_00]: so that's changing now for good but otherwise I think it was not done in past just to conclude

[00:33:46] [SPEAKER_00]: the question that you asked all the entrepreneurs who raise capital at higher valuation needs to

[00:33:53] [SPEAKER_00]: fundamentally realize and maybe should coin a new word for valuation maybe it's a agreed

[00:34:00] [SPEAKER_00]: valuation to split equity or something like that the way we have this thing because whatever your

[00:34:05] [SPEAKER_00]: valuation which you had created the agreed valuation is a valuation to split equity between

[00:34:14] [SPEAKER_00]: two folks an entrepreneur and investor I'd say so sale Pelle data group and mysteries

[00:34:20] [SPEAKER_00]: Cyrus partner in that fashion only that's how we see if if mystery would not happen that I would

[00:34:25] [SPEAKER_00]: not have capital and that's how they got equity of whatever actually was led to a fight right

[00:34:30] [SPEAKER_00]: so it's just nothing but split and the reason the split is happening in certain fashion is

[00:34:35] [SPEAKER_00]: because no one knows though how how large the portion would be right so you are taking a

[00:34:40] [SPEAKER_00]: bet and entrepreneur and agree to this thing but whatever the greed valuation is never an equity

[00:34:45] [SPEAKER_00]: valuation all the if you take 90 out of 100 businesses if you try to sell those businesses

[00:34:50] [SPEAKER_00]: none of those business would be able to sell at the at the valuation but the difference is so

[00:34:54] [SPEAKER_02]: huge right I mean if you look at 2021 times it was not unusual for someone to raise at 30

[00:35:00] [SPEAKER_02]: times revenue 40 times revenue etc I mean I have seen deals myself right but today I mean

[00:35:07] [SPEAKER_02]: if you look at platinum qualities as companies in the US right larger market and so on right

[00:35:13] [SPEAKER_02]: it's trading at a single digit 6x not even 8x right 89x this difference right what do people do

[00:35:23] [SPEAKER_02]: because I mean you'll have to really beat the loss of physics to kind of grow at grow into the

[00:35:29] [SPEAKER_00]: valuation that they have raised at right so not necessarily who said that they are to grow

[00:35:34] [SPEAKER_00]: public market company goes up company goes down in private market it can go down why there is

[00:35:41] [SPEAKER_00]: no that stigma or mental emotion there is a there's a contract that's agreed in every

[00:35:45] [SPEAKER_00]: entrepreneur that that call broad broad base weighted average a company which has been

[00:35:51] [SPEAKER_00]: which has been valued at let's say 100 million let's say let's say companies are a million

[00:35:57] [SPEAKER_00]: dollar and cannot raise capital the entrepreneur and his investor need to sit together and figure out

[00:36:04] [SPEAKER_02]: but don't I mean aren't there these anti-dilution anti-dilution is anti-dilution is broad base

[00:36:11] [SPEAKER_00]: weighted average with two factors one of the wild valuations have in capital is being raised

[00:36:14] [SPEAKER_00]: raise lesser capital grow into 10 mil thing and these are all agreed formula right you can

[00:36:20] [SPEAKER_00]: get it where of tell me which VC wouldn't agree to weigh it off its entrepreneurs courage that

[00:36:26] [SPEAKER_00]: needs to go and talk to the VC and say he boss my venture time because if the venture dies the VC

[00:36:31] [SPEAKER_00]: loses the shit he loses the entire capital in this case he gets a he gets something I have out on

[00:36:37] [SPEAKER_00]: behalf entrepreneur to get them ms off one of the company that we advise the heart in the city

[00:36:43] [SPEAKER_00]: at sea we got them like photo hybrids and ms off the entire round so it's not this thing the

[00:36:49] [SPEAKER_00]: problem is ignorance problem is having the courage to go and talk in clear manner

[00:36:54] [SPEAKER_00]: refix the cap table right so it's not a problem at all is a problem these these guys

[00:37:00] [SPEAKER_02]: whoever raised that kind of money right should sit across the table with the investor

[00:37:08] [SPEAKER_02]: and agree on a new sort of a redistribution right yeah so there are three things need to happen

[00:37:12] [SPEAKER_00]: first thing that needs to happen is that which is more of a founder needs to realize

[00:37:16] [SPEAKER_00]: then the investor board probably needs to agree and support on the business plan so there is

[00:37:21] [SPEAKER_00]: a right called annual business plan which is agreed in the ssa in the affirmative rights so people

[00:37:27] [SPEAKER_00]: need to figure out that in new world will capital is scarce the capital not available maybe the

[00:37:33] [SPEAKER_00]: cap the business plan which was agreed that during the time investment may need to be redrafted

[00:37:36] [SPEAKER_00]: it's very very simple thing you go and have discussion with your investor and you need

[00:37:40] [SPEAKER_00]: to convince investor so first thing is that right second if that business plan needs money

[00:37:45] [SPEAKER_00]: you don't have to it shouldn't be flexing them you can raise whatever money you need at whatever

[00:37:51] [SPEAKER_00]: valuation you need who is stopping you just your board right and board is assembly of founders

[00:37:57] [SPEAKER_00]: and investors you agree to that keep that in your pocket and go out and raise capital

[00:38:02] [SPEAKER_00]: if actually founder is somebody who who actually has capital they can just do the rights issue

[00:38:10] [SPEAKER_00]: they don't need to entertain existing guys right and right she can have a device valuation

[00:38:14] [SPEAKER_00]: so this problem which has been made out so back is the problem once again because a lot of founders

[00:38:20] [SPEAKER_00]: are not aware what they can do it is their mental stigma key boss if I go to VC where I actually

[00:38:27] [SPEAKER_00]: negotiated 100 million valuation it's completely fine if you see public markets sometime IPO

[00:38:36] [SPEAKER_00]: happen at higher price or sometime QIB happens higher price if market comes down it will have

[00:38:42] [SPEAKER_00]: lower price it's not necessary that you would you would founder job is not to defend the valuation

[00:38:47] [SPEAKER_00]: which unfortunately they get into founder job is to ensure three things am I progressing month on

[00:38:54] [SPEAKER_00]: month year in year forward am I giving my employee or my customer happy if founder

[00:39:00] [SPEAKER_00]: solves for this thing ultimately business will get built who business of billion dollar

[00:39:07] [SPEAKER_00]: one thing which is I would the Silicon Valley so hardly a problem which is again comes from the

[00:39:13] [SPEAKER_00]: same thing I said the VC model right sometime VC don't want founders to build small companies

[00:39:19] [SPEAKER_00]: because small company doesn't generate VC kind of return right power load doesn't really come

[00:39:22] [SPEAKER_00]: so sometime they say boss if you are building small company shut it down

[00:39:26] [SPEAKER_00]: return the capital return the capital doers who shut it down or this thing so that's a

[00:39:32] [SPEAKER_00]: that's a that's a different game all good fundamentally how does it work for the

[00:39:36] [SPEAKER_02]: investor right I mean because if I came in at an X valuation and now you're saying

[00:39:42] [SPEAKER_02]: you're doing a downtrend at X minus 20 percent or X minus let's say 50 60 percent

[00:39:48] [SPEAKER_00]: how do I make my money let's take a cap table let's say founder on let's say 50 percent

[00:39:54] [SPEAKER_00]: let's say three VC on whatever 2020 10 right and they the last one happened was $100 million

[00:40:00] [SPEAKER_00]: so if you do down wrong let's say 40 mil 60 percent valuation but you if you only did

[00:40:10] [SPEAKER_00]: one mil or two mil rates or five mil rates not because it's a broad it's not a full ratchet

