Ep #9 | WTF is Venture Capital? Ft. Nikhil, Nithin, Rajan A., Prashanth P. & Karthik R.

1. 0:00 – 2:09

   Intro

   1. NKNikhil Kamath0:00

      [upbeat music] My aspiration for this particular session is anybody who's starting a company in the next few years, if they were to watch this, they will learn something.

   2. NKNithin Kamath0:09

      [upbeat music] An entrepreneur, I mean, should go build a business solving a problem which he cares most about.

   3. KRKarthik Reddy0:17

      Look, the excitement in India is higher than it's ever been.

   4. NKNikhil Kamath0:20

      We were trying to establish how much VC money has come into India.

   5. PPPrashanth Prakash0:24

      It's roughly around sixty, sixty billion.

   6. NKNithin Kamath0:26

      Are they really investing in you, the fund manager, or are they investing in India?

   7. KRKarthik Reddy0:30

      I'm looking ten years out. I want to see what's a billion-dollar opportunity ten years from now.

   8. NKNikhil Kamath0:35

      And what are the typical pays when you start off at a VC firm?

   9. PPPrashanth Prakash0:38

      Uh, sixty, seventy lakh.

   10. NKNikhil Kamath0:40

       What is he saying? Really? [upbeat music] Hi, guys. Thank you everyone for, uh, coming here. Uh, first thing I want to say is, this is not me interviewing you or moderating a conversation. Uh, this is more five friends trying to have a conversation. I think, uh, all of you have a lot of experience in the venture world and, uh, in the investing world. A lot of people want to create businesses, startup, entrepreneurship in India, and they will do so in the next decade. So we want to cover all things startup: what sector to focus on, where would-- it would be easiest to raise funding, which sectors are growing fast, what you guys think are sectors with, uh, tailwinds, which one have headwinds. And we will also kind of talk about the problems of the venture capital world, compare venture capital to PE and angel, talk about what happened in the last decade, what went wrong, and what can we fix to make sure the next decade is better, not just for us here, but, uh, every single guy who's looking to start a company tomorrow. Uh, so maybe start off with introductions. Uh, I'll come to Prashant last. Maybe Nithin can start.

2. 2:09 – 3:44

   Nithin discusses the Rainmatter Fund

   1. NKNithin Kamath2:09

      [chuckles] Okay, I'm Nithin, his brother. [laughing]

   2. PPPrashanth Prakash2:13

      What is Nithin doing here? [laughing] He just does not like VCs.

   3. NKNithin Kamath2:17

      Yeah. [chuckles]

   4. NKNikhil Kamath2:18

      So we were chatting with each other.

   5. PPPrashanth Prakash2:20

      Yeah.

   6. NKNikhil Kamath2:20

      Genuine, authentic story. And I was like, "You diss VCs so much on Twitter." [laughing]

   7. NKNithin Kamath2:26

      Right.

   8. NKNikhil Kamath2:26

      "Like, tell me, like, give me some questions to ask." And then we chatted-

   9. PPPrashanth Prakash2:29

      So I'll come do it personally. [chuckles]

   10. NKNikhil Kamath2:30

       Yeah. [chuckles] Then we chatted for twenty minutes, and then I'm like, "Why don't you just come join?" [chuckles]

   11. NKNithin Kamath2:35

       Yeah, I'm, I'm zero prepared, you know. I'm actually wearing his shirt right now. [laughing] So, uh, from 2016, we started this thing called Rainmatter, um, which is... It started off as a fund incubator, I don't know what you can call it. But, uh, we said we can't solve for all capital market problems, and we need to associate, partner, et cetera. And then startups came. So we had built a bunch of APIs for startups to build on top of us. Uh, so Smallcase was the first startup that came out of the, uh, of the, of the Rainmatter initiative. So the Rainmatter intake, uh, kind of extended into Rainmatter Health, which I'm very passionate about, and then Rainmatter Climate, um, you know, which we are supporting through our foundation. So we've now invested in eighty, eighty-five startups.

   12. NKNikhil Kamath3:19

       I'm going to ask this question to everybody.

   13. NKNithin Kamath3:21

       Right.

   14. NKNikhil Kamath3:22

       In the eighty-five startups that we have invested in, how many have survived?

   15. NKNithin Kamath3:27

       Right.

   16. NKNikhil Kamath3:28

       How many have thrived, and how many have shut down?

   17. NKNithin Kamath3:30

       I think, so for us, I think, uh, two have shut down. Because we are very early, right? As in, we are still, like, five-- four, five years in, so we are still quite early in the game. Probably they'll have better answers to this.

   18. NKNikhil Kamath3:43

       Karthik, would you like to go next?

3. 3:44 – 9:46

   Karthik’s Accidental VC Story

   1. KRKarthik Reddy3:44

      Sure. So, um, I went to the US in '99, after working here for about three years for my business school, and then essay said I want to be on Wall Street, et cetera. And when there, it was the absolute peak of the dot-com boom. So, so '99, you land up there, and then everything shifted. So I spent my winter break, my summer break, everything in Silicon Valley. So got enamored with this idea of how technology can be applied to everything. And so I tried to break through desperately, but everything came crashing by April 2000. That was the dot-com bust, and so all jobs evaporated, and if you had a visa issue, then there was nothing at all. And so there was this urge, like this pain to, like, try and get into these sectors, but nothing happened. So about five years I spent working there. It was a little directionless, so I moved back. So 2006, I came back to Bombay. I actually interviewed with, uh, Rajan's current firm. Despite its new name, it's, uh... I think I met some of his colleagues back in '06, '07. So I think most people thought I was fresh off the boat, don't know what the hell is going on in India. Why should I hire this guy? And venture was very new, 2006, so I recount the real venture story from '06. There was a little bit before '06, but... And so I reconciled to the fact that no one's going to give me a job, and, uh, became a banker briefly, and then somehow, curiously, went to the Times of India group.

   2. NKNikhil Kamath5:09

      Why Times of India?

   3. KRKarthik Reddy5:10

      I was a media telecom banker, and, like, people thought, like, I knew a lot of stuff about the industry.

   4. NKNikhil Kamath5:16

      What is a media-

   5. KRKarthik Reddy5:17

      So I started getting industry jobs.

   6. NKNikhil Kamath5:18

      What is a media telecom banker?

   7. KRKarthik Reddy5:20

      Serving s- those sectors.

   8. NKNikhil Kamath5:21

      Mm.

   9. KRKarthik Reddy5:22

      So TMT, as it's called. In the West, it's called TMT: telecom, media, technology. And, uh, so essentially, you service those sectors because they're all interconnected. And in the '90s, all of these became intertwined. And then the Lehman crisis happened-

   10. NKNikhil Kamath5:35

       Mm.

   11. KRKarthik Reddy5:35

       -and then whatever little sort of entrepreneurial hooks that the Jain brothers at Times were giving me, they all got pulled back a little [chuckles]

   12. NKNikhil Kamath5:42

       Mm.

   13. KRKarthik Reddy5:42

       ... because they became very conservative on the capital. And ironically, I was actually their corporate rep on Mumbai Angels and Indian Angel Network. So I knew of, like, Prashant, et cetera, remotely, because we used to cut, like, one small five lakh check, and, check, and Accel would be a co-investor back then. Rajan, of course, was doing his own thing, but through Indian Angel Network.... so one thing led to another, and I said, "If I'm doing, I'm so passionate about this over weekends," and, uh, they didn't give me any money. So I ended up taking all my savings and putting five, 10 lakhs.

   14. NKNikhil Kamath6:13

       Mm.

   15. KRKarthik Reddy6:14

       Ran out of it in, like, six, seven checks.

   16. NKNikhil Kamath6:15

       Mm.

   17. KRKarthik Reddy6:16

       Uh, I was a salaried employee, and then I'd actually s- helped sell a guy, uh, one guy's business, so he's, he's become like a brother to me. So he trusted me blindly. So I made him a few tens of crores. He said, "You can take four, five." So I said... I started using that as a balance sheet-

   18. NKNikhil Kamath6:33

       Mm-hmm.

   19. KRKarthik Reddy6:34

       - and, uh, investing for him.

   20. NKNikhil Kamath6:35

       Mm-hmm.

   21. KRKarthik Reddy6:36

       As I said, if I can do this on a weekend, uh, once a week, once a month, then what if I can do this full-time? So that yearning from 2000 came back in a, in a big way. And interestingly, I don't know if Prashanth knows this story, I have to tell it someday, but Shekhar Kirani works there, and me, and Sanjay Swami, and all of us were pieced together by this gentleman called Rajesh Jain, uh, who runs Netcore.

   22. NKNikhil Kamath7:00

       Mm-hmm.

   23. KRKarthik Reddy7:01

       And we became a think tank to think about what early-stage investing should be like in India. And it lasted about six months, and momentum spluttered. Uh, and I was one of the few guys who actually built a deck out of it, and it was called Project Factory. And, uh, there were two models, basically. I think Sanjay Swami and Prime became... He went to UID, but after that, he became more of a curated 10 companies.

   24. NKNikhil Kamath7:25

       Mm-hmm.

   25. KRKarthik Reddy7:26

       And I became the other extreme. We did s- sixty-seven, 70 companies in our first fund, right? So we were total Silicon Valley super angel fund model. We adopted that, and we did our recce work in the US, and we saw that micro VC was erupting.

   26. NKNikhil Kamath7:39

       Mm-hmm.

   27. KRKarthik Reddy7:40

       So we picked and chose this model, and that's how Blume started. So it's been 12 years, a little over 12 years.

   28. NKNikhil Kamath7:45

       How big is Blume now, and how many companies have you done?

   29. KRKarthik Reddy7:48

       In our fourth fund-

   30. NKNikhil Kamath7:49

       Mm.
4. 9:46 – 11:31

   Karthik's Double MBA Adventure

   1. NKNikhil Kamath9:46

      So in the little bit of research that we did-

   2. KRKarthik Reddy9:48

      Yeah

   3. NKNikhil Kamath9:49

      ... we categorized you as IIT, IIM, Wharton.

   4. KRKarthik Reddy9:54

      Mm.

   5. NKNikhil Kamath9:54

      Bungee jumping, snorkeling.

   6. KRKarthik Reddy9:56

      Huh.

   7. NKNikhil Kamath9:57

      Uh, South Indian boy in Andhra Pradesh, married to a girl who is in the creative industry.

   8. KRKarthik Reddy10:05

      Huh, a lot of research. [chuckles]

   9. NKNikhil Kamath10:06

      Is that how you would paint Karthik? So how would you represent who Karthik truly is?

   10. KRKarthik Reddy10:11

       No, so by all of what you characterized, I'm not, um, satisfied with, um, um, lack of adventure.

   11. NKNikhil Kamath10:19

       Mm-hmm.

   12. KRKarthik Reddy10:20

       So therefore, the double MBA.

   13. NKNikhil Kamath10:22

       Mm.

   14. KRKarthik Reddy10:22

       I was desperate to get out of the country.

   15. NKNikhil Kamath10:24

       I think we're trying to make a case for people who are going to college-

   16. KRKarthik Reddy10:27

       Yeah

   17. NKNikhil Kamath10:27

       ... from somebody who has been to a college here and there.

   18. KRKarthik Reddy10:31

       Sure.

   19. NKNikhil Kamath10:31

       Both top of the line. I think your experience will be very relevant.

   20. KRKarthik Reddy10:34

       Yeah, but, like, so as a double MBA, though, it's a, it's not a apples to apples comparison because I hacked my second one-

   21. NKNikhil Kamath10:39

       Mm

   22. KRKarthik Reddy10:39

       ... in the sense that I finished, almost finished my finance major in the first year and started experimenting in the second year.

   23. NKNikhil Kamath10:45

       Mm-hmm.

   24. KRKarthik Reddy10:45

       And I met my wife at UPenn.

   25. NKNikhil Kamath10:46

       Mm.

   26. KRKarthik Reddy10:47

       So when people ask, it was written in the stars.

   27. NKNikhil Kamath10:49

       Mm.

   28. KRKarthik Reddy10:49

       It had nothing to do with me getting to Wharton. And so, and then you, you, you do a lot of experimental stuff, and all of this experimenting in the West Coast, doing internships through your third semester, almost finished by the third semester. All of that hacks were possible because I'd done one.

   29. NKNikhil Kamath11:06

       Yeah.

   30. KRKarthik Reddy11:06

       So mine was not the conventional, conventional MBA.
5. 11:31 – 15:05

   Rajan recalls death-defying experience

   1. NKNikhil Kamath11:31

      Rajan, would you like to go next?

   2. RARajan Anandan11:32

      Yeah. So, um, so I'm Sri Lankan.

   3. NKNikhil Kamath11:35

      Mm-hmm.

   4. RARajan Anandan11:36

      Born and raised in Colombo.

   5. NKNikhil Kamath11:38

      Mm-hmm.

   6. RARajan Anandan11:38

      Sri Lankan Tamil.

   7. NKNikhil Kamath11:39

      Mm-hmm.

   8. RARajan Anandan11:40

      I left the country because, uh, most Sri Lankan Tamils left.

   9. NKNikhil Kamath11:44

      When was this?

   10. RARajan Anandan11:45

       '87.

   11. NKNikhil Kamath11:46

       How old are you, Rajan?

   12. RARajan Anandan11:47

       I'm over 50. [laughing] Um, my story. So I, I left in the late '80s, went to school in the US, university, undergrad, grad school. I worked at McKinsey, Chicago, for a long time. Um, I worked at McKinsey because I couldn't get a job at Ford or General Motors.

   13. NKNikhil Kamath12:04

       Mm-hmm.

   14. RARajan Anandan12:04

       I was a mechanical engineer, manufacturing systems, so I really wanted to be a-

   15. NKNikhil Kamath12:07

       And before that, college?

   16. RARajan Anandan12:09

       ... uh, US, yeah, MIT and Stanford, Engineering.

   17. NKNikhil Kamath12:12

       Before that?

   18. RARajan Anandan12:13

       Before that, Sri Lanka. So I grew up in Sri Lanka, 100%.

   19. NKNikhil Kamath12:15

       One thing I really wanted to ask you before we move to the next phase of your life, is you grew up in a country filled with conflict. And I read stories like you saw people getting dragged out of their car and killed, and, uh, you lost your father early in life. Uh, two facets, two directions. One, do you think there is a correlation between trauma, insecurity, and turmoil in childhood, which kind of makes the odds of being successful later in life higher? Because you're overcompensating for something or, uh, making up for feeling vulnerable at some point when you were really young. Question A. And B, if you could throw some light on the Sri Lankan conflict, because, uh, we've had like a bird's-eye view because we're next to them, but I don't truly know where the conflict started, uh, and what is happening right now.

   20. RARajan Anandan13:13

       Look, see, when you go through a period like that, right, where... I mean, it was one day actually that tens of thousands of Tamils were killed. So, you know, imagine driving back home from school, and in front of you and behind you, people are being pulled out of their cars and burnt. Okay? Uh, and the only reason that my... I have a younger brother, who's five years younger than I am, lives in the US. The only reason we are alive today is because we speak Sinhalese and Tamil.

   21. NKNikhil Kamath13:43

       Wow!

   22. RARajan Anandan13:45

       So when, you know, when you go through a period like that, and then, of course, lots of things happened after that. But, you know, that day, I had thirty classmates. Several of my classmates died. Several of my teachers died in my class. So when you go through a period like that, it was a very traumatic period, obviously. Um, but you know, one of two things will happen to you: either you become very hateful or you become very grateful. There is only two states. So, um, fortunately, I just became very grateful.

   23. NKNikhil Kamath14:13

       Mm-hmm.

   24. RARajan Anandan14:14

       So now, you know... So you can imagine, right? So I ended up much later running large companies, billions of dollars of revenue. So I used to have bad quarters and good quarters. So you can imagine having a bad quarter is nothing compared to being dead.

   25. NKNikhil Kamath14:27

       [chuckles]

   26. RARajan Anandan14:28

       You know? So I just wake up every day, I'm just really glad to be alive. [chuckles] And so, you know, I find-

   27. NKNikhil Kamath14:36

       I so resonate with you. I feel like heightened traumatic experiences in life speeden up evolution significantly. To me, the most attractive people are the most scarred of people, 'cause I think in those moments is when you evolve.

   28. RARajan Anandan14:52

       Yeah. And you also like... But, but you can- it can also go the other way, by the way, right? You can become very hateful. You could become, um... It can, you know, and I've seen that happen as well to people, so.

   29. NKNikhil Kamath15:04

       Dad?

6. 15:05 – 16:14

   Rajan's Father: The Real-Life Adventurer

   1. RARajan Anandan15:05

      No, so my dad was, uh, a lawyer who loved adventure sports.

   2. NKNikhil Kamath15:09

      Mm-hmm.

