Prime Venture Partners Podcast
A podcast for entrepreneurs who are looking to build & grow their startups. Avoid common traps & learn uncommon strategies & tactics from makers & doers of startup ecosystem. Prime Ventures is a early-stage venture fund which focuses on startups that not only need capital but also require mentoring to transform them into disruptive companies. We share a passion for working closely with entrepreneurs and enjoy sharing their journey in a high-frequency, interactive and fun environment.Read more about us at http://primevp.in
Prime Venture Partners Podcast
How Venture Capitalists Secure Billions to Fund Indian Startups? | Inside India’s Top VCs' Minds 🚀
💰How do VCs raise billions before they invest in startups? What happens behind the scenes when venture capitalists secure funding from Limited Partners (LPs)?
📌 Timestamps:
0:00 - Introduction
2:45 - How Gautam Mago & Rahul Chowdhri Became VCs
4:55 - The Growth of India’s Startup & VC Ecosystem Over the Years
7:40 - How LPs Shape the Venture Capital Industry
12:08 - What VCs Look for in a Startup
16:35 - Fundraising Mistakes Founders Make & How to Avoid Them
21:20 - India vs Global VC Markets: Differences in Investment Strategies
26:05 - Sectors & Trends That Will Define the Next Wave of Startups
30:50 - Why Exits Matter: IPOs, Acquisitions & VC Returns Explained
36:45 - Advice for Founders
For the first time, three of India’s top VCs pull back the curtain on the venture capital fundraising process!
Rahul Chowdhri (Stellaris Ventures), Gautam Mago (A91 Partners), and Amit Somani (Prime VP) break down:
✅ How do VCs raise capital from LPs & the challenges they face?
✅ The key questions LPs ask before backing a VC fund.
✅ How are investment decisions made when managing hundreds of millions?
✅ Why fundraising is just a startup problem—VCs do it too!
With ~$2 Billion collectively raised for Indian startups, this episode is a must-watch for founders, investors, and anyone looking to understand the world of venture capital.
🔔 Subscribe for more startup & VC insights!
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The reason we wanted to actually have this podcast is to say we don't talk about this.
Speaker 2:It is like a startup founder trying to, you know, for the first round of capital. If you have good pedigree, people want to talk to you.
Speaker 1:Yeah.
Speaker 2:That doesn't mean you'll get money.
Speaker 3:The macro interest in India has never been higher, so interest in India could is never been higher Interesting that all three of us are homegrown funds.
Speaker 1:How has the LP landscape evolved over the last 15, 17 years?
Speaker 2:Now there are institutional LPs from India. I fear in next 10 years tide may turn the other way, that we'll have excess capital.
Speaker 3:Us public market plus 5% is kind of what LPs would expect you need a May Kalu Tikki burger of India for McDonald's to succeed. Said you will spend your time everywhere, but you'll get the capital from the US.
Speaker 2:There was a time in between where we felt we should just pack, shop and go home.
Speaker 1:Welcome to the Prime Venture Partners podcast. I am delighted to have with us today two friends and longtime successful VCs in the Indian ecosystem Gautam Mago, a partner at A91, and Rahul Chaudhary from Stellaris Ventures. Welcome to the show, guys. Thank you. Thanks for having us. Gautam, love to start with you One. I've been always curious about the name A91. Where does that come from, and perhaps you can tell our listeners and viewers a little bit about the fund and what you guys do?
Speaker 3:Sure. So when we started A91, which was about six years ago, we were trying to find a name that stood for excellence in India, and so we hit on A91. The A is inspired by Ashoka the Great and the 91 comes from India both our country code as well as the year of liberalization and we put that together to form A91, which we hope to stand for excellence in India. We are a six-year-old firm, so we are a late-stage venture. Early-stage growth capital typically Invest between we have now 27 investments so far. Invest between we have now 27 investments so far. We invest between 100 to 400 crores I prefer to talk in crores versus millions of dollars in companies that have you know post product market fit typically well into revenue generation and so on relevant for us. We think of our sectors as consumer, healthcare, financial services and technology, and we've made new investments in manufacturing, engineering type businesses as well.