[00:40:15] [SPEAKER_00]: full ratchet doesn't exist now any VC who is signing full ratchet is a evil VC stay with that just

[00:40:20] [SPEAKER_00]: explain full ratchet full ratchet is 100 mil means my investment which I invested 100 mil

[00:40:27] [SPEAKER_00]: will convert 40 mil we're broad based weighted average means I invested let's say 20 mil at

[00:40:32] [SPEAKER_00]: 100 mil and now investing or you are taking money from somebody else at two mil so it is

[00:40:37] [SPEAKER_00]: like weights so that weighted average valuation would be closer to maybe let's say 80 or 90 only

[00:40:44] [SPEAKER_00]: for this thing so let the anti-dialysis hit if the anti-dialysis is hitting negotiate in MSAB

[00:40:49] [SPEAKER_00]: let the anti-dialysis hit you MSAB MSAB is basically the way we have employee stock option

[00:40:55] [SPEAKER_00]: we have MSAB which is management stock option management of founder stock option whatever you

[00:40:59] [SPEAKER_00]: want to call it right so take the capital right now if you think by taking this capital

[00:41:06] [SPEAKER_00]: it's a volatile journey right you came to 100 mil then you came to 40 mil tomorrow you

[00:41:10] [SPEAKER_00]: actually created a billion dollar outcome negotiation MSAB boss 100 mil pay a thiep

[00:41:22] [SPEAKER_00]: if I create a value tomorrow from 40 mil to a billion dollar this x percent 2 percent 5 percent 10

[00:41:31] [SPEAKER_00]: percent needs to come to me because even in that scenario you will still make 203 or 4x may not

[00:41:38] [SPEAKER_00]: make 20x which you would have made the problem is the dexter fights a lot for founders like anything

[00:41:48] [SPEAKER_00]: for any mother we are very clear three things is very very essential dexter

[00:41:54] [SPEAKER_00]: we would not advise a founder who is shitty you can you can see a track record a lot of

[00:42:00] [SPEAKER_00]: shitty company came to us with not advice wealth will be created by fusion of founders

[00:42:06] [SPEAKER_00]: creativity or entrepreneur and investors capital

[00:42:10] [SPEAKER_00]: ultimately founder in this asymmetric information world is a person who doesn't know anything about

[00:42:15] [SPEAKER_00]: all the rights etc so he needs to at least start and educated and then mutual negotiation

[00:42:21] [SPEAKER_00]: needs to happen which is not unreasonable given Indian laws lot of laws are enforceable so we

[00:42:26] [SPEAKER_00]: actually side with investors when some of those rights come into play like if you do fraud or

[00:42:31] [SPEAKER_00]: if you need exit etc but the point it has to be wealth has to be well this created was here

[00:42:36] [SPEAKER_00]: oh yeah oh pie badao bano pie cut kese karna will figure out if pie is not created everybody's

[00:42:44] [SPEAKER_00]: losing at least a pie to be created so that's something the problem is founders remain in

[00:42:50] [SPEAKER_00]: so much shell founders and we are lonely then they are not their ecosystem like tie at

[00:42:55] [SPEAKER_00]: early stage but they're not ecosystem for founders who raise money so there has to be an ecosystem

[00:43:01] [SPEAKER_00]: for founders who have raised capital and I get like in a month I get like more than 30 40 calls

[00:43:07] [SPEAKER_00]: from people who raise capital who call me like three or four days before board meeting they've

[00:43:11] [SPEAKER_00]: been that it board meeting what he can talk to me so that ecosystem lacks in India which needs

[00:43:16] [SPEAKER_00]: to be created so education for founder is capital how to handle how to have a negotiation

[00:43:23] [SPEAKER_00]: or a discussion with the investor because none most of the founder and never gone second time

[00:43:28] [SPEAKER_00]: founder becomes smarter third time founder becomes smarter about this but founder is wrong to take

[00:43:32] [SPEAKER_02]: money at those kind of valuations like I can play I mean I'll try to steal man the founders case

[00:43:40] [SPEAKER_02]: right someone's offering like an fu kind of valuation for me right it's a lot of money

[00:43:49] [SPEAKER_02]: I am building this business obviously you know to cause an impact on everything but also to make

[00:43:54] [SPEAKER_02]: money and there's this huge opportunity to make money and even if I make a little bit of secondary

[00:43:59] [SPEAKER_02]: that you know my life is sorted let's say number one number two if I reject this

[00:44:05] [SPEAKER_02]: this is going to my nearest competitor right and they become stronger their ability to

[00:44:12] [SPEAKER_02]: resources money all of that stuff is way more right and number three is just plain formal

[00:44:19] [SPEAKER_02]: right and as much as I'm a biggest believer in this business I know that a business is

[00:44:30] [SPEAKER_02]: like half chance right I mean it's 50 50

[00:44:35] [SPEAKER_02]: okay

[00:44:36] [SPEAKER_02]: so for all of these reasons let me just

[00:44:45] [SPEAKER_00]: I'll answer in question multiple part ocean so

[00:44:49] [SPEAKER_00]: let's define this equation when founder in the kind of truth and 21 were being chased by investors

[00:44:55] [SPEAKER_00]: who are offering them money at a crazy valuation okay let's define that equation

[00:44:59] [SPEAKER_00]: okay

[00:45:01] [SPEAKER_00]: first is it an ethical to take my answer is no it is immoral to take money answers no

[00:45:07] [SPEAKER_00]: it is illegal to take money no let me go even further with somebody like Sanjeev

[00:45:12] [SPEAKER_00]: because Nani has tweeted and somebody has tweeted that some of these founders actually

[00:45:17] [SPEAKER_00]: never created a value for the investor yet they did secondary and bought houses in like

[00:45:22] [SPEAKER_00]: McDonald's etc and I see I know number of them a lot of them are my friends etc as well

[00:45:27] [SPEAKER_00]: even is that wrong let me ask once again repeat is that it was was a founder when the founder

[00:45:33] [SPEAKER_00]: being chased and its secondary and bought some nice house for himself or for this thing was it

[00:45:38] [SPEAKER_00]: an ethical no what is immoral no was it illegal no what was wrong given you're talking about it

[00:45:45] [SPEAKER_00]: the wrong was it was imprudent it was unwise because when you take somebody's money

[00:45:51] [SPEAKER_00]: I am my country music I think it's a little out of interest because I think so when you're taking

[00:45:57] [SPEAKER_00]: investor money it is your duty it is your responsibility that you would make money for them

[00:46:05] [SPEAKER_00]: if founder knows best about the business investor cannot know if he knew by taking

[00:46:10] [SPEAKER_00]: money and by deploying their hoards of money into team or technology or product or marketing

[00:46:15] [SPEAKER_00]: is not going to generate a value out of thin air is actually better to probably not take money

[00:46:21] [SPEAKER_00]: now I'll come to the interesting question that you ask for competition what if what we'll do

[00:46:26] [SPEAKER_00]: if you don't take money because you wise but somebody else are doing and you just turn

[00:46:29] [SPEAKER_00]: your tough I agree with that you need to defend your tough right so you would need to probably

[00:46:35] [SPEAKER_00]: take money maybe take money and this is where the advisors come into play and advisors

[00:46:42] [SPEAKER_00]: are not in India I know invest in mancos get demonetized and for right reasons because

[00:46:48] [SPEAKER_00]: out of 300 people 90% are bad right but but but if you have a good advisor probably the good

[00:46:54] [SPEAKER_00]: advisor would advise you a force to take money from a sensible investor whose source of money

[00:47:00] [SPEAKER_00]: itself is not cheap if you're taking money from your fund I won't name the fund but if you're