   3. RARajan Anandan15:10

      He, um, you know, for fun, he would do endurance sports. He was the first Sri Lankan to swim across the Palk Strait between India and Sri Lanka. He was the first Sri Lankan to swim both ways. Uh, so anyway, he died, uh, he was trying to swim the English Channel. He died of hypothermia, which means your brain freezes. He broke his, uh, hip on a bike, motorbike, and he went to London to get surgery, and then while he was there, he got his hip operated on. He's like: "Hey, I'm here. I always wanted to swim the English Channel." It was early August, and you should not swim the English Channel in the early August, especially if you're Sri Lankan-

   4. NKNikhil Kamath15:46

      Mm

   5. RARajan Anandan15:46

      ... 'cause you're not used to the cold waters. So basically, halfway through, um... Basically, what happens with hypothermia is your, your brain stops working, but your body keeps going. And so they knew that something was wrong, so they basically airlifted him. He was dead on arrival when he got to Dover. So I lost my dad, um... So he didn't pass away in the conflict.

   6. NKNikhil Kamath16:09

      Sorry if I got more personal than I should.

   7. RARajan Anandan16:11

      No, no, it's okay.

   8. NKNikhil Kamath16:12

      But-

   9. RARajan Anandan16:12

      It's okay.

   10. NKNikhil Kamath16:13

       Did you do so

7. 16:14 – 19:04

   Are Success & Trauma correlated?

   1. NKNikhil Kamath16:14

      well in life because of these heightened experiences of your youth?

   2. RARajan Anandan16:19

      I don't think like, folks-

   3. NKNikhil Kamath16:20

      Do you think there were-

   4. RARajan Anandan16:20

      I mean, we're, we're old, but, like, if we think that, you know, we've been successful by now, I mean, that's game over.

   5. NKNikhil Kamath16:25

      Because, because your jobs are to gauge entrepreneurs, essentially-

   6. RARajan Anandan16:29

      Yeah

   7. NKNikhil Kamath16:29

      ... and bet or not bet on them. I'm trying to arrive at if you were to map childhoods of 100 people you bet on.

   8. RARajan Anandan16:38

      Oh, certainly. Pe- you know, people who, um... Look, I didn't have any options, okay? There was no plan B.

   9. NKNikhil Kamath16:45

      Mm.

   10. RARajan Anandan16:46

       When I left, I had a one-way ticket and a couple of hundred dollars in my pocket.

   11. NKNikhil Kamath16:49

       Mm-hmm.

   12. RARajan Anandan16:50

       Fortunately, I had financial aid from MIT-

   13. NKNikhil Kamath16:52

       Mm-hmm

   14. RARajan Anandan16:53

       ... and there was no going back.

   15. NKNikhil Kamath16:55

       So do you have a predisposition that you will not invest in companies where the, where the person you're investing comes from an affluent family and hasn't had-

   16. RARajan Anandan17:05

       I don't have a-

   17. NKNikhil Kamath17:05

       ... ups and downs in life?

   18. RARajan Anandan17:05

       No, I don't have a predisposition, but, but... So for instance, you know, there are founders we have invested in, right, who come from very well-to-do families.

   19. NKNikhil Kamath17:15

       But what are the patients?

   20. RARajan Anandan17:15

       But it just so happens... Yeah, but it- but that is not the... India, that is not the norm in India.

   21. NKNikhil Kamath17:20

       Mm.

   22. RARajan Anandan17:20

       Right? If you look at, uh, look at India, you look at... I mean, we just happened to, you know-

   23. NKNikhil Kamath17:26

       Mm-hmm.

   24. RARajan Anandan17:27

       If you look at the IIT grads or you look at... You know, they tend to be not from that, that, uh-

   25. NKNikhil Kamath17:33

       That mold

   26. RARajan Anandan17:33

       ... That, that, yeah, that, uh, that, uh, TG, if I can call it that, right?

   27. NKNikhil Kamath17:36

       Would you extrapolate-

   28. RARajan Anandan17:37

       Target

   29. NKNikhil Kamath17:37

       ... and say out of 100 companies you invest in, how many?

   30. RARajan Anandan17:41

       I, I don't know. Actually, I shouldn't comment. I don't know the- I honestly don't know the percentage, but it's not... Yeah, it, it'll be in the 10, 20, that kind of percentage, at most.
8. 19:04 – 20:41

   How Rajan ventured into VC World

   1. SPSpeaker19:04

      then I ended up working for Michael Dell.

   2. SPSpeaker19:06

      Mm.

   3. SPSpeaker19:06

      I ended up in India because of that. Then moved to Microsoft, ran Microsoft India for a couple of years, and then spent a long time at Google, leading Google India and Southeast Asia. For a long time, I was a very active angel investor, which is how I know Karthik-

   4. SPSpeaker19:19

      Mm

   5. SPSpeaker19:19

      ... from very early. So when I moved, I moved in 2005 and made my first angel investment in India. I was, I'd made a... You know, I was angel investing in the US but made my first angel investment in 2006.

   6. SPSpeaker19:28

      Mm-hmm.

   7. SPSpeaker19:29

      Uh, joined Indian Angel Network. I think we saw one company once a quarter.

   8. SPSpeaker19:34

      Mm-hmm.

   9. SPSpeaker19:34

      That was sort of the rhythm.

   10. SPSpeaker19:35

       Mm-hmm.

   11. SPSpeaker19:35

       That was what was India was, right?

   12. SPSpeaker19:38

       Mm-hmm.

   13. SPSpeaker19:39

       Um, and then I spent, uh... I joined Peak XV, which was then, you know, we rebranded. We used to be called Sequoia Capital India, Southeast Asia, almost four years ago. So, so what I do now is I, uh, I focus on very early-stage companies, so seed stage, so if you're raising three to four million or less.

   14. SPSpeaker19:55

       Mm-hmm.

   15. SPSpeaker19:55

       And we launched a program called Surge, where I spend most of my time, which we've had the great pleasure, great fortune [laughing] of having Nithin come and talk to our founders many times.

   16. SPSpeaker20:05

       Mm-hmm.

   17. SPSpeaker20:05

       Yeah, so that's what I do.

   18. SPSpeaker20:06

       Uh, how many companies, size of the fund today?

   19. SPSpeaker20:09

       So, so Peak XV, uh, has about nine billion under management. Of that, two and a half billion is dry powder. Uh-

   20. SPSpeaker20:17

       What is dry powder?

   21. SPSpeaker20:17

       Dry powder is we haven't invested.

   22. SPSpeaker20:19

       Okay.

   23. SPSpeaker20:19

       So essentially, last year in June, uh, 2022 June, we raised two point eight billion.

   24. SPSpeaker20:24

       Mm-hmm.

   25. SPSpeaker20:25

       Uh, so of that, three hundred million we've invested, so we have two point five billion. That, dry powder is a term in our industry-

   26. SPSpeaker20:30

       Mm

   27. SPSpeaker20:30

       ... where that's investable capital, right? That we'll invest over the next several years. Uh, Peak XV has four hundred plus active companies.

   28. SPSpeaker20:38

       Okay.

   29. NKNikhil Kamath20:40

       Yeah, so Prashanth,

9. 20:41 – 24:03

   The Dynamic life of Prashant

   1. NKNikhil Kamath20:41

      I don't know, should I preface your introduction? [laughing]

   2. SPSpeaker20:43

      [laughing] Please.

   3. NKNikhil Kamath20:44

      Make it look a little more colorful. [laughing]

   4. SPSpeaker20:47

      [laughing] Go ahead.

   5. NKNikhil Kamath20:48

      So Prashanth and, uh, I are really close friends who, we probably do two, three dinners in a month, travel once in three, four months, and there's probably a dozen businesses we've invested in together, a charity b- a charitable thing called YIPP. Uh, but we actively engage a lot, and, uh, I think we speak on the phone very often, and we figure out what to do next and stuff like that. And he's always been a great source of advice and, uh, somebody I've reached out to for, uh, many, many different things. I think not just me, but he's very close to Nithin as well. [claps] Uh, the one thing about Prashanth that no one knows is outside of Accel and what he does professionally, I have not seen a more relentless man who has so much more energy than I do at my age, who's doing a hundred different things every day. Like, if you call him up at five in the evening, he will be talking about garbage and sanitation in Bangalore. If it's COVID, he'll be trying to import oxygen concentrators from somewhere. Uh, this is him-

   6. SPSpeaker21:59

      Sure

   7. NKNikhil Kamath21:59

      ... like, perpetually. This is the day-to-day in his life. So with that, maybe- [laughing]

   8. SPSpeaker22:04

      Anyway, I'll [laughing] I keep myself busy-

   9. NKNikhil Kamath22:09

      [laughing]

   10. SPSpeaker22:09

       ... that's for sure. Uh-

   11. NKNikhil Kamath22:10

       I think here, everyone but Rajan is Bangalorean. You went to St. Joseph's, right?

   12. KRKarthik Reddy22:14

       No, no, I'm a Chennai boy.

   13. NKNikhil Kamath22:16

       Oh, you didn't go to school in Bangalore?

   14. KRKarthik Reddy22:18

       Only, I am, I am Bangalore.

   15. SPSpeaker22:19

       But in general, in the VC ecosystem-

   16. NKNikhil Kamath22:21

       Yeah

   17. SPSpeaker22:21

       ... you don't find a lot of, uh, Bangalore folks. But anyway, um, went to, uh, engineering, the same college [chuckles] as Nithin here in Bangalore, and, uh, um, went to the US, uh, immediately after engineering. So-

   18. SPSpeaker22:35

       What did you do before engineering? What did your parents do?

   19. SPSpeaker22:38

       My dad was, uh, started his, uh, uh, career in the public sector, so he worked at HMT.

   20. SPSpeaker22:46

       Must have been clocks back then.

   21. SPSpeaker22:46

       Clocks, and, I mean, he works, he worked in the foundry. But, uh, uh, he was my first exposure to entrepreneurship.

   22. SPSpeaker22:54

       Mm.

   23. SPSpeaker22:54

       So he, he quit his job in the public sector, and, uh, in those days, you had, uh, this whole, uh, public sector trying to, uh, create, uh, smaller, uh, supply chains for themselves. So ITI created this, uh, program to, uh, have s- uh, different entrepreneurs come and supply, uh, parts to them. So he got one of those, uh, opportunities and, uh, started a small-scale industry. Uh, so I, so when I was, uh, maybe in, uh, sixth or seventh grade, I remember, uh, him trying to get his first ten lakh rupees or five lakh, I don't remember what it was, to start the industry, right? And, you know, it, it was, in those days, there was no venture, so it was, like, [chuckles] really a different thing to, to be a startup entrepreneur. But it was a very different India-

   24. SPSpeaker23:53

       Mm-hmm

   25. SPSpeaker23:53

       ... then, right? So entrepreneurs-- so I have some little bit of memories of, uh, what it is to be an entrepreneur in the India of that era. Very different.

10. 24:03 – 28:28

    Prashanth’s Leap into the VC Career

    1. SPSpeaker24:03

       When did you meet Shubhrato again? Which year?

    2. SPSpeaker24:06

       Uh, when did I meet Shubhrato? Was '88.

    3. SPSpeaker24:09

       Okay.

    4. SPSpeaker24:10

       '88. Uh-

    5. SPSpeaker24:11

       And then?

    6. SPSpeaker24:12

       Uh, then in 2004-

    7. SPSpeaker24:14

       Mm-hmm

    8. SPSpeaker24:14

       ... so Shubhrato exits Tavant.

    9. NKNikhil Kamath24:17

       ... mm-hmm

    10. PPPrashanth Prakash24:17

        -right? I exit Netcraft.

    11. NKNikhil Kamath24:19

        Mm-hmm.

    12. PPPrashanth Prakash24:19

        Right. Both of us are in Bangalore. We, we tried to figure out what to do next, and that's where we start Erasmic.

    13. NKNikhil Kamath24:27

        That was two thousand?

    14. PPPrashanth Prakash24:29

        Uh, '04.

    15. NKNikhil Kamath24:30

        Would you call that a venture capital firm?

    16. PPPrashanth Prakash24:32

        No, we were an incubator.

    17. NKNikhil Kamath24:33

        Okay.

    18. PPPrashanth Prakash24:33

        We were an incubator.

    19. NKNikhil Kamath24:34

        Back then, there was no venture capital?

    20. PPPrashanth Prakash24:36

        There, there was... No, no, there was one round of venture.

    21. NKNikhil Kamath24:38

        Yeah?

    22. PPPrashanth Prakash24:38

        No, I raised venture for Netcraft-

    23. NKNikhil Kamath24:40

        Okay

    24. PPPrashanth Prakash24:40

        ... startup.

    25. NKNikhil Kamath24:41

        You and Subroto started the-

    26. PPPrashanth Prakash24:42

        Yeah

    27. NKNikhil Kamath24:42

        -Erasmus?

    28. PPPrashanth Prakash24:43

        Yeah, E- Erasmic.

    29. NKNikhil Kamath24:44

        Erasmic, and then?

    30. PPPrashanth Prakash24:45

        Okay, uh, Erasmic, and then in 2006, along with, with, with Google, started a fund.
11. 28:28 – 30:36

    Rajan's Angel Investing Hacks

    1. KRKarthik Reddy28:28

       No, I have actually two questions.

    2. PPPrashanth Prakash28:29

       Mm.

    3. KRKarthik Reddy28:29

       Yeah.

    4. PPPrashanth Prakash28:30

       Yeah, go on.

    5. KRKarthik Reddy28:30

       So one, Rajan, with you: You've invested in over two hundred companies?

    6. RARajan Anandan28:34

       As an angel-

    7. KRKarthik Reddy28:35

       Yeah

    8. RARajan Anandan28:35

       ... yeah, several hundred, yeah.

    9. KRKarthik Reddy28:37

       How do you... I mean, how do you keep a tab? As in, like, how does it work?

    10. RARajan Anandan28:41

        So I think, look, when I was an angel, uh, I mean, I was running, you know, I had an operating job.

    11. KRKarthik Reddy28:46

        Right.

    12. RARajan Anandan28:47

        Um, so, you know, I was, I was sort of, I had this simple thing, which was I was on call.

    13. KRKarthik Reddy28:53

        Mm-hmm.

    14. RARajan Anandan28:53

        Anytime any founder called me, I would always help them-

    15. KRKarthik Reddy28:56

        No, I know-

    16. RARajan Anandan28:56

        ... or whatever

    17. KRKarthik Reddy28:56

        ... I heard that, but how, how were you giving time?

    18. RARajan Anandan28:58

        No, so no, meaning... No, so only when they call me, I would make time. I mean, look, it was twenty-four/seven. Also, I-

    19. NKNikhil Kamath29:03

        Are you giving time to all the angel companies?

    20. RARajan Anandan29:05

        I, uh-

    21. NKNikhil Kamath29:06

        Then why are you expecting him to? [chuckles]

    22. KRKarthik Reddy29:06

        No, no, but I'm, I'm trying, trying to find out how he's doing it.

    23. RARajan Anandan29:09

        No, but the thing is, most, most companies don't call.

    24. KRKarthik Reddy29:11

        Oh, okay.

    25. RARajan Anandan29:12

        Right? So it's not like I'm calling to say, "Hey, what happened last quarter?"

    26. KRKarthik Reddy29:14

        Yeah.

    27. RARajan Anandan29:14

        "Or what happened last month?"

    28. NKNikhil Kamath29:15

        Oh, you, you never do that, do you?

    29. RARajan Anandan29:16

        No, no, no. No, I mean, obviously-

    30. NKNikhil Kamath29:17

        No, because you, you actively also exit these companies. How do you make those decisions if you're not... You know?
12. 30:36 – 32:16

    VC Returns Revealed

    1. NKNikhil Kamath30:36

       which take money from large family offices, sovereign funds, PEs-

    2. RARajan Anandan30:42

       Yes

    3. NKNikhil Kamath30:42

       ... different kind of people, generally outside of India, bring the money into India. What kind of a return are you forecasting for them when you take the money?

    4. PPPrashanth Prakash30:51

       They all are in public markets through various other, uh, you know, uh, funds, and they have been investing in asset classes like real estate and some of these others, again, over, over the vintage. I think venture is new for a lot of them. So they have seen venture in China, they've seen venture in the US. I think India is still experimental-

    5. NKNikhil Kamath31:18

       Mm-hmm

    6. PPPrashanth Prakash31:19

       ... or has been experimental. Now they're getting to the stage where they want to see returns from India. They want to see, uh, you know, India starting to-

    7. NKNikhil Kamath31:28

       Mm

    8. PPPrashanth Prakash31:28

       ... deliver the kind of returns they expect from these other geographies. So-

    9. NKNikhil Kamath31:31

       But what is the rate of return that you're... You're going to a LP and pitching, you're going to a limited partner and pitching your fund to take their funds. What are you seeing? Will you make fifteen percent a year, ten percent a year, twenty percent a year?