Speaker 1:Fantastic Thanks. Thanks, gautam, that is interesting to know. I didn't know the 91, the year of liberalization, but that's great. Thanks, gautam, that is interesting to know. I didn't know the 91, the year of liberalization, but that's great, rahul. A little bit about the name Stellaris, and then what you do and we go from there.
Speaker 2:We'll very simply put Stellaris is backing Stellar founders.
Speaker 1:Awesome.
Speaker 2:Jokes apart, you know, when we were starting, we had this question of what the name be, because we have fundraising and there was no name on the pitch deck. So Ritesh, one of the three of us, decided that he'll take up that responsibility and in some language he figured out. Stellaris stood for constellation of stars.
Speaker 2:And we thought that would be a good name to get started, so that's how the name came. We are an early stage fund, so we do. We are on the other spectrum spectrum of what Gautam and his team does. We do anything from a business plan stage company to a series A. These are typically companies, pre-pmf, using technology and backing India-originated founders. So those are the three pillars of our strategy. We have been in business since 2017, so this is the eighth year now. And now investing from a third point. We are okay investing anything from half a million to a 10 million dollar check at the entry point in a company.
Speaker 1:Wonderful. So I know both of you were also stellar VCs We'll pick on Rahul even before you started your new firms. So the episode today is really focused on you know, most founders would think that VCs have a ton of money and perhaps the two of you do I'm still looking, looking for it but that we ourselves have to raise money, and we raise money from. You know, people who are called lps or limited partners. Uh, how has the lp landscape evolved over the last 15, 17 years since you, gentlemen, have been doing this, and, in particular, in the context of your funds as well. So maybe we can just start with you, gothamautam.
Speaker 3:So, firstly, there's no one LP landscape as you can imagine. It's a capital market. There are as many perspectives as there are people. If the public capital market has, I don't know, x number of million people, maybe the private capital market has X thousand people, right, let's call it that. So there's enough diverse perspectives, I think.
Speaker 3:If you look back 15, 17 years back when I started, originally at Sequoia Capital, I joined in 2007. The private investment industry in India was really five years old. The first firms were founded in the late 90s Chris Capital and Westbridge, and there were some others, but it was e-ventures and some of them had evolved to become more private equity style versus more venture style. But it was a very, very small capital market. So I think I learned this from someone else that if you look at the venture business in India, it evolved in that 2005 to 10 timeframe mostly alongside Silicon Valley sort of sponsorship, if you will right, whether it was a loose coupling or a tight coupling. And the same was true with the private equity business. Most of the private equity industry, most of the venture industry, was global firms with global LPs, and I suspect I was above my pay grade at that point of time, but I suspect that most people were just along for the ride without much education, saying, hey, we're investors in XYZ firm whether it was Sequoia Capital or, I don't know, blackstone or whoever else and okay, these guys say so, we'll try it.
Speaker 3:I think, if you fast forward to today because the industry has been around for so long there's a lot more sophistication, there's a lot more understanding and there's a lot more participants. Lps themselves have evolved. They've all sort of set up Asia setups, india setups, et cetera. So I think there is a lot more sophistication. You still have a lot of LPs that are very, very uninvested, under-invested in India, and then, of course, you have an emerging class of LPs from India, given the wealth that has got created in India over the last 20 years, both founders and public investors and so on. I think there is a I'd say the macro, if I was to sort of draw a dichotomy which I think we all have to hold in our heads at all points of time. The macro interest in India is never been higher. The micro of saying hey, but why is it translated into returns that are not bad but not stellar, is also there. There's a lot of macro interest. There's no doubt about that.
Speaker 1:Wonderful Rahul, congratulations on just closing your third fund, a $300 million fund, and I know that you guys started also, like you said, seven, eight years ago and the earlier funds were like 90 and 200, something, right, 225, right, uh, so obviously, uh, how have you seen it, even in just this last eight years, not just the 17 that you've been practicing this art? How has it changed what? What are the kind of different questions people are asking now? What is accepted, what is still?