[00:47:04] [SPEAKER_00]: taking money whose source of capital was so cheap that the fund never cared about putting the

[00:47:08] [SPEAKER_00]: money and they would be okay to take right it's probably not right to take money that money

[00:47:14] [SPEAKER_02]: sort of unintuitive thing yeah you take money you're taking chances right because why would you

[00:47:20] [SPEAKER_02]: like worry about that yeah right there so source of money and rather than taking higher money the

[00:47:25] [SPEAKER_00]: better thing to negotiate is which is hard to negotiate with investor is I'm taking your

[00:47:29] [SPEAKER_00]: money but you cannot invest in these are three on four competitors whether it's a legal agreement

[00:47:34] [SPEAKER_00]: or the verbal agreement in the heart whenever we took money I and Shag talked to investor and some

[00:47:39] [SPEAKER_00]: of them actually invest in competition is we would like you not to take money you not to invest

[00:47:48] [SPEAKER_00]: in money and if you're investing at least let us know before you want to talk to them for example

[00:47:52] [SPEAKER_00]: I advise the heart company that advice for series a b c d e and there's no written agreement

[00:47:57] [SPEAKER_00]: there's informal agreement is key the winner if you're advising competition at least let me

[00:48:01] [SPEAKER_00]: know or at least it's a good fit that's how that's how business happen in India right

[00:48:08] [SPEAKER_00]: so you could do that right so if you're worried if you're only reason to take money when you

[00:48:13] [SPEAKER_00]: did not need money and you cannot deploy that capital was to ensure that doesn't go to competition

[00:48:18] [SPEAKER_00]: is right region let's just put it this way whether you want to do secondary if you're

[00:48:23] [SPEAKER_00]: doing secondary enjoying life and just investing in other people start up and not putting money

[00:48:27] [SPEAKER_00]: more not putting this thing is wrong this is definitely not

[00:48:32] [SPEAKER_00]: it's prudent I'm no one to call it unethical but probably not prudent

[00:48:38] [SPEAKER_02]: is basically that so I think you think there is this incentive structure itself has become

[00:48:47] [SPEAKER_02]: little perverse in some sense right this week there was a news that the Qatar investment

[00:48:53] [SPEAKER_02]: fund is going after by juice personal assets itself right whatever he owns I mean I have not

[00:49:00] [SPEAKER_02]: I've never heard of that before to be honest right I mean like from an investment fund basically

[00:49:06] [SPEAKER_02]: funding and start up going after individual founders itself but do you think that was I mean

[00:49:12] [SPEAKER_02]: forget the specific case of by juice but do you think there is like overall because of the

[00:49:17] [SPEAKER_02]: capital and so on the incentives itself are sort of perverse right now where

[00:49:22] [SPEAKER_02]: you know founders think that okay you know what let me race around I'll take some money off

[00:49:29] [SPEAKER_02]: of the table and you know if it happens it happens right if I end up building a big company

[00:49:37] [SPEAKER_02]: I mean sure but otherwise the ride is kind of worth it which was the opposite of the 2006 or 2008

[00:49:43] [SPEAKER_02]: times right whereas it was pretty much all or nothing right and it was such an anathema

[00:49:48] [SPEAKER_02]: to start up itself right even getting a forget about marrying or whatever even getting a job

[00:49:54] [SPEAKER_02]: after being a failed founder was impossibly hard and I can say that it was almost as much

[00:50:00] [SPEAKER_02]: even in 2017 when as a failed founder I was applying for a job right so do you think

[00:50:06] [SPEAKER_00]: the incentive structure itself has to change 100 so again deep question multiple parts

[00:50:13] [SPEAKER_00]: or answer multiple parts I'll come to incident destruction maybe last so first let's come to

[00:50:17] [SPEAKER_00]: founders what is wrong and what I write right if founder doing secondary when investors are changing him

[00:50:24] [SPEAKER_00]: to be pal of cap table and having a nicer house or nicer thing is in my opinion is definitely not

[00:50:34] [SPEAKER_00]: wrong subject to that founder is ensuring that is not diluting his or her focus

[00:50:39] [SPEAKER_00]: and the founders continue to build the company however a founder is taking slightest of money

[00:50:46] [SPEAKER_00]: off the table for whatever means whether it is hiring a friend who runs a recruitment

[00:50:53] [SPEAKER_00]: consultancy company and you paid that guy and that money is coming back more common than we

[00:50:57] [SPEAKER_00]: think right I'm telling you each method I know right away in this call or hiring a marketing

[00:51:02] [SPEAKER_00]: agency whom you're paying money and that money is coming back to you in form of cash

[00:51:08] [SPEAKER_00]: or doing K-Packs and those guys are doing or doing or invoicing so I've been a I've been I've been

[00:51:14] [SPEAKER_00]: an entrepreneur I am Marwadi Baniya I've been a CFO I don't know I don't rely on before

[00:51:21] [SPEAKER_00]: delizense honestly right that's a there's actually one of the most useless we have to do

[00:51:26] [SPEAKER_00]: intelligence company and we see all the examples the while some funds are being made bad but

[00:51:32] [SPEAKER_00]: more than them I think the company is the agency where they're right the report should be made public

[00:51:37] [SPEAKER_00]: and said that whether they discover that it's not it's not difficult to discover a founder who is doing

[00:51:43] [SPEAKER_00]: bad just by looking at the numbers etc it's not at all the things you need to go on ground and do

[00:51:49] [SPEAKER_00]: the work so that is really really bad if founder is taking money so it's very simple

[00:51:54] [SPEAKER_00]: definition if it comes in public whether your mom will feel bad about it we are

[00:51:58] [SPEAKER_00]: never will feel bad about it whether you'll be able to look in nice is

[00:52:06] [SPEAKER_00]: right so secondary transaction versus that should not happen if founder doing

[00:52:12] [SPEAKER_00]: chori in whatever means in fashion is wrong you negotiate higher salary than market you do

[00:52:18] [SPEAKER_00]: secondary doesn't negotiate it call it's it's an agreement between you and this thing you may

[00:52:22] [SPEAKER_00]: question prudence of that that's a question now let's come to the other part which is unusual

[00:52:27] [SPEAKER_00]: which you said a fund going after personal asset of this thing in a fraud if an investor going out

[00:52:33] [SPEAKER_00]: of personal that's absolutely okay if you took money without telling me and that money belong to

[00:52:39] [SPEAKER_00]: my LP then you took it and I want to go after a personal asset that's I don't disagree with that

[00:52:43] [SPEAKER_00]: because how the ecosystem affects otherwise otherwise the ecosystem the company law people

[00:52:48] [SPEAKER_00]: will take in India a lot of come a lot of promoters are taken companies to insolvency

[00:52:54] [SPEAKER_00]: and in backhand they got their friendly buyer to buy the company right that's a way to loot

[00:52:59] [SPEAKER_00]: either creditors investors so while it is unusual it's basically done by from like UI or a global

[00:53:06] [SPEAKER_00]: fund etc which is unusual but I don't I don't disagree with that this thing whether

[00:53:12] [SPEAKER_00]: by just done anything I have no idea right I can't comment subject but if they are doing

[00:53:17] [SPEAKER_00]: that maybe they have maybe reason to believe and sort of do that right so in that case is wrong

[00:53:25] [SPEAKER_00]: now come to the incentive structure incentive structure play a very very powerful role in

[00:53:30] [SPEAKER_00]: people's behavior in VC's behavior I said markups play role in terms of so let's let's let's take

[00:53:37] [SPEAKER_00]: an example if in a company in fact I was having a discussion while coming to you with a very seasoned

[00:53:44] [SPEAKER_00]: VC that if I'm an investor in a company and if I know something wrong and you are investing you are

