E4: The Realist

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Episode Transcript


Hi Karthik, Welcome to this episode of insider investing. It's so good to talk to somebody I've known for so long, but we've never had this conversation. So it's going to be really interesting for me. Karthik I'll kick it off by this you know, one thing that consistently comes across when people talk about Karthik Reddy you know, this, this most loved VC, I actually Googled for it.

And, one of the first few hits that you see is this, note by Sajid on his Blume journey. So it's, it's amazing how entrepreneurs, how the ecosystem has associated, this most loved term with blume and specifically with you. So that's incredible for me. You know, one of the things that I've seen from the early days and especially 2008-10, when you folks just ideating setting up is you're as much, if not more, an entrepreneur than a VC.

And you know, I want to talk about that journey. What got you started into this space? You were doing really well in a professional career at Bennett, from there to give it all up, and, and began  Blume in a time when people didn't care much for the asset class. 


Thanks for having me, Sandeep. 

So first, it's been fantastic to have your support as a part of IIFL wealth before you dezerv journey started, for the same period of 10, 11 years, that we've been around. It was almost like a day one introduction. And, it's great to have people who have that belief and support you through the journey, so thank you for that. And the entrepreneurial journey, it's partly  I think the DNA.

So I come from a family of entrepreneurs on both sides. Um, I wouldn't say very successful on one side . I wouldn't, I wouldn't out  which part of my family and, actually very successful on the other side. And it seemed both, both extremes I've seen like, um, so relative to most folks I've seen in my college lives after stepping out of home for the first time, at the age of 17, I realized how privileged I was at one level.

I had a very good upbringing in Chennai. Good schools, you know, got a chance to go to the best colleges, and go abroad so, there was this itch to be an entrepreneur for a long time, because I guess it gets ingrained in the DNA, but there's also this fear of having to deal with everything that's the complexity of India, to be honest.

So, you know, then when you actually, most of the entrepreneurs that I know, the eighties, nineties, which I witnessed, what like hardcore dhanda Entrepreneurs, and in fact, most of the money people made were actually in infrastructure businesses- Real estate, construction and you look at the grime of it  in more of a philosophical way than simply the material.

And as like, this is not for me, I can't do this. I can't not that I don't have the courage to be a sort of a ruthlessly 20 hours a day at it  for a decade. You know, if anything, I'm proud of that over the last 10 years (Sandeep: And which you have been anyway). Yeah. And so it wasn't the fear of the work that it takes to be an entrepreneur.

It was on the, what terms can I control any of the terms of my entrepreneurship. And, um, to me, some of them were very jarring and the world has changed a lot , India has  become cleaner as a business space, but it was very natural in that era to think of how to operate within the system, cutting corners, you've been a witness to an IIFL journey.

You're sort of an entrepreneur, you've been a part of the co-founding team. So you've seen that from the 2000s, there've been various options to build, you know, to your vision very cleanly, , very ambitiously to compete with the best in the world. Um, it didn't seem like that, at least when I was growing up, to be honest.

So the escapism of that was, Hey, I do fairly well in school so I can just keep getting grades and the job market is picking up. So, you know, you are attempting to basically go and solve for the job market, , you know, and, and, and get a better and better gig. , you'll never make as much money perhaps, but you will have the satisfaction of working with good people, etc.

And that kept me going, , then sitting in the U S in 2004, 2003, those genes started expressing themselves. So I was actually cleaning up bed and stuff. I was cleaning up everything in the home  last weekend , and boxes and boxes and boxes of my history were coming up. So what's fresh in my mind is my, there were two files around my startup which I incorporated in Delaware , it was called Crick TV.


What was Crick TV doing?


There was one. It was supposed to, um, take, internet rights for broadcast of cricket all over the world and show it to Northern America. So Willow was doing it , it was not like, and I was a customer of Willow, but I felt like it was a big market. And the idea was to extend that to, , my other proxy name, which I had, which has left folders in my email box 18 years ago, was Zata . So the brand was Zata and it was pre YouTube. So it was like, you know, you thought of content being democratised and it came from, you know , dish TV in the US doing that for actually all. There was a Dish in the US also, by the way, and they actually brought all, um, ethnic content to the US and because DTH allowed for a very different type of distribution from cable.

Over the year one transponder and you can get to everyone. And that was the predecessor to the internet. So I started playing with this idea. And then I said, Hey, I'm under equipped for this! What the hell was I thinking? And after two years, pretty much after burning through all my savings at that juncture, I realized that I wasn't equipped for it. I needed a tech co-founder, you need to have the skills to be able to really build something tangible.

You can go through the grind of saying, I don't know anything, I'm just a good businessman, but that's not the kind of entrepreneurship I'm a fan of, to be honest. Right? So we've come to the mistakes sections, but remind me of one. And that's always like when you find the co-founding team, you can find and fund teams, which you have been guilty of having a flaw in your own job, which is, which is what that was so kind of half-heartedly played out till five or six. 

`And then when my company got acquired, I started thinking of moving back to India. My Wife said, look, you've already destroyed or whatever little we had. You're not, you're not going down the entrepreneurial route again. Please get yourself a job. And there were enough of us and bringing her back after 12 years of her staying in the US too, so stuck to the jobs, , and stuck to what I'd like to do.