Speaker 2:people are like still looking for answers from an l point of view so see, in terms of questions clearly, and in terms of landscape also, right, there are some global LPs and they've been around. They were LPs in Helion and they're LPs in our fund now. So there are endowments, pension funds. They've been around for like 30, 40, 50 years, investing in venture. Once in a while, we also see a lot of new family offices come in. As people create wealth, they start their family offices. So that landscape does change and that is one area in which I would say Indian LPs have come around. A lot of those set of family offices are there, and including angels as well. What has happened over the last few years is also now there are institutional LPs from India who are interested in venture.
Speaker 2:Now, in terms of questions, if you are a global LP, you can invest the dollar anywhere in the world. Clearly, the US has generated some great returns. One of the big questions is why India? And if there's a risk premium, am I actually getting the return that you are? You know the risk that I'm taking for, including currency risk. So that is one question that LPs have. The other one is you know, yes, I like to Gautam's point, I like India, but why should I invest in you as a fund. So what is so different about you when there are, you know, 10 venture funds? Some of them are global platforms, some have been around longer than you have been. And then, finally, question is of track record, as in yes, your FMVs look good, but have you returned money or not? So those are a few questions that you will, I would say, on a regular basis. Whenever we call LP conversation, see, come up as your fundraising.
Speaker 1:Absolutely Interesting that all three of us are homegrown funds, right, and actually kind of a moment of pride there. Right To say that you can do this now, as opposed to the global funds which had the kind of India chapters or whatever, or Asia chapters, as Gautam you said, or long right, including kind of from times past. They're struggling with this question of, like you said, you know, good but not great returns, right, perhaps not stellar returns or whatever, right, and it's just compared to america.
Speaker 3:Sorry, certainly as compared to america yeah, certainly, as compared to america.
Speaker 1:In fact I was going to ask you this uh, later, gotham, that even compared to india on the public markets, which are a lot more liquid, I mean I wouldn't say predictable, but you know you have a lot more control over your destiny, as opposed to one of the things we get asked on the public markets, which are a lot more liquid, I mean I wouldn't say predictable, but you have a lot more control over your destiny, as opposed to. One of the things we get asked on the early stage side is when will I ever see BPI? Because if you're seed stage, we are at prime. We are seed stage. It's very hard to imagine how are you going to get to a 10-year fund cycle?
Speaker 2:So, maybe for the folks that have been around and backing it for a long time 30, 40 years- so maybe for the folks that have been around and backing it for a good returns, it just took longer.
Speaker 2:So in terms of IRR it may not have played out In terms of multiples, it did play out. Also, what has happened is India is much more mature today. I would say most of the LPs that were there 15-20 years back are as interested in India as they were 15 years back. In middle there was a question mark they had on India, but with the size of the economy, growth in the economy in the public markets and the liquidity they're seeing from public markets now they are very interested in India. In fact, I fear in next 10 years tide may turn the other way, that we'll have excess capital, too much capital, which basically you know inculcates a lot of bad habits when you're growing a company or building a company. But you can't have it both ways. So I would rather take excess capital than low availability of capital.
Speaker 2:And I think India is in a very good spot that way.
Speaker 3:Yeah, I'll just maybe say two things. I mean, I think there is a comparison with public markets, but up to a point only, because when you look at the underlying earnings expansion of public companies, it has been far less than the actual returns. So a lot of returns have come from this capital inflow and all LPs that think very, very long-term know that that is not a sustainable answer. So there is a question, but it's only up to a point. Second thing I'll say is that there are good reasons for LPs to be very enthusiastic about India in the very long term.
Speaker 3:When I started investing in 2007, india was a $700-$800 billion GDP economy. We were maybe $700-800 GDP per capita and the infrastructure was digital, physical. Everything was poor or way poorer than it is today. Fast forward to 2025, nearly $3 trillion economy, nearly $3,000, maybe $2,700 GDP per capita. Every small change can lead to large outcomes now, larger than then. So there are very good reasons for that, for LPs to be enthusiastic about it.
