In this episode of 100xEntrepreneur Podcast, we take you through the investment thesis opted by Jishnu Bhattacharjee, Managing Director, Nexus Venture Partners, behind investments in SaaS platforms like – Postman, Druva, & Observe.AI among others.

Jishnu began his stint in the VC world with Nexus VP in 2008, and since then he has been part of many cross-border investments in SaaS startups. Jishnu’s insights which we discuss during the podcast are on –

00:28 – Joining Georgia Tech for MS & Ph.D.

03:02 – Finding his first job offer based on his Ph.D. research paper

05:32 – Joining Business school to move-out of his regular desk-job

06:10 – Connecting with Naren during the early days of Nexus

10:52 – Why did he choose to focus only on SaaS?

15:27 – Journey of his first SaaS investment, Gluster which later got acquired by Red Hat

17:33 – Discovery of Postman

23:49 – Nexus being one of the few VC firms to have a common cross-border investment team & fund

25:41 – “Product-first thinking” the common trait of all the SaaS investments by Nexus VP

33:30 – How did organic growth come early for Druva & Postman?

43:37 – Key aspects influencing Postman’s valuation

51:37 – Broadening the horizon being an Entrepreneur- “Think broadly but act narrowly”

58:22 – Thesis for future investments in SaaS

Read the full transcript here:

Siddhartha  0:00  

Hi, this is Siddhartha Ahluwalia, welcome to the 100x Entrepreneur podcast. Today I have with me Jishnu Bhattacharjee, Managing Director at Nexus Venture Partners. Jishnu has an MBA from Stanford Graduate School of Business, an MS in electrical engineering from Georgia Institute of Technology and BTech from IIT Kharagpur  He has invested in software, technology infrastructure, data and AI, and is interested in a wide range of start-ups. Jishnu’s current board involvements include Druva, Postman, H20.ai, Rancher Labs, Headspin, Observe.ai, Blueshift, Helpshift, Kaltura, and a variety of other companies. His investments also include Mezi (acquired by American Express), Cloud.com (acquired by Citrix), Gluster (acquired by Red Hat), Arkin (acquired by VMware), Elastic Box (acquired by Century Link).  Welcome to the podcast, Jishnu. 

Jishnu  0:56  

Thank you so much for having me. 

Siddhartha  0:58  

Jishnu, we would love to know about your journey and how you got started in venture capital. 

Jishnu  1:03  

Yeah, as you know, a lot of things happen by serendipity. So, yeah, I mean, going back, and I will try to kind of cover briefly, um, you know, back in 2000, I did my undergrad from IIT Kharagpur, and then went to do my PhD in Georgia Tech. And, yeah, if, at the time, like, you know, any of my classmates would have to guess what I might end up doing? I think you will get 90% answers, as I would be a professor, and that’s kind of like, you know, how my orientation has been, as I grew up and all that and, then at Georgia Tech, some great things happened, you know, I was fortunate to get here and I did classes from stalwarts like, you know, who define fields, like signal processing, and all that. My field was electronics and communications and those kind of also led me to kind of guess and kind of assess myself, like, you know, am I going to be at that level, like, the philosophy is, like, you know, if I’m doing something, you know, do I have a shot to excel that and then I also started introspection on what I am good at. And some things as they say, you know, it happens. So I was, I was well into my PhD in a lot of papers and all that. So, you know, as I was doing that, I got a call from someone in Silicon Valley saying that, hey, I have read your paper. And this was right after 9/11. And so 2001, fall, or kind of q4 of 2001. And, and he said, hey, I’ve just raised money, from Kleiner Perkins, or someone and another fund. And, you know, I didn’t know any of those things. But then he said that, hey, you know, the only two of us and we are looking to bring in someone who would define a lot of architectures and our, our engineering, and I saw your paper. And I see you have been driving ideas to papers, how about you drive ideas to products. So, that was the pitch that kind of got me excited. And so, I moved here. So that company was Scintera Networks.

Siddhartha  3:34  

 So, you dropped out of your PhD?