So in the middle of my jobs, I've tried to stay close to industries or sectors that I want to be in touch with. Right. , so whether it was technology banking or whether it was FinTech or whether it was  media tech, the idea was to stay as close to it. And this wave of what I wanted to do in Blume started in the US because I landed in 99, 2000 and got enamored by what the Internet can do to change the world. Right!

And the challenge was always while I got seduced into one idea. The challenge was how will you become a great entrepreneur, doing this and that was never clear. It wasn't, it wasn't clear in my head. , and so in some sense, you, I think you, if you're patient enough playing the real, real long game, which is what entrepreneurship is, , I think you just have to wait for the right moment.

And for me, I clipped back and I think venture capital for me was always a way of getting pleasure. One degree removed off pretty much dealing with every cool idea that I can witness in the world inside of my domain. Right? You don't have to be stuck to one slog for 20 years to build an iconic company.

Of course, that has its own charm. You're on a pedestal as an entrepreneur, but, you know, can I set up something with stands for that, which backs such founders, right? And, and, , If you ask me, late-stage, doesn't appeal to me for all those reasons, because then you're a money manager, you're a fund manager, right?

You don't get the thrill of sharing that entrepreneurial drive with the early stage early journey of the founder, which is what I do, what I do for a living. I don't do it because I'm a money manager. I do it because I get the pervasive, you know, the perverse pleasure of actually watching entrepreneurship unfold in front of my eyes for the first two or three years of a journey in something almost always, it doesn't exist in the world.


Yeah, that kind of vantage point is rarely available to a lot of people. Right. And I, I see, I see why it can be exciting. 


It's a privilege to be a part of that ecosystem.


Karthik, there are many ways that you would associate with entrepreneurs. You could support them in different ways, but I think you chose one of the sort of approaches, which is really the hardest.

And, today doesn't seem so hard. But back then in 2009, you know, we were coming off,  the worst financial crisis we had seen in our lifetimes. And I still remember going along for meetings with you and clients telling us that look, 2006, I invested in this venture capital fund, this, that, that money is never going to come back.

And, you know, why would I even touch you with a barge pole? And then to explain the 2-20 fee structure. So telling them that, look, you have not made money. I will make money, but before that, I will charge some fees to you. And it's a really hard place. I, in fact, think that such as a fund of this stage, hadn't really been raised at scale in India at that point in time, 


That’s correct, we were the first to do a hundred percent Indian money. 


Absolutely. And so, in a way you were sort of convincing a whole new class of investors to invest in this asset class for the very first time. And you know what happened like we went through after that, when drawdowns would get recalled, people wouldn't honor and call for liquidity, et cetera.

So how, how was that entire process of educating Indian investors about this asset class?


One of the four or five different social sector goods that Bloom did for this country- I'll take credit for it. 

I know you enabled 120 to 150 meetings as a group. I think we did a total of 600 pitches. I'm not talking about multiple pitches to the same person. If you add those it’s probably 1200. But basically I now think about it when did I find the time, like, you know, we did this in 2 years flat and, and there were days where, you know, one of your colleagues would take us to Goa and we will do five.

So that explains the pace, but, you know, yeah. But we pitched in Goa and we pitched in Pune, we pitched in Chennai and we converted 75 of them. And the ratio explains the question that you had. People heard us out, they might've thought these guys are sincere. They might have thought these guys are stupid, sincerely stupid. , that they think that can actually make this work, but you know, I think, you know, your validation as I have.

You know, somebody's calling, you know, someone like Harsh Mariwala, someone calling the GV Prasad, of the Reddy labs, basically like every entrepreneur, we shamelessly leached off these brands. So we got the first five or 10 and we just plunked their brand names everywhere and said, okay, these people believe in us. And we just iteratively built. It took us four closes to get to 100cr. Now, some small young companies raised 100cr  in like a week and four closes, 21 months. So I think it's this obsession of an entrepreneur, right. And you've met a gazillion entrepreneurs and you are one yourself. So you know the feeling now, , not that you didn't know it in IIFL Wealth. That ‘Aapko Karna Hai toh Karna Hai’.

So you essentially,  you say that like I have such strong conviction in what I think will happen in the next decade that I will sell. I will sell, no matter how many times I've been beaten and chased away from doors and I think that's what kept us going. And for an entrepreneur, think about a seed entrepreneur back then used to raise 1, 2, 3 crores at most. Very different era. And for us, similarly, I think every time somebody you walked out of the room and they said "Lets do a crore", it gave you momentum for another month, it's a small win. Right. And that's what entrepreneurs are that way. Essentially you need small wins to keep you going, right. It's laid in with potholes. It's laid in with like, you know, stress, but the small wins keep you going. And I think that's our best to keep going

And the asset class, even today, I tell LPs that it's like, how come I get money for the long-term? Why are things changing now? I said, look, you know, we would all be faking it till we made it in some sense, there were the IPO's starting now. It's been 13, 14 years since these companies have been invested in or started, right.

So only now are they making it? So even the best of the funds, the best of the entrepreneurs were struggling because the necessary ingredients for taking off what was not necessarily in place were just waiting for that infrastructure to fall in place magically one day. And honestly that happened, I mean, 15, 16, I think we'd have outstanding funds, our returns in fund one and the extension, but it's taken much longer.