[00:53:48] [SPEAKER_00]: my friend my fiduciary duties to my LP that if you are investing and I you invest because company

[00:53:56] [SPEAKER_00]: becomes stable but what do I do if I am a friend and I don't have an answer and he didn't have an

[00:54:00] [SPEAKER_00]: answer right so the question is what should investor do if the person knows there's

[00:54:04] [SPEAKER_00]: something wrong in the company and somebody else is investing right so these are questions

[00:54:10] [SPEAKER_00]: which are honestly very deep philosophical or ethical question I'm still searching for those answers

[00:54:17] [SPEAKER_00]: in person I'm extremely high on integrity I was a I and my wife never Q and a single

[00:54:24] [SPEAKER_00]: rupee bribe never ever awarded a single rupee of tax we pay whatever tax that is

[00:54:30] [SPEAKER_00]: due to the government and wouldn't want to do any of that thing but that moral

[00:54:36] [SPEAKER_00]: compass sort of probably once it goes higher you would see lesser and lesser so incentive

[00:54:41] [SPEAKER_00]: structure plays powerful role because when founders have lower stake let's say founder has lessened

[00:54:45] [SPEAKER_00]: interest take he would be incentivized to earn higher he would be incentivized to

[00:54:53] [SPEAKER_00]: so I'll give you a very crude example of my brother explaining a philosophy when we had a

[00:54:59] [SPEAKER_00]: debate at home so my brother runs a hospital in kod putli small village near my home

[00:55:05] [SPEAKER_00]: sampur and my father who has taught me as a business and accurate to whatever I know

[00:55:10] [SPEAKER_00]: he complained to my brother key when our drivers take ambulances or our vehicle so

[00:55:16] [SPEAKER_00]: and my brother said it is limited it is fine because technically maybe they feel that I'm not

[00:55:31] [SPEAKER_00]: enough the only way to solve if I pay then I'm a problem key

[00:55:35] [SPEAKER_00]: so you should want them but I don't mother papa wanted it taken half section maybe they said

[00:55:46] [SPEAKER_00]: kid's fine because we are not paying so that's an incentive again because when founder

[00:55:49] [SPEAKER_00]: in my opinion that's not right on part of the founder founder should not have done

[00:56:00] [SPEAKER_00]: that now whether investor knows it and allows it whether he should allow it is a question

[00:56:07] [SPEAKER_02]: do you think fundamentally like other things can change like in the model itself to design

[00:56:13] [SPEAKER_02]: better incentives like maybe like the funds should not be eight year nine year funds maybe there

[00:56:19] [SPEAKER_02]: can be 12 year 15 year funds I'm just giving an example right so something like that or

[00:56:24] [SPEAKER_02]: you know you mentioned founder salaries right now this is always up for contention with the

[00:56:31] [SPEAKER_02]: VCs I mean they have to approve founder salaries and so on and you think VCs should be a little

[00:56:37] [SPEAKER_02]: more generous on that front so that you know the founder feels like at least they're economically

[00:56:41] [SPEAKER_02]: like you know safe right and they don't have to worry about those things right because especially

[00:56:48] [SPEAKER_02]: in the early days they compromise a lot right so that or do you think there should be limits on

[00:56:54] [SPEAKER_02]: when you can do secondaries maybe based on milestones I don't know right do you think that

[00:56:59] [SPEAKER_02]: these kind of things can happen from a business model perspective itself to

[00:57:05] [SPEAKER_00]: have better outcomes I'll answer in multiple part

[00:57:11] [SPEAKER_00]: I think the first thing is that integrity should be the paramount and integrity of the founders

[00:57:19] [SPEAKER_00]: or investor in ecosystem needs to be protected I'll give the best example the reason India the

[00:57:23] [SPEAKER_00]: problems are so high because our law or our law enforcement completely very difficult

[00:57:29] [SPEAKER_00]: to do a net completely difficult if you do something you can't do anything against the

[00:57:32] [SPEAKER_00]: founder the recent example we saw where a US based healthcare company unfortunately founders

[00:57:37] [SPEAKER_00]: were Indian I feel ashamed to know that that founders were Indian where founders just

[00:57:46] [SPEAKER_00]: overstated the figures and that's very easy right then a screen that's in doctor's clinic you

[00:57:51] [SPEAKER_00]: was overstating the media they got punished with the jail right our own flag bearer Mr. Rajesh

[00:57:59] [SPEAKER_00]: Gapta on a circumstance evidence got punished right so Indian ecosystem needs to become more

[00:58:04] [SPEAKER_00]: robust quicker faster as well as penal mechanism need to go higher to protect integrity at both

[00:58:12] [SPEAKER_00]: level where founder do not doing a stupid thing as well as investor not doing stupid things so

[00:58:17] [SPEAKER_00]: that's first answer because integrity central to person it's not necessarily can be imposed if

[00:58:22] [SPEAKER_00]: it's not imposed then the way the reason the law is built to that key I feel or not

[00:58:27] [SPEAKER_00]: we hang right there's a lot to take care right now I don't know the incentive structure

[00:58:32] [SPEAKER_00]: I think extremely debatable of this thing I would say at least on founder salary point

[00:58:38] [SPEAKER_00]: look if you are burning capital investor have provide capital it's a debate I have not come to

[00:58:47] [SPEAKER_00]: the terms with the one side of this thing my simple reason is a founder should get enough money

[00:58:53] [SPEAKER_00]: to have a mental peace if that mental peace come from 10 lakh 15 lakh or 60 lakh or 1 crore

[00:59:00] [SPEAKER_00]: that number need to be usually agreed between that VC on phone if I'm a VC I would figure out what

[00:59:06] [SPEAKER_00]: number give the mental peace to the founder right and whether the number is logical or not reasonable

[00:59:10] [SPEAKER_00]: is that simple that because if your foundation at peace how will build the company

[00:59:18] [SPEAKER_00]: or he's his self esteem is being heard by boring from parents or something so that's a

[00:59:22] [SPEAKER_00]: problematic right so that part needs to be sorted between VC and there's no fixed answer

[00:59:27] [SPEAKER_00]: for that because people circumtense this thing you can define like seed pay on a C C

[00:59:31] [SPEAKER_00]: repeat on a C will define the sector while it's disagreeable that a founder is taking more than

[00:59:36] [SPEAKER_00]: it is fair share and company is burning money right on incentive structure I think incentive

[00:59:44] [SPEAKER_00]: structure exist for both people founders as well as for investors investors said a lot of

[00:59:50] [SPEAKER_00]: a lot of investor aim to make money out of management feel not the carry for example

[00:59:54] [SPEAKER_00]: Dexter venture we want to be one of the first fund where we want to have lower fee on management fee

[01:00:01] [SPEAKER_00]: side forever that's basically the aim if you want to put our skin in the game so you want to have

[01:00:06] [SPEAKER_00]: size of capital from our in the fund as well as lower fee in the fund as a game

[01:00:10] [SPEAKER_00]: lot of founder a lot of investors don't put size of capital of their own plus they

[01:00:16] [SPEAKER_00]: want to make more money out of the management feel but if they justify management fee he

[01:00:19] [SPEAKER_00]: should invest the sponsor capital how there's no spot right so that should be fixed similarly

[01:00:24] [SPEAKER_00]: founder should also skin in the game by ensuring that they have right equity and if at all company

[01:00:29] [SPEAKER_00]: going for a toss maybe sometimes they they invest doesn't matter what valuation you might do a right

[01:00:34] [SPEAKER_00]: issue where nobody participate founder party 50 like at one tenth value nothing at least two

