Special 10yr Anniversary Episode: Past, Present & Future of Indian Startup Ecosystem

On this special episode we have our three partners Sanjay Swamy, Shripati Acharya and Amit Somani discuss 10 yrs of Prime, the India Opportunity, the Evolution of Indian Entrepreneur and much more.

Listen to the podcast to learn about

01:00 - The Meaning of VC as a Startup

13:00 - Indian Startup Ecosystem: 2010-2022+ | Ambition, Talent, Unicorns, IPOs, Exits

37:00 - 10 Yrs at Prime: Lessons Learned about Startups & Entrepreneurs

Read the complete transcript below

Amit Somani 00:20

Today, we have a very special episode with all the partners at Prime. My partner, Sanjay Swamy, Shripati Acharya, and myself, your host, Amit Somani. We are going to talk about the journey of Prime. We recently started our 10th year. Prime was founded in 2012, and we thought we’d just reminisce over the 10 years and what has changed with entrepreneurship, the India opportunity, and just the building of Prime.

So, let me open it up by asking my partner, Sanjay, the first question, because he often introduces himself as an entrepreneur saying that Prime is a startup. Sanjay, can you talk about what Prime as a startup is and what VC as a startup means to you?

Sanjay Swamy 01:05

Well, yeah. Hi, Amit and Shripati, and of course, and all the listeners out there. It’s been quite an amazing journey for us over these 10 years, and really delighted to share some of our experiences. I think when we started Prime, Shripati, myself, Bala, and then when you joined as well, Amit, all of us came from an entrepreneurial background. When we looked at venture capital, you know for us, it was our next startup. I think one of the things we realized is the difference between same and similar.

We might be in a business that a lot of others might also be in and generally from the perspective of our customer, who is really the entrepreneur in this case, viewing the experiences that we had, we said, “Can we offer a service to them or as a solution to them, part of it involves capital, but a lot of it is the relationship both before we actually invest in them, the whole process of the investment, and most importantly, post the investment?”

As it turned out, all of us have entrepreneurial experiences and we are very similarly aligned. We have very different expertise areas. For example, you know you have amazing product experience, you have amazing org building experience from your Google and MakeMyTrip days. Shripati is amazing when it looks at analyzing businesses and metrics. I enjoy the marketing and biz dev and sales side of things. We felt entrepreneurs need to have the collection of all of our experience rather than just who was the lead partner. And so, when we formulated Prime, we said, “Can we come up with an approach, which we think is a startup in many ways, because entrepreneurs are getting the benefit of this sort of unique collection of experience, and create our own signature way of serving our client here, who is the entrepreneur?”

Amit Somani 03:00

Thanks, Sanjay. Shripati, you also talked about this notion of bringing the Silicon Valley style ecosystem to Bangalore and to India. Can you talk a little bit about that and what it means to you to be a VC as a startup?

Shripati Acharya 03:15

Back in 2012, when the Indian startup ecosystem was still evolving, obviously not as large and flourishing and growing as it is today, it was not uncommon to see term sheets which were actually quite complicated and for lack of a better word, pretty founder unfriendly. In terms of the equity which is given out to the founder in the initial stages, and how the various rights were structured, exit clauses, et cetera.

And when Sanjay and I talked about it and we were looking at some of these term sheets, we felt that there was a clear opportunity and a desire on our part to bring the professionalism and simplicity that valley term sheets had, to India. We ourselves had the benefit of having raised in the valley and seen some of those, how the process works, and there was no reason why we couldn’t do it. That was really one of the other motivations that, let’s start something wherein we can present a simple one-page term sheet, keep things simple.

And it has the other benefit that overseas investors would actually find it easier and more comfortable coming up in later rounds, because that’s the other thing, when we talked to our friends out in the valley, given our relationships there, would complain about why they found it difficult to invest in Indian startups. So, that was the other motivation here to say that we are starting something from scratch, why not do it in a way that just makes sense?

Sanjay Swamy 04:45

If I may add to that, Amit, all three of us have really the entrepreneur side. Actually, none of us have really the investor side of things. Definitely a few things for us is we said, “Whatever we do, it has to make common sense.” Which strangely is not very common. And it has to feel fair to all parties involved. We just try to be transparent with it. I think what we found here was there’s often this difference of access to information. So, things like what are liquidation preference, for example, it’s a very simple clause. We always felt it had to be 1x non-participating, but even when I’ve been a founder here in India, as well, the term sheets I would receive have 3x participating with liq pref and things like that.