Speaker 3:I think the time it takes to build companies in India is a question that has to be juxtaposed next to this question. So when we looked at the data, it certainly feels like from company inception and if you're a really good company and if you're therefore top I don't know five percentile, maybe two percentile of companies, you still will take 13 to 15 years to IPO. So I think there is a palpable sense that the future, the next 10-15 years, should and will be better than the first 15 years of India private investing or India venture in particular. But for the future to be better than the past, one is the environment is already better, but some of the inputs may have to change as well. Some of the thinking may have to change.
Speaker 1:Got it. Let's take two cohort of LPs. We'll stick to the international ones. We'll come to India in a few minutes. Let's say somebody is not exposed to India at all. Right, gautam, you also mentioned that there's a lot of underpenetration. We've also got a lot more LP interest in the last six, nine months than perhaps in the last six, nine years, right. But many of them are also relatively new to India. Now, that's a double-edged sword, right, because they have no idea yet about India. And the other cohort is the ones that have been in India for a while. They've got some, maybe it took longer, maybe you know they got the multiple, not the IRR, whatever, right. How would you think about that cohort of LPs, the new ones, and how would you? You know, if you were advising them, what would you say they should think about? Come in, don't come in, think about it, and so on.
Speaker 3:It's hard for any manager to convince an LP that they should invest in it. They have to sort of come to that decision themselves. You can provide some inputs, etc. Second question, I think, is that if you're a large LP, particularly if you're managing a pool of capital more than a few billion dollars or more, I my guess is that most LPs and they should first start with public market exposure to India before they start with private market exposure. That's the logical thing to do. That's what I would do if I was in their shoes. Of course there are people that are only private market focused and so on. Leave those aside for a minute, because that's the most liquid, easy answer versus and you can reverse mistakes easily if you make them, and so on. So if I was advising an LP that had no exposure to India, I would first say dip your faith in the public market first before you do private investing, because you and us and Rahul, this 10-year locked up capital. I mean it's a long commitment, it's a really long commitment.
Speaker 1:Absolutely, Rahul. Do you want to add anything to either of the cohorts? I?
Speaker 2:have a very similar view as Gautam it's very hard for us to advise an LP, tell them what to do.
Speaker 2:That is a call they have to make. I've also seen LPs take a call that for this asset class, this geography sounds more interesting. So for there are LPs who are like VC in India is attractive, but buyout in Japan is what I want to do. So they also decide based on different asset classes. And finally, it's a question of portfolio construction. At the end, right, there's a risk part and the return part and diversity part. So they try to balance all three of them and maybe starting public market is a good idea because, as Gautam is mentioning, so maybe that's a way to start.
Speaker 2:But yes, whoever comes in as in, they have no hurry. See that good. The good part of the of being an LP is if you miss this fund, it's not as if you can't enter in the next one. Like for an early stage fund, if you miss a deal we can't come in at a later stage for that company. Here they have no such if they're a good. Lp they'll get their way into the next one of the same franchise.
Speaker 1:Yeah, no great. I mean one of the very simple things we try to figure out when any newer kind of LP, like how long have you been visiting India? Have you even visited in the last two years, or since COVID? And if it isn't, usually I mean we're not advising them. Of course you're, you know, talking to everyone, but it's like, hey, look, just you know, get your bearings, it's all right. Like there's no, there's no rush, like rahul said yeah, um, switching gears, talking a little bit about fund sizes, right, uh, gotham, your last fund was about 550. Uh, rahul, you guys have sort of grown in in size in terms of the fund size. I think this might be even for the founders that vcs also spend a lot of time both thinking about LP portfolio construction and the fund size. So how do you guys end up at 550 for the last one or whatever the next one is going to be? And, rahul, how did you guys decide that this was the right number?
Speaker 2:let's start with that so you know it's an interesting and a difficult question to answer.
Speaker 2:A lot of time you see, fund size derived strategy, whereas in ideal world it should be the other way around, Right?