    10. RARajan Anandan31:46

        Actually, you know what? I, I-

    11. PPPrashanth Prakash31:47

        No, I think compounded, they would like to see that some- something in the neighborhood of-

    12. RARajan Anandan31:50

        Yeah, north of twenty percent-

    13. PPPrashanth Prakash31:52

        Twenty, twenty percent

    14. RARajan Anandan31:52

        ... net dollar IRR is the expectation.

    15. PPPrashanth Prakash31:54

        Net, net IRR.

    16. NKNikhil Kamath31:55

        Okay.

    17. PPPrashanth Prakash31:55

        After, after fees.

    18. RARajan Anandan31:56

        Net. After the carries, after fees.

    19. PPPrashanth Prakash31:57

        After the fees.

    20. RARajan Anandan31:57

        Carries is basically what-

    21. PPPrashanth Prakash31:58

        Yeah

    22. RARajan Anandan31:59

        ... of the gains-

    23. NKNikhil Kamath32:00

        I know

    24. RARajan Anandan32:00

        ... the, the, no, I'm, for the-

    25. NKNikhil Kamath32:02

        No. No, no, but-

    26. RARajan Anandan32:02

        audience.

    27. NKNikhil Kamath32:03

        Is that the same? Uh, I think the first part of the question, is that the same for all three of you?

    28. RARajan Anandan32:07

        The LP, I mean, because, I mean, I think all of us-

    29. KRKarthik Reddy32:09

        Approximately, yeah

    30. RARajan Anandan32:09

        ... raised from the same set of limited partners.
13. 32:16 – 33:27

    Hunt for Limited Partners (LPs)

    1. NKNikhil Kamath32:16

       how do you first find these limited partners?

    2. KRKarthik Reddy32:18

       I mean, with all due respect to their efforts, I think they are riding a little on their franchise relationships. So there are American brands and Chinese brands who have also done a lot of work. [chuckles]

    3. PPPrashanth Prakash32:27

       So you're saying you don't work for our [chuckles] fundraising?

    4. KRKarthik Reddy32:30

       They've done a lot of work.

    5. PPPrashanth Prakash32:30

       He has to work for our fundraising.

    6. RARajan Anandan32:32

       No, no.

    7. PPPrashanth Prakash32:32

       Which is, no, no, which is a fact.

    8. KRKarthik Reddy32:33

       There's a little of a track record. There's a little of a track record to rely on.

    9. PPPrashanth Prakash32:34

       No, no, also, it's a fact that without a, a parent, uh, you know, like overall thing, like how we all got started, it's very different.

    10. KRKarthik Reddy32:41

        We try to ride on their sort of coattails-

    11. NKNikhil Kamath32:43

        How do you do that?

    12. KRKarthik Reddy32:43

        ... in the sense that, no, they've, A, they're, they're talking to certain set of people, so people are exposed to India.

    13. NKNikhil Kamath32:49

        Right.

    14. KRKarthik Reddy32:49

        So they come asking.

    15. NKNikhil Kamath32:51

        Right.

    16. KRKarthik Reddy32:51

        They come and visit them.

    17. NKNikhil Kamath32:52

        Right.

    18. KRKarthik Reddy32:53

        And they say, "Hey, tell us who else is emerging?"

    19. NKNikhil Kamath32:55

        Right.

    20. KRKarthik Reddy32:56

        So Prashant will be kind enough to make three introductions and say, "You should meet these Blume guys."

    21. NKNikhil Kamath32:59

        But I'm saying referrals play a huge part in this.

    22. PPPrashanth Prakash33:02

        Huge.

    23. RARajan Anandan33:02

        Absolutely.

    24. KRKarthik Reddy33:02

        Huge.

    25. RARajan Anandan33:02

        Yeah.

    26. KRKarthik Reddy33:03

        It's about trust.

    27. NKNikhil Kamath33:04

        Yeah.

    28. KRKarthik Reddy33:05

        And both of you know this better than anyone else. You manage people's, or you basically handle money. Money is o- is more about... I would actually index trust more than returns.

    29. NKNikhil Kamath33:15

        Mm.

    30. PPPrashanth Prakash33:16

        See, because for a lot of them, India is something they're kind of starting-
14. 33:27 – 35:33

    Indian Startup Scandals & FTX

    1. NKNikhil Kamath33:27

       around leakages in compliance and governance in India recently-

    2. RARajan Anandan33:31

       Yeah

    3. NKNikhil Kamath33:32

       ... the trust that all of you worked so hard to build over the last ten years, twenty years, I'm talking about that trust which went from zero to eighty-

    4. RARajan Anandan33:42

       Yeah

    5. NKNikhil Kamath33:42

       ... has come down to what number now?

    6. RARajan Anandan33:43

       No, I... Look, I don't, I don't, honestly, I don't know where the trust has come down. FTX-

    7. NKNikhil Kamath33:47

       Uh.

    8. RARajan Anandan33:48

       ... okay, is like ten times. You look at FTX-

    9. NKNikhil Kamath33:51

       Mm-hmm

    10. RARajan Anandan33:52

        ... you look at, it, this doesn't happen only in India, right? I mean, I know it's happened to us, and obviously we should collectively-

    11. NKNikhil Kamath33:58

        Mm-hmm

    12. RARajan Anandan33:59

        ... do a lot more to make sure that we mature the ecosystem the way, way it used to be. But if you're a global investor, FTX was ten billion, right? Total value lost was ten billion, not, not what the venture capitalists lost.

    13. NKNikhil Kamath34:10

        Right.

    14. RARajan Anandan34:11

        We are yet to see one... And that's one of several that have happened.

    15. NKNikhil Kamath34:14

        Mm-hmm.

    16. RARajan Anandan34:15

        So it's not a, you know, and because these LPs have a global view-

    17. NKNikhil Kamath34:20

        Mm-hmm

    18. RARajan Anandan34:20

        ... right, they invest in US funds, China funds, India funds. So what they're- you know, the questions are really, "Look, why is this happening?

    19. NKNikhil Kamath34:27

        Mm-hmm.

    20. RARajan Anandan34:27

        What is, you know, what are, what is the ecosystem doing about it?"

    21. NKNikhil Kamath34:30

        No, that's a fair point.

    22. RARajan Anandan34:31

        Right? And, and so, so I think it's not a... Because we are in it, of course, it's something that we need to address. There's no question about that, right?

    23. NKNikhil Kamath34:38

        You're saying it's not an India problem, it's a global problem.

    24. RARajan Anandan34:40

        It's absolutely not, right?

    25. NKNikhil Kamath34:40

        Yeah, and I agree with that.

    26. RARajan Anandan34:41

        I mean, look at the data. The data shows, right?

    27. NKNikhil Kamath34:42

        Yeah, yeah.

    28. RARajan Anandan34:43

        I mean, you have to keep in mind that, you know, because we are here in our ecosystem, right, we, we see this huge correction, but this is a global phenomenon. Public tech stocks outside of the FAANG are down between sixty and eighty percent. Zoom's down ninety percent. It's one of the greatest companies. Maybe it's up now, but it was down ninety percent, right? So similarly, if you look at private tech valuations in the US, they have corrected much more-

    29. NKNikhil Kamath35:11

        Mm

    30. RARajan Anandan35:12

        ... than they have here, right?
15. 35:33 – 37:48

    Peek into the LP's Vision

    1. RARajan Anandan35:33

       I mean-

    2. PPPrashanth Prakash35:33

       So, so I had like-

    3. NKNikhil Kamath35:34

       Mm

    4. PPPrashanth Prakash35:34

       ... just to add on to the question. So these LPs, I mean, the investors, are sharp, right? As in, they made money. So, so my question is, are they really investing in you, the fund manager, or are they investing in India? I mean, what are they investing in? I mean, they, they already are sold to the India opportunity, and then they're se- selecting a fund manager, or-

    5. KRKarthik Reddy35:54

       Yeah, it's a, it's a sequential decision, I feel. Whenever I'm faced with it, and I'm on the receiving end a lot, is, um, you don't get to the second part unless they're sold on India.

    6. PPPrashanth Prakash36:03

       Right.

    7. KRKarthik Reddy36:04

       And within India, if they've already allocated, the big question is: Do I need to allocate more?

    8. PPPrashanth Prakash36:09

       Right.

    9. KRKarthik Reddy36:09

       Or am I, as Prashant said, "Am I still experimenting with the market? I have a check with Accel, I have a check with another fund. I'm okay for now.

    10. PPPrashanth Prakash36:17

        Right.

    11. KRKarthik Reddy36:17

        Why do I need to add Blume?"

    12. NKNikhil Kamath36:18

        ... got it.

    13. KRKarthik Reddy36:19

        Right? So for them, it's about until, and with, I mean, no pressure on Prashanth, but unless he delivers in spades, they don't need to necessarily add me.

    14. NKNikhil Kamath36:30

        Right.

    15. KRKarthik Reddy36:30

        Right? And so the- there's a sequencing, and then within that also there is late stage, early stage. The guy might not like my strategy, right? And so it's not, it's not about like investing in a manager, but they have to actually relate to the strategy.

    16. NKNikhil Kamath36:46

        Right.

    17. KRKarthik Reddy36:46

        I know $50 million check writers will say, "You guys play too early."

    18. NKNikhil Kamath36:49

        Ah.

    19. KRKarthik Reddy36:50

        "I don't like how early you play."

    20. NKNikhil Kamath36:52

        And then-

    21. KRKarthik Reddy36:52

        "You guys do too much work for too, too little [chuckles] money."

    22. RARajan Anandan36:54

        Yeah, so they have to, they have to believe in India first.

    23. NKNikhil Kamath36:57

        Right.

    24. KRKarthik Reddy36:57

        Yeah, goes without-

    25. RARajan Anandan36:57

        And then with... Once you decide that, then you decide, okay, who are the best fund managers that you want to invest in that, in the market?

    26. NKNithin Kamath37:04

        And then they look at the spectrum of early stage-

    27. RARajan Anandan37:07

        Early stage, growth stage

    28. NKNithin Kamath37:08

        ... late stage growth.

    29. RARajan Anandan37:09

        Private equity.

    30. NKNikhil Kamath37:09

        And how do they benchmark you? As in, what do they benchmark you against? Just-
16. 37:48 – 38:44

    The Tax Arbitrage Angle

    1. NKNikhil Kamath37:48

       tax arbitrage there? If you're global money coming into India, do you pay lesser tax than Indian money investing in India?

    2. KRKarthik Reddy37:54

       Yeah. Actually, to your point, um, there isn't a tax arbitrage.

    3. RARajan Anandan37:58

       Yeah.

    4. KRKarthik Reddy37:59

       Everybody pays the same taxes.

    5. RARajan Anandan38:01

       Yeah.

    6. KRKarthik Reddy38:01

       Um, it's only certain global sovereign funds which have a double tax treaty equivalent, so they don't have to pay the taxes, but everybody else has to pay.

    7. RARajan Anandan38:09

       So for instance, let's say we take, you know, as Peak XV, we've had 19 IPOs, right?

    8. NKNikhil Kamath38:14

       Right.

    9. RARajan Anandan38:14

       Uh, domestic market IPO is the same-

    10. NKNikhil Kamath38:16

        Mm

    11. RARajan Anandan38:16

        ... whether it's a domestic AIF, whether it's us, we pay tax. There's no difference.

    12. KRKarthik Reddy38:21

        So the only reason they pool outside the country is because they don't want to pay the tax themselves in India.

    13. NKNikhil Kamath38:27

        Mm.

    14. KRKarthik Reddy38:28

        So we deduct and send the money, if you're an international investor. So there's no tax filings for them in India.

    15. NKNikhil Kamath38:33

        Right.

    16. KRKarthik Reddy38:33

        But the tax treatment is the same.

    17. NKNikhil Kamath38:35

        But that's a good segue into the first topic when we are talking about venture capital. I think we should distinguish what is venture

17. 38:44 – 45:27

    Angel Investing Unraveled

    1. NKNikhil Kamath38:44

       capital, what is PE, what is a angel fund?

    2. KRKarthik Reddy38:47

       I keep joking, the only person you're responsible when you're angel investing is your spouse.

    3. NKNikhil Kamath38:51

       Mm.

    4. KRKarthik Reddy38:51

       Right? So there's no institutional responsibility.

    5. NKNikhil Kamath38:54

       Mm-hmm.

    6. KRKarthik Reddy38:54

       It's your money.

    7. NKNikhil Kamath38:55

       Mm-hmm.

    8. KRKarthik Reddy38:56

       When I was doing research around starting Blume, the US had 300,000 registered angels. So I feel like 95% of them are like, um, part-time, pastime.

    9. NKNikhil Kamath39:09

       Mm-hmm.

    10. KRKarthik Reddy39:10

        So they have made money as entrepreneurs or whatever it may be, or as professionals, and they like to help out someone. So it could be their colleagues, friends, children, whoever. And that's also angel investing. Um, then they join networks, they put a little bit. About 5% of them become sort of professional angels. They actually think they can make money off this.

    11. NKNikhil Kamath39:31

        What is the quantum which you would say is angel? Like, if I'm investing 10 lakh rupees in a company?

    12. KRKarthik Reddy39:36

        You know, sadly, in India now, people are raising 1 lakh through various mechanisms.

    13. NKNikhil Kamath39:41

        Mm-hmm.

    14. KRKarthik Reddy39:41

        I find it super dangerous.

    15. NKNikhil Kamath39:43

        So what is the upper limit of angel?

    16. KRKarthik Reddy39:47

        I've seen people put 1, 2 crores.

    17. RARajan Anandan39:48

        1 to 2 crores.

    18. KRKarthik Reddy39:49

        Yeah.

    19. NKNikhil Kamath39:50

        So let's say that is the peak that we would categorize as angel investing, from zero to 1 to 2 crores.

    20. KRKarthik Reddy39:56

        I think the characteristic of the person putting the money is more important.

    21. NKNikhil Kamath39:59

        Mm-hmm. Would you say-

    22. KRKarthik Reddy40:00

        When we started, angel groups used to take 5 lakhs, 10 lakhs.

    23. NKNikhil Kamath40:03

        Mm-hmm.

    24. KRKarthik Reddy40:03

        Now it's got so democratized that people are actually hunting tier three cities and getting 1, 2 lakhs in a syndicate of 2, 3 crores. It's good and bad. You're diversifying somebody's capital at that stage, but I don't know what... I don't think they know what the hell they're investing in.

    25. NKNikhil Kamath40:17

        So I have many friends who do a lot of angel investing, like hundreds of companies, tiny check sizes. Would we all say that the odds of making a return net-net is least in angel investing?

    26. KRKarthik Reddy40:30

        You said easiest?

    27. NKNikhil Kamath40:31

        Least.

    28. RARajan Anandan40:32

        Least.

    29. KRKarthik Reddy40:32

        No, not at all.

    30. NKNikhil Kamath40:33

        Hardest.
18. 45:27 – 46:36

    Decoding Venture Capital

    1. RARajan Anandan45:27

       Yeah, so angel investors, you're investing your own capital-

    2. NKNikhil Kamath45:29

       Mm-hmm

    3. RARajan Anandan45:30

       ... in a very, very early-stage company. Usually, you're just starting up, you pre-launch, whatever, right? Venture capital is basically institutional capital, where these are organized fund managers in a firm, so let's say Peak XV or Accel or Blume, where you raise capital from others.

    4. NKNikhil Kamath45:46

       About what number would you start considering yourself a venture capital firm?

    5. RARajan Anandan45:50

       So I would say a growth fund would invest maybe up to 50 million, so from a few crores per investment-

    6. NKNikhil Kamath45:57

       Mm-hmm

    7. RARajan Anandan45:57

       ... up through 50 million, so-

    8. NKNikhil Kamath45:59

       Fund size, you're saying 50 million?

    9. RARajan Anandan46:01

       No, no, no, I'm talking about per investment.

    10. NKNikhil Kamath46:02

        No, I'm talking fund size.

    11. RARajan Anandan46:03

        No, so fund sizes can vary from $20 million to, I mean, our last set of funds were 2.85 billion.

    12. NKNikhil Kamath46:08

        20 million is the bottom level for-

    13. PPPrashanth Prakash46:10

        10 million.

    14. RARajan Anandan46:11

        India, what is it?

    15. KRKarthik Reddy46:11

        So I think in, in-

    16. RARajan Anandan46:12

        Fund

    17. KRKarthik Reddy46:12

        ... India now, micro VCs are as small as 5 to 10.

    18. RARajan Anandan46:15

        Okay.

    19. KRKarthik Reddy46:15

        But that's because a first-time manager is raising from individuals-

    20. RARajan Anandan46:18

        Mm-hmm

    21. KRKarthik Reddy46:19

        ... not from institutions.

    22. RARajan Anandan46:20

        Mm-hmm.

    23. KRKarthik Reddy46:20

        So he's actually raising a mega angel round-

    24. NKNikhil Kamath46:23

        Mm-hmm

    25. KRKarthik Reddy46:23

        ... and calling it a fund.