So, then when we started out, we said, “Look, Silicon Valley gold standard, a mature industry over the years has gravitated to a certain set of terms and let’s fast forward and get there and save ourselves 30 years of learning.” So, I think those were the founding principles that we started with. And as a new VC firm, we had the opportunity to say, “Look, we have no legacy. Let’s start with these basic principles and do what’s right.”

Amit Somani 04:00

Absolutely. As I think about this topic of VC as a startup, and we still do that today, saying who’s the customer? What are you bringing, where you started Sanjay, beyond capital? Why should an entrepreneur choose to work with you? Because the capital markets are getting kind of more and more liquid and generous and so forth. So, we think about that all the time, and of course, we started with a very big focus on FinTech. So Sanjay was that intentional or was that just because of the time you and Shripati had spent at Aadhaar and you at mCheck. The initial big focus on FinTech for the first many years? I mean, you still continue to invest in FinTech, but was that a conscious choice as you thought about the startup called AngelPrime to focus on FinTech?

Sanjay Swamy 06:45

So we have always looked at solving real problems and through technology. I think the digitization of India the first wave was, of course, just the telecom revolution. After that, we felt that in terms of both value add to the masses at scale, and in terms of the impact that technology could have through the internet era and the smartphone era. Financial services was the one where there was a massive gap between the served and the unserved or the underserved. That’s where there was the biggest opportunity, and I think that has proven out significantly. What we are seeing now is further digitization, and as you see, everything from a Kirana store which initially started just with payments. Today is now changing their entire operations, logistics companies, healthcare companies, et cetera. So, that theme of focusing initially on FinTech has now broadly expanded into all things that are getting digitized in India. Now financial services and FinTech may very well be the mechanism through which they monetize, but digitization is the broader theme.

Shripati Acharya 07:55

So, one of the things which Prime focuses on when they interface with entrepreneurs and with the portfolio companies is they are quote-unquote active investors. Amit, how do you think about that? The term active investors and what is, does it mean that as a venture capitalist you do, as an investor you do and what you decide not to do when you’re working with the entrepreneurs?

Amit Somani 08:20

Yes. Shripati and I actually, for me, even to the decision to join Prime just at the beginning, or just before the beginning of the second fund, this was a very important criterion. Because I was coming from an operating background and so forth. The idea was not that we’ve all had thankfully successful careers as entrepreneurs and operators. It was to say, in what way can you add value? Because we all believe that capital will be a commodity. It wasn’t back then, but it is increasingly becoming so. And early startup journeys, pre-product market fit, sometimes pre-revenue, sometimes even pre-product, you need a lot of collaboration and sort of working together and it’s not like the three of us or the rest of the Prime team has all the answers, but just having a sounding board, somebody that you can collaborate with somebody you can power with, whether it’s on product or go to market or sales or marketing or whatever, or even the network I remember.

Sanjay sort of Rolodex on pretty much every bank CEO or NBFC CEO in the country can be very, very valuable for a young startup. At least to me, it meant that one to be very honest and a bit maybe selfish is I will get the vicarious pleasure of working with startups, not just being a check writer that was not all that interesting. Second, from a startup point of view, it was more that they can just leverage our network, our experiences, our mistakes, and like Sanjay says, make fresh mistakes and not perhaps the ones that we have made. Sanjay, do you want to add too? I know you’re very passionate about being an active investor. What does that mean to you, and why that route for our startup?

Sanjay Swamy 09:55

Yeah, I think over the years, we have certainly learned the boundaries of where the investors’ role ends and where… so, I always tell founders, we will disagree, disapprove, dispute, discuss, debate, but we will never decide. It’s your company and it’s your decision always. So, but certainly, over the years it’s become clearer to us. Again, this is VC as a startup, as we said. So we’re also in the learning mode, and the ecosystem has also gotten more mature. What advice and help startups founders needed in 2012 is very different from what they need today. Lastly, of course, I think we are all humble enough to know that just because something didn’t work when we tried it, it was in a different time and age, and quite honestly I may have screwed up, and I was a founder that doesn’t mean that these founders won’t.

So, the guidance is really not don’t do this, but you know, tread with caution. Hey, it did not work for me when we, or for someone that we know when we tried it. But one of the things that I love to do, and you all also love to do, is we try to use all the products that we back wherever possible. I think that’s one also where we feel when we talk with founders, look, there is a board meeting, whereas gatekeepers of other people’s money when we have invested in the company, we have a fiduciary responsibility to do what’s right. But outside of that, all our interactions, we are part of your team. You’re welcome to give us action items, and we are very happy to try to help there. Obviously, a lot of the help we can provide is through connections is through hiring is through ideas, and brainstorming.