Jishnu

So, I took a sabbatical. And but as it happens that, you know, whenever you take a sabbatical or at least take a break, probably you move to different dimensions. Yeah, even Larry Page and Sergey Brin never completed their Ph.D., I think after they took a sabbatical. I don’t know whether the reasons are I mean, they had really compelling reasons as to build a trillion-dollar company, I don’t know these The reasons are comparable or not. But yes, you know, if you tell me a Ph.D. dropout in that sometimes, you know, ads, ads, maybe another line item on the resume. And then there was a startup, It is very interesting startup we were in I mean, I was deep in engineering as deep as it can get. And you know, we are building electronics for optical and wireless communication as deep in the physical layer, you know, designing all the systems communication systems, silicon, and integrated circuits and that kind of stuff. So, so I was the first engineer to be hired there, member of the founding team, you know, I mean, I was called the founding engineer and whatnot. I was not a co-founder, but you know, that is really great experience to be working on at that level, and then kind of like, you know, learning each day, a new day, and I got deeply, kind of, I would say started appreciating the startup culture. So, I was there for about, like, a few years. And then it turned out that, you know, we had great technology, but we were ahead in the market, we ended up selling the company, which is okay, like, that company became public and all that. So, but after three years, I moved on, I went to a bigger company, I kind of figured out, I am not cut out for the company job. I thought, Okay, let me do something else. And I ended up going to business school. So, from 2006, to 2008, I was in business school. And as I was going through Business School, some venture capitalist from the valley, pinged me because he was looking for somebody deep in tech, who can, hopefully also appreciate business. That’s how he approached me. That’s how he said that, hey, it seems, you definitely have very good tech jobs. And I’m assuming you appreciate business because they’re in this school. So I started kind of getting a flavor of venture capital. And through that, I think, 2007 and 2007,  I got connected to Naren, co-founder of Nexus and Nexus actually just started in 2007 at the time. I didn’t know that because, I was not told that he started Nexus Ventures. I was told that there is one of the smartest persons in Silicon Valley. I said, Wow, that’s a great guy, I have to meet this man. And, and that’s how I met him. And of course, like, I was blown away when I met him and just kind of like, I mean, as to say, success is great. humility is great or greater, but humility after success. Nothing beats that, and very uncommon. And that’s what Naren exactly like, the first time when I met him, like, this is what jumped out. And I say that you know, there is the complete resonance of my way of life and somebody who has kind of, like, you know, as if so much even scarier, and that kind of stuff. So, so I think I think that was one and then also it has so happened, you know, since I’m in the journey, probably it’s an interesting anecdote. So we meet along with, you know, a couple of other teammates from business school. So three of us where we’re looking to do an e-commerce business in India, believe it or not, it was like 2007, and eCommerce was little different. The leak of e-commerce was the idea was at that time, there were no mobile phones. So that startup was called cash cow with a cue. And the idea was, we will use the cybercafes in India as cash collection center. And kind of like, you know, try to do e-commerce there, because there was no internet connectivity at the time, mobile was weak and all that. Now, you know, as we did Film Studies, we kind of came to the conclusion, it was probably not the best idea. But of course, you know, I mean, this was like, probably at the time when Sachin and Binny started thinking of e-commerce. So, clearly, we didn’t have the entrepreneurial genes at that level. Because, you know, after we kind of did study, and all that, we kind of came to the conclusion, it’s not going to be easy to pull off. And, and that didn’t pan out. But what happened, interestingly, is that through that, I got connected to Suvir, who is other co-founder of Nexus, and I didn’t know at that time, just like amazing. I didn’t know at that time. And so we were co-founders, it happened kind of like at almost the same time. So yeah, though, the startup didn’t pan out. I guess, you know, they liked me enough. And I liked them enough. And, honestly, I didn’t know whether the venture is for me at the time. I mean, I was always an operator. I went to business school to start a company. I was trying out many different things. But they were all entrepreneurs. So 2008 I graduated, and I joined Nexus. So, the first investment in Nexus started in 2007. I think early 2007, and I joined one year after the fund had started. So that’s how my venture capital journey began. And I guess one thing led to the other and I’m blessed to have chosen VC venture capital as my job, I think it’s extremely, extremely rewarding in terms of the satisfaction and the impact that you can have. And also just this opportunity to be able to work with some of the exceptional people in many different dimensions, of course, their capability, they’re entrepreneurs, and also great, great human beings, and also, you know, directly or indirectly having influence in creating something meaningful, changing people’s lives. So yeah, I wouldn’t have had my last 12 years in any different way. 

Siddhartha  10:47  

Fantastic. And Jishnu, within Nexus, you chose SaaS, right? How did it happen? Like you chose to focus only on SaaS?

