Startup Mentor, Investor and Advisor Sanjay Anandram chats with Amit Somani, Managing Partner Prime Venture Partners.
They chat about entrepreneurship, how to think about your startup idea, culture and navigating through challenges.
Sanjay Anandaram has spent over 2 decades as an IT industry executive, an entrepreneur, a VC, an advisor to early stage funds, start up mentor and teacher. He’s a founding partner of JumpStartUp, an early stage VC fund set up to invest in technology and technology enabled businesses that leveraged India.
Read full podcast transcript below
Amit Somani 0:22
Good afternoon. This is Amit Somani, managing partner at Prime Venture Partners, an early stage VC fund in Bangalore. Today we have the honor and privilege of having Sanjay Anandaram with us. He’s been in the Indian startup ecosystem, for the last 30 plus years, both as an entrepreneur and investor, a mentor, and advisor. He’s also got many other accolades, which will take a while to go through. But he has taught at IM Bangalore, at INSEAD, amongst many other things. So really look forward to this podcast. Welcome to the podcast. Sanjay,
Sanjay Anandaram 0:54
Thank you, Amit. Thanks for having me.
Amit Somani 0:56
So, Sanjay, one of the quotes of yours that I’ve used innumerable number of times. With attribution is, a feature is not a product, a product is not a company, a company is not necessarily a business and a business is not necessarily an institution. Maybe let’s start there since I love that quote, and I’ve used it a lot in terms of, you know how should early stage founders or entrepreneurs who want to start new companies think about this quote when looking for good ideas?
Sanjay Anandaram 1:22
Right. If you think about any business that gets started, it starts with a vision, what is it that the entrepreneur wishes to achieve, it could be like you know Bill Gates’s vision of a computer on every desktop, that’s like a huge humongous vision. So, you start with your end point, your end goal, which can hopefully keep changing, and then you kind of roll it back, you telescope it backwards to where you currently are, and then figure out, what are the steps you need to take to get there. Now, what remains constant on this journey is the values and culture of the organization that you wish to create because, those can’t get grafted onto the company later on. It’s part of the DNA of the founding team, it’s part of the kind of people you hire, the policies that you have, the kinds of customer interactions that you have, and overall engagement with a larger stakeholder ecosystem. So, it’s a very critical element, that essentially defines who you are, as a person, as a company, as a group of people, as well as your interactions with the outside world. So, when we say for a startup, I’m doing a company, the question that arises is, even if you think about it, every single small business in the world, is in the business of selling something for more money, than what it takes to produce it. “A pan Wallah does the same thing and so does the guy on a pushcart, who’s selling vada-pao.” So, that’s exactly the business that every person is doing. So what differentiates them from all the others. There are the obvious things like scale, like team, like technology, the appropriate business model, etc, etc, etc. But as you start making progress on that continuum from a just a feature that soon gets absorbed into a product, and then the product becomes lets say a small revenue generating business, there are issues of governance that become important. There are issues about processes that become important. There are issues about culture, issues, about values about how you interact with the larger community around you. When we say people are our greatest asset, the acid test of that is every day, your greatest assets, leave your company and go home. Unlike the rest of the assets. People are the only assets that don’t depreciate, but can certainly appreciate. So, what is it that you’re doing from a people treatment standpoint, that ensures, that you actually respect the value of these assets. So, you’ll notice that as you journey through this continuum left to right, it is from a feature to a institution, the qualitative aspects of what it takes to create this organization, start gaining a lot more significance and a lot more importance as the company makes that journey. Initially, it’s all about the tech, it’s all about trying to solve a quick and dirty problem, getting in some initial revenue and customer traction, all of that. That by itself doesn’t lend itself to creating an institution, an institution transcends time, it leaves behind a legacy, there is a certain way in which you do things. So even today, when somebody says this person is a Google person, or a Microsoft person or Reliance person or an Infosys person, long after that person has left those companies, it is the culture, it is the way of doing things, is the way of thinking about problems. It is the attitude. It’s the values, all of these transcend time, and in many cases they transcend space as well. And I remember back in the 80s, GE was the dominant industrial conglomerate around the world. Jack Welch was the most admired Chairman etc, etc. And the point, at that point was, he’s a GE person, he’s an HP person, right? And that defined who the individual was. In fact, one of the famous books of the 80s was a book called “The IBM Way”. It was a culture, a way of doing things. So, these are all great examples of how companies that survive 100 years, transcend space, transcend time, because of the intangible assets, manifested through their culture, the values, the way they treat people, the way they interact with the larger stakeholders, that actually defines them. So it’s very important, assuming entrepreneurs want to create the long term value, to learn to start thinking on those parameters.