But in those meetings, we are not playing the role of an investor or a board member. We are playing the role of a team member. I think if we are able to strike that balance, and thankfully I think in the large number of cases, we’ve been able to do that, well, I think founders also enjoyed a lot. We, as you said, live our vicarious pleasures through this because we’re continuing to be actively involved in designing of products or marketing campaigns and what have you, and I think that’s what makes this really exciting for us as well.

Amit Somani 12:05

Wonderful. Sanjay, I’m reminded of this that one of our podcast guests, I think it was Amar Goel from PubMatic. He talks about Frank Slootman, the CEO of Snowflake and earlier of ServiceNow. He is like, after every board meeting, he would give five action items to each board member, and he would check every week as to, “Hey, I gave you those five action items, where are we on that?” So, I think the best founders know how to leverage Prime well. We always tell them, and many do, and not necessarily everyone does. So, wonderful to hear this journey about Prime as a startup and its evolution. Let’s switch gears and maybe now talk a little bit about the Indian entrepreneurial opportunity and how that has changed in terms of the market and what has changed.

So, Shripati let me ask you what was the opportunity landscape and the set of companies and the kind of things that were on the zeitgeist of people’s minds back in 2010, maybe a year or two before you started AngelPrime.

Shripati Acharya 13:00

So, in that period, there were fairly few venture-funded startups, and really the conversation in the investment ecosystem and among entrepreneurs was really about how do I create a company, which is the Amazon of India? How do I create the Expedia of India? How do I create any company which is moderately successful in the US or China, and does the similar version make sense in India? And the reason for that is that the TAM, the total addressable market in India and the profit pools underlying them were decidedly small, and you can imagine this is an era where it’s pre-JIO. The cell phone penetration is fairly less, it is pre-UPI. The Aadhaar project is, actually not even, just being launched. The first Aadhaars are being issued at that point of time, so it’s not even in anybody’s conscience. At this point of time, the Indian entrepreneur ecosystem is really looking to create companies which will have significant opportunity but looking outside in instead of inside out. So, the companies which were really up and about at that time were BookMyShow, Zomato, MakeMyTrip, Flipkart, Mcheck, Ezetap, Pine Labs. These were the companies which were started at that point of time. There’s not even a significant SaaS ecosystem. I mean, SaaS companies are all essentially sitting out of the US at that point of time.

Amit Somani 14:45

Great, many of these names sort of remember back fondly from my days at MakeMyTrip. CCAvenue, BillDesk, and so forth. Let me switch gears because both you and Sanjay and our partner emeritus, Raj, spent a lot of time at Aadhaar. Sanjay, what was the next generation like as the government started to get involved? And some of the digital rails started to come about. Can you take our listeners through that as you experienced it at Prime?

Sanjay Swamy 15:10

Yeah, so as Shripati said, the first wave of companies included one that I was running, Mcheck, which didn’t make it. We were sort of at the bleeding edge of mobile payments there, and probably four, five years ahead of Paytm and just a bit too early. But I think when we and Shripati, and Raj and I had this unique opportunity to be full-time volunteers working for the government on Aadhaar, and I think it was clear to us that whatever India was going to do, we were going to achieve the penetration and the benefits of the internet, but in a very different manner from what had been achieved in the west and certainly the US and what happened in China. I think that’s where we felt looking at Aadhaar and India stack, which were government-led initiatives.

The early talk at that time of things like FASTag and things like GST that were coming in and later in the UPI that came in. I think it was clear that there was a set of open interoperable digital railroad that was going to be set up by the government that was going to be advocated by the government. That was quite likely going to become sort of the biggest opportunity for mass adoption. The second thing that was on the horizon, and it took a little longer initially than we had thought, was the advent of 4G and JIO, and also the concurrent sort of steep drop in Android smartphone pricing that meant that high-speed internet was made available to all corners of India and to the masses at very affordable rates.

To date, India has the lowest data rates in the world here. And so I think the combination of that perfect storm of the government during the railroad. JIO coming in, and then, of course, the other telcos like Airtel and the others also following suit with a similar pricing on the 4G networks and the smartphone devices going down in price that kind of led to a perfect storm where adoption was no longer… access and adoption problems are being solved. Many Indians, in many ways, sort of leapfrogged. I mean, people say that YouTube is India’s search engine, not Google because actually people go and look for videos on how to do things rather than figuring out what things are. So, I think that adoption started happening at a pace that was unimaginable at the start of the decade.