Speaker 2:So I don't want to claim that we have figured out the right answer, but at least I'll tell you the strategy and how it leads to a fund size. So our view was that we will do early stage, which means seed and series. We need to build a portfolio which is at least 25 companies. We have six check writers and there is a certain number of deal flow that we see from which we think we can do maybe eight, nine a year. And if you reverse calculate from that, we arrived at a number between 250 to 300 for early stage round. Now, three and a half years later, if the inflation of round sizes keep on happening, then the number might be different. If the amount is very similar, then number will be similar as well. So it's a question of what capacity you have, what stage you want to enter and what are the round sizes happening in that stage, and obviously including the following amount so that is the math we had done to arrive at the fund size.
Speaker 2:We had a lot more interest, but at least we felt that even 300 is a hard one to deliver. Going above that didn't make sense.
Speaker 3:How about you, gautam? Honestly, not very different. I think it is art more than science, although there is some science. You do similar math as how many investments per year? What are we seeing? What's the average investment size? And I think it's good practice, if you have the good fortune of being in that situation is to say no to some of the capital, because ultimately, we are all human. While there is competition in the market and there is an aspiration to do more, these things can only grow at some organic pace Unless you completely add a new strategy to what you do.
Speaker 1:Yeah, I think it's heavily debated inside of Prime. We've decided to keep it the same across funds, but with a lot of animated debate. I think it's heavily debated inside of Prime. We've decided to keep it the same across funds, but with a lot of animated debate. And in terms of what the strategy should be, how would LP portfolio construction? I once heard from and I won't quote his exact face Doug Leone, when we had got to meet him many years ago, that keep an equal number of LPs. I'll just leave it at that, Right, and therefore you do the math right. So it's 550 divided by whatever. Do you guys consciously think about LP portfolio construction, whether it, in terms of the source of capital, could be us, like Rahul said earlier, it could be pension funds, could be endowments, could be DFIs, whatever, right? Or is it a lot more now that the new firms are established, right? Yeah, hey, you've got a lot more people wanting to invest.
Speaker 3:I certainly think. We think about it now. I think first fund one and fund two. It's harder to think about it too much. There are, I think, broadly speaking, two approaches that I have seen. One is if you look at the large global firms of course this happened over a period of time. They all have very diversified LP basis, so no LP is more than 5% of the fund or whatever. And then you have the other extreme where you have 10 into 10 as well.
Speaker 1:Correct, rahul. Just a twist on that question how about the geography right, because you've raised some from india, a lot more from abroad. Does that kind of play into mind?
Speaker 2:so not as much geography, but more the kind of lps you're getting does play as in. Do these people have, or do these institutions have, reputation of backing multiple funds in their mind, at least when they are coming into you? What kind of checks they write? What is their focus on India? Are they new to India? So, those are the things that I would say go more into our discussion than a certain geography, because geography is a very hard one for us to have a view on.
Speaker 2:Somebody from Europe might be very convinced about India, but somebody from Singapore may not be.
Speaker 3:Makes sense, although I mean the emerging answer. If you look at the emerged answer, I don't know what it is for you guys. If you look at outside India capital, big chunk of it tends to be dollar in origin. Yes, it tends to be American. In one I had got advice from a hedge fund friend. He said you will spend your time everywhere but you'll get the capital from the US. So yeah, and you know, it comes through various forms and so on, but the end source is often that's probably, I suspect it's true for you also.
Speaker 1:Yeah, very much. Yeah, similar for us. In fact, for us it used to be 100% from the US. So that is why the geography question of the mind, to say maybe we should get some from Asia, maybe some from the Middle East or whatever.
Speaker 3:So I think, even though it's a smaller fund, India is a interesting and India LPs is interesting and relevant question to think about for the next 10-15 years. For sure already there are reasonable amount of fairly sizable LPs in India, are they? There are a reasonable amount of fairly sizable LPs in India. Are they up the curve in terms of understanding of what private market investing, what venture investing, what growth investing is they're getting there? They're not there yet, but the capital base exists and if you look at I don't know the numbers but Chris Capital's current fund, what we hear is that there is going to be a sizeable domestic component. In the sort of private equity world people have raised reasonable size purely domestic funds and that LP base is getting a bit more sophisticated. So that may also be an interesting trend for the next 10-15 years.