Amit Somani 5:39
Absolutely! So, let me peel that apart. Couple of things come to mind. The very first is, as the cost of building a product or a feature or even a company has come down. There’s been a lot more ability to experiment. So, a lot of people, like Paul Graham and others would say, “Don’t worry about it, build something that you want, build something that people want. Don’t think about everything else.” Yes, obviously some company ethos, your own values all that matter. But, in the very-very initial stages, you’re like, two engineers out of, engineering college and you’re dabbling in some idea. How do you know at that point, that you have the kernel of something that could expand eventually, into becoming a business or a company or so on. So, that is one part of the question. And the second part of the question is going to be around, just culture and ethos, but let’s start from feature to product.
Sanjay Anandaram 6:28
Yeah! So, the kernel of the idea of building stuff that subsequently over a few iterations becomes an institution or an organization, is actually within the founding team itself. Meaning the DNA of the founding team essentially manifests itself, over time and all through multiple morphings, into the value system of the organization. So therefore, to be able to express it in a form that is tangible. In other words, how do I manifest values, culture, attitudes, ways of doing things, processes, the treatment of people, conflict management respect etc etc. When it is intangible, but the tangible manifestation of that is quote unquote encapsulated in the culture. So, the point being, all of this cannot be grafted, it is that which is natural to the founding team. So, one should not try and be something that you are not, be who you are, be honest. So, the cognitive dissonance within the founding team reduces. And if you are saying, Look, I’m building this company to make money and shitloads of money very quickly. Nothing wrong with it, as long as you’re clear about it, as long as you’re honest about it, and then go about to make that happen. On the other hand, if you’re saying, Look, I’m really building something as a legacy that will last 100 years even after I as a founder disappear. The approach is very different.
Amit Somani 7:57
Sanjay Anandaram 7:57
Again, so the honesty of purpose, the integrity of your approach, the discipline of putting the systems in place to make it happen, that is more important. To make that happen, Amit you need to be self aware. That’s important in other words, I am not swayed by what I read, I see because Techcrunch said it or Paul Graham said it or some other person said it. Is this what I want to do because after all, the company is a vehicle for my dream. It’s not a vehicle for anybody else’s dream.
Amit Somani 8:29
I’m just going to invent a new acronym on this podcast, founder mission fit. At prime we often talk about founder market fit, saying Sanjay would be perfect for this kind of market. Amit might be better for that kind of market. Yeah, definitely inspired from product market fit. Now as a founder-mission, founder-value fit.
Sanjay Anandaram 8:47
It’s a wonderful term.
Amit Somani 8:49
So, we already invented one term on the podcast. So, talking little bit about history, and particularly in the Indian startup ecosystem. Maybe just in the last 20 years, things have changed quite a bit and evolved for the better. So, how do you compare the evolution of the Indian entrepreneur? You love doing stuff at the early stage. So, how have you seen that evolve, particularly between, say last two decades, I guess now we are in 2020s.
Sanjay Anandaram 9:15
Yeah! So, initially, it used to be that there was a lot of ignorance. In other words, the entrepreneur wanted to be an entrepreneur, without quite knowing what that meant. So and I’m talking, I’m restricting myself largely to the world of startups as we know it now. I’m not talking about traditional businesses that have been passed through families and things of that kind. I’m talking about the educated middle class, Indian, who became an entrepreneur out of choice. till that point, there was an entrepreneur out of necessity or entrepreneur because it was part of a family heritage. I’m talking about those who become entrepreneurs out of choice because I’m educated, I’m aware I want to make a difference, I want to solve a problem etc. those kinds of people. About the turn of the century, you had a situation where ignorance was very high. Silicon Valley had burst on the scene, Y2K had happened, Indians were all over Silicon Valley, etc, etc. And that was the first wave of entrepreneurs in a sense that emerged in India. But they didn’t quite know what it meant. What was a startup? What’s a stock option? What is venture capital? How do I do sales and marketing when I don’t have any money? How much equity do I need to give? What is equity? What’s a convertible note? And 250 other questions. And along the way, people bumbled, figured out, read books, met people, talked, events, conferences, all the rest of it, and figured out stuff. That was a time just Incidentally. I started a magazine at the time. In 1999, to cater to this group of people and educate them on all of these things. And that was how, it used to be those days. So, the first set of early venture capital funds, Silicon Valley style funds, emerged in that