So the IRR will dip a little like would have been happy with 25% plus IRR. We'll end up at 20% IRR? Yeah. So, you know, but I think we, the belief is playing out and which is what I think anyone of your listeners and India should talk pride in, that it was a tough slog. That we are all five years ahead of ourselves. But if that five years of infrastructure laying on one end of the pipe had not happened, there was no way that entrepreneurs on the entrepreneurial energy that got unleashed in 16 could have taken advantage of a JIO and of UPI. You got to build rails on every front. See, we didn't have Infrastructure that Amazon, we didn't have the dark fiber that, you know, a Netflix had, right.

You building all the rails. And so it's literally, like they say, you're falling off the thing and you're leaving the parachute. That's what we all did. We all jumped off a hundred planes and we were just trying to build the parachute before we land. And finally it feels like it's worth it because 10 years later, it's a safe landing.

And I think it's going to be a phenomenally interesting journey for the next set of entrepreneurs, both fund managers and investors and investee companies. What now jumping into the journey. And I think the hard work's been done by both sides for the next decade to enjoy.


So I, I completely agree, you know, the kind of intense log that you guys did at that point in time. And, you know, it's not very different from any other business, right? When you, when a new sort of user is coming onto a platform on a new platform, the user knows that this is an early stage company. So therefore there will be issues in the product. and in many ways, these early adopters are enthusiastic.

And I see that, like, in, the early set of investors who came in into Blume, they came in, I mean, return was probably one of the things. I think the whole thing, that there is a great team, which is starting up and doing something that excitement of backing folks like you was, was interesting. And the second thing was they also wanted to back entrepreneurs in the Indian ecosystem.

So I think so much of that is also because of, you know, those early enthusiasts who came in. 


There are one or two people who said, I don't know whether you succeed, but I'm writing this off. As I give you the check, right. There was that person who said after two years or so, they said, you think you would have done that money?

And I said, yeah, hopefully in spades. And he said, It's okay. I am budgeting only  cash back not gains on this. I will prove you wrong Sandeep, I love the fact that the bar is so low. I want to beat this bar. And so it's good and bad. You're right. It's, basically early adopters, are general slots and equivalent to our angel investors.

And I've said this in a different way Sandeep, and you probably heard me say it as well. That fund was equivalent to our Seed Block, friend and family, seed roots as actually help us give 100 Crs, then came and like the government entity, which gave also, it's like a closet grant. 

And this is what happens in early stage startups. They does for 10 years before we give up money back, but we knew that they were being just generous out of the government poll and I'm happy that I've now returned them the taxpayer money and there's more to give back.

And then the fund one fund two became like a Series A now. You've got first institutional investor, but other investors, et cetera, then the fund 3, we've just completed investing articles around. And now we find it using a Series C round, which is often now. Yeah, it's not, it's still a mix, but it's almost like a pro rata mix. Like your existing investors that are exercising the pro rata, to continue playing in the game. 

So a little different from the company journey on two counts. One is your existing folks have to back you otherwise new folks don't come in. That's the one big difference. And the second is the pro rata that keeps growing doesn't shrink, right?

In terms of absolute size. In most other company journeys, the numbers shrink as the company is doing well. People just double it up. And the busted because the other allocation for them in terms of who they're giving capital to, it's not an investment in that sense. 


So it's a sharper J Curve,  probably for a company like Blume. Right.

Which is like, so it compounds very fast, but the point is, you know, it's one thing to put a certain amount of money out of your personal capital and give it to folks like Blume. It's another thing is to join Blume. Right. and that early team that came together.  and I just remember it being so diverse right from across like spaces. I mean, you and  Sanjay obviously like poles apart as personalities. Then there was Ashish who,  again, a very different, you know, person. So how was it like attracting talent in a time when this industry itself was not proven? 


It explains why there is a Motley crew to clear your point. we were not offering a job. So the, the bigger VCs, but offering a job, meaning you had the security cover, you have raised $20 million and hardly any fees right? 2% percent is fine, but it's nothing. You have a budget of 2CR INR to run your business each for five years. How is that a budget? And that includes everything. Right. And what basis then are you attracting talent? Who wants to come and work for a decade potentially. Okay. And so essentially, what does that, what did I just say?

It's a prescription for people joining and becoming co-founders in that sense. Um, and, and we didn't have startup Seed capital that, you know, even, you, I know you were a co-founder of the institution, but that's, its seed capital is much larger in our case, even predict the market is improved. So you can attract really good founding teams with pool $3 million round

We survive basically on $1.5 to $2 million for five years, most of our companies burn much more than we can have ever burned in a year. So we run on a very frugal budget, we still adjust breaking out of that. So I think the job seeking theme buildings or meetings started happening in 2018. So prior to that, what you were attracting was two, three things.

And, it explains also why, four of the eight leadership folks from the Time's Group in the same team that I ran right?.  And so essentially like most good founding teams, , you have to have this cultural alignment, mission alignment pre baked into the, into the thinking. So in the case of Sanjay and Me you are right, they have very different personalities, but it came from the same motivations we met through Mumbai angels.

So it was at least a format in which we understood our motivations for why we do what we do very well, beyond that it was about what they are building to words, and who's going to come and join that journey. So I don't know if you know this, I'm not able to sustain that hack anymore because people are impatient, but no person hired 2016, 17 was hired in less than six months.

It took that much time. It is more like a dating exercise, much like, the two founders dated for a year before getting engaged and putting up the first pitch deck that Sanjay and My name on the same deck, took about eight months from when we decided we want to talk. And so the same idea about anybody who joined Blume.