    26. NKNikhil Kamath46:24

        And is that through a Cat 1 or 2 AIF?

    27. KRKarthik Reddy46:27

        That's correct.

    28. NKNikhil Kamath46:28

        Mm.

    29. KRKarthik Reddy46:28

        Cat 1.

    30. NKNikhil Kamath46:29

        Cat 1, AIF.
19. 46:36 – 52:14

    AIF & its categories

    1. NKNikhil Kamath46:36

       What is Cat 1, Cat 2, Cat 3? Who can take that, like, very quickly?

    2. KRKarthik Reddy46:39

       The government didn't know how to regulate all of this, so in '96 they started something called Domestic Venture Capital Fund Regulations. Everybody was classified under that, whether you were private equity, real estate, or venture capital. And they realized that that was a crappy way to deal with the complexity of these many asset classes, because now you're asking us to break it down. The government hadn't figured that they needed to be broken down. So 2012, they revised it and called these regulations AIF Regulations, Alternative Investment Fund Regulations. So basically, now they can regulate us, basis what kind of risk we take. So Cat 1 cannot invest in certain securities like debt, et cetera, public markets. Cat 2 can, and Cat 3 is only public markets.

    3. NKNikhil Kamath47:18

       So who is typically, uh, which category-

    4. KRKarthik Reddy47:19

       Venture capital is Cat 1 and 2. Private equity is Cat 2.

    5. NKNikhil Kamath47:22

       How do they decide between 1 and 2?

    6. KRKarthik Reddy47:24

       Basis what securities you can buy.

    7. NKNikhil Kamath47:26

       Hmm.

    8. KRKarthik Reddy47:27

       So if you, if you're only doing equity investing-

    9. NKNikhil Kamath47:29

       Mm-hmm

    10. KRKarthik Reddy47:29

        ... and you don't touch-

    11. NKNikhil Kamath47:30

        Private equity.

    12. KRKarthik Reddy47:31

        Private equity investing, and you do not touch, uh, the, the public markets and debt securities, then you have, you can be a Cat 1.

    13. NKNikhil Kamath47:38

        Perfect. Back to venture capital.

    14. RARajan Anandan47:40

        Yeah, so venture capital is, so think of it as this is institutional capital, so it's organized teams. It's not an individual's capital.

    15. NKNikhil Kamath47:47

        So it could be as low as 5 to 10 million?

    16. RARajan Anandan47:49

        Yeah.

    17. NKNikhil Kamath47:49

        All the way up to billions.

    18. RARajan Anandan47:50

        So a small fund could be, small fund could be 100 crores.

    19. NKNikhil Kamath47:53

        Mm-hmm.

    20. RARajan Anandan47:54

        Uh, you know, large funds could be 25,000 crores-

    21. NKNikhil Kamath47:58

        Mm-hmm

    22. RARajan Anandan47:58

        ... 30,000 crores, 50,000 crores.

    23. NKNikhil Kamath47:59

        Mm-hmm.

    24. RARajan Anandan48:00

        Uh, in the US, the large funds are... I mean, you know, the largest fund ever raised-

    25. NKNikhil Kamath48:03

        Mm

    26. RARajan Anandan48:03

        ... was the Vision Fund, which is $100 billion-

    27. NKNikhil Kamath48:05

        Mm

    28. RARajan Anandan48:05

        ... from SoftBank, right? Uh, although that was probably a hybrid venture plus growth, you know, pseudo private equity. So the way, simplest way to think about it is, you know, venture capital is organized institutional capital that helps you get off the ground.

    29. NKNikhil Kamath48:20

        Mm-hmm.

    30. RARajan Anandan48:20

        So it could be the, for a now individual company, could be the 2 to 3 crores that you need to get your company off the ground.... to funding your next round. So there's different stages. Seed, we can get back to that. Seed, Series A, Series B, Series C, up through a company that gets to a level of profitability. And then either, you know, there's a mix. Term will be interchanged between growth capital and private equity. We'll take on from there. But private equity really then is once you're a, an established, mature company-
20. 52:14 – 53:04

    Dry Powder in Detail

    1. KRKarthik Reddy52:14

       you know, you had said dry powder earlier, right? As in, the term was-

    2. RARajan Anandan52:18

       This is the term that's used-

    3. KRKarthik Reddy52:18

       Yeah

    4. RARajan Anandan52:19

       ... internally in the industry.

    5. KRKarthik Reddy52:19

       Correct, yes. Now, there, there's this whole debate running, right? As in, how much of this dry powder do you have access to? I mean, how much is the money that's lying with you, and how much is that you can call for? So if Sequoia, I mean, or Peak XV, you have $2 billion of dry powder. Is that $2 billion sitting with Sec- with Peak XV?

    6. RARajan Anandan52:38

       No, it's commit- it's committed-

    7. KRKarthik Reddy52:39

       Right

    8. RARajan Anandan52:39

       ... and you call for it. You don't wanna, you don't wanna call it all and then invest over many years because it impacts your IRR.

    9. KRKarthik Reddy52:45

       The IRR counter starts the minute the money is wired into your account.

    10. RARajan Anandan52:47

        The minute the money gets to you.

    11. KRKarthik Reddy52:48

        Oh, so you... Okay. I, okay, that makes-

    12. RARajan Anandan52:50

        So you never touch that money.

    13. KRKarthik Reddy52:51

        Right.

    14. RARajan Anandan52:51

        That just better stays there.

    15. KRKarthik Reddy52:53

        Right, but what if the person backs out?

    16. RARajan Anandan52:55

        So Nithin, the institutional investors, once they commit, they don't.

    17. KRKarthik Reddy52:58

        Reputationally, they have a even bigger-

    18. RARajan Anandan53:00

        They don't, they don't back out

    19. KRKarthik Reddy53:00

        ... reputation to protect than we do.

    20. NKNikhil Kamath53:01

        Another interesting question: How, what

21. 53:04 – 53:58

    Breakdown of LPs

    1. NKNikhil Kamath53:04

       proportion of your limited partners, where venture capital is getting their money from, are institutions, and what portion are family offices and stuff like that?

    2. KRKarthik Reddy53:14

       See, in our case-

    3. RARajan Anandan53:15

       It varies by firm

    4. KRKarthik Reddy53:15

       ... it's like, uh, 90% is institutions.

    5. NKNikhil Kamath53:18

       Mostly?

    6. RARajan Anandan53:19

       Ours, ours is 100. We don't have any family office.

    7. NKNikhil Kamath53:22

       Right.

    8. RARajan Anandan53:22

       We don't have any HNIs. We don't have any corporates.

    9. NKNikhil Kamath53:24

       Same?

    10. KRKarthik Reddy53:24

        I would say 50/50.

    11. NKNikhil Kamath53:25

        Why is that different? Because you're raising money from India, and they're bringing from outside?

    12. KRKarthik Reddy53:30

        They're still not considered good enough for all those institutions. [laughs]

    13. NKNikhil Kamath53:33

        So let's say with scale, venture becomes more of an institutional thing.

    14. RARajan Anandan53:37

        Institutional, yeah. You raise institutions.

    15. KRKarthik Reddy53:38

        Yeah, because you can't raise that kind of capital from small investors. That said, I remember having a chat with Tiger as late as 2014, '15, and they would still reserve a little for people who backed them in 1991.

    16. NKNikhil Kamath53:52

        Mm.

    17. KRKarthik Reddy53:52

        No, they all have a small-

    18. RARajan Anandan53:53

        Small corpus

    19. KRKarthik Reddy53:54

        ... allocation thing.

    20. NKNikhil Kamath53:55

        Makes sense.

    21. KRKarthik Reddy53:55

        They say, "You're a loyal investor, I'll give you the right to keep investing."

    22. NKNikhil Kamath53:57

        Makes sense.

22. 53:58 – 56:08

    Fund Cycle & Incentives

    1. RARajan Anandan53:58

       The fund cycle is 10 to 12 years. But, but most term sheets are typically five to seven years, isn't it? I think seven years-

    2. KRKarthik Reddy54:05

       From an exit requirement?

    3. RARajan Anandan54:07

       Yeah.

    4. KRKarthik Reddy54:07

       But nobody, we don't really exercise that.

    5. RARajan Anandan54:09

       Yes.

    6. KRKarthik Reddy54:09

       But you, you will have some powers, right, as in-

    7. NKNikhil Kamath54:12

       Yeah, there is a, there is a-

    8. KRKarthik Reddy54:13

       We do, but-

    9. NKNikhil Kamath54:14

       ... an opportunity to exercise.

    10. RARajan Anandan54:15

        Right.

    11. NKNikhil Kamath54:15

        But-

    12. RARajan Anandan54:15

        But we don't

    13. NKNikhil Kamath54:16

        ... it's not.

    14. RARajan Anandan54:16

        Because keep in mind, you know, this business is a power law business. What that means, you know, it's that few companies that really return, and we all know that, you know, it takes... No, some companies will.

    15. KRKarthik Reddy54:25

        Right.

    16. RARajan Anandan54:25

        Like growth stage investors, right? So if you're, let's say, investing 50 million, so at Peak XV, we are three teams.

    17. KRKarthik Reddy54:30

        Mm.

    18. RARajan Anandan54:30

        We have a seed team, search team, venture team, and a growth team. So the growth team can. So you invest 30, 40 million in a late-stage company-

    19. RARajan Anandan54:37

        ... two, three years later, the company goes public. So within five years, you could, you could, you could exit.

    20. KRKarthik Reddy54:42

        I think there are two elements, I think, as entrepreneurs misunderstand VCs. Intent is, we'll never make money if you don't make money.

    21. NKNikhil Kamath54:48

        Mm-hmm.

    22. KRKarthik Reddy54:49

        Okay? So incentives are aligned. It's not like I can make the money, run out with the money, and you're stuck there, right? Broadly, there is incentives to be aligned with you. So nobody will kill a golden goose on the basis of a term that's written there. However, you don't want to misalign incentives and say, "Oh, you have ten years," number one.

    23. NKNikhil Kamath55:09

        Right.

    24. KRKarthik Reddy55:09

        Because invariably, entrepreneur is such a tough journey that if I say you have ten, you'll take 15.

    25. NKNikhil Kamath55:14

        Right.

    26. KRKarthik Reddy55:15

        That's point one. Point two is, you're underestimating the fact that my checks are written all the way from day zero to year five. So I'm writing follow-on checks. I'm writing fresh checks on the last day of year three, right? And my term life is fixed, so I have to apply the same principle everywhere.

    27. NKNikhil Kamath55:35

        Right.

    28. KRKarthik Reddy55:35

        So the last check, just because it's the last check in the fund, I can't say, "Screw you, I'm going to give you seven years." Whereas because you were the day one guy, I'll give you ten.

    29. NKNikhil Kamath55:44

        Ah.

    30. KRKarthik Reddy55:44

        So you establish a set of standards that work broadly amongst all of us. And so Axel doesn't have a separate set of terms than I do, and vice versa. And it doesn't matter whether I'm the first year of the fund or the third year of the fund.
23. 56:08 – 59:30

    Demystifying Private Equity

    1. NKNikhil Kamath56:08

       PE, would you like to take it?

    2. PPPrashanth Prakash56:09

       None of us are PE-

    3. NKNikhil Kamath56:10

       Yeah

    4. PPPrashanth Prakash56:10

       ... uh, here. But, uh, uh, you know, just to take off from where Rajan was talking about, I think what late-stage venture and, and PE, I think there are a lot of similarities between these two. But PE funds are exclusively raised as PE funds, right? So, and, uh, typically-

    5. NKNikhil Kamath56:29

       Sorry, what does PE stand for?

    6. PPPrashanth Prakash56:31

       Private equity.

    7. NKNikhil Kamath56:31

       Mm-hmm.

    8. PPPrashanth Prakash56:32

       And by the way, from a classification perspective, sometimes it's confusing because this entire class is called PE.

    9. RARajan Anandan56:39

       Private equity.

    10. NKNikhil Kamath56:40

        It is private equity.

    11. KRKarthik Reddy56:40

        We're in a spectrum-

    12. PPPrashanth Prakash56:41

        We're in a-

    13. KRKarthik Reddy56:42

        ... of risk.

    14. NKNikhil Kamath56:43

        For scale, is there a differentiation in scale between VC and PE?

    15. PPPrashanth Prakash56:46

        I think it's, it's less about scale. I think it's about time to exit.

    16. NKNikhil Kamath56:51

        Uh-huh.

    17. PPPrashanth Prakash56:51

        They like to come in closer to when there is visibility to an IPO event, two, three years, or an exit event, two, three years. I think their horizons and their windows of how long they want to hold is very different. They, their, their-

    18. NKNikhil Kamath57:05

        Very different meaning significantly shorter than VC?

    19. PPPrashanth Prakash57:08

        Much shorter.

    20. RARajan Anandan57:08

        Much shorter.

    21. PPPrashanth Prakash57:08

        Much shorter.

    22. RARajan Anandan57:09

        Because they're coming in, in later.

    23. PPPrashanth Prakash57:10

        They're coming in later. Their expectation on the maturity of the model and this product market fit that he was talking about-

    24. NKNikhil Kamath57:17

        Mm-hmm

    25. PPPrashanth Prakash57:19

        ... is much more.

    26. KRKarthik Reddy57:20

        Yeah, night and day, yeah.

    27. PPPrashanth Prakash57:21

        Yeah. So, so they really expect, uh-

    28. NKNikhil Kamath57:23

        So you're saying PEs are more conservative historically-

    29. PPPrashanth Prakash57:26

        Correct

    30. NKNikhil Kamath57:27

        ... than VCs?
24. 59:30 – 1:03:20

    Market size for Consumption discussed

    1. NKNikhil Kamath59:30

       step, establishing market size. A lot has been said about people having overestimated the size of different sectors in India. Should we pick a sector each and try to establish what the actual size is? Would you like to go first? [chuckles] Do you have a sector?

    2. PPPrashanth Prakash59:47

       [chuckles] Yeah, so... No, I mean-

    3. NKNikhil Kamath59:50

       Why are you laughing?

    4. PPPrashanth Prakash59:50

       No, because I've said so much about this. [chuckles]

    5. RARajan Anandan59:53

       His favorite pet peeve. [laughing]

    6. NKNikhil Kamath59:54

       [chuckles] What do you... Okay, can I ask you guys a question? [chuckles] When he keeps VC bashing online-

    7. PPPrashanth Prakash1:00:00

       I don't VC bash, dude, what are you saying?

    8. NKNikhil Kamath1:00:02

       What do you guys think when he-

    9. PPPrashanth Prakash1:00:03

       Kartik, uh, do you think I VC bashed?

    10. KRKarthik Reddy1:00:05

        No, no, I, I like his thinking.

    11. PPPrashanth Prakash1:00:06

        No, I-

    12. KRKarthik Reddy1:00:07

        Rational

    13. PPPrashanth Prakash1:00:07

        ... I think, uh, he's, uh, I mean, I can... He's, he's overtly kind of being very myopic about a, a particular industry that he's involved with, and, uh, and, uh, you know, if you look at broadly other sectors, right? The same thing does not apply in many areas, but-

    14. NKNikhil Kamath1:00:28

        Explain, like you guys should have-

    15. PPPrashanth Prakash1:00:29

        Yeah

    16. NKNikhil Kamath1:00:29

        ... an argument about this, so- [chuckles]

    17. PPPrashanth Prakash1:00:30

        I mean, no, no. So for example, I mean, I, I, I think, I mean, let's, let's take, uh, uh, a, a consumer company. If you look at, uh, you know, the opportunity to build, uh... And, and to, to me, a two thousand to two thousand five hundred crore-

    18. SPSpeaker1:00:45

        ... kind of revenue in a consumer business with a, a bit of somewhere in the two, three hundred crore kind of range.

    19. KRKarthik Reddy1:00:54

        10%, yeah.

    20. SPSpeaker1:00:54

        Uh, that some- some- somewhere in that range is-

    21. NKNikhil Kamath1:00:57

        Consumer company, give us two, three examples, just for context.

    22. SPSpeaker1:00:59

        I mean, it could be, it could be something like, uh, a company like Blue Stone.

    23. NKNikhil Kamath1:01:03

        Mm-hmm.

    24. SPSpeaker1:01:03

        Right? Uh, in, which is in the jewelry business, or-

    25. KRKarthik Reddy1:01:06

        Lenskart

    26. SPSpeaker1:01:06

        ... that example, or Lenskart.

    27. KRKarthik Reddy1:01:07

        MamaEarth.

    28. SPSpeaker1:01:08

        Right, MamaEarth, any of these, right?

    29. KRKarthik Reddy1:01:10

        BoAt, Noise.

    30. SPSpeaker1:01:11

        And h- how do these companies get scale in India?
25. 1:03:20 – 1:08:04

    The Online vs. Offline Conundrum

    1. NKNikhil Kamath1:03:20

       that trend seems to be holding true for everything? Like, we were talking to the Blue Stone guy, remember?