Jishnu  11:00  

 Very good question. And at that time SaaS was anything but a category that was possible out of India. So if you look at like, you know, from the beginning, the inspiration, one of the core inspiration of Nexus was, we saw India as a hybrid of China and Israel. Yeah, in China, maybe 100%, of value creation happened domestically, which is even true today. Whereas in Israel, almost hundred percent of value creation happens internationally, companies starting out of Israel, and they have done an amazing job. And at that time, we saw India as a potential blend of two, where there is a huge domestic market, when you talk about technology-enabled innovations in consumers and businesses, at the same time, because of the talent that has happened in software talent in India, and for last two, three decades, starting from 80s, India has played a lot of IT services companies, and that has led to a lot of software know how I would say in the country, we should be able to build product companies, software product companies out of India, addressing the global market. So that was the inspiration with which Nexus started. And in fact, if you look at, like, you know, even before I started doing it, actually I love to think that, how we kind of thought about it, and how we pioneered this, so to say cross border, it SaaS category, the first investment that Nexus made was in early 2007, in a company called dimdim, which would have been Zoom, like, if you look at. That was exactly Zoom, prior to zoom, the idea was, you know, WebEx and others didn’t have the experience. And this gentleman out of Hyderabad started this company, and we sold in 2011, when Zoom started. So, when we say that, you know, we actually sowed the karma, like we did, we had the karma, that’s, you know, that kind of led to somebody else, grow, you know, take on that. And then, of course, you know, the rest is history, but, you know, that kind of tells us and we actually sold Dimdim to Salesforce, and it’s just, you know, we sold it too early and all that. So, but that tells you about the inspiration that we had, and then we also invested in company called Pubmatic. That was before I joined which was out of Puna So, we had that thing. So, we knew that, you know, we are doing something but yes, when I joined it, it was not clear what exactly would be meaningful in India. And one thing we knew that India has to be an IP led superpower, it cannot just like, you know, IP services, they have built great things, I mean, in India has built great things, but that cannot be a sustainable advantage going forward. So that’s why one thing we decided is that we are not going to invest in any IT services company, which was a very different kind of step and decision compared to any other fund in India at the time or any other fund. So I think, you know, those kind of decisions paid off. And then the other interesting thing would be so when I started out, that is 2008, I started thinking, you know, what makes sense here, right now, at the end of the day, okay. SaaS is SaaS, but it’s like, you know, huge category, and what would make sense or whatnot. And, that was the time also, what happened is that AWS cloud was just started to happen. And in India, if you look at you know, it was like, most of the businesses were being done in pen and paper. And there was no legacy there was not like, you know, a lot of on-premise installations and on premise tech and all that there was going on. So in a way, we thought that cloud adoption in India is even more natural. And even for Indian entrepreneurs, if cloud picks up the costs to build a startup and time to market and all that can all be faster. So that kind of we got some inspiration. I won’t say we knew a whole lot, but our inspiration was, this movement of cloud is going to accelerate technology startups. Of India. So that kind of like, you know, and that led to a lot of things. And then at the end of the day, you know, as much as like, we are very bottom of investors by that what we mean is that as much we think of sectors, we don’t go by sectors, we try to meet exceptional entrepreneurs, learn from them, and try to kind of like, you know, add fuel to the realization of the vision and partner with them. Right. So through that, we started meeting great companies, great entrepreneurs, and, like, you know, the very first investment that I have done, it’s a company called Gluster, which is the first storage being offered on software, leveraging cloud, I mean, those kinds of things. And he’s an entrepreneur, he had his first open-source company, he has his first journey for Gluster actually started it kind of pivoted in different ways. And but it started in Bangalore, then he moved to California, and he was building supercomputer in Berkeley, actually, Berkeley had a project, he was not a student there, but he was building, I think it was called Thunder or something. And then, you know, when he started building, he had this a very small shop, very small office in Bangalore, where he had, like, you know, a set of five really passionate engineers and started building this. And we got to meet him. And we thought instantly, I mean, they were like, you know, he was just trying out, that was the time when it was not easy to raise funds anyway, I remember 24 VCs passed, saying that, you know, I mean, you’re smoking, you know, nobody can build storage and software and all that. And,  we thought, totally opposite. And Naren and I invested in the company. That was my first investment, VC investment. This was kind of like, we ended up writing the term sheet, I still remember October of 2008, you know, so things like that. And then, of course, you know, I mean, many, many things happened over last 12 years. And one thing led to the other.

Siddhartha  17:06  

So, Jishnu, one of the companies, which clearly, you know, stands out among your wonderful portfolios, Postman, right, because many of your companies have gone IPO. Many have been acquired at a very high valuation, but Postman certainly stands out. Right. So, when you invested in Abhinav, and his co-founders, what was the Spark, which you spotted at that point in time? 