[01:00:39] [SPEAKER_00]: things get fixed right if let's say founder is lower those take like five to ten reasons

[01:00:43] [SPEAKER_00]: take how do you fix it get your founder to invest some money in the company lower value

[01:00:47] [SPEAKER_00]: do we provide waver on its right issue two things happen his stake comes up company gets

[01:00:53] [SPEAKER_00]: capital and stake goes up there are very easy things to fix but the problem is that

[01:00:58] [SPEAKER_02]: ecosystem doesn't discuss and doesn't talk about these things what do you make of founders pledging

[01:01:04] [SPEAKER_02]: their equity to take a loan and buy more equity yeah that's very interesting phenomena

[01:01:13] [SPEAKER_00]: yeah let's say oh the question is whether founder did it whether founder

[01:01:18] [SPEAKER_00]: founded it at somebody's behest that the question is debatable but

[01:01:21] [SPEAKER_00]: there's nothing wrong with it if you think you're so it's this again this comes with

[01:01:28] [SPEAKER_02]: a legal answers now immoral and ethical now does it typically happen in let's say promoter led

[01:01:33] [SPEAKER_02]: companies like conventional companies where the promoter yeah and by some conventional public

[01:01:39] [SPEAKER_00]: listed company it happens all the time there is a you can go on share holding table and you

[01:01:43] [SPEAKER_00]: find what the equity being pledged and a lot of founder pledged but most of them pledging

[01:01:48] [SPEAKER_00]: equity to buy more equity pledging equity to buy their own more equity they don't do that they typically

[01:01:53] [SPEAKER_00]: do it for other uses like build other businesses etc right typically that doesn't happen and I

[01:02:00] [SPEAKER_00]: don't know the law position there there may be law to pledging could it buy your own more equity

[01:02:04] [SPEAKER_00]: but if you want to do that's completely okay so let's say let's say your company has valued

[01:02:08] [SPEAKER_00]: a three billion dollar time and you felt that this equity is valuable right and you took

[01:02:14] [SPEAKER_00]: you did borrowing at that value right if you want to buy your own equity that means either you're

[01:02:19] [SPEAKER_00]: buying because it's lower and you feel it valued so as long as you're not hitting the covenant of

[01:02:24] [SPEAKER_00]: the borrower it's fine there's no problem whether you should do that as a method to

[01:02:32] [SPEAKER_00]: increase your equity I answer you know why because because your job you're not a financial right

[01:02:37] [SPEAKER_00]: you're not a bank you're not a capital market guy you're not a bond expert right

[01:02:41] [SPEAKER_00]: so this is this is typically no financial expert your job is to build a company right

[01:02:45] [SPEAKER_00]: so if you want to build a wealth ultimately by buying equity you are building well it's better

[01:02:50] [SPEAKER_00]: to negotiate a upside sharing structure so P may also have equity may have right upside sharing

[01:02:55] [SPEAKER_00]: and negotiate that if you are aiming to get wealth there are 10 other ways why do financial

[01:03:00] [SPEAKER_00]: engineering you are not an expert through financial engineering you don't even know what

[01:03:02] [SPEAKER_00]: kind of risk you're signing up so it's not advisable it's not prudent for founder to

[01:03:07] [SPEAKER_00]: do it is what I would say is not wrong but it's not prudent is what I would say for founder to do it

[01:03:12] [SPEAKER_02]: so we've just discussed many many many nuances right on the state of the venture ecosystem today

[01:03:21] [SPEAKER_02]: with all of these complications right and this sort of a landscape to navigate right

[01:03:29] [SPEAKER_02]: we are seeing newer funds coming into the market almost every week you know

[01:03:34] [SPEAKER_02]: so we run something called the roundup where we cover all the startup news and we've been doing this

[01:03:38] [SPEAKER_02]: for like four years every week quite rarely we miss and this year the unique thing is almost every

[01:03:47] [SPEAKER_02]: week we've seen one or two funds being launched right I don't know what the total number of funds

[01:03:54] [SPEAKER_02]: are at this point of time but crazy right I would hazard a guess and say it's gone up

[01:03:59] [SPEAKER_02]: like two times by in the last like two years at least right what is the logic of all of these

[01:04:05] [SPEAKER_02]: funds coming into the market right because the what I personally feel is the number of fundable

[01:04:11] [SPEAKER_02]: startups are very very very finite right and we have a case where for example sequoia has some

[01:04:19] [SPEAKER_02]: 2. something billion dollars to invest in India and Southeast Asia startups largely

[01:04:24] [SPEAKER_02]: India basically right Axel has raised a fund bloom will perhaps raise another fund right and so on

[01:04:30] [SPEAKER_02]: and so forth all of this put together maybe like I think between the three or four funds

[01:04:34] [SPEAKER_02]: they might have four or five billion dollars of capital to invest right in the next

[01:04:40] [SPEAKER_02]: two three years right how will these funds really compete in this market yeah multiple again

[01:04:48] [SPEAKER_00]: fairly deep questions are answered multiple folks so first thing I'll say you said that

[01:04:52] [SPEAKER_00]: already the capital is so huge and the finite entrepreneurs to uh finite entrepreneurs to build

[01:05:00] [SPEAKER_00]: I used to cover in 2006 along with sorab who was a part of clear capital used to cover UK

[01:05:05] [SPEAKER_00]: stock market on special coffee can invest in just like so so at that time I'll tell

[01:05:13] [SPEAKER_00]: you name a few companies paragon was a lender in buy to let up buy up

[01:05:19] [SPEAKER_00]: garghari do let connect with school lending of the egg he line galey and it was a listed lender

[01:05:25] [SPEAKER_00]: ICP was a mezzanine lender okay we had shardlemann capital we had fnc we had a birdie we had

[01:05:31] [SPEAKER_00]: medicine mezzanine's eventually that would have okay so icp cup icp as a company uh

[01:05:38] [SPEAKER_00]: it was only lending from hennison that's it no other business right we had companies like

[01:05:44] [SPEAKER_00]: shardlemann capital fnc hennison a birdie all of these were listed asset managers either

[01:05:51] [SPEAKER_00]: the agglization asset manager or single asset manager like law and trust two fund managers

[01:05:55] [SPEAKER_00]: running the company if you talk about insolvency side the law has come in in 2016 in in yukin 2006

[01:06:03] [SPEAKER_00]: we had companies like debt field director acuma or these companies which were the only

[01:06:07] [SPEAKER_00]: job is to convince a borrower kibosh you are defaulting rather than defaulting will

[01:06:12] [SPEAKER_00]: come you an advice and we'll do a settlement with you and bank so that your default rate

[01:06:16] [SPEAKER_00]: happens lesser and for bank also and we haven't lesser right so if you see do you see any of

[01:06:22] [SPEAKER_00]: these company in india answer is none abardin i heard after abardin you see in uk but do you see

[01:06:27] [SPEAKER_00]: any of the name of the company let me give an equivalent of these company right so equivalent

[01:06:32] [SPEAKER_00]: of abardin etc abecus built by sunil bhaiya sunil singhaniaji or merciless built by uh

[01:06:38] [SPEAKER_00]: sora or four people built by prashan jen that's equivalent now equivalent of icp is all the

[01:06:45] [SPEAKER_00]: ventured fund that we see likes ulterior etc equivalent of let's say lenders there are

[01:06:50] [SPEAKER_00]: specialty lenders which are coming so it's not a question of entrepreneurship or number of finite

[01:06:56] [SPEAKER_00]: entrepreneur please understand economy by definition is slow india my father's generation

[01:07:06] [SPEAKER_00]: in fact even in my father was worried that my job won't take place when i was in school and college