So Ashish would keep dropping hints, I would pick up some of them. And I would say any kind of, for this guy, you know, he's saying he wants to join. Do I have the money at first close yet? Finally it's like, how much more openly should I say instead of them come on board, but these are the risks, right? I don't know what I'm going to be able to promise you in 2015.

This is 2011 and this is what I have in my hand. , and so that's how the Sajid came. That's how Adit came and that's how I Aprit came. So that's how we got started. Right. And I've been one of the items, every trip I would take for Delhi, he would ask if he could meet. And I would say I have a car ride to Noida and I thought, and that's how we get to know each other. And then I say, and he says, what's, what's the next step? I said, the next trip to Delhi

So this, this will keep going on. And we did this. It almost sounds silly, but we did this a lot, even when Rohan came up to a year of spending time with the portfolio company. So I wanted people to be that sure on why they're choosing to join us and whether they're ready for this kind of a crazy entrepreneurial new journey. It's not sustainable anymore.

I think it's Sajit, I think we've made the last of those spaces in some sense, Kunal who joined as a senior person recently, as known as for Mumbai Angles connection. And so I think there's a little bit of that buy-in required if you're coming in at a senior for sure. At a junior level, you're grooming them. And now, thankfully, the brand attracts really well. you put an ad, you put a posting out and you get 200 great resumes now.

And, and so that has changed. But in the early days, you're right. I think it was mission alignment, cultural alignment. And so I, what I was realising about my own form of entrepreneurship and what I wanted Blume culture to stand for is essentially what I was testing these people for them, these six months journeys and saying, am I making a mistake?

Or I'm getting someone who's long term aligned to how we think about a Blume is a brand in context of how I want them to be with the entrepreneurs. So for example, if the person didn't know how to speak to an entrepreneurial, it didn't matter how intelligent they were for my company, because that's the only, that's only, that's the only thing that we were selling actually.

How does one grow, change anybody's life, right? Even in the context of 2012, it's a start gap was commoditized. And you honestly, in 2011, 12, we lost deals on a one crore pre-money valuation. 


Who's Blume versus XYZ angel network.  And only time will tell whether that was a foolish decision, they should have taken money from us and built a bit of company.

And so the differentiation was that, what, what are we for entrepreneurs? And, and I'm trying to gauge every person to say, is this person going to stand up for that scrutiny, very tough, very tough, which is why it took that long. The other hack, I don't want to necessarily make it public, but I dropped a hint. It's sort of a trade secret at Blume, but basically we actually bought above a certain level. We actually, when they passed the internal tests, that means depending on the level of three to five people internally, and there shouldn't be that flag that have flags on anyone from anyone, otherwise they don't pass the bar because we spoiled for choice. Getting 200 resumes for a single position is quite a choice.

Why are you making a mistake in saying, let's give the benefit of doubt. Then we do a second level check when we pull in the founder ecosystem as well. 


Interesting. So you've got the phone with us or talk to these folks. Yeah. 


So basically what that then allows us to do is the founders impression of why they think we are the most loved VC to your point is somewhat calibrated and tested from there.

It's just so some founder said, Hey, are you asking us to do this? I said, yeah, these other people are going to serve the next generation of you guys. And do you think that they passed the Blume test and, you know, from your lens and that our founders are critical of us and they say, Hey, you want a Motley crew early on, but now I'm now I'm exposed to somebody from Sequoia, Tiger etc.

I want the Blume person to be the core of the Blume culture core, but as sharp as that person, not that we are not as sharp as intelligent, but they want all the appeal of everything packaged into one. So bars have become much higher, but basically we hope to pass those buses as we build out the team. So it's a new generation of building the first 10 years cannot be equated with Coming 10, but I hope to sort of meet that bar with the new Blume that we are building.


Well, I think it was very smart to co-op the founders, right? Because in a way they feel invested in Blume, in that sense. And then probably hopefully they'll bring them back, and probably they do.


And somebody asked me in 2014 or 15, when they were evaluating us, they finally came into our fund at 2018  and he said, funds up the, on each of the small funds, they essentially have a lot of them have like a mafia that they are attached to PayPal Mafia or Uber Mafia

These sourcing for a small fund comes from networks, which cornered. So what's your mafia, cause you don't have any companies yet, which are unicorns, et cetera. You're not in. I said there would be a Blume Mafia some day. You just have to wait for four or five years and they didn't believe us, but I think it's happening.


No, there is already a Blume mafia, I think. , there's so much like so many founders now exceptionally successful. Kabir at Danzo, Vasant at small case. Gaurav at Unacademy. Like, you know, all of these phenomenal founders that you folks are backed, but, and on that , Karthik, like what was, is there a common thread that you were looking for when you back folks like these?

Because you said that, you know, as an entrepreneur yourself, you ended up backing other entrepreneurs who were like you, so like, what is it that really worked for you? I know Gaurav speaks about the persistence with which he followed up with you folks over a very long period of time. So his persistence, that thing that like, checks the big box for you, or is it, is it just the idea, or is it like different things for different, entrepreneurs that work?


Yeah, I'm thinking, formulas won't work, because you know, entrepreneurship is, is lessons. I don't think it's formulas. And the beauty of entrepreneurship is that I feel, I mean, in fact, I have a post, we can, it this week, I've shared it with you when I'm done. Um, and when you read it, you'll see where the inspiration comes from.