So, I would say about, if you look, go back to circa 2016, let’s say. We entered this wave of hyper-adoption of the internet in India. A couple of things like demonetization and, of course, most recently with COVID and things like that also drove the agenda of digitization much more aggressively. I think entrepreneurs started realizing that they didn’t have to copy what was done in the west to be successful in India. India was going to look quite different. I think certainly the cost structure in India had to be very, very different. How you design services and how do you distribute them? How do you monetize them? Had to look very, very different if you went beyond the top, say 30 million from the A category users. I think that’s what has led to this boom in India, where we are seeing really different types of companies being… I mean, the other day. Yesterday I had a visitor from the US and had to help him with his RT PCR test. He was stunned to see a lab technician come and produce a QR code, and I paid him with UPI, and costed all of $30. In the US, it probably costs $150 to get the test. The scale, the pricing, and everything in India is completely different. So, I think we experienced through the last 10 years, this phase where we were defining the types of companies that were going to be successful in India. We’ve been pleasantly surprised with the desire of customers, consumers, and businesses to actually adopt technology.

Shripati Acharya 19:20

Actually, one of the things which I’m reminded of Sanjay is that, in the early days, when we were pitching Prime as a fund for two investors, one of the things which we talked about was really like, imagine if everybody had Aadhaar, imagine if there was a financial rails laid on top of it, what would the scale of the opportunity be? I recall that’s why FinTech ended up being one of the big focus areas for us because we felt that was the area, which is going to leverage Aadhaar and everything else, which was the stack, which was going to be built on top of it. It’s just like a very core underlying belief. It took, of course, a lot longer as all things which are transformational take to roll out. It’s fascinating to see how that pretty much informed this wave two of startups, which you’re talking about.

Sanjay Swamy 20:10

Actually, on that note, one of the points people would always ask us is where are the profit polls in India? Per capita GDP is so low until it gets to $4,000. It’s now at like 2,700. Is there even an opportunity? I think it took us several years to realize that that was the opportunity. The transformation from offline paper businesses to digital businesses, even without necessarily increasing the per capita GDP, was in itself the first order opportunity. That would be the platform for the increase of the GDP over time. I think we have all been learning because it has not followed patterns that have been established in other parts of the world.

Amit Somani 20:45

Yeah. I remember Shripati and I were in Beijing in March 2018, and we were asking some of the VCs and early-stage investors there, and they said it’ll happen much faster than you think. Of course, China’s per capita was already quite substantial. They said, look because even just digital adoption will start increasing consumption of tech-driven businesses and so forth, including in areas which are otherwise deemed to be non-monetizable, like gaming. You see what has happened with Dream11 and so many others, WinZo, and so many other interesting companies out there. As we sort of look forward here, I think so far we’ve served India. We’ve done great innovation here with various companies, various sectors where it’s FinTech, and so forth. But now I think the future is here in terms of building global companies out of India.

If I think about EdTech or the massive export of EdTech globally, whether it is a BYJU’S, or it is Quizizz, which is one of the companies from our portfolio and so forth, Indian entrepreneurs, ambition, and ability to serve global markets with a product offering is increasing a lot. The other one I would call out is SaaS and global SaaS driven companies. With the success of the likes of Zoho and the Freshdesk IPO and so forth. I mean, those things are also happening. Do any of you want to comment on building global companies out of India?

Shripati Acharya 22:15

I think our entrepreneurs always had the ambition to build out of India, but the rest of the infrastructure required how do you sit from India and target a florist in Boston was really not there. As compute became democratized with Amazon, AWS. Search became democratized with Google and Facebook. I think these capabilities are superpowers, which only large companies had, now were available in the hands of the entrepreneur. I think that’s why Indian entrepreneurship as the Indian companies targeting global markets has really flourished and I think I see a very bright future for that.

Amit Somani 23:00

The other day, I met one of the early employees and now a co-founder of a large unicorn company. They said there are nine unicorns that are from the Flipkart “descendants or mafia.” So to speak I think talent has also become very prolific when I was joining Prime. And certainly, when I was at MakeMyTrip, there were barely a few hundred product managers. Now, if you do the same search on LinkedIn, there are thousands, if not tens of thousands of, product managers, engineers, data scientists, all those things. Talent is also proliferated thanks to the first couple of generations of startups.

Sanjay Swamy 23:30

That actually was the question I wanted to ask you, Amit. You’ve been a product manager at IBM research and at Google in the valley and then in India at MakeMyTrip. In terms of these new businesses that are being built, which are technology businesses, data businesses, AI based startups that are coming out here. As a VC, I think you have a very unique thing of having been on the management team of a company that went IPO. I think you’re probably the only VC in India that has got those credentials as well. How do you see this new wave of Indian startups and the tech talent here and overall management talent, because that’s always been a question in India where you may have great founders, you’ve got great individual contributors, but the mid-management has always been a gap. How have you seen that evolve? And what is your view of scaling that?