Jishnu  17:36  

Yeah, very, very different. I will talk about that. Just several companies I’m looking forward to IPOs in the coming months and days. IPOs haven’t happened yet. Yes, there have been fantastic acquisitions. But I think the next leg is IPO. And I think, you know, we will see several companies, several IPOs for companies being built out of India in the coming, let’s say 12 to 24 months. So, yeah, very, very exciting times ahead. Now coming to Postman. Postman is very unique, by the way, it’s very, very outlier company, very unique. And it also exemplifies, I would say, the kind of companies we want to do, and also like the ways we connect with entrepreneurs. So, let me give you the background, actually, we first got to know about Postman through one of our companies. And one of the founders, who is the engineering founder, he actually told us that hey, you know, this is a lifesaver for me. And you should, you should find out, like who is building it? Yeah. And, you know,you should get connected. So, that’s how we first got the linkling that there is something here now two things, I would say, came about together. One is the fact that somebody just built something very simple, which he did to solve his pain point. He was a developer. And he was dealing with API’s and the core part about what he was building is that like, you know, API is something that you start building, but it is somebody else who has built so if that API doesn’t work, then your code doesn’t work, but for no fault of yours. So it is very important that whatever you’re doing ongoing basis, you are being able to test it out and know that hey, you know, because this is an external dependency in some ways So that’s what he identified, he solved. And he’ll release it as open source. And it turned out that 10s of thousands of people at the time across the world were using, right. So, this was in 2014. And the second was, you know, we were deep into because we started doing cloud investments, we did a lot of open-source investments. So we understood developers, we understood the kind of bottom-up method of building companies building software. So, we resonated with what he was doing. We’re seeing the technology because that’s how code will be built. People will not start just building software from codes. But rather, they will start kind of like, you know, just taking in because API is a way of making another service or another code, which has been already built, how do you make that available, and be used by somebody else, it’s kind of Lego blocks, you know, you don’t have to worry about the content inside the Lego blocks, rather, you just focus on the interfaces. So that’s what API enables. So we had that inspiration, and then we saw this thing, and then Abhinav exceptional, like, whoever meets him, there is an element about him, which is very very substance oriented. He is understated. And, I mean, this just resonated with our culture, I would say very much. I mean, it is a no brainer. So, when we connected we knew we have to work with, and that’s how kind of like, you know, this has been a fantastic thing. That other thing, also in Nexus, I will absolutely like to highlight, you know, almost all our investments have been fantastic teamwork, we do not consider this investment is his or this investment is somebody else’s, rather it is Nexus investment. And that also Postman exemplifies a lot like the first from India, the person who told us about Postman, he told this to Sameer. Gradually, in the next day itself, like we knew that something was there, we didn’t waste time, I jumped in we did the first very first investment, when it happened, it was just seed. In fact, the company was not even Incorporated, if I’m not mistaken, then we put in some seed money, they came to our office in Bangalore, where they started working in and then kind of, like one thing led to the other, it was just like, you know, we gave a 1 million seed, let me say, don’t worry about it, just get started. So, this is a week, very strongly collaborated, collaborated both in India and US, because that’s our one model right. Now, as you might know, Nexus is one integrated fund across US India, and which is so important here, because our incentives are totally aligned, it’s very different from the other funds who have mothership in the US and fund in India. This is also another conscious decision we have taken which creates overhead, it’s not easy to kind of do all like, you know, Type A plus personalities being kind of like, you know, working together in one structure, One Investment Committee, one fund, one outlook, you know, so those things have also helped us to be able to foster this cross border category.

Siddhartha  23:43  

And Jishnu, as you rightly pointed out, Nexus is the only fund I believe, which invest in India and US from the same fund and the same investment team which evaluates between India and the US for every opportunity. Right. And other thing to highlight is, you know, the serendipity, which you discovered, Postman has also been the serendipity, how Nexus discovered WhitehatJr. 

Jishnu  24:15  

Very much. And we want to kind of do that more. The other thing is that always keeping an open mind, we honestly, we have our sector understanding or whatever. I mean, we of course, you know, do our analysis, so that our sparks are there. So it’s kind of like, you know, we try to keep ourselves you call it like, let’s say prepared but we are not like, you know, running after these categories, because there won’t even be a category when somebody meet, like, in fact, for Whitehat also, right? If you look at nobody thought that, you know, coding can be a category. But there were signs. And more importantly, like, you know, how the entrepreneur was thinking, like, Can we think, as the entrepreneur is thinking? Is there a resonance? Right? And can we be one plus one, much more than one, you know, once we kind of partner, so I think that philosophy has been very helpful, and we definitely want to continue and, in fact, build on that and, and foster that. 

Siddhartha  25:24  

And tell us, you know more about Postman because specifically, it’s a very different kind of SaaS, which you have invested as community SaaS as I would call it, rather than traditional SaaS, how would you classify in those buckets, any SaaS investment which you are evaluating? 