Speaker 1:Got it, rahul, question for you as you went from the first $90 million fund, although you were kind of restarting the journey to the $300 million, like we often ask founders when they are raising right. It takes the same amount of effort to raise $90 million as $300 million. Or is that a myth or reality, beyond the caveat of you just starting restarting back when you did Solaris 1?
Speaker 2:I think it is more dependent on where you are in your evolution as a fund more than anything else. In the first fund I think it was the toughest fundraise for us For about nine months. There was a time in between where we felt we should just pack shop and go home. We only had, like it started a conversation where it looked like everybody was interested in us. In three months nobody was talking to us. So it is like a startup founder trying to you know for their first round of capital. If you have good pedigree, people want to talk to you.
Speaker 1:Yeah.
Speaker 2:That doesn't mean you'll get money.
Speaker 1:Yeah, no, it is definitely very humbling to fundraise, as is probably not apparent.
Speaker 3:I think what founders don't appreciate necessarily as much is that you need many yeses to make a fund. You don't need one. The big difference and the reason why it is both less hard but also a lot harder, is that I think the two things that are different and but also a lot harder is that I think the two things that are different and I think, given that a lot of your audiences, founders, it's pertinent for them One is that you don't need one yes, you need many yeses. Second is there is no okay, make some progress and show me Right, all or nothing. So that's those both make it can make it different.
Speaker 1:For sure, right Building along the same lines. How do you quote unquote prepare for a fundraise, or what is it that you are thinking about? Like okay, you know as and when you do your next fund? Like hey, here are the set of things we should think about. Of course, you have to talk about track record, your portfolio, but are there, or even the timing right, like the first fund was probably six, seven years ago Now this one you know. So any thoughts on that in terms of when you are preparing for a fundraise? What are you thinking?
Speaker 2:So one is that if you want to plan, you can't plan only six months in advance. It has plants only six months in advance. It has to be planned three years in advance to assume or think like an lp as to what will they look for in you when you go out for your next fund and if you have certain funds running behind you. There are expectations that lps have of you having proven xyz by the time you are in the ninth, nth or n plus one fund right. So you have to at least get that sense. The second one, and very important one fund right. So you have to at least get that sense. The second one, and very important one, is are your existing LPs going to support you? It is like, again, when a founder is a late stage round, they go and first check with their existing early stage investors. Are they in or out right?
Speaker 2:So having that sense it's an important conversation to have and you know there are questions around team and succession planning and all that stuff. So those things have to be in line and not to say that you have to engineer it. You have to be ready with those questions and I'm assuming that they all make. There's a reason why those questions are asked. So if team matters and if succession planning matters, then anyways, you should be thinking about it before you start to fundraise. So those are kind of things that matter. And finally, is the story landing or not? And at least we do a lot of preparation before we start talking to LPs on what are the potential large or important questions that will come up when you go and start pitching.
Speaker 1:Yeah, so let's double click on both of those right Exits, which has been the Achilles heel of the ecosystem forever, and that leads to DPI, which is capital return, not just raised into the fund and you mentioned team. Are there any other questions like that? And then, of course, we'll talk about exits.
Speaker 2:See, differentiation is the other one that, at least if you're in a crowded market, every LP will ask you why should I invest in you? Why not in 10 other funds, as I said would be longer, better brand name and so on. So that is one question that you have to answer and then finally, what is the portfolio founder saying about you, as in when they do ref checks and I think ref checks are very extensive and very important in their diligence? What is the ecosystem saying about you?
Speaker 1:What is your own company saying about you?
Speaker 3:Gautam maybe talk a little bit about exits and generating returns, real dollar returns. I think the marker in our minds is that M&A is a difficult route. In India, in the HUL minimalist acquisition of few days back and you know, kudos to the team. They built a incredible business.
Speaker 3:It is rare if two thousand crores of cash exit is quite rare in India, how many we have seen over the last, I think we will see more Clearly. It will happen, but it is not the same frequency as America. So you have to sort of be on the path, in our view, to be an IPO-able company. And if you have that, there are some strategies you can employ to sell along the way because DPI is important for LPs. Sell along the way because you, because dpi is important for lps, um, the uh, and I also think some of it is a function of where you are in your life as a firm.