I also feel like the punchline of that piece would be that you can build unicorns in very different ways. That is, and that's after, I have the courage to say that after them, I have one and that's going to be two more than the quarter and after seeing these trajectories and the people who some of them have pointed at and marketing, because that I'm sure they will become.

And that trajectory is all very different. All five, I've actually been the ones that were the three that I've got to become. And the tool that you mentioned. Right. And so what did, , taught us and it takes time to learn this. I mean, if anybody told you in 13, 14, they know that. Specifically to do this, then bullshitting, still be bullshitting.

And i tell you why, because the ratio, the loss and win ratios have broadly not changed in 60 years of Venture Capital. So if they were, if formulas were as clean and specific, as you're asking me to outline them, then we would have gotten much better at this as an industry, how come it doesn't happen? Right? Because the reality is you leave the founders to their own will for 23 and a half hours of the day invested in engagement and intrusions are only 30 minutes a day.

So on average, right? So the founder has to go back and be capable of doing ABCD EFG. That is that. And therefore, no founders can be identical, but the shared common traits to point, right? 

So if you go back in the, we even the mistakes, we made them along because we cut 60, 70 checks and we basically experimented a lot, but tiny textbook, the clever way of, , if you look at it from portfolio modeling and construction, which people don't give us credit for, let's stop losses were always super tight, I couldn't have lost much money. And people don't ever understand that I was doing a boatload of learning for very, very little capital. Nobody has done that much learning with that little capital in this country. 

 And so, um, no one's ever appreciated that, but the mistakes on that lot were, what you put is that point on the very first sentence you were looking for people like you.

So we were looking for two things, actually, maybe projecting, cause we had an entrepreneurial gene. We were expressing our genes through that. We said, they all have sincere and high perseverance, Integrity, No Cheating, will not not waste money

And then the second lens of that, which is also flawed, is a "What is the Idea". So therefore I love this guy because he walked into my room and told me the same idea that I'd been thinking of. That's the thrill of an early stage venture,  You're reading the tea leaves here. You're flipping through the economist, you're reading a trend in China, you're eating some trend in technology and you say, this is bound to happen.


So that positive affirmation, you sort of, the moment you'll find that you latch onto it 


Too early sometimes, right? Because the market is not timed for this because you might pick the wrong one depending on the right idea. Oh my God. There's so many examples of that. And finding one, it's not fun and it continues to happen because it's not a perfect world and you can't go and discover every entrepreneurial in a particular area that you like

However, we've gotten better. So we like the thesis area now. Now we actually write and  presented to IC go out and chase such funds. So that's how we solve the idea problem.

We're saying at the investor level, in the team, you've got to get super focused on which ideas you chase, because you've got to be like, top, docile in the country on having the thought leadership on this, on this space, you can't be behind the Sequoia, Tiger.

How does it matter was they'll put 200 million before you blink into those companies. So you've got to be ahead of them. So that will happen with a little bit of specialization. So that's one way we solve. Right? So picking founders, it's not about picking founders. It's about picking founders who shared a vision of a very large market build-out much ahead of the rest of the market.  

The mistake we were making in fund one was sometimes three years, four years ahead. And sometimes when you picked, without looking at the rest of the market, we were picking the wrong founder because there was smarter, there was a smarter founder who was actually better timed on, better equipped to walk through the door six months later.

And we would miss him. So Misha was like that first, my man actually says, Hey, we have too much in this space. I don't think we'll be able to do it because of competition. Right. And never even met the guy. Right. My reply came through Navin Tiwari, but its embarrassing that's the truth. Right?

And so you've got to be careful on that. And that's one, that's a systemic problem that you want to solve. And the original question you asked around founders, it is all about, you said, it's perseverance. It is ambition. It is a capability. But however, there are a lot of nuances and everything, right. One is the ability to sell the mission.

Not just believe it yourself, because yes, there is a critical view of this solo founders who go to VCs, you know, sell a sexy story and raise money. It's not about the VC. I don't care that much about it. Of course it matters that you have to sell a story to get a Tiger or Sequoia`. You're excited, but it's not that it's about, can you sell it to your team members?

Can you sell, who, who comes and joins as a co-founder? , so if you don't have that, how would have been legendary tenure companies, right? And so the core DNA is to be incredible capacity to believe in sell a vision, to incredible ability to listen to the customer problem that you're chasing.

Therefore, two levels of nuances there. You have to be so married to the problem that. As it's as important as your marriage action matters to your spouse, you have to believe in it and not get mad at to the solution. I guess I used to be, I used to say that in the first five years now, I haven't disregard anybody who starts with that.

That is absolutely lost because I've seen every plan change. Every product change in the first 12 months, you are going through the journey. So you tell me out of the six months, so then  how to solve the problem, right? Which then means the best founders are literally hear to the ground all day. Whenever they get a chance they're going onto the market, they're going to the street that are understanding it. They're able to touch and feel the problem, which is why sometimes we struggle to figure it out with Intercity Bus Transport.

When did VC took a bus last time? Ah, so you can't even relate to the problem, right? And that they're not sometimes VC, sometimes don't fund this business because they don't relate to it at all. That is entrepreneurship, live, breathe in it all the time. If you're listening to the customer, then I think we get outstanding outcomes in life

And those journeys pay off. Even if they fail, because you would have built a company, worth somebody else buying, it will be a suboptimal outcome and still be a journey worth having. And then a lot of those founders, especially if they come from a technology area that they love, they'll go build another great company in that space after this.