era. So the VCs were learning entrepreneurs were learning, there was no ecosystem around you. So the funding value chain didn’t exist. There were no real customers, all of that. So what you did was you essentially did a lot of, a concept arbitrage, meaning it worked overseas, some concept, I will take that and implement it here. It was the second iteration of what earlier used to be a labor arbitrage. I’ll do the same thing, but at a lower cost out of India. So, these are the two kinds of predominant things that took place. I remember writing a piece at that time on something called the birth of a micro multinational. Which was what a startup was, you had a startup out of Silicon Valley, there’s one founder who’s a White Caucasian, you another founder was an Indian guy who did manufacturing out of China and you sold to customers around the world. Which is exactly what a multinational does except with regard to diminished size and so on. So that was the environment those days. Look at entrepreneurs now, Which is really the interesting thing, there have been almost two or three iterations since then. And today, if you look at the entrepreneurs, significantly more knowledgeable, significantly more aware, thanks to technology, thanks to the media, thanks to travel and a host of other things. And the fact that today, you have a market, that is in India itself. Those days, there was no market in India for a variety of reasons. So today, you can build a business in India for Indians. You don’t need to necessarily look outside. Second is the entire B2B category is now looking like it’s a big real opportunity out there. 3rd is that it’s cross sectoral. It’s not restricted just to, let say, BFSI or just to education or travel. You can clearly see multiple sectors of the economy, showing promise, with regard to absorbing technology, absorbing offerings from young companies. And then the funding value chain the continuum right from today. You haven’t very defined angel investor segment, seed stage later stage, public markets and venture debt, all of that, which was just absolutely conspicuous by its absence in the years earlier. So that’s another big plus. Third is availability of talent. You have entrepreneurs and executives today, who’ve gone through, at least a couple of rounds, of quote-unquote, what I would say a life cycle of a startup. A startup, may have survived for three years or five years, person steps out, does another company or joins a large corporate, leaves the corporate comes back into the startup world, you’ve seeing a lot of that happen. So there’s a lot of talent availability, talent that comes out of the multinationals, the Googles, Microsoft’s of the world, funding value chain, and all the other things I talked about. That is the big difference and that mix, and the convergence of talent, opportunity, capital, regulation, is just explosive. And I think we’re right there.
Amit Somani 13:58
How about the entrepreneurs, the themselves, like what are the new sets of achilles heel is a climate call? What used to be ignorance back then, or notion for understanding what unit economics are a bit Dark Sector versus a five, seven years ago? Like what are the things to watch out for? if you’re a young entrepreneur or even a growing company entrepreneur now, like, what are two three things you would say, Hey, watch out for this, this is the new challenge.
Sanjay Anandaram 14:22
Two quick points I’d make, the rest of it is, i think fairly sort of standard across time. One is the earlier generation of entrepreneurs. When I say earlier, I’m talking about 5,7,8 years back. That generation of entrepreneurs were essentially, the first generation of digital natives in India, who sat behind a computer screen and found customers and created in offerings. That group has never walked a street, to sell to physical world customers. And in the B2B world, you have no recourse But to do that. That experience is not there. And because that experience is not there, facing rejection, understanding how to navigate a large or mid sized enterprise, the buying behavior of these companies, so these become important. So that’s the first point, understanding that. Second is capital availability has distorted expectations and aspirations. Because I have a lot of capital, I think I can do a lot of things that don’t require attention and diligence and frugality. I can throw money, hire people, throw money, change business models, throw money, build technology, all of that. Which is not the way that you would want to build a company, which goes back to the earlier point about what kind of a company, do you really want to build. So, these are the two important things for the person to think through.
Amit Somani 15:45
Very interesting! So Sanjay, talking about this hot new buzzword, which has been there for ages called coaching. Last year, I read this book Trillion Dollar Coach by Alan Eagle, Eric Schmidt, the former CEO of Google, and Of course, I’ve had many successful executive coaching relationships, where I’ve been the coachee. I’ve also coach people at better people, but you are known as one of the best mentors in Bangalore, if not in India, certainly in the tech ecosystem. So, can you elaborate a little bit on this? Mentoring coaching, what does it mean? How do you figure out as an entrepreneur, founder or CEO, whether you’re ready for it? etc?