    2. SPSpeaker1:03:25

       Mm.

    3. NKNikhil Kamath1:03:25

       Like, when they were online, their sales were X, but when they realized they're doing a combination of online with offline-

    4. SPSpeaker1:03:33

       The whole omni channel in India

    5. NKNikhil Kamath1:03:33

       ... everything changed.

    6. KRKarthik Reddy1:03:34

       Trial-

    7. SPSpeaker1:03:35

       Yeah

    8. KRKarthik Reddy1:03:35

       ... trust, access. So all of that gets built by offline.

    9. NKNikhil Kamath1:03:40

       But that pattern is not necessarily true in America, but it is in India. Why is that?

    10. KRKarthik Reddy1:03:44

        It is! Like, Bobby Parker has stores now.

    11. SPSpeaker1:03:46

        Businesses were built-

    12. KRKarthik Reddy1:03:48

        Also-

    13. SPSpeaker1:03:48

        ... I mean, just, just online itself in that market-

    14. KRKarthik Reddy1:03:51

        30 years

    15. SPSpeaker1:03:51

        ... consumer market was big enough that you can just build, build a large business, like I said.

    16. KRKarthik Reddy1:03:56

        Correct.

    17. SPSpeaker1:03:57

        I mean, I, I came, came up with this 2,000 crore thing, right? But whatever the equivalent, like two to two, three, two to three hundred million dollar revenue in the US, you can build purely online.

    18. NKNikhil Kamath1:04:06

        So what we're saying-

    19. SPSpeaker1:04:06

        But in India, it's, it looks like you have to go also offline.

    20. KRKarthik Reddy1:04:10

        I think what-

    21. NKNikhil Kamath1:04:10

        So what we're saying to our audience who's trying to start a business, is the odds of you reaching scale are significantly higher if you combine a online and offline component.

    22. KRKarthik Reddy1:04:22

        No, there's, there's variance, too. So what I'm trying to say is, Purple is one of ours, if I'm correct.

    23. NKNikhil Kamath1:04:26

        Mm.

    24. KRKarthik Reddy1:04:26

        So they started as a marketplace.

    25. NKNikhil Kamath1:04:28

        Mm.

    26. KRKarthik Reddy1:04:28

        Eventually realized that if they don't build margin by launching their own brands-

    27. NKNikhil Kamath1:04:32

        Mm

    28. KRKarthik Reddy1:04:32

        ... it's not a great business.

    29. NKNikhil Kamath1:04:33

        Does Purple have offline like Nykaa does?

    30. KRKarthik Reddy1:04:35

        Not yet, but getting there.
26. 1:08:04 – 1:13:17

    Platforms & Marketplaces

    1. NKNikhil Kamath1:08:04

       building a platform or a marketplace is not-

    2. KRKarthik Reddy1:08:07

       Not anymore. That's gone.

    3. NKNikhil Kamath1:08:08

       You're not anymore. It's over. I think it's over.

    4. RARajan Anandan1:08:10

       But I, I do think vertical marketplaces, there's still potential for them.

    5. PPPrashanth Prakash1:08:13

       But there also, Rajan, I think the, the-

    6. KRKarthik Reddy1:08:14

       That's how Purple started.

    7. PPPrashanth Prakash1:08:16

       No, the-

    8. KRKarthik Reddy1:08:16

       You have to evolve

    9. PPPrashanth Prakash1:08:16

       ... in, in these vertical marketplaces today, you've got to be a lot more focused on the value add.

    10. KRKarthik Reddy1:08:23

        Yeah.

    11. RARajan Anandan1:08:23

        No, I agree.

    12. PPPrashanth Prakash1:08:23

        I'm saying there, there was a time when-

    13. RARajan Anandan1:08:25

        Yeah, you could just aggregate-

    14. PPPrashanth Prakash1:08:26

        - you could just aggregate.

    15. NKNikhil Kamath1:08:26

        Is that also triggered by ONDC?

    16. PPPrashanth Prakash1:08:29

        No, not really. I think it is just triggered by now this realization that just GMV does not work.

    17. NKNikhil Kamath1:08:34

        But wouldn't ONDC reduce the cost of getting distribution? Like, if I were a Meesho and I went to every mom-and-pop shop, got them on board my platform by spending that money, meeting them and doing it. If ONDC allows for that mom-and-pop shop to be discovered by you, who is also a platform, doesn't the USP in that go away organically?

    18. PPPrashanth Prakash1:08:57

        See, ONDC as a platform, I think when you, when you look at the sectors that have not been served, whether it's your like end kiranas, where, where today there is no l- legitimate way in which a kirana can be discovered, can be-

    19. NKNikhil Kamath1:09:17

        I mean...

    20. PPPrashanth Prakash1:09:18

        Right?

    21. NKNikhil Kamath1:09:18

        ONDC and these Paytm, all these guys are discovering them very fast.

    22. PPPrashanth Prakash1:09:21

        No, no, no, that's what I'm saying.

    23. NKNikhil Kamath1:09:22

        Uh.

    24. PPPrashanth Prakash1:09:22

        So I'm coming there.

    25. NKNikhil Kamath1:09:23

        Mm.

    26. PPPrashanth Prakash1:09:23

        So I'm saying, if, if you're already on a Swiggy or a Zomato kind of platform as a restaurant, you know, I think there, there will be a little bit of a time, in my mind, for somebody to find value in-

    27. NKNikhil Kamath1:09:40

        But even when they do-

    28. PPPrashanth Prakash1:09:42

        Yeah

    29. NKNikhil Kamath1:09:42

        ... for the platform, having discovered them, will get devalued because of ONDC. If not today, at some point in the future?

    30. RARajan Anandan1:09:49

        I mean, I do think over the next, maybe not in the near term, but over the medium term, ONDC will have a significant impact, but it's going to start with mobility. I think the most interesting example is Namma Yatri, which has now just crossed eighty thousand rides a day, which is quite remarkable actually, right? So I do think mobility is going to get disrupted first, right? For different reasons. I mean, uh, you know, three-wheelers for different reasons, for two-wheelers and so on. I think after that might be food delivery.
27. 1:13:17 – 1:21:00

    Import Laws, PLI & Patriotism

    1. NKNikhil Kamath1:13:18

       most countries which have done well in manufacturing, not just now, but historically, have done it by virtue of closing their market off for a short period of time from outside competition, and letting homegrown stuff improve in, uh, quality, scale to a certain point. Like, there's a lot of precedent for this, right? Like, uh, Industrial Revolution, which happened in Birmingham many, many years ago. The environment was, for that, was created by the UK shutting down and not allowing foreign goods in. One can also agree that China did the same, and they didn't allow Western goods in, shut the economy off to foreign produce, and then their domestic economy thrived. Do you think India should go down that direction, where to get better at solar cells, for example, we should stop importing cells or impose significantly higher duty to make Indian product more artificially more competitive? Is that the way to increase manufacturing prowess?

    2. RARajan Anandan1:14:22

       We've already, we've already started doing that, right? So if you look at-

    3. NKNikhil Kamath1:14:24

       Going down that path?

    4. RARajan Anandan1:14:25

       Like for instance, let's take electronics manufacturing.

    5. NKNikhil Kamath1:14:28

       Mm.

    6. RARajan Anandan1:14:28

       Okay, less than five percent of electronics sold in India were assembled here, okay? So you should... You know, you start with assembly, then you have to make components, and so on and so forth, right? That number is now, I don't know what the latest number is, but it's well north of seventy percent of electronics, consumer electronics, okay? That are sold.

    7. NKNikhil Kamath1:14:43

       But none of the IP is being captured.

    8. RARajan Anandan1:14:44

       Sorry?

    9. NKNikhil Kamath1:14:45

       None of the value in that cycle is being captured.

    10. RARajan Anandan1:14:47

        No, no, but, but that's a matter of time, no? First you have to start assembly, then you start components, and so on and so forth, right? So-

    11. NKNikhil Kamath1:14:51

        But do you think the broader question is: Is India... We've all established we need more manufacturing prowess. We need to capture more of the value in IP in India.

    12. RARajan Anandan1:15:01

        Yes.

    13. NKNikhil Kamath1:15:02

        Is India doing the right thing by imposing duties and PLI and all of that? Which I think it is.

    14. RARajan Anandan1:15:09

        In strategic-

    15. NKNikhil Kamath1:15:10

        I think we should do like that.

    16. RARajan Anandan1:15:10

        In strategic sectors for limited periods of time-

    17. NKNikhil Kamath1:15:13

        Mm-hmm

    18. RARajan Anandan1:15:14

        ... it is, it is working. It's not is it the right thing or not? It's beginning to work.

    19. NKNikhil Kamath1:15:17

        Yeah.

    20. RARajan Anandan1:15:18

        We should continue down this path, and you will see... You know, like, it's very interesting. I was talking to the Boat team. You know, they make the-

    21. NKNikhil Kamath1:15:24

        Mm

    22. RARajan Anandan1:15:24

        ... you know, it's four, five, four thousand plus crores now of revenue. So they used to not... They used to design here and then get everything made in China. Now, I think it's like thirty, forty, I can't remember the latest number, but thirty, forty percent in, in eighteen months-

    23. NKNikhil Kamath1:15:37

        Yeah

    24. RARajan Anandan1:15:37

        ... is, is now actually, they are now the large, second largest, um, headset, uh, accessories company in the world.

    25. NKNikhil Kamath1:15:45

        I think one of the really, uh, cool definitions for patriotism in my mind, like, I don't think we have exercised this in the manner that many Western, like the US, for example, has.

    26. PPPrashanth Prakash1:15:58

        Yeah, yeah, they, they have a very different passion for product.

    27. NKNikhil Kamath1:16:00

        They're like buying US-made.

    28. PPPrashanth Prakash1:16:00

        Yeah.

    29. NKNikhil Kamath1:16:00

        They sell it so much. I feel like for everybody watching, right? Like, if you have product A, product B. Product B is India-made, product A is China-made. Even if product B is five percent inferior, I think the biggest act of patriotism in a modern capitalistic world today is picking product B over product A.

    30. RARajan Anandan1:16:24

        I think that's a really bad strategy.
28. 1:21:00 – 1:24:07

    Digitsed Indian Supply Chains

    1. PPPrashanth Prakash1:21:00

       uh, you know, two other examples, maybe slightly, just switching back to B2B. Most Indian supply chains are, are, uh, starting to really work more efficiently, and we're able to compete because of two reasons: one, a lot of digital infrastructure got built within the country, right? Whether it is, uh... And, and formalization of the economy through GST and, uh, you know, the ability to build more efficient warehousing. All of that would mean that if you are supplying product now from India, right? Because everybody in the digital chain is mobile, right? Your level of efficiency in your supply chain in India is on par or better than any other country globally. So I think that's a unique opportunity, which we have been waiting for the longest time, right? See, uh, if you look at manufacturing as a, as a sector, 35 to 40 years, nothing really has happened in this country. But now with the digitization of the supply chain, the ability to glo- for global demand to digitally access Indian product and Indian pricing on Indian product, and the sensibilities in the Indian entrepreneur to build for quality, it's no longer about what the Indian consumer wants. I'm saying the ch- game has changed and has to change to the next level in India. We are not going to become a $10 trillion economy by supplying better products to Indians. That has its place, right? We will have to, and this is where I agree with Rajan in terms of the quality benchmarking, that we need to be able to build best product globally. And to be able to build best product globally, I think partnerships are also very important. I think we cannot get also closed. If you're not getting the technology from China, we need to figure another place to get the technology from, right? So we have to build world-class product from India, that, that, that whole China Plus One diversification, take advantage of that in the next two to three years. And, uh, a lot of entrepreneurship, I think, has to be built there.

    2. NKNikhil Kamath1:23:24

       I agree.

    3. PPPrashanth Prakash1:23:24

       Just by-

    4. NKNikhil Kamath1:23:25

       I think in competition, one unique thing that is happening in India right now, I think the fact that we have stable governance and stable policy-making for as long as we have had it, I feel like that in itself has made India so unique to take advantage of the China Plus One opportunity, because you look at everything around us-

    5. PPPrashanth Prakash1:23:46

       No, but Nikhil, let's add these two-

    6. NKNikhil Kamath1:23:48

       Uh, uh

    7. PPPrashanth Prakash1:23:48

       ... the digitized supply chain and the compute power, real-time compute power across the supply chain with every individual.

    8. NKNikhil Kamath1:23:56

       Yeah.

    9. PPPrashanth Prakash1:23:57

       Right? And corporate taxes, which are globally benchmarkable, all of them done by the Modi government in the last eight years.

    10. RARajan Anandan1:24:06

        Yeah.

    11. NKNithin Kamath1:24:06

        I think one of the reasons

29. 1:24:07 – 1:26:02

    Role of VCs in the Economy

    1. NKNithin Kamath1:24:07

       why Indians are putting global world-class products is the money all the VCs have brought into the country, right? I mean, it's just crazy because I remember in 2010, when we first started Zerodha, you know, went around finding website designers. And, and just that, you know, I'm just saying, just that one small bit, right? The quality that has gone up is just immense, and I don't think that would have happened if not for all the money you guys have put in the country [chuckles] so, and, and, you know.

    2. RARajan Anandan1:24:36

       I think it's a combination of... You know, it's a good point. You know, it's a combination of capital, but it's also, you know, like, one very interesting thing we should talk about, the smartest Indians are not leaving India in droves.

    3. NKNikhil Kamath1:24:49

       And they're coming back.

    4. RARajan Anandan1:24:51

       They're staying, and they're coming back.

    5. NKNikhil Kamath1:24:51

       So many are coming back.

    6. RARajan Anandan1:24:52

       They're coming back, they're building companies here.

    7. NKNikhil Kamath1:24:53

       You know what, Gru? VCs are, in a certain way, because 90% of the money coming in is external, you're like marketing agents for India.... you're going out in the US, you're pitching to people to put money into India, and you're bringing money back?

    8. KRKarthik Reddy1:25:06

       No, and, and we're pitching both, right? We're pitching the India opportunity, which is the macro and all of that, the, the, the sta- stable government. But more, I think, the, the, the capability of the Indian entrepreneur, I think, is so recognized globally. I think that is bringing half the money. [chuckles] I think the Sundar Pichais and, uh, Satya-

    9. NKNikhil Kamath1:25:28

       Yeah, I think you-

    10. KRKarthik Reddy1:25:28

        I think they're-

    11. RARajan Anandan1:25:30

        Yeah, absolutely.

    12. KRKarthik Reddy1:25:31

        They're, they're big, big-

    13. RARajan Anandan1:25:31

        No, also, like thirty percent or whatever, twenty-five, thirty percent of Silicon Valley founders are basically first-generation Indians.

    14. NKNikhil Kamath1:25:37

        So to close the market size-

    15. RARajan Anandan1:25:39

        No, but market, we should talk about the export. We've only talked about the mess.

    16. NKNikhil Kamath1:25:42

        Yeah.

    17. RARajan Anandan1:25:42

        You talked a little bit about exports.

    18. KRKarthik Reddy1:25:43

        I, I, kind of, yeah.

    19. NKNikhil Kamath1:25:44

        We've said sixty-three percent is consumption focused.

    20. RARajan Anandan1:25:47

        Yeah.

    21. NKNikhil Kamath1:25:49

        That does not include ex- export. That sixty-three percent is about one point seven, one point eight trillion dollars.

    22. KRKarthik Reddy1:25:55

        Yes.

    23. NKNikhil Kamath1:25:56

        Uh, outside of consumption, which we spoke so much about, what is the balance thirty-seven percent?

30. 1:26:02 – 1:27:38

    Indian Tech Supremacy

    1. KRKarthik Reddy1:26:02

       Exports is a huge thing.

    2. NKNikhil Kamath1:26:03

       We shouldn't-

    3. RARajan Anandan1:26:03

       Yeah, so actually, if you look at, uh... So if you're an entrepreneur looking to start up, right? Again, start with something you know something about. You have unique insights. But building for the world now is a, is a very real thing, right? So if you look at new seed-funded startups in India in 2022 calendar, last year, and this is seed funding we've defined as between five crores and forty crores raised per company, right?

    4. NKNikhil Kamath1:26:29

       Mm-hmm.

    5. RARajan Anandan1:26:29

       So companies that have raised between five crores, uh, and forty crores, so between half a million... So four crores, half a million dollars to five million. We just call that seed, large seed round, uh, somewhat average seed round. Forty percent of all Indian startups that raised seed funding last year, in that definition, were building for the world from day zero. Most of those were building software products, vertical SaaS, application SaaS, modern data stack, cybersecurity, infrastructure companies. Increase now, now we are seeing a new crop of AI companies, right? So I think that is the first... So in many ways, right, if you look at export from a technology-enabled standpoint, the first big wave was IT services. That's now a two hundred and fifty billion dollar industry. Software products is the next big wave, and now we are going to see, coming after that would be the manufacturing wave. Consumer brands, right? So you're seeing toy brands. Uh, there's this company, we are not investors in it, it's called Ayurveda Experience in Delhi. They make Ayurveda products and sell them in the US. They don't even sell on any marketplace. It just crossed fifty million dollars of revenue.