Amit Somani 24:25

Absolutely Sanjay, I think talent has exploded and obviously, as it has exploded, so has capital, and that’s creating some other interesting challenges, but not just product managers, like you correctly pointed out middle management talent, talent for doing sales and marketing. Like Shripati, you were saying in SaaS companies, people, thanks to the Freshworks and Zoho kind of mafia, understanding distribution, all of that is increased. So even one of our own portfolio companies, Recko, where the founders were at Flipkart, recently exited to Stripe and directly dealt with the Stripe founders, would’ve been unimaginable five years ago because they learned a lot at Flipkart. They saw the problems of scale of e-com and reconciliation. They were able to build a team. I mean, they were mid-level folks at Flipkart at best. These are not necessarily people close to Sachin and Binny or whatever.

I think that all of that has improved. I think that will lead to an amazing set of next second and third generation entrepreneurship, which is already happening. I think all of that is very promising. I think people are also beginning to be more open-minded that startups…, one of my favorite lines from Reid Hoffman is that you need startups that go from being like a band of pirates to being the Navy, to being the Marines, and so on. As you scale a company, you have to get more specialized. I think we are learning to be that. Of course, you need the entrepreneurial energy and the wild creativity of founders, but you also need the general managers and the head of sales and the marketing brand people to know how to build a brand. And we are seeing that in younger companies like Bolt, Revos, which is one of our portfolio companies. I think it is very exciting to see the development of talent.

Sanjay Swamy 26:10

Yeah, and I have to say, even with product experience. I think we used to probably rightfully be branded as startups that built probably good functionality, but the UI UX was not state-of-the art, et cetera. I recently had an experience with Zomato where one of the items was not delivered and I went through their Zomato valet, and I just clicked on the item that was not there, and one click and it said, “Hey, do you want this item delivered? Or do you want a refund through UPI in real time?” And that experience I have not seen, I mean, we’ve used products all over the world, but I can see and maybe it is because of the cost of support being disproportionately higher than the value of the product that I was consuming was two Idli and was 120 Rupees. The willingness of the Indian startups to leverage technology to the fullest and push the limits of the technology and the consumer to also start adopting it. I think that has grown manifold in the last three, four years.

Amit Somani 27:15

Absolutely. of course, can’t not talk about the unicorns. We saw more unicorns created last year, 2021, than probably in the history of India. Shripati, do you want to add something to that?

Shripati Acharya 27:25

Yeah. I just recall again, when we’re pitching one of our earlier funds, all the unicorns with their nice big logos would fit in one slide. Literally, I kid you not, because it all fit in one slide and so the questions we would get from investors and the overseas investors is like, “Okay, but does this like create a trend?” I mean, like precious few unicorns here, and you’re trying to say that you’re going to have tons of them, it’s just fascinating to see the transformations here, which just a few six, seven years can bring.

Sanjay Swamy 28:00

And Amit, related to that point. I think one of the biggest things we see as we go out globally and raise money. The biggest question was, where are the exits? We never had a straightforward answer to that. Today, like in our own portfolio, we recently had Happay exit to CRED. You mentioned Reckro exiting to Stripe. Earlier last year, Perpule was acquired by Amazon. Some outstanding outcomes for everybody in the ecosystem. Of course, there are several outside of our portfolio as well, like WhiteHat Jr. or to BYJU’S, and several others. I think what’s important is of course we all aspire to build that IPO…, unicorn, every founder aspires to, and if they have an opportunity, of course, they should pursue their dreams. But what we are also seeing is there is a virtuous cycle here in India, where companies that do get to large scale are able to acquire some of the companies that might not get there, creates liquidity for everybody in the ecosystem, creates really solid wealth creation for everyone, founders and employees of startups.

It used to be known as Aesop’s fables. That was the joke. Now people really realize that there is value in ESPOs. I think we’ve not yet reached that maturity where people say, “Can I trade off compensations short term for ESOP?” I think that those days will also come where people realize that’s the 10x, 100x opportunity. So I think that is also one where now we have enough going around where people realize that you can solve real problems for India, create lasting companies, and wealth creation in one vehicle. That’s what entrepreneurship is about.

Amit Somani 29:40

I’d be remiss in not adding all the IPOs that are happening. Whether it’s a Nykaa or a Zomato or a Paytm, and when we were going IPO at MakeMyTrip in August 2010, absolutely unanimously the board said there is nothing but NASDAQ do not look left, do not look right. Now, both the government has made it easier. The capital markets, the retail investors’ appetite. So now I almost don’t see any company wanting to, so when Freshdesk listed in NASDAQ, I was literally like, really like, why are they not listing in India? I think things have become very different in 10 years from when we started. I know it sounds a little bit off, correction. From Shripati’s thing, fundraising is never easy right back to the VC as a startup. Can you talk about some of the humbling stories in terms of fundraising for Prime itself as the fund, not necessarily our companies?