I think the last, last point on that is the incredible capacity to learn from other people and learn to discern what inputs and outputs to be from others' learnings and knowing their DNA. Which is where the big difference comes, not every founder can listen to a Vijay Shekar or Gurav Mujal and be excited about how to copy a play book.

You don't have that characteristic. How can you, what is a SAAS founder though? Can quietly build a billion dollar company by mechanically, clinically going at it like a surgeon and hitting it out of the park and building a hundred million dollar revenue company. You have to play too. We have a term for it. In the VC world we have a jargon for everything.

So, it's a founder market fit. It also found the product fit. So it's essentially, you will not find somebody who walks through the door and says, you know, I've built a consumer business now I've been a SAaS business and vice versa. Not that I want to be bound by that, but a lot of the time it's not easy for correct.


Well, you know, , everything that you said has been spoken before, but the point on the selling thing is interesting, Karthik, because in India, it's almost like neglected the fact that you constantly need to be selling not only as a founder, but even otherwise. Right? I mean, we grew up in a time when we were told that you just like, do your thing, do it really well.

And then you'll be proven, but I guess,one big takeaway for me from this is the fact that You're constantly selling whether it is for the team, whether it is to the VCs, whether it is to vendors, even that, you know, they should prioritize your work and why you will become such a big company that they will regret not having worked for you.

So I think that that thing is very important. And you spoke about like, is Meesho that anti-portfolio, that you think about?


Plenty of them, Meesho, Zetwerks, I'll tell you what my book is actually an anti-portfolio actually. 

Meesho and Zetwers are bizarrely processed as anti-portfolio. So, we never met the founder. We failed on the written communication itself. So, we fixed a lot of processes post 2017,18 when the team, because the process was failing us. Um, that's a different story and a trade secret so i won't revel that. But, around 600 - 700 founders have met between 5 of us in a year now. Because we fix the process dramatically. 

So no referred founder gets mystified in Blume at least for the conversations. To me, the genuine mock of an  is when you met the fumble, you had a shock at taking the check, but not, and this is also non-trivial. So for example, I met these swiggy founders when they had a bundle on a rooftop in UB City and I said, one more Korean company.

I don't think so. Right. And I think I'd already been, just made the bet on. Before that, I didn't think we were going to play. And then we were  $250K check writers and they probably went and got, I don't know the exact history, but they probably got a million dollars from Accel.

Same thing. Even running a part of some Angel syndicate. And then Accel came and gave them $1 Million.

I don't Flog myself saying this is anti portfolio, If i am not in the game then how come i am a anti-portfolio? That's like saying Kunal Shah is an Anti Portfolio. Kunal is a nice guy, i know him and i spoke to him while he was building it. If I had $5 to $10 million I would have asked whether he had let me in to the round. But, with 500k what would ask him? 

So, we were asked to make a list of anti portfolio and so 70, 80% of them had a mix of this nature that they are either too late or get bootstrapped and they come too late for the market that you don't get a shot at them. That is a very large round and you don't get a shot at that, an alum of an Accel company. So they went to Accel and got the check. How was that anti-portfolio? We never had a shot at it. 

Anti Portfolio is when you look at it properly. And you fail to read the thesis of the founder, that it had become very big. And that's a failure on somebody in the leadership team to not pick that signal up or that que up. So we plan to minimize that going forward, but there are many people like that. As I said, we've met Ritesh twice before we said No, to Oyo’s we met Ola. We liked him, but then a tiger came and cut the check. 

So they just, things happen like that nature. , but basically the ingredients that you asked about did appeal to us, which is why we chase some founders more.

And in some cases you might go and read it because it's a zoom call now, or whether you didn't meet the founder, how can you make a judgment call? That was the biggest learning from the process. 


But this or this thing about, you know, you're almost like bracing for failure, right? So there is a, there are errors of omission and commission, , on, in the VC space and especially in the stage, which you are at all going after.

So the potential for failure is much, much higher. And then to, I mean the number of successes will be low and they will compensate for all the failures burden. Just an absolute terms. In number terms, the number of failures would be much higher and therefore like motivating the team through this. Like, you know, you're like seeing companies die more than you're seeing companies succeed, and then you're picking them up and saying that, look at it, this happens in the business and you get onto the next Investment. How does that process work?


It's gut wrenching. I mean, you know, um, even with one crore losses, right? That's what an avg series A burns in a month, right? With the one, the first time, the losses, the first write downs happen as early as 2012, 18 months into the fund. And then various things hit you.

It says you're point, it's a Power Law business. You read about it, but experiencing it, um, the losses come way ahead of the gates, right? , bubble is breaking out today. It was a 13 company and it's massively breaking out today, but like there's a graveyard of companies prior to that. Right. So the good news, as you likely said, is empirical evidence points to the fact that it's about Power law business

Five six we'll pay for all the mistakes, whether it's a 20 in a 25 company portfolio or a 40 in a 50 company portfolio is five, six of pay for all of them. How does it happen? And so that's what we are trying to fix in our bits, right? You're just saying, it will happen for various reasons, like I'm there, if I iterate this better in every fund and say, why is it happening in every fund?