    6. NKNikhil Kamath1:27:35

       Can I digress and ask one question?

    7. RARajan Anandan1:27:37

       Yeah.

    8. NKNikhil Kamath1:27:37

       So trends

31. 1:27:38 – 1:35:23

    Industry Picks, Trends & Next Unicorn

    1. NKNikhil Kamath1:27:38

       of VC money this year have been slowing down of investment in gaming, consumer tech, edtech, e-commerce, lesser money is coming in. Crypto, SaaS, and fintech are flat. The highest investments or the rate of growth is coming in retail consumption, energy, and EVs. Why that trend? And if that is the trend, what is the opportunity for somebody building a business today?

    2. KRKarthik Reddy1:28:08

       So I have a controversial view on this.

    3. NKNikhil Kamath1:28:09

       Yeah.

    4. KRKarthik Reddy1:28:10

       Uh, honestly, do- sh- I think as an entrepreneur, you shouldn't care one, two hoots about what you just read out.

    5. NKNikhil Kamath1:28:15

       But if, if you're entering an industry-

    6. KRKarthik Reddy1:28:17

       No, it's-

    7. NKNikhil Kamath1:28:17

       ... which is being funded or the rate of funding is going up, isn't that a tailwind?

    8. KRKarthik Reddy1:28:21

       No, it's a terrible way to think about business opportunity as an entrepreneur.

    9. RARajan Anandan1:28:24

       Yeah, what will happen is, by the time you have to raise your round-

    10. KRKarthik Reddy1:28:26

        Yeah

    11. RARajan Anandan1:28:26

        ... that sector may-

    12. KRKarthik Reddy1:28:26

        I'm, I'm... Okay, let me, let me gloat a little bit about my skill, I think. I'm looking ten years out. I want to see what's a billion-dollar opportunity ten years from now. If I'm a good VC, and my counterpart should be a good entrepreneur who's also thinking that way, we're not building for one year, two years. These are all cyclical. You'll have a short-term cycle, you'll have a medium-term cycle. How do I care what's hot? I need to find five intelligent people who believe, agree with my point of view. And he just said gaming is down. He's where he says he made five investments this year.

    13. NKNikhil Kamath1:28:58

        Mm-hmm.

    14. KRKarthik Reddy1:28:58

        So he's bullish.

    15. NKNikhil Kamath1:28:59

        Right.

    16. KRKarthik Reddy1:29:00

        Go find him-

    17. NKNikhil Kamath1:29:00

        Right

    18. KRKarthik Reddy1:29:01

        ... if you are bullish on gaming.

    19. NKNikhil Kamath1:29:02

        Right.

    20. KRKarthik Reddy1:29:02

        So actually, the point was not that, Nikhil. So I didn't mean to come across rude, but the point is, if the entrepreneur is building into a market trend-

    21. NKNikhil Kamath1:29:11

        Mm-hmm

    22. KRKarthik Reddy1:29:12

        ... it's a very, uh, I'm going to be rude to the entrepreneur, it's a very eighty style of building.

    23. NKNikhil Kamath1:29:18

        Mm-hmm.

    24. KRKarthik Reddy1:29:18

        You're trying to go where the money is.

    25. NKNikhil Kamath1:29:19

        Mm-hmm.

    26. KRKarthik Reddy1:29:20

        You're going to-- trying to go where the opportunity is.

    27. NKNikhil Kamath1:29:22

        Mm-hmm.

    28. KRKarthik Reddy1:29:22

        What is your advantage? What is your distinctive advantage, and what is your passion about building into that space?

    29. PPPrashanth Prakash1:29:27

        So, so actually, I have an, uh... I mean, I, I, I partly agree that you shouldn't, uh, kind of go after a market that's currently being, uh, touted as the next big thing. I think that's the wrong thing. But I think entrepreneurs should have a macro global view-

    30. KRKarthik Reddy1:29:44

        Sure
32. 1:35:23 – 1:45:46

    Picks for Disruptive Sectors

    1. NKNikhil Kamath1:35:23

       you guys on the spot? Just because this will help some people, and make you, without explanation, pick one sector. If somebody's building, removing all passion, all of that outside, one sector that you think will grow at a pace faster than others for the next ten years. We can start with Nithin.

    2. NKNithin Kamath1:35:47

       I think the first trillionaire on this planet will be someone solving for climate problem.

    3. NKNikhil Kamath1:35:53

       Okay. Elaborate.

    4. KRKarthik Reddy1:35:55

       He's getting close. He's got another eight hundred billion to go. [chuckles]

    5. NKNikhil Kamath1:35:57

       [chuckles] Yeah.

    6. NKNithin Kamath1:36:00

       The speed at which climate change is affecting our lives, right? As in, eventually, when push comes to shove, you know, like how COVID resulted in so many billionaires out there for m- making vaccines, you know. People who are solving, uh, for some of these problems.

    7. NKNikhil Kamath1:36:17

       How?

    8. NKNithin Kamath1:36:18

       Anything, I mean, like any climate intervention types, as in, say, for example, including Elon Musk doing electric cars.

    9. NKNikhil Kamath1:36:25

       So you mean things like EVs, energy transition, stuff like that?

    10. NKNithin Kamath1:36:28

        Yeah, plant-based foods. I mean, like I said, it's very early for plant-based food, but solar... Like, anything that is, you know, that will-

    11. NKNikhil Kamath1:36:35

        Thoughts?

    12. PPPrashanth Prakash1:36:36

        Mm-hmm. Uh, I, I'll kind of chime in there. Big proponent of climate, um, re- I think we are, if you look ten years ahead, right, there are two trends. I think one is health and how, how much disruption we will see in what I call as upstream medicine.

    13. NKNikhil Kamath1:36:54

        What is upstream medicine?

    14. PPPrashanth Prakash1:36:55

        Upstream medicine is that really every disease that you ultimately see-

    15. NKNikhil Kamath1:37:01

        Mm-hmm

    16. PPPrashanth Prakash1:37:01

        ... right, as a manifestation, has started twenty years before.

    17. NKNikhil Kamath1:37:05

        Mm.

    18. PPPrashanth Prakash1:37:06

        In some form. And today we don't have the diagnostics or we don't feel it, and doctors can't, uh, kind of detect it. So-... you only detect it at the end, right? So what Medicine 3.0 will be, and maybe we are still not seeing a lot of that in India, but I think we are at the cusp of being able to look at so much data upstream, that you will be able to start one's journey in not getting into that situation twenty, thirty years later, right? Today-

    19. NKNikhil Kamath1:37:45

        Yeah.

    20. PPPrashanth Prakash1:37:45

        -at, when you're thirty-five.

    21. NKNikhil Kamath1:37:47

        You know what the funny thing is so far?

    22. PPPrashanth Prakash1:37:49

        Yeah.

    23. NKNikhil Kamath1:37:49

        You remember those sectors where I said funding is increasing?

    24. PPPrashanth Prakash1:37:52

        Yeah.

    25. NKNikhil Kamath1:37:52

        Both of you have just spoken about that.

    26. SPSpeaker1:37:54

        Yeah, no, because I think this is, this is-

    27. NKNikhil Kamath1:37:55

        Energy, EV, health.

    28. PPPrashanth Prakash1:37:58

        Yeah, and see, I think these are-

    29. SPSpeaker1:37:59

        But it's, it's, it's-

    30. NKNikhil Kamath1:38:00

        It's the current trend.
33. 1:45:46 – 1:52:18

    The X-Factor in Successful Founders

    1. NKNikhil Kamath1:45:46

       is very applicable to you guys is, say I'm a startup, and I'm pitching to you guys to raise money. You've done this a long time. In your experience, what have been the traits, I will ask each one of you individually, traits in companies that have worked out, and what have been the common traits in companies that haven't worked out? Give me two things that you have found in common between companies and founders that you've invested in that has worked out.

    2. KRKarthik Reddy1:46:16

       Yeah, it's usually the one eighty of what works, doesn't work. So one of them is my bias, as I said, for people who truly relate to the problem that they're solving. So which is aligned with what both of you had chased as well in your, in your lives and how you've built. Uh, I think the reason I believe that is very important is because the journey, in my view, supernormal journeys, the ones that, those five companies that deliver the magic, those are ten-plus year journeys, and full-ridden with potholes and shocks and emotional setbacks. The only thing that keeps you going is the mission. So if you have started with the purpose of saying there are some quick bucks to be made here, I don't see it work.

    3. NKNikhil Kamath1:46:59

       Uh, okay, got it. So one thing you said is founders with lo- long-term vision?

    4. KRKarthik Reddy1:47:05

       Mission more than vision.

    5. NKNikhil Kamath1:47:06

       Okay, vision, mission, with something they relate with.

    6. KRKarthik Reddy1:47:09

       Yes.

    7. NKNikhil Kamath1:47:09

       A problem in their own personal lives.

    8. KRKarthik Reddy1:47:10

       That they want to solve for a long period of time.

    9. NKNikhil Kamath1:47:12

       Yeah.

    10. KRKarthik Reddy1:47:13

        The second one is, I think, [clears throat] incredible evolution as... And by the way, we used to think teams are important. Of course, they're important, but I think I'm back to over-indexing on one alpha female, alpha male equivalent, because I don't think you can distribute that vision and mission.

    11. NKNikhil Kamath1:47:33

        Why one alpha male, one alpha female?

    12. KRKarthik Reddy1:47:35

        No, meaning one, one-

    13. NKNikhil Kamath1:47:35

        Why not just one alpha male?

    14. KRKarthik Reddy1:47:36

        No, that's what I meant.

    15. NKNikhil Kamath1:47:37

        Uh.

    16. KRKarthik Reddy1:47:37

        Either. I'm being gender neutral.

    17. NKNikhil Kamath1:47:39

        Okay.

    18. KRKarthik Reddy1:47:39

        But I'm saying-

    19. NKNikhil Kamath1:47:39

        One alpha male or one alpha female.

    20. KRKarthik Reddy1:47:40

        Or one alpha female. So I'm saying, I'm saying it's important for there to be one CEO, uber founder CEO. And yes, theoretically, private equity or late-stage growth can replace them, saying, "These guys are useless." I'm trying to judge at seed, which is my bread and butter, whether they're capable of learning, inquisitive, and self-improving to become CEOs at every stage.

    21. NKNikhil Kamath1:48:05

        Are those the top three traits you watch for? Inquisitive, curious, and willing to learn.

    22. KRKarthik Reddy1:48:10

        Yeah.

    23. NKNikhil Kamath1:48:10

        Change-

    24. KRKarthik Reddy1:48:11

        Yeah

    25. NKNikhil Kamath1:48:11

        ... in another word.

    26. KRKarthik Reddy1:48:12

        Yeah. Otherwise, no chance they can scale.

    27. NKNikhil Kamath1:48:14

        You want to go next?

    28. NKNithin Kamath1:48:15

        No, I mean, see, all the investments that I've done is in areas that I deeply care about.

    29. NKNikhil Kamath1:48:20

        No, but how, how-

    30. NKNithin Kamath1:48:21

        That's true
34. 1:52:18 – 2:00:04

    Is Hard Work Overrated? Let's Debate!

    1. RARajan Anandan1:52:18

       do it. Because that's-

    2. NKNikhil Kamath1:52:19

       Do we really believe all that?

    3. RARajan Anandan1:52:20

       Yeah, because I've seen it.

    4. NKNikhil Kamath1:52:22

       Do we really believe that success is because of hard work?

    5. RARajan Anandan1:52:25

       I think it's obsession, absolutely.

    6. NKNikhil Kamath1:52:27

       No, no, I mean, even-

    7. RARajan Anandan1:52:27

       I don't have a single

    8. NKNikhil Kamath1:52:28

       ... like, just to set it right. So, so I started trading the market in '97. Uh, Zerodha started in 2010. All our success came in 2016, so it took us 20 years.

    9. RARajan Anandan1:52:40

       Yeah, there you go.

    10. NKNikhil Kamath1:52:41

        Right, you know, so there is... You know, like, today, of course, now we can have five days a week and all of that, but, [chuckles] like, you know, so it, it, it-

    11. RARajan Anandan1:52:48

        I lived in my office for six years.

    12. KRKarthik Reddy1:52:50

        Yeah.

    13. RARajan Anandan1:52:50

        Right. No, that's my point, right? [laughing] That's my point.

    14. NKNikhil Kamath1:52:52

        Like, lived there.

    15. RARajan Anandan1:52:52

        Exactly.

    16. KRKarthik Reddy1:52:52

        Yeah.

    17. RARajan Anandan1:52:52

        There you go.

    18. KRKarthik Reddy1:52:54

        Me too. Yeah. [laughing]

    19. RARajan Anandan1:52:55

        I thought you were questioning. I'm like, "Okay-

    20. NKNikhil Kamath1:52:57

        No, no, [laughing]

    21. RARajan Anandan1:52:57

        ... you're going to have five-

    22. NKNikhil Kamath1:52:57

        No

    23. RARajan Anandan1:52:57

        ... five days a week, nine to five, and build Zerodha." [laughing]

    24. NKNikhil Kamath1:53:00

        No, no, but, but I'll tell you where the dichotomy arrives in this conversation. I feel hard work in the mainstream is a way of appeasing our ego, both as a c- consolation and as a reward. Consolation when things don't work out, I can tell myself, "But I worked hard." When I win, appeasing my ego on the other end, because everyone can argue, like, probably the watchman of my apartment works three times as hard as me. So can you really correlate hard work to success?

    25. RARajan Anandan1:53:36

        Absolutely.

    26. KRKarthik Reddy1:53:37

        Necessary, but it's not sufficient. I go back to that argument. I don't... Um, it's not a guarantee.

    27. NKNikhil Kamath1:53:41

        But like that, everything is necessary.

    28. KRKarthik Reddy1:53:43

        I'll tell you why-

    29. RARajan Anandan1:53:43

        No, apparently.

    30. NKNikhil Kamath1:53:44

        Okay, I agree with you there.
35. 2:00:04 – 2:01:00

    Clash of Co-Founders

    1. NKNithin Kamath2:00:04

       question was really, one, you're going through tough times, right? And then, one, you're going through good times. Tough times, you, you kind of know, you know, like people, you know, if, if a business breaks, you know, it's a tough time, it broke. But are there many times where companies are going through good times and they break because co-founders don't get along well?

    2. PPPrashanth Prakash2:00:23

       Happens. Happens. You know, they start out with the same, uh, kind of passion, you know, focus, and the business takes a different sh- It's doing well, but it's become a different business.

    3. NKNithin Kamath2:00:37

       Yeah.

    4. PPPrashanth Prakash2:00:37

       And one of them relates to that different business, and the other one does not relate to it.

    5. KRKarthik Reddy2:00:42

       It's also sometimes, it could be that the, the CEO persona has evolved to something, and the number two or number three in, in hierarchy, for what it's worth, is not as motivated to continue doing the same thing or has become less relevant.

    6. NKNikhil Kamath2:00:59

       Just

36. 2:01:00 – 2:03:33

    Red Flags in Founders

    1. NKNikhil Kamath2:01:00

       one thing, one thing a person pitching to you does wrong, you would, like, shut off instantly.

    2. PPPrashanth Prakash2:01:08

       Over simplification of TAM.

    3. NKNikhil Kamath2:01:10

       Elaborate?

    4. PPPrashanth Prakash2:01:11

       Total addressable market, right? Over simplification. It means that person's homework is like-

    5. NKNikhil Kamath2:01:17

       He's saying India has one hundred and forty crore people. I'm selling shoes, I can sell to one hundred and forty crore people.

    6. PPPrashanth Prakash2:01:21

       No, no, no, no, no, no, it's not that bad. [laughing] I mean, they won't get a meeting, but I'm, I'm saying that they have not... I mean, okay, Agri and Allied Services-

    7. NKNikhil Kamath2:01:30

       Mm

    8. PPPrashanth Prakash2:01:30

       ... is a, uh, five hundred million, uh, five hundred billion market, right?... and he's selling, he or she is selling organic, uh, fresh we- uh, F&B in the market.

    9. NKNikhil Kamath2:01:45

       But I, I get your point, oversimplification of TAM. Next?

    10. RARajan Anandan2:01:49

        I, I would say, look, basically, if I don't say wow even once because of lack of insight.

    11. NKNikhil Kamath2:01:55

        Hmm. Can I say one? Overtly optimistic without voicing that the future is uncertain and all of these events can occur.

    12. RARajan Anandan2:02:05

        Yeah.

    13. PPPrashanth Prakash2:02:06

        Not pre... Yeah.

    14. NKNikhil Kamath2:02:07

        Next, Karthik.