Shripati Acharya 30:30

It’s fascinating that when you are an entrepreneur and you’re looking for a job or whatever, it is you go and talk about, I worked here, I studied here, and I did this, and I launched this and so on and so forth. I would actually go into that kind of a pitch with the investor. They would actually have very supportive and sympathetic looks at me. At the end of it, they would say all that’s really interesting. Congratulations on a good career, but have you ever managed money before? And the answer is no. Then they have a look saying, “So why are we here?” So it is really humbling to understand that the barometer with which investors look to potential new venture capitalists is very different, and they are in the business of managing money. VCs are in the business of managing money. Unless you can demonstrate that you can credibly manage and return and provide good returns, it is not something which most people would be interested in. So, that was the memory which remains very fresh in my mind even now.

Amit Somani 31:40

I have one story I remember and Sanjay, maybe if you have some war stories. So oftentimes even our founders ask us right? You just go. You raise money, you come back and it’s like close the fund. It rarely works like that. If at all, I remember this one investor that we’ve been talking to for five or six years. They meet every year, US-based investor, obviously won’t name them or even the genre, large investor. Then we finally culminated in like an eight or nine-hour meeting with all three of us wearing suits and ties. They said, “This is great. Maybe we should consider you for the next fund.” We’re like, “Okay, finally, got it.” I’m like, “No, no, no, you’re just getting the wine and dinner there is no check here.” You’re humbled enough times as a VC if you’re building an organic, homegrown brand. Sanjay, do you want to add anything to the fundraising journey at Prime?

Sanjay Swamy 32:30

I will add the positive experiences. These are, sort of, long standing relationships, and quite often it takes a lot of time to cultivate the relationship and get to fruition. We’ve also had the opposite happen a couple of times where through fairly random meetings because one person happened to be in a certain city and somebody came, was there the same day and you happened to meet, and it resulted in some fairly significant long-term partnerships as well. I think our focus has been just focus on doing the right things, align your interest with everyone and stay very focused on do what you say and say what you do. So, our visitor who was here yesterday said that about us, and I think you need to have a point of view. You need to have what you stand for. You need to have a certain way of building.

As long as you know, you have conviction about that, and this is true for entrepreneurs as well. At some point, there will be an inflection point, and people will start seeing the successes and believing the story. If you don’t have the successes, then you don’t deserve it anyways. And I think our experiences have been quite varied. Some of these meetings have been quite strange. Venture capital, in general, is a business where, when you say pass, you actually mean fail in some ways. So we’ve had our share as well. So, just as entrepreneurs who meet us or meet other VCs feel that they’re being turned down, I think it’s good that we can empathize with them as well because the same happens to us a lot.

Shripati Acharya 34:00

Yeah. I think if you look back and see what you’re grateful for, it’s really when somebody has taken a chance on you, and you look back and say they had no reason to do it that they probably just did it because they felt like there was some connection, and they believed that yes, this could work and they took a risk. That’s how really Prime started when that core set of folks took a chance on us. I think that in that sense when we do that for the entrepreneurs, we are only paying it forward.

Sanjay Swamy 34:30

I think for us, the biggest moment of satisfaction from our investor’s perspective was when we gave them an outstanding return for fund one late last year, early this year because they were really the people who had no reason to as Shripati said to believe that we could deliver for them. But I think now it’s, there is a little bit of a track record, and now there is a different set of expectations, but the first people who took a chance on us, I think we are very grateful for.

Amit Somani 35:00

Absolutely. I think luck and serendipity definitely have played a big role in our journey as it has for many of our startups.

Sanjay Swamy 35:08

I think the way you came in as well, right, we accidentally spoke to you and you know, we were talking about this and then we said, “Hey, let’s just meet Amit one more time and chat with him about it.” I recall you saying, “Oh, I don’t want to be a mentor to your company.” We said, “No, no, no, no, no. We are actually thinking about bringing you in as a partner.” That was also completely a random sequence of coincidences that led to those meetings. I think my advice to founders is always have a prepared mind, always be on the lookout. You never know when the opportunity is going to come. I think every startup that makes it to be something big will have four or five such moments, which were actually not carefully planned out or not thought out, but made a material impact to their success. So, as great as founders are and as organized as they should be, and as thorough as they should be in their planning, I think it’s very important for them to look for these moments.