[01:07:12] [SPEAKER_00]: so our parental generation was only worried about financial security the first time our generation

[01:07:18] [SPEAKER_00]: is saying okay in entrepreneurship also financial security can happen you can do a wealth creation

[01:07:22] [SPEAKER_00]: there's no wealth creation no one would do business except maybe some marwadi community

[01:07:27] [SPEAKER_00]: where there is a fabric of supporting each other right otherwise it was very very hard for

[01:07:32] [SPEAKER_00]: folks to imagine entrepreneurship so a fortune is set for a country like india's humongous

[01:07:40] [SPEAKER_00]: unbelievable and we need to tap on that opportunity set very very fast so apart from country's law

[01:07:46] [SPEAKER_00]: tax law land labor capital reform the capital has to be able to answer the right direction

[01:07:51] [SPEAKER_00]: right so answer is that we don't need to worry about ecosystem imbalance that capital will

[01:07:57] [SPEAKER_00]: financial system or economic system is self-balancing correcting system

[01:08:02] [SPEAKER_00]: sometime you need a regulator like rbi to keep the inflation check or

[01:08:06] [SPEAKER_00]: deposit growth for security check or somebody like you need a sebi kind of system to keep an

[01:08:10] [SPEAKER_00]: fn on check right otherwise system it would probably self correct itself so we don't need to worry

[01:08:14] [SPEAKER_02]: about that but actually you are saying there's enough opportunity or rather there's enough places

[01:08:19] [SPEAKER_00]: the money can be deployed absolutely and given the we have three more things now AI internet

[01:08:25] [SPEAKER_00]: and technology and globalization you can build setting in india for any anywhere our upi being

[01:08:33] [SPEAKER_00]: exported to a friggin country your singapore country etc right so the thing is key you can

[01:08:37] [SPEAKER_00]: build a lot and india given the the nature of hard work you extremely efficient locator capital

[01:08:44] [SPEAKER_00]: being talented english educated we have the best approach in the world to build it

[01:08:49] [SPEAKER_00]: so this money coming in is absolutely fine and let more money will come in right now

[01:08:55] [SPEAKER_00]: once sebi actually eases the angel fund license that sebi gave was actually stepping

[01:09:01] [SPEAKER_00]: in the direction which is i call it and try hni now professional hni what i call as who are putting

[01:09:07] [SPEAKER_00]: money so that's not a worry at all so there is enough opportunity for these things the second

[01:09:12] [SPEAKER_00]: phenomena which is second order impact which is not analyzed and i wish both let's say

[01:09:18] [SPEAKER_00]: innocent banking industry as well as practically or winch capital financial report this data

[01:09:22] [SPEAKER_00]: so for example our industry doesn't report one data in banking

[01:09:25] [SPEAKER_00]: closer rates or value added to an entrepreneur or on things well created some of some of the data

[01:09:33] [SPEAKER_00]: right or success the company that we advised these are data let's say it should be reported

[01:09:36] [SPEAKER_00]: in instant banking similarly funds should report who are the actual gps or who are the anchor

[01:09:42] [SPEAKER_00]: who are co gps there are a lot of funds in india which are being created which are fund

[01:09:48] [SPEAKER_00]: where they have a co gp which is a family office where the sponsor who has special rights in ic

[01:09:54] [SPEAKER_00]: or hiring or how the fund is being managed right why that is happening is very interesting to note

[01:10:03] [SPEAKER_00]: indian venture capital industrialization and silicon valley or foreign capitalization different

[01:10:09] [SPEAKER_00]: in foreign countries got freedom lot better like 300 year back and their institution like we

[01:10:16] [SPEAKER_00]: have epfo yesterday we saw use focus on epfo as well as nps those institution got built

[01:10:23] [SPEAKER_00]: like canada has four pension funds are like otpb so those got huge capital and those market matured

[01:10:32] [SPEAKER_00]: where those institution had 1.5 percent to 10 percent location toward alternative asset

[01:10:38] [SPEAKER_00]: so fundamental provider of capital for those venture capital fund or equity fund

[01:10:42] [SPEAKER_00]: what those institution which exist in us canada europe like ms term etc with the product capital

[01:10:49] [SPEAKER_00]: right that right that provider of capital was never interested about fee you had 2 percent

[01:10:55] [SPEAKER_00]: fee management fee as well as carry they said we need to do the best final we don't worry about

[01:11:01] [SPEAKER_00]: a fee indian family office are very hard on negotiation they value every rupee that is

[01:11:07] [SPEAKER_00]: so they realize okay rather than giving 2 percent fee so if you do the math one let's do the math

[01:11:14] [SPEAKER_00]: right now if you invest 100 in a fund 2 percent annual fee for 10 years means 20 rupee then there

[01:11:20] [SPEAKER_00]: are expenses and the setup cost annual expense which are over all this management fee by the way

[01:11:25] [SPEAKER_00]: so whatever money you invest in a fund right which means if your fund has to generate

[01:11:34] [SPEAKER_00]: 3x which is very reasonable expectation in 5 or 7 and 10 years right it will generate 18% IRR

[01:11:38] [SPEAKER_00]: after carry and taxes etc the investment is to generate 5x which means this is an

[01:11:45] [SPEAKER_00]: incentive to a higher risk now indian family office is given an interact with a lot of

[01:11:49] [SPEAKER_00]: families and i think why the hell i need to give 2 percent if i have to deploy 100 crore or

[01:11:56] [SPEAKER_00]: i have to deploy 500 crore i may either hire a team which a lot of family officers are doing

[01:12:02] [SPEAKER_00]: or i actually can find i actually can find or co hire a non-tikner who becomes

[01:12:08] [SPEAKER_00]: a co-gp with me so rather than this guy joining somebody else is i'll give him enough freedom

[01:12:15] [SPEAKER_00]: i would be just an ic or maybe some hiring decisions or

[01:12:19] [SPEAKER_00]: some sort of sponsor level decisions etc let me build it along with this guy and that the

[01:12:24] [SPEAKER_00]: reason you see plurip the proliferation of lot of funds and that will continue to happen

[01:12:31] [SPEAKER_00]: in india so all the newer fund that you launch are getting created with blessing of a very key anchor

[01:12:39] [SPEAKER_00]: in my opinion there are very less funds who are getting created where they don't have an anchor

[01:12:45] [SPEAKER_00]: investor a huge anchor is to backing them and they actually have entered and another thing

[01:12:51] [SPEAKER_00]: that had done well where we need to thank the entire ty nascom community people like

[01:12:56] [SPEAKER_00]: sivastav and equivalent who have argued with government over the last 10 years and created

[01:13:01] [SPEAKER_00]: that 10000 crore fund of fund that has become biggest boon because that fund of fund have

[01:13:07] [SPEAKER_00]: been an LP in lot of new funds said to be an SRI and that has that has seeded a lot of funds

[01:13:13] [SPEAKER_00]: because if you do the math for a person to become fund manager you need a fund size of

[01:13:18] [SPEAKER_00]: minimum like 60 crore like 300 crore and at least the journey has started right so that's

[01:13:23] [SPEAKER_00]: basically has spawned the journey of the all the new fund that we see coming to the country

[01:13:28] [SPEAKER_00]: that interesting thing which I tweeted on your tweet was it's easy to create fund one and it's not

[01:13:34] [SPEAKER_00]: easy let me not say it's easy creating fund one is not a definition success creating fund four

[01:13:42] [SPEAKER_00]: is because fund one may pay line best car over our track record banana get fear of fun to

[01:13:47] [SPEAKER_00]: one of which will be done on TV PI which is probably okay but fund three and fund four

[01:13:52] [SPEAKER_00]: become important so not created fund four you won't be able to create an institution so