Jishnu  25:41  

So, if you look at it, there are a couple. So, one is the underlying commonality of any investment, we want to do the underlying commonality, and the spark that we look for is product first thinking like, it doesn’t mean that somebody we have even invested in companies which are in PowerPoint or sometimes even pre PowerPoint, so, it’s not that somebody has to have a product, but it is very important that they are thinking product and technology first, which means that at the end of the day, like talk about Druva for example, I will come back to Postman in a second, but to drive that point of product like when I invested in Druva, you know, it was very much like kind of smaller series  A rounds compared to what is happening today. Now, at that time, Jaspreet and Millind they had this product, which was actually being used, like their bookings were very less, like, you know, revenue was probably hardly 500 k ARR, or something like that, or even less, but the product was being used in 26 countries, and many of them didn’t even talk to Jaspreet and Millind, they got the product at the time, it was pre cloud. So, they got the product, they will download it and they will use it and there was some you know, early cloud services and all that, but the idea is what they were handling the product and they were using it. So, that mindset, whoever can think of that, you know, the product can be self serve. We want every product be built that way. Now, that doesn’t mean that every product can be sold totally self serve, there has to be what we call sales served component in many cases, and sometimes, you know, their sales reports would need to start early enough I mean, granted the founder themselves himself or herself will have to do the selling initially not like you know by hired salespeople. So, there is this concept of self serve product and, and, and self serve GTM I think our philosophy is that every product should be self serve in a way that you know, if somebody gets handed the product, they should be able to get value out of the product in like next 30 minutes. So, so, there shouldn’t be any kind of like, you know, in all the sophistication has to be buried underneath. The user experience has to be as simple and the value should be as kind of tangible and very first time to gratification. So, that’s what we look for now, of course, in Postman’s case, what happened is that that was at such a level that you know, it was so easy to use, it was a very simple focused product, but at the same time, people just love the product so much that they started spreading it all by themselves. So, for a long time in the company, even today, we don’t have any like dedicated salesperson, I mean, we have started building like after three years, we started building business teams, where we had marketing we had customer success and people who have started using them, then they started paying them, we would call them up and explain some of the other things that Postman can do and they might pay even more. So, those motions started happening a lot later, but for the first three years, there are some marketing activities, but nothing in respect anything related to sales that you can say so, it does everything self serve, both self serve product and self serve go to market which is very uncommon and what you will call community SaaS I mean other other way to look at it is that, it is kind of developer SaaS where there are three distinct components like product community and customers, you know, product and community was leading to customers rather than you know you thinking about customers from the beginning. So, that was Postman and rightfully so what they also do is the first three years, they didn’t even think of like, 2014 we invested seed money and that we rolled it into 2015, end of 2015, we led our series A and we were the only investors till that time, and then, you know, from there to till 2017, we didn’t really have any thinking on monetization and stuff like that, and we did invest in marketing, and, you know, thoughtful marketing, and kind of like, you know, built out different things like those are also product-led, even our marketing was also very much driven by the product, like, you know, it is kind of like, you know, inbuilt in product and that kind of stuff. So, we really invested in the product and community users, you know, steadily users always steadily kept on growing, like, when we invested, it was like, you know, 10s of thousands of users. At this point, as we talked about, it’s 12 million plus users. So, I think, end of 2017, when we started monetizing, and really thinking through all these things, and after that, till date, also, everything has been bottom-up, like, I mean, the customer acquisition cost is zero, I mean,  we ended up also doing a bigger round, not because we needed the money, I mean, total, in the company, we raised maybe 200 odd million, almost hundred percent of the money is still in the bank. So, it’s very kind of unique situation here. And of course, you know, that doesn’t mean that we will not be using the money. I mean there are multiple things that is going on and we’ll figure out like, you know, what is the best way to use the money and all that, but it’s a very unique situation that you know, the company has grown, you know, first product, then the community came in, and they started paying us and now the customers are growing, now we have bigger accounts, all these things happened, very kind of like, you know, organically, so to say, and we brought in people to help it, you know, customer success in such situations become very, very important. Because once people start using, you need to kind of connect with and, and honestly, the culture in Postman says that the customer success, customer support, we are all done for a long time by the founders themselves. I mean,  what you are building has to be used and appreciated, and you are responsible for that, I mean, the culture is that, you know, we do not depend on a separate QA team and all that. And there might be some functionalities, which are being done, and there are some distinct, but everybody, every engineer who builds would need to stand by the quality, because without that, there is no product, like, you know, just building some features and releasing, it doesn’t mean anything, right. So it’s inbuilt into company culture, very much like standing by customers and making sure that you know, they are getting the value out of it. Because the core is that, you know, if you are delivering real value, you will be able to create real value, you can define, you know, what will you monetize? How much will you monetize, that will evolve over time, all these things can be done intelligently by thinking intelligently about go to market, and monetization, but all these things have to follow, delivering real value not before that, if you don’t deliver real value, you know, you don’t deserve real value, right? So you have to deliver value and then only you can expect to be compensated for that. 