    15. KRKarthik Reddy2:02:08

        Cases where I've seen founders sort of, uh, give no voice to anybody else on the call.

    16. NKNikhil Kamath2:02:17

        Hmm.

    17. KRKarthik Reddy2:02:17

        They bring people in as-

    18. RARajan Anandan2:02:18

        Yeah, that's true

    19. KRKarthik Reddy2:02:18

        ... theoretically, team or co-founders.

    20. NKNikhil Kamath2:02:20

        Hmm.

    21. KRKarthik Reddy2:02:21

        And, uh, basically, you feel like the others have nothing to share. It's the variant of a CTO problem equivalent. You need someone who, you know, can express that strong vision as well. And, uh, a lot of mistakes have been made because we've overestimated that individual's capability.

    22. NKNikhil Kamath2:02:40

        Hmm.

    23. KRKarthik Reddy2:02:41

        So I start, believe it or not, in a 20-minute introductory call, sometimes I will ask for-

    24. NKNikhil Kamath2:02:45

        Hmm

    25. KRKarthik Reddy2:02:46

        ... who owns how much?

    26. NKNikhil Kamath2:02:47

        Hmm. Do you think overconfident people are better off to deal with than under-confident people when starting a company? Because they will overcompensate.

    27. KRKarthik Reddy2:02:55

        Yeah, if I had to, if I had to pick one, I'd pick the overconfident.

    28. NKNikhil Kamath2:02:58

        Why?

    29. KRKarthik Reddy2:02:59

        So there has to be a will to say that, "I can conquer any mountain," right?

    30. NKNikhil Kamath2:03:03

        Mm-hmm.
37. 2:03:33 – 2:04:45

    Unraveling the Trends in Startup Funding

    1. NKNithin Kamath2:03:33

       much VC money has come into India, and we figured that number is sixty or seventy billion.

    2. PPPrashanth Prakash2:03:38

       See, the AUM at the, uh, in the VC is, uh, is roughly around sixty, sixty billion today.

    3. RARajan Anandan2:03:45

       I think the total startup funding is a lot more than that, right? Because, uh-

    4. PPPrashanth Prakash2:03:48

       Ah, so-

    5. NKNikhil Kamath2:03:49

       So we're leaving PEs and all out.

    6. RARajan Anandan2:03:50

       No, no, I'm not talking about PEs.

    7. NKNikhil Kamath2:03:52

       We're talking about venture capital.

    8. RARajan Anandan2:03:52

       I'm not talking about PEs, because a lot of capital also came from strategics. So if you look at the year 2021-

    9. NKNikhil Kamath2:03:58

       Mm-hmm

    10. RARajan Anandan2:03:58

        ... the total funding into Indian startups was over $40 billion.

    11. NKNikhil Kamath2:04:03

        Mm-hmm.

    12. RARajan Anandan2:04:03

        That was up from $10 billion in 2020.

    13. NKNikhil Kamath2:04:06

        Mm-hmm.

    14. RARajan Anandan2:04:07

        And 20- I mean, this depends on, like, which data, but 2019 was $14 billion, right? So the way to think about startup funding-

    15. PPPrashanth Prakash2:04:13

        Ah

    16. RARajan Anandan2:04:13

        ... which is largely VC-

    17. PPPrashanth Prakash2:04:14

        So, so that-

    18. RARajan Anandan2:04:15

        ... but also includes strategics, right?

    19. NKNithin Kamath2:04:16

        But that was Geo, I'm guessing, right, uh, in that 2021?

    20. KRKarthik Reddy2:04:18

        Yeah. Yeah. The, the, the-

    21. NKNithin Kamath2:04:20

        That fifteen-

    22. KRKarthik Reddy2:04:20

        The big ones are tucked into that.

    23. RARajan Anandan2:04:21

        Yeah, but that's $10 billion of that, right?

    24. PPPrashanth Prakash2:04:23

        $10 billion.

    25. RARajan Anandan2:04:23

        Right. So, so-

    26. PPPrashanth Prakash2:04:24

        So, so, see, and also, you know, what we are not counting is, we are saying AUM of Indian VCs, right? VCs in India. I think what-

    27. RARajan Anandan2:04:34

        That doesn't include SoftBank-

    28. PPPrashanth Prakash2:04:35

        So what, what-

    29. RARajan Anandan2:04:35

        ... it doesn't include Tiger, it doesn't include Kotu.

    30. PPPrashanth Prakash2:04:36

        What Rajan is saying is that there is AUM that is kind of quasi-allocated for India, but sitting outside.
38. 2:04:45 – 2:05:05

    Public vs. Private Markets: High Return Opportunity

    1. NKNikhil Kamath2:04:45

       market better than private markets?

    2. PPPrashanth Prakash2:04:48

       No.

    3. NKNikhil Kamath2:04:48

       Liquidity, cheaper multiples, maybe lesser growth.

    4. RARajan Anandan2:04:53

       For whom?

    5. NKNikhil Kamath2:04:53

       You know which side I am on.

    6. RARajan Anandan2:04:55

       For whom?

    7. NKNikhil Kamath2:04:55

       For money, blanket.

    8. RARajan Anandan2:04:57

       No, for investors, for founders?

    9. NKNikhil Kamath2:04:58

       For investors.

    10. RARajan Anandan2:04:59

        Privates.

    11. KRKarthik Reddy2:05:00

        Because that's where innovation is.

    12. NKNikhil Kamath2:05:02

        Okay. If I were to start a company today,

39. 2:05:05 – 2:06:04

    LLP, Partnerships & Pvt. Ltd. Explained

    1. NKNikhil Kamath2:05:05

       let's say I'm making something that we spoke about. We spoke about a drone com- drone company. Should I be an LLP, a partnership, or a private limited company? Pick one. Why?

    2. PPPrashanth Prakash2:05:17

       I think-

    3. KRKarthik Reddy2:05:17

       No, just keep it simple, private limited. You want to, you want to keep all options open in terms of taking additional capital, and it's-

    4. NKNikhil Kamath2:05:25

       Higher taxation, if it were to be profitable.

    5. NKNithin Kamath2:05:27

       No, but the thing is, there's no other option.

    6. KRKarthik Reddy2:05:29

       Yeah.

    7. NKNithin Kamath2:05:29

       If you want to raise capital, it has to be private limited.

    8. KRKarthik Reddy2:05:30

       Yeah. One is that, and second, I mean, look-

    9. NKNikhil Kamath2:05:33

       If we have to raise capital, best to be private limited.

    10. KRKarthik Reddy2:05:35

        Yeah.

    11. RARajan Anandan2:05:35

        You have to be.

    12. NKNikhil Kamath2:05:35

        If you ever intend to raise capital-

    13. RARajan Anandan2:05:37

        You have to be

    14. NKNikhil Kamath2:05:37

        ... I think that's not a insight which is easily available.

    15. KRKarthik Reddy2:05:41

        Yeah, I think, I think in lifestyle businesses which are oriented towards partnership or service revenue-

    16. PPPrashanth Prakash2:05:45

        Yeah

    17. KRKarthik Reddy2:05:45

        ... of one kind, then it makes a lot more sense to have an LLP or a proprietorship or whatever, because you intend to take that cap, that g- r- the profits, you know, into your own pocket, and, and then pay taxes. But in every other sense, when you have a secondary shareholder, you have to be private limited.

    18. NKNikhil Kamath2:06:03

        Okay. Is the

40. 2:06:04 – 2:08:03

    Tenure & Fees in the VC Universe

    1. NKNikhil Kamath2:06:04

       two-twenty model skewed? Does it misalign interest from stakeholder to venture capital guys? And is the seven-year tenure or the ten-year tenure too low? Answer it.

    2. PPPrashanth Prakash2:06:17

       I think the ten-year tenure is, for early-stage VCs, a necessity. And in, uh, markets like ours, I think it's, uh, more like ten plus two or ten plus three.

    3. NKNikhil Kamath2:06:28

       It is not as easy for a venture capital guy to make money as most people assume.

    4. RARajan Anandan2:06:33

       Absolutely.

    5. NKNikhil Kamath2:06:34

       You have to return significant value before you can start charging money.

    6. KRKarthik Reddy2:06:37

       The entrepreneurs that we, who win for us, make multiples and multiples of the money we make-

    7. NKNikhil Kamath2:06:43

       Hmm

    8. KRKarthik Reddy2:06:44

       ... and make it much faster than we make it.

    9. NKNikhil Kamath2:06:46

       Mm-hmm.

    10. KRKarthik Reddy2:06:46

        So ours is a patience game where you have to still average out ev- all your winners-

    11. NKNikhil Kamath2:06:50

        Mm-hmm

    12. KRKarthik Reddy2:06:50

        ... to see actually meaningful money, and comes right at the end.

    13. NKNikhil Kamath2:06:53

        Okay. Facts-

    14. NKNithin Kamath2:06:54

        Uh, uh, no, just one, I have just one question. So in the US, the, you know, like, we were... I was reading this article which said, over the last decade, the, the benchmark, Nasdaq, has outperformed the, the VC benchmark, right? So in a world like that, where you can actually buy an ETF for almost zero cost, do you think there'll be pressure on this two-twenty in the future? I mean, forget India, I'm just talking in the global, you know, in the US context.

    15. KRKarthik Reddy2:07:20

        So, so without getting into specifics, I think there are occasionally some funds who can charge even more than that.

    16. NKNithin Kamath2:07:24

        Correct, yeah.

    17. KRKarthik Reddy2:07:25

        And it comes, it comes only because there's repeated, uh, evidence of success and of beating those benchmarks.

    18. NKNithin Kamath2:07:31

        Right.

    19. KRKarthik Reddy2:07:31

        And that is a entitlement of the top quartile of the venture investors.

    20. RARajan Anandan2:07:35

        But top-performing funds have outperformed the Nasdaq.

    21. KRKarthik Reddy2:07:37

        Yeah, by a mile.

    22. RARajan Anandan2:07:38

        Yeah, of course.

    23. KRKarthik Reddy2:07:39

        By a mile.

    24. RARajan Anandan2:07:39

        Yeah, yeah.

    25. KRKarthik Reddy2:07:39

        Right, so I think it's a top quartile, uh, syndrome.

    26. NKNithin Kamath2:07:42

        Mm-hmm.

    27. KRKarthik Reddy2:07:42

        Everybody else, you have to give a chance for them to try-... So you can't suddenly give them a lower price and, and a lower cost structure-

    28. NKNikhil Kamath2:07:49

        Right

    29. KRKarthik Reddy2:07:49

        -and say beat Sequoia or Accel. How will they beat them? Right?

    30. NKNikhil Kamath2:07:53

        Right. Yeah.
41. 2:08:03 – 2:08:49

    SPACS Explained

    1. KRKarthik Reddy2:08:03

       and you're just making too much fee.

    2. NKNikhil Kamath2:08:04

       What about SPACs?

    3. SPSpeaker2:08:06

       How have the SPACs done?

    4. NKNikhil Kamath2:08:07

       Most of them have shut down.

    5. KRKarthik Reddy2:08:08

       They're terrible, actually.

    6. SPSpeaker2:08:09

       Yeah, so there you go.

    7. NKNikhil Kamath2:08:09

       Very, very-

    8. KRKarthik Reddy2:08:10

       For most assets, they're terrible.

    9. NKNikhil Kamath2:08:11

       It's, it's a gamble. Would anyone like to define SPAC in one sentence?

    10. KRKarthik Reddy2:08:16

        Special, Special Purpose Acquisition Company, usually where there's enough people willing to give the equivalent of a venture manager the ability to go and identify one or more assets to buy-

    11. NKNikhil Kamath2:08:27

        Bringing down the time taken

    12. KRKarthik Reddy2:08:28

        ... and do a roll-up, right? So the financing comes before knowing what they want to buy, and you're essentially giving incredible power to an operator or an investor to say that there are great ideas out there which are mature that I can buy. The problem is, most SPAC managers go and buy... There's, I think, there's a misalignment of interest, and they buy bad assets.

42. 2:08:49 – 2:09:20

    India vs. USA: The Battle of Fund Performance

    1. NKNikhil Kamath2:08:49

       How is India different from the US? Why are funds making a higher return in America than India?

    2. SPSpeaker2:08:54

       We're in a different point in our journey, right, as a country, and, uh, we have just got started in the VC ecosystem, where entrepreneurs are learning how to build, learning how to scale, learning how to IPO and return money. So unless-

    3. NKNikhil Kamath2:09:13

       Also, there is no exits and M&A as well.

    4. SPSpeaker2:09:15

       That's what, that's what, I, I mean, uh, just one M&A here and there can't build the ecosystem,

43. 2:09:20 – 2:13:46

    Secrets of IPOs & OFS

    1. SPSpeaker2:09:20

       right?

    2. NKNikhil Kamath2:09:20

       Okay, so this one is actually close to my heart. Uh, when IPOs are happening, like, I have a friend called Kiran from Biocon. She was telling me about her IPO when it happened, how it exponentially helped grow her business at a time when access to capital for her was only the IPO route at that scale. Why are all VC-funded companies of today not raising primary capital, but doing OFS and giving exits and secondary capital to previous investors, and thus dumping overpriced stuff onto unsuspecting retail investors like me?

    3. KRKarthik Reddy2:10:11

       So I agree with, uh, Nithin on this. I didn't know you share the same view publicly, but I think it's almost like a sin to do that with public investors.

    4. NKNikhil Kamath2:10:18

       Because everything has been OFS.

    5. KRKarthik Reddy2:10:20

       So I'll tell you what has happened. Basically, the private market was willing to buy-

    6. NKNikhil Kamath2:10:24

       Okay, sorry. OFS is offer for sale.

    7. KRKarthik Reddy2:10:25

       Offer for sale.

    8. NKNikhil Kamath2:10:25

       Secondary round, where you're not putting money into the company, but a previous investor is exiting to you.

    9. KRKarthik Reddy2:10:32

       So misalignment of interest, people thought they can get away with ridiculously priced IPOs in the public market.

    10. NKNikhil Kamath2:10:37

        But that, that was venture capital doing it.

    11. KRKarthik Reddy2:10:39

        Of course, of course.

    12. NKNikhil Kamath2:10:40

        Yeah.

    13. KRKarthik Reddy2:10:41

        I- When it comes to problems in India, it's-

    14. NKNikhil Kamath2:10:43

        Mm

    15. KRKarthik Reddy2:10:43

        ... nobody's fault, it's everybody's fault, huh?

    16. NKNikhil Kamath2:10:45

        Mm.

    17. KRKarthik Reddy2:10:45

        I'm not-- You can't just exempt the founders from it. They, if they really want to put down their foot, they have to. If they're so determined, don't raise stupid money.

    18. SPSpeaker2:10:53

        But the founders were in for the ride, too-

    19. KRKarthik Reddy2:10:55

        Yeah.

    20. SPSpeaker2:10:55

        In all these cases.

    21. KRKarthik Reddy2:10:56

        Don't raise stupid money.

    22. SPSpeaker2:10:57

        It's not just-

    23. KRKarthik Reddy2:10:57

        Don't make excuses of like-

    24. SPSpeaker2:10:59

        Yeah

    25. KRKarthik Reddy2:10:59

        ... you know, coming down to a patriotism point.

    26. NKNikhil Kamath2:11:00

        No, I'm not saying founders are not wrong.

    27. KRKarthik Reddy2:11:01

        No, I'm just saying-

    28. NKNikhil Kamath2:11:01

        I'm saying why were founders and venture capital wrong?

    29. KRKarthik Reddy2:11:02

        Yes, yes, yes. No, no, no, uh, uh, at, at some level, you're right.

    30. NKNikhil Kamath2:11:05

        Mm.
44. 2:13:46 – 2:14:48

    Are the VCs sector restricted?

    1. NKNikhil Kamath2:13:46

       in India?

    2. PPPrashanth Prakash2:13:48

       ... No, that's changing, right?

    3. RARajan Anandan2:13:49

       Well, it's not focused on what sector-

    4. PPPrashanth Prakash2:13:50

       I mean, now, uh-

    5. RARajan Anandan2:13:51

       Question is, what four sectors are we not focused on?

    6. NKNikhil Kamath2:13:53

       Like, for example, agri- agriculture gets very little venture capital.

    7. RARajan Anandan2:13:56

       No, agriculture is actually-

    8. PPPrashanth Prakash2:13:57

       They've done well.

    9. RARajan Anandan2:13:57

       There are a thousand agri-tech startups.

    10. NKNikhil Kamath2:13:59

        But relatively as a corpus of the world-

    11. PPPrashanth Prakash2:14:00

        Relatively, because I think, you-- See, it's al- it's always a question of supply of entrepreneurs-

    12. NKNikhil Kamath2:14:07

        Mm-hmm.

    13. PPPrashanth Prakash2:14:07

        -who have an intention to work in that space-

    14. NKNikhil Kamath2:14:11

        Mm-hmm.