[01:13:56] [SPEAKER_00]: we'll create a lot of funds but whether we'll be able to create an institution like Sikora

[01:14:01] [SPEAKER_00]: Excel in India that's going to be seen on P side is at least happened at least for two funds or

[01:14:07] [SPEAKER_00]: I can say Chris capital I think they're from nine from 10 Kethera capital who are excellent

[01:14:11] [SPEAKER_00]: fund when I go to Singapore USA talk to some of the LPs there who say here can you make

[01:14:17] [SPEAKER_00]: an introduction there right similarly like in 91 hopefully they should do also pretty well

[01:14:23] [SPEAKER_00]: so we think there are some institution which will do very well in India as well

[01:14:28] [SPEAKER_00]: on the VC side but that institution that those institution being created still 10 to 15 year

[01:14:34] [SPEAKER_02]: out what makes a really really good fund like something like an axel right because I mean

[01:14:41] [SPEAKER_02]: I've had investors on the podcast and there's a huge overlap in terms of what they look for right

[01:14:49] [SPEAKER_02]: large enough market great team you know good product disruption let's say right track record

[01:14:56] [SPEAKER_02]: etc. etc. I mean these are like like if if I look at maybe like 10 15 VCs that I've hosted on the

[01:15:02] [SPEAKER_02]: part I mean pretty much everyone will have 80% of those covered right so what is the alpha

[01:15:08] [SPEAKER_02]: rate like what is what what sets apart someone who's truly phenomenal from someone who's just about

[01:15:15] [SPEAKER_00]: okay three things so I would say we have homegrown fund axel is still a fund launched by Indian

[01:15:21] [SPEAKER_00]: entrepreneur but under a brand which is foreign brand if I talk about homegrown front we have

[01:15:27] [SPEAKER_00]: Nexus excellent fund we have bloom we have got India question the newer fund like spatial

[01:15:32] [SPEAKER_00]: invest like still risk so there are all newer homegrown fund which are hopefully are doing well

[01:15:38] [SPEAKER_00]: and will do well I would say three things for any fund manager first till stability the team

[01:15:46] [SPEAKER_00]: so a lot of time team is not stable when incentive structure not aligned if you are

[01:15:51] [SPEAKER_00]: not able to have right incentive structure look you cannot stop anybody's ambition if two

[01:15:57] [SPEAKER_00]: people work together and then people are ambitious they want to create new fund it's

[01:16:00] [SPEAKER_00]: fine but when it's happening because incentive alignment issue there's a problem or a personality

[01:16:06] [SPEAKER_00]: issue like in any fund starting guy there's one guy who's senior right but so whether you can create

[01:16:12] [SPEAKER_00]: an institution on team site where where whether institution because fund is in any partnership

[01:16:18] [SPEAKER_00]: structure right so whether you can respect the institution and the responsibility lies on

[01:16:23] [SPEAKER_00]: either the GP the main GP or the co-GP who created the fund can do that the second thing

[01:16:28] [SPEAKER_00]: is can they build immense trust or faith in the on the ecosystem and this is not just about

[01:16:35] [SPEAKER_00]: investing great companies that way are you being empathetic to founder are you ensuring that you're

[01:16:42] [SPEAKER_00]: not ghosting the founder are you ensuring that you're getting back to founder are you community

[01:16:47] [SPEAKER_02]: your thesis right but do you think that that is still a differentiation because I would expect

[01:16:58] [SPEAKER_02]: that

[01:16:58] [SPEAKER_02]: because this I would have I would have definitely said that okay maybe 10 15 years back right it was

[01:17:08] [SPEAKER_02]: something unique to be founder first right be empathetic be transparent all of those things

[01:17:16] [SPEAKER_00]: I mean you are from that world so I mean look everyone says founder first but the problem

[01:17:20] [SPEAKER_00]: I'm talking about a very very deep problem in the system so ghosting is the biggest problem

[01:17:24] [SPEAKER_00]: not getting back to founder and founders in the pitch is the biggest problem

[01:17:29] [SPEAKER_00]: not being fair to founder during negotiation of terms the fear is very difficult to develop

[01:17:38] [SPEAKER_00]: it needs to define it let's say you feel that founder needs money badly and and you actually

[01:17:44] [SPEAKER_00]: do more work intelligence there are certain issues crop up and you actually renegotiate

[01:17:48] [SPEAKER_00]: the valuation right there's a bad faith thing and that happened in this current market a lot

[01:17:54] [SPEAKER_00]: we see a lot of investor doing that that's wrong right if you if you if you find our

[01:17:59] [SPEAKER_00]: unfundable walk away right that's my definition so I think there are a lot of problem is still

[01:18:06] [SPEAKER_00]: so as of now this is known as more like which which fund has invested in high

[01:18:11] [SPEAKER_00]: how many good quality on which has actually raised future funds or become unique on etc

[01:18:16] [SPEAKER_00]: but I think when we'll really have a grown institution even these things would

[01:18:22] [SPEAKER_00]: merit a lot whether founders where investors are ensuring that founders are hosted or founders

[01:18:29] [SPEAKER_00]: get back for example in Dexter venture it's a very small effort micro we see you're not even

[01:18:33] [SPEAKER_00]: started right we ensure and this is the reason I'm doing that because because starting I want

[01:18:38] [SPEAKER_00]: to fix these we ensure that we get back to founder within week we try to ensure that

[01:18:43] [SPEAKER_00]: we close the loop we don't ghost them we might take more time and diligence because a lot of my

[01:18:48] [SPEAKER_00]: personal money is sitting in the fund but but we're trying to ensure that we are not sort of

[01:18:54] [SPEAKER_00]: doing things which I as a human or an entrepreneur will feel bad about it's simple so one

[01:19:00] [SPEAKER_00]: building extremely high brand equity in entrepreneur ecosystem and third which is

[01:19:05] [SPEAKER_00]: very natural that ultimately you are taking money from investor are you generating returns

[01:19:08] [SPEAKER_00]: for investor not just tvi so whether you are able to generate market bidding returns which

[01:19:14] [SPEAKER_00]: investor your LP can get elsewhere and can you can you generate though on a sustainable basis

[01:19:20] [SPEAKER_00]: and these are three things is the most critical other things is whether you are operating ethical

[01:19:25] [SPEAKER_00]: way which is seen when markups happen or down don'ts happen so I met a GP I met an LP in Dubai

[01:19:31] [SPEAKER_00]: and the most interesting conversion they are like they are they are invested with like top 10 VC

[01:19:37] [SPEAKER_00]: funds and one of the things that they complain about Indian GP is it's here we are probably

[01:19:42] [SPEAKER_00]: invested in let's say maybe three to four or five GPs one of the thing we found very funny is that

[01:19:48] [SPEAKER_00]: same company being reported different value by those my GPS and it reflects the character of

[01:19:54] [SPEAKER_00]: the GP to me and is very certain that I'm not going to invest in that person again

[01:19:59] [SPEAKER_00]: if I know that person is just trying to mark up because he has to show higher TVPI right

[01:20:04] [SPEAKER_00]: we would expect more transparency from those ones so I think those are the reasons which would happen

[01:20:12] [SPEAKER_00]: which will differentiate the firm India still needs to see world-class institution

[01:20:17] [SPEAKER_00]: homegrown in world-class institution Indian VC is my opinion Vinod Kosala has this quote right

[01:20:25] [SPEAKER_02]: I mean the numbers vary but he says some X percentage of investors add no value

[01:20:32] [SPEAKER_02]: some Y percentage of investors actually add negative value to a company and very very

[01:20:35] [SPEAKER_02]: very few percentage of we say is actually add real value right how can an investor add value