Siddhartha  33:27  

Jishnu, please help me understand like you have taken two examples Druva and Postman. It’s very rare that the customer adoption in SaaS happens without a sales and marketing team. Right? if you can share what what were those key things in the product that led to other users leading on to other users to use it?

Jishnu  33:50  

So these two examples are very good because two have very different motions. Talking about Druva that I would say is more like what you would expect in general for a company, product first company. So, to what they did is they had a very, very easy to use product that people could use. And they did a lot of like, you know, their process was through like Google search, I think people would find through Google search, and then they will use it and when they started seeing that people are initially downloading and using it, those are in department levels. They invested in sales, you know, first inside sales out of India, and then right after we invested, we helped Jaspreet move to US and then started building out the sales organization from there. Initially, it was inside sales, but gradually we started kind of like, you know, going up like if more departments within organizations were using, then it was bubbling up to the CIOs radar. And we were doing an enterprise sales and we were kind of building out the entire kind of like, you know, marketing engine, sales, machinery and all that. So that was kind of Druva’s journey. And of course, you know, Druva has grown very big. And hopefully, like, you know, in coming year or two, we can take the company public. Whereas in Postman, if you look at that is a very different motion where the product was such that, first of all, the need was very accurate what Abhinav landed up to, like, you know, Abhinav, Ankit, and Abhijit solved it for them, right first, and then they released it. And it turned out that, you know, people were searching for such kind of stuff. I mean, it was the perfect storm, so to say, you know, where people just started using it. And once they started using it, it just spread. So let’s say, you know, in an organization, I started using it, I am liking it, firstly I’m telling about this to my colleague, and then the colleague starts using and then, and developers usually are pretty close knit communities. They know each other, and there are also different forums, which have developed over time, but it’s just by nature what they do, and all that there is inherent bit of the collaborative tendency and okay, the collaboration will come later. But I’m saying this idea, right, hey, you know, I’m building this, what is it a developer, like me, might be using, and also there, actually, things move very fast, right? Like, you know, there are always new technologies coming up. So developers, by definition, have to be good, developers are always very inquisitive. And they need to understand they need to be in the flow, right. And so that’s what spread it was pure word of mouth. And it was like an open source product, initially, it was not even cloud, it was just open source product that, you know, people used it. And that went on going one after the other. And then as things started growing. I think, in 2016, we launched our cloud offering. And then once we had cloud, we had lot more data that we had, because people started using whatever they were using in Postman, and building in Postman was started reciting in Postman, which we called collections, and those are all available. So we started getting actually a lot of the breadcrumbs like a lot of data and you know, the power the data analytics powerhouse that we have built in house internally is amazing, that we have built and then later when we started monetizing, we had this term which we said PQL (product qualified leads), like you, will hear these things in the market that there is MQL. We never spoke in those standard nudges, what we focused on is product qualified leads, which means really understanding who are using the products? What are they using in the product, much more importantly, how are they really engaging, and what are the touch points when they get converted into paid customers. So our model was that, that you know, people start using and then there are certain things for which they would pay and those are mostly in terms of usage. We did not kind of wall the features, like everybody would get access to even if somebody starts in Postman, even today, they will get access to everything. But as they use it, their usage grows, the idea is that you know, then we are offering more value to you, then you should compensate us. So, or let’s say, you know, more users are coming in because gradually it became a collaboration platform, where people collaborate on Postman, postman, so if like, okay, you know, two to three users are there, that’s fine. If you’re adding more users, you need to pay us, right. But all those things are automated, and triggered based on lots of probably like, you know, hundreds and thousands of variables. So we built all those systems. And we call this product qualified leads, we have a funnel, which is defined by product usage, in terms of like, you know, where things are, what are the touch points, and then also defining, let’s say, there are customer success people, at what points, you need those touch points, you know, when you can kind of go with you can help them and hopefully, you can also explain them, what all other things we can do, how you can increase collaboration and all that, and potentially increase the revenue that you can collect from the customers. So, that’s the motion that Postman has followed. 

Siddhartha  39:18  

Wonderful, and how much big do you think that the large accompany like postman can get? Is there a cap to it?