Amit Somani 36:08

Absolutely. I’m going to try to create a moment of serendipity by saying if you’re looking to join a firm in a leadership role. We’re actively hiring at all levels from associate to VP, to principal, and dare I even say partners, so do reach out.

Sanjay Swamy 36:20

Absolutely. If there is nothing here for you with us, there’s definitely one of our amazing 40 portfolio companies that would provide great opportunity as well.

Amit Somani 36:30

Shripati, as you reflect back on these 10 years, what are some of the top lessons that you think we have learned that you have observed about this journey?

Shripati Acharya 36:45

So, a couple of things come to mind, which I’d like to share here both from an entrepreneur perspective. This is really from talking to several entrepreneurs, tens and dozens and dozens of entrepreneurs over this period of time. What I’ve found is that the best entrepreneurs have a great balance of ambition and humility. Ambition, I think is easy to understand because without ambition, without the desire to make a difference to the world, without actually believing something, which nobody else believes in, you cannot possibly make a difference and cannot possibly have a impactful startup and so that I think we all understand and believe in, but the humility part of it is actually having the ability to listen to those who are not using your product, to those who are critiques of your idea. They might even be your friends.They might be some investors who don’t believe in you. They might be customers who don’t want to buy anything which you are actually providing to them.

Humility is the ability to listen to that feedback. Because that feedback is telling you something very, very important, and you might listen to it and consciously agree to not act on it. That’s perfectly fine, but sometimes there are gems hidden in there, which you can incorporate and make sure that you don’t fall into a big mind field, which you can otherwise avoid. So I think I’ve seen lots of entrepreneurs who have great ambition, but without the ability to have this other countervailing trait of being able to listen to folks who don’t believe in their idea, they actually take either a lot longer to succeed or probably not succeed as much. That’s one, the second one is a little bit more, maybe even controversial, nuance is you call it, which is what I call the hold or fold dilemma.

What I mean by this is that we often reward and appreciate and admire entrepreneurs who exhibit extreme persistence. Persistence in their idea, in the face of odds, continuing with it when everybody else was saying no, and then making it happen you know Elon Musk and Tesla, and SpaceX. These are all examples of those things that’s absolutely true. You require persistence, you require it greatly. You require determination to make your idea happen. But as like the previous point about having both ambition and humility, I think the entrepreneur should also be open to the idea of when it makes sense to fold. By fold, I’m not saying necessarily shutting down the company. Fold could also mean when you’re actually taking an exit when you’re selling the company to another, going through an M&A for example, and it is really a determination which the entrepreneurs and founders have to make about what is the opportunity cost of their time.

It’s actually not just their time, the time of the company, which they’re running as well. But most importantly, it is understanding whether it makes sense at this point of time to actually be a part of another company when you’re getting an opportunity to exit versus continuing or whatever their plan might be and there is no clear right answer to this. That’s the point I’m trying to make. It is always a fuzzy decision. It’s always a tough decision, but it is a decision which should be made with a lot of consideration and thought and debate with everyone who they trust contributing to that. Instead of saying bravado and courage, isn’t just continuing to hold and moving ahead, because that might actually result in value destruction versus value accruation in many ways. So those are the two things which come to my mind.

Amit Somani 40:45

Thanks, Shripati. Very interesting, I think the balance between humility and ambition. Sanjay, you’re a very passionate company builder, serial entrepreneur earlier. Now, serial VC, I guess, or a parallel VC. What are some of your big learnings over the last 10 years as you’ve gone about building Prime?

Sanjay Swamy 41:00

So, I’d like to correct you. I am a parallel entrepreneur. But my point… I’d say my big takeaway is kind of similar to Shripati but I put it slightly differently. I feel it’s harder to build a small company than it is to build a large company. That might seem really counterintuitive to most people. But what ends up happening is that when you’re aiming to solve a large problem. It is also something about a problem that nobody else has solved. Category creating, category-defining, however, you want to put it. What ends up happening is you’re solving a large pain point for someone. If you do solve it successfully, the outcome can be massive. What that does is everyone from employees to investors to even customers are rooting for you. They’re all going to chip in and try to make you solve this problem.

So, as Shripati said, of course, there’s a balance between ambition and humility in solving this. If you combine that with solving something really large, wherein the small probability that you might succeed, the outcome is a massive company. I think the world conspires to try to make you happen. So there will be a period of time where people are going to laugh at you. Then they’re going to be naysayers. They’re going to say, you’re not going to be able to do this. It’s going to take blah, blah, and blah. The same people will come back and support you to the fullest the moment they see the slightest of hint that you might actually succeed because everybody wants to be associated with success and everybody wants to help somebody succeed.