[01:20:44] [SPEAKER_00]: to a founder like beside the money itself I think I have huge respect for Vinod Kosala

[01:20:53] [SPEAKER_00]: is a iconic entrepreneur investor and somebody who doesn't

[01:20:58] [SPEAKER_00]: afraid to speak his mind and open to speakers in public too there are very

[01:21:04] [SPEAKER_00]: less people in India we see somebody like Sanjeev Chandani not many people do that

[01:21:09] [SPEAKER_00]: I would say investors primarily add a value to either entrepreneur or investor by putting

[01:21:16] [SPEAKER_00]: systems in place which naturally come as soon as the funding round happened

[01:21:20] [SPEAKER_00]: systems like there has to be good quality auditor or internet auditor or the CF or MIS etc those are

[01:21:25] [SPEAKER_00]: enough levers to provide value to founder because founders in India are too busy in execution sometimes

[01:21:32] [SPEAKER_00]: they miss the larger picture thing which are very very critical in building the institution

[01:21:37] [SPEAKER_00]: life and for example last two years one of my very close friend and few other friends said that

[01:21:43] [SPEAKER_00]: you need to institutionalize and honestly institutionalized question is hard you need to

[01:21:47] [SPEAKER_00]: away to do that so that happens rest is founders are lonely and founders are not experienced

[01:21:54] [SPEAKER_00]: things as an investor you experience things right so you don't need to give them gyan on business

[01:21:59] [SPEAKER_00]: or strategy but you definitely bring the insight because founders are too busy executing

[01:22:05] [SPEAKER_00]: so if you can bring an insight of something happening in world where found is not exposed

[01:22:12] [SPEAKER_00]: so that something should be done key maybe if you that company using technology in this way and

[01:22:18] [SPEAKER_00]: maybe you do that second thing is focus lot of time founders so founders are their biggest enemy

[01:22:27] [SPEAKER_00]: because decision risk most founder are susceptible to decision risk I'll define decision risk

[01:22:32] [SPEAKER_00]: let's take example Switzerland when Switzerland fool that is very powerful it went ahead

[01:22:36] [SPEAKER_00]: and acquired repower and did Kpex where the demand did not exist right because you feel

[01:22:41] [SPEAKER_00]: overconfident or let's I'm not sure I should public let's Mr. Anil Mani he got equal wealth

[01:22:46] [SPEAKER_00]: but today there's no wealth left right probably it was part of decision risk so founders sometime

[01:22:51] [SPEAKER_00]: do decision risk so investor in board can graduate and guide founder on decision risk

[01:22:56] [SPEAKER_00]: as well right but giving micro knowledge or I think the worst thing they found a lot of

[01:23:03] [SPEAKER_00]: lot of young for young investor do is they start comparing

[01:23:08] [SPEAKER_00]: a portfolio founder to other portfolio that guy raised capital boss you should answer

[01:23:13] [SPEAKER_00]: you are not performing or the guy is doing so much better or a baba that company different

[01:23:19] [SPEAKER_00]: there's company different don't give a gyan if you want to give gyan don't compare randomly and

[01:23:23] [SPEAKER_00]: give gyan on contextual be helpful on b2b connects be helpful on hiring which lot of

[01:23:29] [SPEAKER_00]: investor anyway do that's a hiring biggest value at that investor provide but be this thing and

[01:23:34] [SPEAKER_00]: open the doors for let's say if you have connection us and founder wants to do that so those are

[01:23:39] [SPEAKER_00]: value that can provide but these are more like tactical value at the significant value add

[01:23:44] [SPEAKER_00]: comes stand with founder I saw a tweet by a founder named Anil is founder dot 278

[01:23:51] [SPEAKER_00]: he tweeted what Sanjeev stand with the founder once you invested is not just about

[01:23:56] [SPEAKER_00]: transactional stand with founder and they're thick and thin in their in their happiness and so

[01:24:02] [SPEAKER_00]: rose so that's another thing that if you can do can you keep founders mentally we say let's say

[01:24:08] [SPEAKER_00]: I'll give example of my own family right and rather my wife and co-founder Dexter capital

[01:24:14] [SPEAKER_00]: she's building Dexter venture now she she is building multi-bhashi and she's still building

[01:24:20] [SPEAKER_00]: and multi-bhashi reaches taken at tech where taking more money meant you have to burn

[01:24:25] [SPEAKER_00]: capital and grow to a particular this thing which could put the survival the company at a risk and

[01:24:30] [SPEAKER_00]: if you do degrow and become profitable that would build the company slowly Dr. Malpani

[01:24:35] [SPEAKER_00]: excellent human I'm not come across a person in terms of who is extremely mature Dr. Malpani

[01:24:43] [SPEAKER_00]: and Anrada wouldn't tell anyone not another investor and went through a lot of turmoil

[01:24:48] [SPEAKER_00]: for more than nine to twelve months what do I do and she would ask me

[01:24:52] [SPEAKER_00]: to promote one capital we should just return the capital right something like Dr. Malpani actually

[01:24:57] [SPEAKER_00]: would be a guide an angel to her you don't need to worry you keep building he anyway promote

[01:25:05] [SPEAKER_00]: frugal entrepreneurship so his biases towards that anyway so he kept building and he actually

[01:25:09] [SPEAKER_00]: encouraged her to keep building doesn't take too much of bandwidth and want to do something

[01:25:14] [SPEAKER_00]: with your time absolutely okay so those kind of investors don't exist in India

[01:25:18] [SPEAKER_00]: too many investors like they exist so that should happen so there are a lot of ways founders

[01:25:23] [SPEAKER_00]: invest can add value being their personal friend by personal course ensuring founders back that they

[01:25:30] [SPEAKER_00]: did the back of the founders but not by giving them telling the kids yeah that's my way to

[01:25:39] [SPEAKER_02]: given that people are such a big determinant for success in this whole business right I mean

[01:25:44] [SPEAKER_02]: I feel like definitely it's really helpful to index more on the people front for sure right

[01:25:50] [SPEAKER_02]: and I think the real value add you know I feel like VCs can also add is the thing that they

[01:25:59] [SPEAKER_02]: see things in aggregate right I mean a founder is too close to the product maybe too close to

[01:26:04] [SPEAKER_02]: the business too close to his market but VCs are able to see things in aggregate they see that

[01:26:08] [SPEAKER_02]: from a thousand three thousand feet view right that is one thing second thing I think is that

[01:26:15] [SPEAKER_02]: VCs can also see the startup as a financial asset which is also necessary right I think very few

[01:26:21] [SPEAKER_02]: entrepreneurs perhaps like negligible amount of them will have the heart to see it as a

[01:26:26] [SPEAKER_02]: financial asset right maybe the more mature ones right so those are two things I would say

[01:26:31] [SPEAKER_02]: all right so Devendra I have you know way more questions to ask you than we can fit in you know

[01:26:39] [SPEAKER_02]: whatever time we have at this point in fact I mean the camera is overheating as you know our

[01:26:43] [SPEAKER_02]: producer just said we'll definitely record a part two but one of the most fascinating

[01:26:48] [SPEAKER_02]: conversations I've had in recent times thank you so much for coming to the studio and

[01:26:53] [SPEAKER_02]: looking forward to a part two very very soon thank you so much Roshan it was pleasure

[01:26:57] [SPEAKER_00]: for me to be here more than happy to be come again and sharing my thoughts awesome so this concludes

[01:27:06] [SPEAKER_02]: part one of the conversation I hadn't planned a part two or a part three perhaps but yeah we'll

[01:27:13] [SPEAKER_02]: record a part two and we'll be back soon thank you for joining us and hope to see you again