Speaker 3:Once you have a few funds under your belt which have performed well on a cash returned basis, then perhaps there's more forbearance to say, okay, we trust you and you know you'll figure it out, which is normal, it's absolutely human. You know if everyone has to earn on their stripes and on their trust, um, but I think the and you know, despite the IPO markets of today, which are exuberant and almost, like many companies, can go public, the challenge I think for a lot of LPs has been that from the time of inception it takes quite a long time, and then I think there's a. The dichotomy, I think, is that you need LPs that are patient because it's going to take time, but nobody is infinitely patient, right? So nobody can be infinitely patient.
Speaker 1:Right, I think, rahul, the problem is harder yet for earlier stage fund. I know you do seed, but also Series A, but imagine your seed investment portfolio as a standalone cohort. It takes even longer. So how do you guys think about two questions, one Gautam's point about are you thinking, not necessarily exitability, but if this were to ever go IPO someday, what would it be? Or is that not? It's largely like an early bet and then we'll see how it goes.
Speaker 2:No. So I think for us, every investment we make better the IPO, if it works out, so that is at least incoming thesis of every investment we make better VIP, if it works out, so that is at least incoming thesis of every investment. Obviously not everything right. On the other question, on engineering and exit, like I'll make a statement which is more, you guys will laugh at me you need a burger of India succeed right, so the same burger in us doesn't succeed in india, and hence similar exit strategy in us may not work in india now what?
Speaker 2:is that right strategy? I don't want to claim that I have the answer, but I'll tell you. What we have done is, uh, in our prior lives we realized that waiting, or this whole notion of getting, trying to get to full potential is the only way to exit, was a bad idea. And at least over the last eight years, whenever we got a liquidity opportunity, we looked at it really seriously. And in companies that were middling, we took it blindly. In companies that were doing well, if it were exceeding, let's say, 10x of our capital, we took enough money off the table. So at least there were some partial exits that happened. Now, obviously, we could not have done it on our own. There had to be liquidity windows that were available, but in the past we had not taken advantage of the liquidity windows.
Speaker 2:So at least this time we changed that a little bit. Good part is, with multi-stage funds and later stage funds coming in.
Speaker 4:We don't have to.
Speaker 2:At least an early stage investor doesn't have to wait for full M&A or full IPO to get all the cash back. If the company is doing well, a lot of series D investors are interested in doing secondaries also to bulk up their ownership. You have to be a little bit nimble and you know what we want founders to do is we have hustle.
Speaker 3:There's a very similar thing out here as well, you know, it's interesting I think Fred Wilson has put this out a long time back about the Union Square Venture strategy and it's different from I mean from the strategy that some other firms follow, that they sell along the way, right, they sell one third and just, you know, just write the upside on the balance. Um, there's another lp of ours who gave us the advice that some even private equity firms in india follow, which is the version of what raul is saying at 3xl one third and then you can, you, you know, it's fine, you're sending, you're sending the capital back, et cetera. I think the this full potential bit is is a is a useful framework. If all the companies are, or some of them have, a chance to become Google, yes, right, then of course you don't want to sell anything ever.
Speaker 1:Yes.
Speaker 3:Right. It doesn't feel like we're in that paradigm in India. I wish we were. I don't think we're in that paradigm in India.
Speaker 1:Not yet, at least. Yeah. So that leads to an interesting question in terms of because a lot of the audience here is probably founders right, how open are you about these conversations? The reason we wanted to actually have this podcast is to say we don't talk about this, nobody wants to talk about it. So appreciate both of you talking about it.
Speaker 1:So how openly do you talk about end of fund life this one, you know, if you're going to raise 200 million I might want to take some chips off the table or how much of it is more kind of hallway conversation or even sort of like backroom.