So I really feel that it’s very important. And for founders what you don’t want to do is learn at the end of seven years of a toil that you ended up with something very small. I would rather you learn in two years that it was never going to be big, and you shut it down, and you resume. I mean, start something new again. Or if you’re really going to put in this slog for seven years, ten years, however long it takes. It better be a massive company that you’re going to create. So that’s my takeaway.

Amit Somani 43:10

Awesome. Sanjay. You also often talk about entrepreneurship is not all that glamorous as it looks. There are more down days than up days, although when the up days happen, it’s very gratifying and rewarding. Talk a little bit about that.

Sanjay Swamy 43:25

Yeah. I always say it’s 360 days of hard work and frustration and five days of glory, and in the leap year, it’s 361 days of frustration. You don’t even get a break then, but you know those five days are what you live for. And those are the moments where a customer says something great about your product. An employee has a breakthrough. Somebody from the most unexpected quarters reaches out and says, “What you’re doing is really exciting. How can I help?” I think, and that’s what entrepreneurs need to live for. I mean, this is, it’s not all up, up and up. It’s going to be really very rocky and very, very choppy as kind of like the stock market is these days. But when you live through that, actually, that’s also when you appreciate it a lot, and success is not guaranteed.

I mean, this is not meant to be easy. You’re solving a problem that nobody else has. I think it’s very important to enjoy the journey. As Shripati said, listen to everything around you and make sure that… I think in this world in general, if you don’t repeat the same mistake you are going to be in a good place. As long as you’re constantly getting that as they say, 1% better per day is 37x at the end of a year. So, that has to be the thing. So if you’re clear about what the end goal is, these ups and downs in between should not be rocking you. I think that’s where I feel entrepreneurs also sometimes… So the counter pointer to Shripati’s hold or fold is don’t fold too early because it sometimes… and that is why it’s a dilemma always. Just make sure that you’re enjoying what you’re doing, and you know why you’re doing it, and then good things can happen.

Amit Somani 45:10

Yeah. I am reminded of another quote, which is highs appear higher than they are and lows appear lower than they are. So maybe just, I’ll share a couple of my quick learnings on the VC side of this, which is that entrepreneurs come in different fits and finishes. It’s not just a top business school. We keep teasing our partnership Shripati here for being from Stanford and HBS and IIT Chennai and so forth. But there are many amazing entrepreneurs we have in our portfolio who are missionary founders solving big problems and creating amazing value for their employees, their customers, their shareholders, who don’t have that pedigree or that background. This is one big learning I, and how to not have that kind of bias as a VC to say, “Oh, they don’t have pedigree, or they not have fit and finish. Sometimes they’re not even wearing deodorant” Whatever it doesn’t matter.

If they are big about solving big problems and making the world a better place, they are people that we should bring capital to. So, that is one sort of big learning. The other that we have learned is that you have to think in probability distributions because not a uniform kind of finish thing. I mean, venture capital does have a Zipf’s law, and it’s not the most normal distribution, but that said at the early stage, right there are many things that are not just unknown but unknowable. You just can’t figure it out. You can’t either invest in a company or perhaps even start a company on a spreadsheet. I mean, yes, you might find it disingenuous. Because we do ask about the addressable opportunity and the proxies for whether customers will buy or not.

But you do also have to have some optimism and some imagination as to what it could be when it becomes big. So, those are the two big things because once it becomes big, it can become monstrous. That’s the venture business. This is not to Sanjay’s point about it’s harder to build a small or a smaller company than a larger one because as you build a larger one, interesting things happen. With that, I’d like to bring this to a close with a quote that we’ve often heard attributed to different people. As we record this 10th anniversary special episode at Prime, which is that we often tend to overestimate things in the short term. We don’t know maybe 2022 and 2023 will have fewer unicorns than 2021, but we tend to underestimate them in the long term.

So, it actually keeps growing and keeps compounding. 10 years from now, we might look back at this point, just like we’re looking back at 2012, and say, “Oh my God, what were we talking about? This is such a big opportunity.” So India and Indian startups are definitely an idea whose time has come. So, with that hope you, the listener enjoyed listening to this podcast. If you like this format of hallway conversations, do send a note to our dear producer and community manager, shikhar at primevp.in, and thank you for being on the journey, and good luck.

Enjoyed the podcast? Please consider leaving a review on Apple Podcasts and subscribe wherever you are listening to this.

Follow Prime Venture Partners:

Twitter: https://twitter.com/Primevp_in

LinkedIn: https://www.linkedin.com/company/primevp/

Let us know what you
think about this episode

If you believe you are building the next big thing, let’s make it happen.