Sanjay Anandaram 16:23
That’s a very interesting question. Because, it’s like this in the Indian tradition, “a shishya finds a guru. The Guru never finds a shishya.” So it’s very important. And so what does it mean? It means that self awareness is an important prerequisite for a founder or entrepreneur, to determine what his or her limitations are, and where does he or she need help? And the help can be on multiple dimensions. So it starts with that self awareness. And a lot of people don’t have it when they start, but they figure it out as they make progress. And I’ve had situations where people come make a presentation. And along the way, they say, you know what, I think I need a CEO. And I’m not good at this, or I’m not interested in this. I don’t want to run operations. I don’t want to keep looking at numbers. But my interest is actually going out and defining a vision or a roadmap for the company, whatever the case may be. Ultimately, if you distill it out, it comes from awareness of what is my interest? What is it I wish to do? Where do I want to see this entity go? And obviously, it’s not easy to do. It’s really-really emotional, it’s very hard. It’s exactly that of the pain that a young mother feels when she has to take the kids to first Montessori and then to kindergarten and then subsequently to school. You’ll find the parents sitting there outside the school, sitting there, making sure that teacher is taking care of every single piece, and then all of that. So, its exactly how a founder feeds. And it’s very-very understandable. So, therefore the important thing, like I said, A is this self awareness piece. Second, there has to be honesty of purpose, meaning, the founder should be clear about, you know what, this is where my boundary ends, I’m not capable, competent, knowledgeable, experienced, to take it to the next stage or the next phase. And be open and talk about it. Honestly, again, it’s not easy. This is where the role of the mentor comes in. Creating a environment where the founder is unashamed, of being vulnerable, unashamed of opening up and speaking, and saying, Look, I’m screwed. I don’t know how to handle this. But, my best friend and I started this company. And now, I just don’t think he’s good enough. How do I tell him? How do I handle it? Which is a thermos and quarter type problem, okay? It’s a dilemma. It could be ethical, it could be moral, it could be something else. So the point being again, Understanding that I’m facing conflict, understanding that I’m unable to resolve it, and yet feeling comfortable and safe in the presence of someone to be able to talk about it. And therefore the reciprocal relationship is important. In other words, the mentor again, has to open up and feel that yes, I need to be able to speak with this entrepreneur and give them the environment in which they can be themselves. So that’s a very important element that comes. The third element that is critical to this whole relationship, big piece is that the founder, need not follow, need not listen to everything that the mentor says. And therefore there should not be an ego problem from the mentor side, saying, “Hey! look, I had suggested the following things to the entrepreneur. And look, that person has rejected nine of them and just done only one.” Which is a ego issue that the mentor needs to let go off and saying, look, at the end of the day, it is the journey that has to be taken by the founder. It is not me walking a surrogate journey, but, I have to enable the entrepreneur to have a successful journey. And therefore, whatever I believe is the appropriate messaging and the help and assistance, I need to provide that without my ego being attached to it. So that is a very critical element from the mentor’s standpoint. Then you’ll find another situation where you have the tendency to either do some back seat driving, or to say things like I told you so. Which again, is an element of the ego. So letting go of the ego while being dispassionate in rendering advice is a very important thing. So it is in a way, a “jugalbandi” that has to work in perfect consonants for the ideal mentoring thing. There are other ways to do this, which is let’s say a more professional, almost like a shrink would do it, in a typical couch based setting, therapy type setting. Where there is a pie, you’ve got one hour of time you come in last time, we talked about this conflict, that conflict, this is it okay now? Where do you want to pick up the thread? It’s a very different kind of an approach. My bias is the first type, the non therapy kind of model works for me. On the coaching front. Yes, there are lots of organizations and excellent coaches and all of that. But each has a model, that works for them. I don’t believe this is a standardized, scalable, templatized kind of a model it’s not, it’s very person dependent, it’s context sensitive, and therefore, one has to be sensitive to that.
Amit Somani 21:43
So very quick tips on how do you improve your self awareness quotient, before you get into a formal mentoring or coaching relationship, any, like 360 degree surveys is something that I have used that has worked well for me but any other simple tips?
Sanjay Anandaram 21:57
What I have found that works, because I believe that the answers to everything ultimately lay within us. Either we do not ask the questions, or we are afraid of the answers. That is the reason we do not pursue it further. So can we moment we find that there’s conflict, there is stress. And each one of us knows when we are stressed and there is conflict in our heads. We are tense, we bark at people, we kind of, feel very abrupt and angry and all of that. And the question then is, Can I sit down and ask myself these questions in an honest way? In other words, Can I be honest with myself? If I cannot do that, then there is no mentoring that can help you. This is my personal view. The second thing that arises out of this is, if I therefore I’m honest with myself, a large percentage of the issues and problems that I think I have, can be easily solved, because now I’m aware of these issues and I’m willing to own up to them. The other Part of it is when I go talk to people, and I get feedback, which is the 360 degree thing that you have talked about, and I’ve talked to a variety of people, and therefore, that’s always a good thing. It’s good measure of how others perceive you, in many ways, again, now how you take that feedback is a function of how receptive you are to feedback in the first place. And you can only be receptive to feedback, if there is a self awareness. And you have self awareness in my view is by being honest with yourself and saying, Yes, I want to change, I want to know, I want to figure out where I am, why am I getting stressed out? Why am I getting angry? Is it really such a big deal as I’m imagining it to be? All of those kinds of issues. And that’s very-very important real words, because we don’t spend adequate time with ourselves. We are all lost in activities. And activity is not an outcome. That’s an important thing to have a sense of distinction in our minds.