Jishnu  39:28  

See, you know, it’s amazing. If you look at what is happening right now broadly, like, you know, and that’s where kind of the inspiration comes in, and why, you know, there is so much excitement. So if you look at today, when postman started initially it has been developed right? Now, developers at this point in the current counts, it will probably be whatever, like, let’s say 35 million. And you know, we have companies like GitHub, yand out of that, say one third of those are their enforcement platform. Now what has also happened and which is extremely encouraging. And that is kind of where the technology world is also going is. Many other personas, in addition to developers started using Postman. So for example, like, you know, I have other companies who are selling API as a product today. And, the sales people are actually showcasing their API is on Postman platform, because the beauty that happens is that, you know, Postman is basically the turnkey of all things API. So with the API, what you can do, what all like, you know, if you have to demonstrate what a PA does, if you have to demonstrate their performance, if you have to demonstrate kind of like, you know, what are the things you can do with API, you can do in a heartbeat, like, you know, we have this concept called run in Postman. So, Postman is becoming like, at this point, currently, we have like 250 million plus APIs in Postman platform, and people are just putting in there. So you call call ops people called support people, or even like salespeople, they have started using Postman. So, the whole addressable user base of Postman is growing very rapidly as we speak. And, I mean, sky’s the limit. And then other thing that happens is that, if you look at what do these non developers or non programmers are doing with Postman, you can actually do, you can even put together API’s without knowing coding. And that essentially does some function or becomes what we call headless applications. So there is no UX, but you can actually get a job done, like you can trigger if this API happens, then that something like that, and it can be done, actually, very easily. So one of the vision is basically, how do you convert these non programmers into developers? So, if one of the vision we work on is that, you know, in the coming years, can we take this whatever, 12 million to 15 million users that we have to 100 million. That is one inspirational vision that drives the company, many of the decisions that we take in the company, and this is like, you know, not just kind of as a byproduct of that you are actually expanding that universe of people who can touch software, and can kind of like, you know, build things with software, significantly by order of magnitude. So that’s how we are looking at it. And of course, once you kind of do it, and once you, as I said, always that, you know, if you are delivering real value to those people, you will also be able to create real value. 

Siddhartha  42:39  

And what is one metric that you track at Postman very closely? 

Jishnu  42:45  

Actually, two, three things, of course, usage is extremely important. Postman is the daily navigator of people’s work life. So, I’m getting into the Postman environment, and Postman platform, and then through that, you know, everything is getting directed, of course, you know, we have tons and tons of integrations into Postman, we have tons and tons of integrations out of Postman, and then we become the brain, the hub. So, the number one thing that we track is usage. And then of course, as users are coming in how many new users are coming, how kind of existing users are becoming more engaged users, and how we then convert users to paying users and those kinds of stuffs, but usage is what drives us. 

Siddhartha

Fantastic. And you know, touching upon the current valuation, like in the last round was $3.5 billion of Postman. So, there are a few unicorns in your portfolio, for example, Druva, which are based on a revenue multiple of valuation, they have cross hundred million. So how does the valuation math for Postman work?

Jishnu

So, sometimes I see that, you know, what you can think of is a valuation as net present value of a company’s potential. One way to look at it right. Now, at the end of the day, there are multiple aspects that goes on. One of the core thing, let’s say, for a company like Postman that we are, that we’re coming in See, I think this is the first time probably any company in the world I know of, has brought in this concept of network effects into enterprise software.

Siddhartha  44:44  

Yeah.

Jishnu  44:45  

Because if you look at it, you know, what we are building is a network of developers network of beyond developers, like you know, several personas within organizations, and network of many, many types of organizations. As you know, there are now 500,000 organizations who are there, and 250 million to going to like, I think very soon will be billion API’s plus. So around that, and it’s almost like an API economy today, like Stripe is an API company, just like a billion plus or Twilio is an API company, right. API’s getting central stage, because that is the way by which software is getting developed, in many ways. So, that leads to an network effect where subsequent users are getting more value than the previous users, or the previous users value increases as more users are joining. Right. That part which we know we have traditionally seen in companies like Facebook, in consumer world, we are actually have started to see in the enterprise software world, right. That’s what Postman brings in. So these are, like some of the examples as you can think, here, and of course, the company is growing without spending any money. I mean, you know, I don’t know very many companies, which grows like, you know, 3X profitably generating cash rather than spending cash. So, so, yeah, I mean, you know, very, it has a lot of uniqueness. And then the other thing, also you have to remember, you know, valuation is also a function of market. Somebody, there will be different people who will come in and who would like to work with the company, and eventually market decides. So those are kind of the dimensions, I would say. 