But you can't control it. And then you have to reconcile with it. At some point, the causes for those failures are very high, but you asked me a different question. So how do you reconcile for me? There were two steps of reconciling constellations, which one was losing the money. The more important thing was losing time.

Yeah. Because, because you can get that same amount of time. Yeah. It's the same moment of time you're distributing across that. And then after a year of bloody hard work, one disadvantage. Right. So what the hell was I doing? Like, I like skip Sunday breakfast with my kid to spend time with his entrepreneur and he just blew up.

Right. And so it changed a lot of things that own Blume. It allowed us to get more focused in concentration of portfolio. Not just because LP be said is a good idea, but because you want to spend time with every company, very thoughtfully for one number two, you want to, it changes your perspective on each bet you make, have a shot in hell of returning the fund. You might say 1% probilility, but is it? 

If it is below 1%, then please don't play it because the entrepreneurs are in the pitch shot. Whether the ideas in terms of its, you know, it's a nice, cute app. Don't play it. It's a waste of time. Right? So, so it changes your thinking around and that's what the mistakes are fine.

One word, right? At that point, you said, what? Unicorns there? Not done like that, by the way. And then people would say, if it gets to 50 million, 8% of it I'll make 4 million, it's a decent outcome. But that's an interesting,

So very quickly what happened was once you get to 60 to a hundred million, and when you look at some lead the map around the next guy, picking up the company, right, the next day, picking up the company is looking for a one to 10 journey of that firm. They don't appreciate the fact that you got them from zero to one.

They don't care. They don't care. It's like the Time Pass, this founder takes the company from one to 10. And then he said, what was I thinking, going to measure them? What the hell to do? What is it? A three? No, I have to find that the founder can build zero to 10 and that when you put those lenses in and then when you pick very deeply, and then when you take enough ownership now, because the ownership thing changed because of the time.

Obviously not just because of that, yeah, because I'm spending so much time. I want to be paid for my time. Even if it means playing another half, a million dollars extra, I pay for my time, but I play for my part. Right. So I wouldn't know, 15%, I will not settle for 7 or 8. Okay. So all of this then changes the model.

and we  became five companies, more concentrated, but the lenses shopper now that every company you pick and all the math of a hundred, $150 million fund, which is up on three and four, is that if they're going to make unicorn you don't return much money, because you will own very little, when they get to that stage, therefore the lens on day one is in " Can this company be a Unicorn?"

It's a crude way of objectifying this, and therefore some young college kid who's very smart will get left out because you think about, and say, this kid will shape up to become, you know, the next up in the Gurav, Munjal you know, et cetera, look taught from what I'm seeing. Right. They have high energy, but they might not get there.

Then they get them 50 million, a hundred million. Yeah. Potentially they look really smart. They can get there. Let's move the needle. No, it does not move the needle. Ironically, even a sub $50 million exit as a failure mark in the portfolio, because it did not move the needle on the success so that some total of all the non five winners in every top portfolio in the last 30 years is less than 10, 15% of the gross returns.

So which portfolio it comes from, nobody asks it's a footnote, right? Let's say, oh, you're giving me five more about some of the a hundred after giving me $350K its ok i will take it. Nobody asks who gave that 5

The extreme way of looking at this, you need to start calling out, you're dying your bandwidth, your capital allocation. So I know you know this, but for the audiences, only 30 odd percent of our capital goes into those initial packs because the mistakes are made there. And the bulk of the capitalism reserves and in the early stage fund, I think the mantra is just keep doubling down on those five, 10 winners, right?

Some will get two to 300 million, some will get 3 billion, but that's where you want 70% of your capital and time to be spent. 


I think it's interesting that you talk about more about optimizing for time, then optimizing for capital, And that's an interesting thought process from a VC perspective, right?


I think. In an early stage. You see what I said might be true for a digress, right? Because they don't have to spend the time getting into a company where a lot of things are fleshed out. Teams are, boards are, somebody is taking care of the oversight. Everything make all of that is,


And that time spent is time spent really coaching people. Right? I think coaching the entrepreneur, coaching the teams, , around the entrepreneur. I, you know, I wonder like, how is it, , like guiding somebody who's really in the arena? I think, , so the person in the arena is playing his own game. You're sitting outside and I know you wrote about the playbook, , Netflix series, but how, how does that work?

Isn't it frustrating sometimes? And you see, you know, if I was there, I would have done this, but now I have to get him or her to do something else without telling him as much. 


If you look at Banks are alluding to that. I enjoyed that series Madrid CF, when the second. It was not dependable for a lot of people, but I also realize a lot of people don't like sports avidly enough to watch the series.

So I was transcribing in some sense for them, but it helped me think through all of the elements that you're speaking about, which is what are the challenges of a coach, because that coach it's, whether there's a life coach, whether it's a mental health coach, whether it is a, a sports coach, whether it's a VC coach, it's the same problem.

You're not in the field. The other person has to go deal with their life after the one session, , at least in a sports game, they actually on the sidelines. Here they're not in the sidelines. The founders taken the board inputs, left the room and then they're on their own. Again. Okay, so you get, so by the way, we are on the sideline sometimes when we're back channeling with investors, when we're guiding them on WhatsApp, on what to say in the meeting and what you are doing in real time, also coaching sometimes. But a lot of it is not real. It is more, almost six months in advance, the kind of coaching you want. You're hoping that what you see today becomes their behavior six to 12 months from now.