Amit Somani 23:57
Sounds great, very fascinating. We could go on and on but the Let me switch gears and talk a little bit about the next decade or so for India. So we are at about $1800-2,000, GDP per capita, China just last week touched $10,000. And obviously, while we’re all building interesting companies, new models, digital mobile, smartphones, etc. How are we going to build large sustainable companies here? And what are you visualize the India macros to be over the next decade or so?
Sanjay Anandaram 24:27
I’m very bullish on India. Let me first make that statement up front. Why am I bullish in India? I think, this is a country that is going through amazing structural changes. Let’s forget the topic of demographic dividend as flogged to death and all of that. Structural change, i mean, from a taxation standpoint, GST is a big thing. Like in everything in India, it’s a work in progress. Nothing is ever solved in India, but is my condition today better than what it was two years back, is the only way to look at things in India. Second thing is, the opportunities that are emerging across multiple sectors, digital payments, in which I think prime is a leading player, or financial services and all of that, is pretty much leading a lot of the initiatives. Thanks to the structural changes the ideas of this whole Digital India, India stack, etc, etc, Is making profound changes on the ground. And that’s a very-very important thing the impact of these you will see as we make progress, so that is on one side. Second issue is regard to, purchasing power and all of it, India will follow its own trajectory, in which China did this or somebody else did that. environments are different contexts are different. I don’t want to get into, how and why things were. But, the fact of the matter is that in India, you need to be patient, that is a thing a given. So, you cannot come to India expecting, a Silicon Valley timescale to operate. Right, whether it’s with regard to building out scale, creating that kind of value and all of that, therefore, it’s important to calibrate the opportunity, calibrate the fund, to calibrate the investment, according to what is available. And people have made money will continue to make money provided it’s well calibrated. So that’s the second thing that arises out of this. And end of the day, it’s a matter of time, in my view, that when you have a large number of people who suddenly start having some disposable income, there is going to be consumption, lead expenditure, there is going to be opportunity, therefore that arises out of it, and people wants basic stuff is met in entertainment, healthcare, food, all of that you’re seeing, the numbers in many cases, it was been conceivable that let’s say a B2B logistics company would be operating at a breakneck speed. And now with the new initiatives further which is against structural in nature lending into the MSME sector will see a big spart later of this calendar year. I expect that to start changing dramatically. Once that happens, I think, the announcements by the likes of Amazon and everybody else, the MSME sector starts becoming, digitally integrated with global supply chains. So these things are a matter of time, we cannot do what China did. China wants to be a fully developed nation by 2049, which is the hundredth anniversary of the Cultural Revolution. But the way they do it is very different given the circumstances there. The way the western developed was also very different. So we can follow those models.
Amit Somani 27:37
So Sanjay, this has been really, really fascinating. Before we wrap up, I know you’re a really avid student of Bangalore history. We have some sidebar conversations on that. So maybe in a couple of minutes, if you can highlight some interesting things about the journey of Bangalore itself, well outside of tech, well outside of anything personal.
Sanjay Anandaram 27:55
Very-very quickly. I mean, the origin of technology, I would imagine trace it back to, the time of Tipu Sutan, with the rockets that he made, the world’s first rockets that were made out of iron cylinders, which would actually go to a distance of a couple of miles, which was really-really powerful and Paul’s enormous attention among the British troops. So, that is the first time that was used. The second example is, of course, the Banglore Torpedo, that was made here with the Madras Sappers. And when also that was very potent weapon that was used in the First World War and the second world war as well. So that’s how technology came. A lot of people came to Bangalore, because of that from all over the country around the world, etc, etc. So it was always cosmobolotin technocratic culture that led to many of us and we can have a separate session on this.
Amit Somani 28:48
Sanjay Anandaram 28:48
That’s a quick response.
Amit Somani 28:50
Thanks, Sanjay. It’s been an honor and privilege to have you on the podcast, and thanks again.
Sanjay Anandaram 28:55
Thank you very much Amit, thanks to Prime. Well, it was my pleasure to be a part of this. Thank you