Speaker 2:You know like we'll talk about actually, we are very open with the founders in this, as in when we come in we say we are there for eight, nine years. So that is understood. Founders at least I would say founders who have been in the industry also understand that funds have a life. When they are raising the next round, we tell them to figure out whether that investor has a fund life constraint or not. So it is not as as if they don't understand the math. If a founder is looking to build a company that will go IPO in 15 years from zero to inception inception to exit. They also want people on their cap table who are patient enough to be with them when they are going IPO. They want investors who will not sell quickly because that impacts the stock price. So they are I would say founders are very intelligent and understanding about this fact. In fact, they would help you get an exit as long as it doesn't harm company's fundraise potential.
Speaker 1:Yeah, the primary that sort of thing.
Speaker 3:Similar. I think it's a little bit easier to have this conversation at growth stage than it is at venture stage, because I think there is more clarity about a path. But I would still say I would say even now, versus five years back when we started, I think we have more maturity and clarity around the conversation to be had with founders saying, okay, once we invest, what is the path, what is the goal, how do we sort of take the steps along that path, versus sort of kind of implicit right. Yes, so I think the explicit conversation I think is we've also improved our ability to do that. But it is easier. Growth stage, adventure stage. It's when you are, you know, I think, the I suspect adventure stage. The time to have that conversation is four or five years. In once there is a post, the little bit of momentum.
Speaker 1:So as we, as we get to the kind of you know end of the show here, let's say it's 2030 and you're raising whatever N plus one, N plus two, whatever that ends up being five years from now, Right, what do you think you know a little bit of looking into the future, both from your own fund lens point of view, but also, since this we're talking about LPs, what do you think are the kind of things we would be thinking about talking about five years from now? What is your prediction, projection thought process? You, Rahul, had said earlier that, look, we think three years ahead when you just closed your fund. So maybe it's too premature, we're still recovering from that, but let's say it was 2030. So it's five years hence.
Speaker 2:See. One is that, and specifically about Stellaris, I would say we should have proven more funds in terms of performance. We had a great fund one, but fund two, fund three also needs to perform. So that is one thing that I'm hoping by 2030 we would have proven as an industry I would say a lot more later stage India. By 2030, we would have proven as an industry, I would say lot more latest stage India. Specific funds will get created. That is my personal view. With more capital coming in larger outcomes from India.
Speaker 2:We have very few A91 equivalents. But let's say, if somebody were to write a $50 million check, I can't think of a tech focused India specific vehicle whom I can go to today, and as a 50, I mean 50 to 75 in that range. So we'll see more of that. One thing that we will have to prove as domestically grown entities is can we last for the first generation? And that is one other question on India that while opportunity and everything is there, not too many locally grown fund have lasted beyond the first generation of founders who started the fund.
Speaker 2:You mean the GPs Beyond the GPs, exactly so by 2030, that better be proven, that we can create new GPs. You know that is what created Sequoias and Bessemers of the world in US and I hope and I do want us to create something similar out here.
Speaker 3:I actually would submit that the LP base, 5-10 years out, would have become larger and more sophisticated. We would be talking less about them, I hope, and more about the companies and the businesses to build, Because the real bottleneck, I think, of how to do better for emerging companies in India is not actually LTEs. It's not right. It's really the nature of the businesses that we can build where our competitive advantage lies, what the economy of India allows, what export opportunities allow, etc. Etc. And I think if we do a good enough job as investors what the economy of India allows, what export opportunities allow, et cetera, et cetera and I think if we do a good enough job as investors and really founders investors can only do very little then we won't be talking that much about the LP side of things, because the LPs will be there, there'll be plenty and so on, but I do suspect there will be larger and more sophisticated LPs. But I do suspect they will be larger and more sophisticated LPs. Yeah, so that's.
Speaker 1:Great, and I would say that we should have put the DPI question behind us as an ecosystem, not just individual funds and so on.
Speaker 3:Which is a function of companies just doing better.
Speaker 1:Companies have to do well, and there has to be liquidity along the way, right, whether it is through along the way, you, you know, selling a little bit of your winners hopefully not the googles, uh, or whatever those end up being but also enough and more ipos, like, like both of you guys have had. So with that, we'll bring this to an end. So thank you, uh gautam, thank you, rahul, for being on the show, and it was great to great to chat with you thank you, thanks for having us dear listeners, thank you for listening to this episode of the podcast.
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