So, you know, you have to invest that sort of commitment from the absolute people. Don't change. They have to absorb the idea that it is their idea. That's an entrepreneur's ego and entrepreneurs failing. And I, and, , until that happens, you have actually not done a job as a coach. Therefore we over index the various questions.

You've asked in this hour. We over-index on the ability to win founders. Trust, found that empathy, right. Ability to understand the problem from their shoes. Right. It's okay for you to pontificate what the hell, you know, what they're going through. Right. And then it's just always out of time. And that's why it takes time, right?

Because that's not about email or WhatsApp chat or a phone call or a board input. It's about actually once in a while taking the time to go and have a beer with them and understand what else is bugging them in their lives. Because it's time away from your family. You're playing, you're counseling them like a kid, or, you know, a friend, everything.

And those journeys keep changing. So yes, the best founders then upgrade the coaches also. Because they have different challenges, let's say outgrown what they wanted to see in the first couple years of the journey. And then they're looking at how the hell do I grow this from 10 X the size now, right.

And they need to go to someone who's been there, done that and who can play a good Coach. Spectacular at going and finding those coaches for themselves. All the others are now, we learnt from that how good he is at. And then we advocate those play books to others. So you're learning. So I think coaching in itself is a playbook that keeps evolving.

And I would argue that the base ingredients are almost absolutely necessary. They're essential, sufficient they're necessary, but not sufficient. So the base ingredients are what we over-index sport inside the team. And then we try to grow up with our best companies to develop skills, to become a better coach.

And that's, if you don't enjoy that journey, then you'd be a terrible early-stage VC. 

In the latest stages, I have mixed feelings about that. Some people don't treat this as a money manager job. I don't think, I think you're overestimating. Whether everybody thinks that I think there are, I'm not saying that later stage VC's don't enjoy this, but I don't think they're set as coaches like a late-stage founder, coaches that are actually more funders.

Yeah. I'm just a VC in another billion dollar company. What are they going to tell you? We're going to tell you what we've learned from others. I keep saying this, VC's core  strength is pattern matching of all kinds in picking, in learning, in coaching, and giving advice, it's all pattern matching.


And so much of entrepreneurship is breaking out of patterns. 


That's why I send you the trick to customize from your learnings, which pattern to advocate or particularly entrepreneurial. Because otherwise you fall into the trap of advocating some BS, which is non-applicable to 8 out of 10 founders. So if you make it formulate you are screwed, pattern matching is going to be customized.

And a curation of that is a mixer, I think it's also great. 

We kept joking, We tell founders "Go ask some help from VC's" express because VC wants to help. Right? Oh, really good genuine VC want to help and that Kick comes from the thought of I have contributed something. Post Check, kick comes from contributing to something for the VC.

Of course I can watch the journey, but you want to know that you mattered in the founder's journey. And, and so when, so if you're actually customized and one, the more and the founder says, thanks! That was a great insight or this helped me, or whether they give you credit for it in public or private after that doesn't matter.

But that's basically the job also in one sense. 


I see, there's a book in there somewhere, Karthik

I will wrap with this Karthik, you know, you're this aggressive investor investing in high risk assets, your career and your life is linked to that.

How does Karthik personally invest? Like how do you pair the sort of balance of risk or is it like, is it like two independent things? 


As of now, it's two independent things it's like most entrepreneurs are not, don't break out for a certain period of time. I'm not yet there to be very honest.

and prior to that, I had done too many experiments with my angel investing with those entrepreneurs that I didn't really save that much for our education on the loan repaid to the country. So I haven't had too much money for good or bad. Right. And therefore investing has just been, Hey, I might need it for a rainy day.

Just put it into, you know, literally deposits and insurance, the security, because I know my family sort of, you know, case for that, given all the risk I'm taking on this spot. So, , currently it's over-indexed on just secured assets, which are very, very loaded guns because I feel I'm like, it almost feels like I'm 99 to one in terms of indexation on My current life, I'm all in on my job. I'm all in all capital. Every dollar we could have saved by taking a little bit extra from the fees is my founder's contribution back to the GP contribution back to the funds because my LPs want to see skin in the game. I don't have too much cash. So whatever little we can take from our fees is also in the fund.

So all in, this, from a rewards perspective, I'm in from a reinvestment perspective. So I basically 2024-25 is when this might change. But because those are my big paydays on funds, one and two, all the vehicles that we raised between 2011 and 16, 17, all of them will mature at the same time, extensions opportunity, funds core funds.

So when that payday arrives or we think about this problem, but right now I don't have the bandwidth or the luxury of money in the bank to really think about it.


It's amazing, like, you know, fully invested, All In! Going deep. I think it's a lot to learn Karthik. Thank you so much. This has been such a real conversation. We've learned a lot, , and who knows, maybe we, , we'd encourage you to put out a book around some of these things 


Someday soon, so hopefully thanks a lot for giving me the opportunity and allowing me to keep it real, great questions and enjoying this.

Best of Luck to dezerv, I know you're building up a phenomenal product out there for folks like me. And I was actually thinking, you know, you don't have too much. Maybe I'm the right customer with, you know, my parents after their marriage they have that little bit that they have in a nest egg. And, , I know you're building for that kind of an audience today.

And so hopefully be a customer soon. I haven't onboarded yet. 


We'll correct that very soon, Karthik. So, thank you so much. Thanks for doing this. 


Thanks a lot. 


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