    15. PPPrashanth Prakash2:14:12

        -and who relate to that space, and like I said, who want to go tap into that opportunity. So it's not like we'll get entrepreneurs and we'll not fund them.

    16. RARajan Anandan2:14:22

        Actually, India has among the most broad base-

    17. PPPrashanth Prakash2:14:24

        Mm-hmm.

    18. RARajan Anandan2:14:24

        -maybe next to China.

    19. PPPrashanth Prakash2:14:25

        Mm-hmm.

    20. RARajan Anandan2:14:26

        By far, much more broad base than the US or UK or Israel.

    21. NKNikhil Kamath2:14:30

        So there are a lot of sectors that we-

    22. RARajan Anandan2:14:31

        So many sectors

    23. NKNikhil Kamath2:14:31

        ... invest in are US guys like?

    24. RARajan Anandan2:14:33

        Yeah, and they will know about consumer brands.

    25. KRKarthik Reddy2:14:35

        And probably, outside of, let's say, biotech, life sciences, a few of those-

    26. RARajan Anandan2:14:37

        Yeah

    27. KRKarthik Reddy2:14:37

        ... really deep sectors, we probably have, for an ecosystem this young, we have sector-specific VCs in every sector. There are two or three funds which just focus

45. 2:14:48 – 2:16:47

    Variables in the VC World

    1. KRKarthik Reddy2:14:48

       on agri.

    2. NKNikhil Kamath2:14:48

       What is the correlation between public markets and private markets? Is one leading the other? Public markets are doing well-

    3. RARajan Anandan2:14:54

       Public markets lead the private market.

    4. NKNikhil Kamath2:14:55

       Private markets tend to do well? Because you have exited IPO, right?

    5. RARajan Anandan2:14:58

       Correct.

    6. NKNikhil Kamath2:14:59

       OFS. [laughing] Prashant brought this up earlier tonight, that only two companies have raised more than fifty million from external investors this year.

    7. PPPrashanth Prakash2:15:09

       No, no, no. Two companies-

    8. KRKarthik Reddy2:15:11

       Hmm

    9. PPPrashanth Prakash2:15:11

       ... have raised more than forty, fifty bucks.

    10. KRKarthik Reddy2:15:13

        Full calendar year.

    11. RARajan Anandan2:15:15

        Fifty million? No, no, more than that. Lenskart raised, what? Five hundred million.

    12. KRKarthik Reddy2:15:18

        No, that's a pri- secondary.

    13. PPPrashanth Prakash2:15:19

        No, no, no, no. I'm, I'm talking about external-

    14. NKNikhil Kamath2:15:21

        From new investors.

    15. PPPrashanth Prakash2:15:22

        From new external ex... New externally led rounds-

    16. KRKarthik Reddy2:15:25

        Wow

    17. PPPrashanth Prakash2:15:25

        ... there's been two this year. So it's a, it's a, it's a tough market in terms of-

    18. NKNikhil Kamath2:15:30

        So doesn't that mean chaos in VC world? Like, nothing is happening.

    19. RARajan Anandan2:15:33

        This is the best time, because you know what's happening is-

    20. KRKarthik Reddy2:15:37

        Clean ups and stability.

    21. RARajan Anandan2:15:38

        No, not only that, companies are focused on what they should be-

    22. KRKarthik Reddy2:15:40

        Yeah, yeah

    23. RARajan Anandan2:15:40

        ... which is to get profitable.

    24. NKNikhil Kamath2:15:41

        Do you think India-focused funds are much larger than they should be? Like, for example, if Prashant were to only have hundred million dollars to allocate to India, would you perform significantly better?

    25. PPPrashanth Prakash2:15:52

        I think if you're in the early stage component of the fund, fund seed to scale, right? So you, we don't stop at supporting the company just for seed. And like Karthik was talking about this-

    26. KRKarthik Reddy2:16:04

        That's how we've grown

    27. PPPrashanth Prakash2:16:05

        ... being able to, being able to provide the entire continuum of, uh, support to the company, I think is something entrepreneurs value. And they want you to be with them, uh, for a reasonable part of the early cycle, because, uh, it's not easy all... Uh, I mean, the, say, the there have been periods where we have had great funds who can follow on in Series B and C in India, and there have been periods where there have not been, uh, where, where there's been a void in that market. So I think it's, if, if you want to support your companies and, and make sure that they have that capital continuity, I think it's good to have a certain scale.

46. 2:16:47 – 2:18:19

    Jobs in VC World

    1. NKNikhil Kamath2:16:47

       If I were to be starting off in the work ecosystem today, and I want a job with you guys in a venture capital fund, what do I need to do? What do I need to study? What experience do I need?

    2. KRKarthik Reddy2:17:00

       Usually, it'll help you if you've worked in, uh, in the startup ecosystem.

    3. NKNikhil Kamath2:17:04

       Yeah?

    4. KRKarthik Reddy2:17:05

       I think so.

    5. NKNikhil Kamath2:17:05

       So if I worked in a fintech startup, you would be more likely to hire me?

    6. RARajan Anandan2:17:09

       We just hired somebody.

    7. NKNikhil Kamath2:17:10

       Yeah.

    8. KRKarthik Reddy2:17:10

       Yeah.

    9. RARajan Anandan2:17:11

       She worked at a fintech startup.

    10. NKNikhil Kamath2:17:12

        And what is the typical pays when you start off at a VC firm?

    11. RARajan Anandan2:17:15

        Depends on whether you're an analyst, associate-

    12. NKNikhil Kamath2:17:17

        The first, first level at the bottom.

    13. PPPrashanth Prakash2:17:18

        No, you're an associate, right?

    14. NKNikhil Kamath2:17:20

        Yeah.

    15. PPPrashanth Prakash2:17:21

        You're an associate, I think you start somewhere in the, uh, sixty, seventy lakh.

    16. NKNikhil Kamath2:17:26

        What are you saying? Really?

    17. KRKarthik Reddy2:17:28

        Yeah. For us, it'll be half that number.

    18. RARajan Anandan2:17:30

        It depends on whether you're an analyst or an associate, no?

    19. NKNikhil Kamath2:17:32

        Like, it's, it'll vary across different firms.

    20. RARajan Anandan2:17:35

        Most firms have a two-year program called an analyst program, which is paid a lot less.

    21. KRKarthik Reddy2:17:38

        Which is lower.

    22. RARajan Anandan2:17:39

        Much lower. So that's where most people start.

    23. NKNikhil Kamath2:17:41

        And even there, you would look for experience in a startup?

    24. PPPrashanth Prakash2:17:43

        No, no, no.

    25. RARajan Anandan2:17:44

        I mean, the analyst program, our profile is usually-

    26. KRKarthik Reddy2:17:46

        There you just look for smarts, who's actually figured out how to work in a work environment.

    27. NKNikhil Kamath2:17:51

        Is like-

    28. KRKarthik Reddy2:17:51

        You don't want to train them on that.

    29. NKNikhil Kamath2:17:52

        Is like a fancy education, a prerequisite?

    30. PPPrashanth Prakash2:17:54

        No.
47. 2:18:19 – 2:24:00

    Capitalism, Wealth Inequality & Gen-Z

    1. NKNikhil Kamath2:18:19

       It's work from home, AI, uh, woke culture, society inculcating a certain level of, I would say, distrust in the capitalistic way of life. All of these put together, if there is one big change you see in the way we live and work, next few years, what could it be?

    2. PPPrashanth Prakash2:18:48

       I think, uh, most countries, as they've gotten richer, and I think they found it difficult to manage this idea of good capitalism and this whole trickle down in terms of that, when the rich get richer, the poor don't get poorer. But I think, uh, we, we have that challenge. I, I don't know if you have an answer for that-

    3. NKNikhil Kamath2:19:16

       Mm-hmm

    4. PPPrashanth Prakash2:19:16

       ... but I think, uh, we, we will have challenges.

    5. NKNikhil Kamath2:19:19

       Income inequality, wealth inequality.

    6. PPPrashanth Prakash2:19:21

       Wealth, wealth inequality.

    7. NKNikhil Kamath2:19:22

       Another way of putting it, you're saying asset prices are inflating faster than wages in the world.

    8. PPPrashanth Prakash2:19:26

       Wages in the world, and few people can... The good can afford better and better products.

    9. NKNikhil Kamath2:19:30

       Whoever has assets will continue to get richer.

    10. RARajan Anandan2:19:33

        Yeah, I think consumers will, uh, continue to seek out experiences more and more. You see that now with the younger Gen Z, et cetera, right? They don't own homes, they don't own cars, and I think that trend will just continue. So if you're an entrepreneur building-

    11. SPSpeaker2:19:49

        ... looking at, you know, especially focused on consumer, looking to build on that great experiences, right? I think is, uh, you can't go wrong. Like some of our best performing companies are global travel companies.

    12. KRKarthik Reddy2:20:00

        I think it becomes even more important, um, to establish what Rajan referenced a while ago around what your value system is and sticking to it, not trying to cater to all of the elements that you spoke about. Uh, you can't cater to a WFH person if you believe it's WFO, right? You can't fake woke culture if you don't believe in it. Everything changes. The way you select people, the way you build organizational culture, um, is tuned to your core beliefs, right? So all of these are impediments in how quickly you can scale. I think you're much happier with the organization you've built ten years down the line. Um, so at least building a small venture firm, I think this has become very important for us.

    13. NKNikhil Kamath2:20:48

        No, but I think I'm actually a little optimistic here. Uh, I think the, the, the newer generation are gonna question the true cost of everything. In a sense, I think the problem with gen- this generation, right, the, the two thousand to now, whatever, twenty, I think the capitalism had taken a very kind of an ugly side, where you're growing at any cost, right? I mean, you don't care what's happening, you know. I mean, you just have to grow at whatever cost. But the younger generation, like, because they don't want to own material things, they want to go travel, they want to experience things. I think they'll be less capitalistic than the generation that went by. Businesses, entrepreneurs who are building for that world, for that audience, will be able to stand out. There's something that I really, really believe in. I think subconsciously, society is ignoring so much in this drama of virtue signaling, which is happening in the ecosystem. I feel many people are pretending to be unnaturally virtuous, unnaturally altruistic, selfless, whereas they truly are not. Uh, that pretense worked in the previous generation. I can give you many examples, but I wouldn't like to, by lack of access, because people could not see what a person was doing at every point of time. I think in this generation and the next, uh, to recognize our shadow personalities, to recognize that we are all human and be authentic about it, be authentically greedy, authentically capitalistic, I think that will be the cool of tomorrow. And I hope more people think like this, because if not for that, you know, we can all sit and complain about income inequality, but income inequality has not happened necessarily because of the ecosystem, but because of human nature. If I were to divide all the money in the, on the planet equally amongst everybody, tomorrow, one will work harder than another. Day after tomorrow, one will be more skilled at a certain thing. And we will come back to where we are today, maybe not in five, ten years, but in fifty years or a hundred years, because that is the very nature of us being human, and that is what makes us thrive to begin with. So I don't think we should look down on the anomalies of capitalism. I think they need to be respected. Imagine an alternate world where every company is run like Air India was once run. I don't think it would be net, net better for the productivity-

    14. SPSpeaker2:23:37

        No, of course-

    15. NKNikhil Kamath2:23:37

        ... of the world at large.

    16. SPSpeaker2:23:38

        I've seen that.

    17. NKNikhil Kamath2:23:39

        I don't think socialism works at all, and we have more than enough precedent of that.

    18. SPSpeaker2:23:44

        Right.

    19. NKNikhil Kamath2:23:44

        I think capitalism has to be appreciated, and that probably is the most likely scenario in which our country can get lucky and go towards that $5 trillion, $10 trillion dollar eco- economy in the fastest way possible. Okay, last leg of today.

48. 2:24:00 – 2:28:58

    Third Edition: Vote for a Charity & create a change!

    1. NKNikhil Kamath2:24:00

       [laughing]

    2. SPSpeaker2:24:00

       [laughing] Oh, we have one more?

    3. NKNikhil Kamath2:24:02

       Charity.

    4. SPSpeaker2:24:03

       Oh, right. Okay.

    5. NKNikhil Kamath2:24:03

       Yeah, last leg.

    6. SPSpeaker2:24:04

       Uh-huh.

    7. NKNikhil Kamath2:24:05

       Okay, so when we started this show, which was not a long time ago, uh, like, see, we don't do very dramatic, entertaining things. Like, it's not like, you know, I want to call you here and talk about Byju's and BharatPe. None of what we did. Uh, the very intrinsic reason for doing this is the summary and everything that we discussed today is not available for a student graduating college in India today, but this is a prerequisite for somebody starting a company. And, and a facet of this-

    8. SPSpeaker2:24:40

       Yes

    9. NKNikhil Kamath2:24:40

       ... which we started a couple of ep- episodes ago, uh, I would not even like to say charity. Uh, firstly, I don't believe charity is altruistic. I feel like everything has subtext and context, which I might not be able to speak about in a manner which will be comprehendible by many, many people, including myself, in most cases. But I think charity is done from a place in your heart where your morality is being appeased, and we are all each triggered by different virtues in life, morality being a very big one. So let me call it change. Uh, we also hope this episode can bring about change in society and get more people to contribute in their particular societies. So what we do at the end of every show, each of you commit to donate a certain amount of money. Uh, I don't collect the money. You donate directly to the charity which gets picked, but we put up five options on a poll online, on YouTube and social media, and in a very democratic manner, people will vote for it. Whichever charity wins amongst the ones that you guys have picked will get the sum culmination of that money.... So each of you could maybe suggest an amount that you would like to donate to whichever charity, and name a charity as well to put up in the poll.

    10. PPPrashanth Prakash2:26:06

        Since we spoke so much about climate, and I kind of, I'm all, all, all in there-

    11. NKNikhil Kamath2:26:12

        Yeah.

    12. PPPrashanth Prakash2:26:13

        Uh, I'd like to, uh, kind of pick ACT Environment.

    13. NKNikhil Kamath2:26:18

        Okay.

    14. PPPrashanth Prakash2:26:18

        ACT is something a lot of the VCs here-

    15. NKNikhil Kamath2:26:21

        Yeah, yeah

    16. PPPrashanth Prakash2:26:21

        ... have been part of.

    17. NKNikhil Kamath2:26:22

        Yeah.

    18. PPPrashanth Prakash2:26:22

        And, uh, I will commit, of course, I've already committed to ACT. I'll commit an additional twenty-five lakhs to ACT.

    19. NKNikhil Kamath2:26:30

        Okay.

    20. PPPrashanth Prakash2:26:30

        Uh, new capital.

    21. NKNikhil Kamath2:26:32

        Okay.

    22. PPPrashanth Prakash2:26:32

        And, uh, ACT, uh, Environment, uh, focuses on air, water, waste-

    23. NKNikhil Kamath2:26:40

        Yeah

    24. PPPrashanth Prakash2:26:40

        ... and land use. All huge problems for India, and, uh, as we become a lot larger and larger economy, uh, we, we, we got to take care of some of these.

    25. NKNikhil Kamath2:26:50

        Rajan, next.

    26. RARajan Anandan2:26:51

        Yeah, so, uh, the charity is, uh, a small charity in Delhi called the Smile Foundation.

    27. NKNikhil Kamath2:26:56

        Mm-hmm.

    28. RARajan Anandan2:26:57

        Focuses on, uh, children-

    29. NKNikhil Kamath2:26:59

        Mm-hmm

    30. RARajan Anandan2:27:00

        ... and, uh, helps them on health and education.
49. 2:28:58 – 2:29:28

    Enjoy Some Bloopers

    1. NKNikhil Kamath2:29:00

       Dude, you got four more.

    2. NKNithin Kamath2:29:02

       Then I have forty more here. What are you saying?

    3. NKNikhil Kamath2:29:04

       Huh?

    4. NKNithin Kamath2:29:05

       No, no, no, no, no worries.

    5. NKNikhil Kamath2:29:07

       Ah.

    6. NKNithin Kamath2:29:07

       No, I'm joking. [laughing]

    7. PPPrashanth Prakash2:29:08

       [laughing] Next time I'm going to ask you, how long is this podcast?

    8. RARajan Anandan2:29:15

       [laughing] It's not perfect enough.

    9. NKNikhil Kamath2:29:17

       We're just like... [laughing]

    10. KRKarthik Reddy2:29:20

        Rajan is wondering, like, "What did I sign up for?" [laughing]

    11. RARajan Anandan2:29:23

        Unique experience. Thanks to the crew, yeah. [laughing]

    12. NKNithin Kamath2:29:25

        This is like a proper test of neuroplasticity.

50. 2:29:28 – 2:29:39

    Outro

    1. NKNikhil Kamath2:29:29

       [upbeat music] Hi, I'm Nikhil Kamath. I'd love to know what you thought of the episode. Uh, comment, like, and subscribe, and thank you for watching.

Episode duration: 2:29:39