Siddhartha  46:39  

And Jishnu, let’s talk about key milestone in your portfolio, I think which you aspire as a investor would be 100 million ARR. Am I right?

Jishnu  46:50  

At least, so the idea is really this. The question, really, when we were going in, you know, we always ask this question. I mean, that doesn’t mean that of course, you know, as we all know, that, you know, as much as we would like, not all companies will get there, but the idea is that, can a company be a self-sustaining company over the decade or beyond? Yeah. So, that’s how we look at it. And then one question, as a thought experiment of that we ask, is that can this grow into a billion-dollar revenue company? It sounds like, you know, very, very this thing, and sometimes it’s actually very, very difficult to even say, like, you know, and sometimes we ourselves would say that, you know, hey, you know, what are we talking about, and all that, and how to kind of have an engaging discussion around it, but we force ourselves to that, you know, if we are investing in a company, is there an opportunity to build a billion dollar revenue company? Right. And, and I think, you know, that kind of teaches us a lot of things, because, of course, you know, these are thought experiments, right, you know, as thought experiments as it can get, but it forces us also, to kind of think through, okay, what are the dimensions? Of course, you know, there are 20 different things can that can go wrong? But are there two things that can go right? Can we articulate it now, and maybe that will change, but every time we should ask ourselves, what are those two things, and then those two things can change as the company builds on growing? So yeah, so that’s how we look at it? We are energized and inspired to build really meaningful companies that can pass the test of time.

Siddhartha  47:46  

And I think a few enterprise companies, you know, I would not say have crossed that, that $1 billion in ARR across the world.

Jishnu  48:41  

There are quite a few right now, if you look at today, how the prominence of SaaS is growing, how the entire SaaS market cap is growing, if you look at like, you know, the kind of companies that are being built, by definition, I’m talking about you know, with a very select few, the question really is that if we can get a very handful to that level, we will feel blessed, right, no question. But, that actually asks you you like, you know, if somebody has to get in, like, essentially, you are saying that, you know, can a very large company large market be created, can there be a 10 billion plus market be created? Let’s start from there, right. So, those kind of things are we find like, you know, very useful exercise for us. And if we can see that there is a path to 1 billion, then I would say that our confidence level that is there can be 100 million ARR plus company we build increases. So it’s kind of like, always think of the possibilities without constraints, assuming that the company had all resources. Can we think of the possibilities of what it can grow to, and what it can build and of course, you know, we are very patient. It’s just that we’ll take the time coefficient out, because you cannot do anything artificially I mean, it will take its natural course, you know, there is the gestation period. But if but you know,  those kind of exercise are very, very helpful we feel, as we also help the entrepreneurs, one of the core thing that as a venture capitalist, we would like to bring in is, can we expand the thinking horizon of the founders, they, you know, I mean, of course, you know, we all say, we need to connect with people for hiring, we like to kind of like, you know, connect with customers and all that, that’s fine, that, you know, you have to do for day to day activities, but your real value, because venture capital is expensive, for any entrepreneur, at the end of the day entrepreneur is building the company. Yeah. And, and it’s very expensive, like, you know, you’re parting with your company. You are making somebody your partner, by parting with valuable shares is not an easy decision, and that’s what they should ask also, like, what they are getting. Sometimes I feel that entrepreneurs also, just think through more who can connect me to this connect with that with these are very tactical, I will tell you, like, you know, we are doing it all the time, but I think entrepreneurs also should think of like who can be that partner who would expand their thinking horizon, who would push them, right to get out of comfort zone. And, and along with that, empathize. I mean, you know, one cannot be kind of delusional thing that, you know, or you have to be that or you have to marry that with reality, where the company is in, at what stage they are in, and help them in that journey.

Siddhartha  51:33  

And Jishnu, help me understand, you know, when you say, broadening the horizon, what does it entail to broaden the horizon of the entrepreneur? Is it how large a company can be built? Or is it much more beyond that? 

Jishnu  51:48  

So, we have a terminology in Nexus, what we say is that, think broadly and globally, but act narrowly and locally. So, the idea really, is that, you know, you should always have an inspirational vision, and that will evolve over time. For example, for me, the inspirational vision for Postman at this point, is, we need to have a hundred million developers or 100 million users, I mean, you know, they all become developers at some point, like, they don’t need to be coders, they don’t need to be programmers, but let’s say, you know, 100 million-plus users, right? And that will evolve, maybe, you know, two years after I was a billion, yeah, that is the inspirational vision, right? What goes underneath is very, very, like, you know, you have to act narrowly, and kind of see, okay, you know, given everything that you have, what are the opportunities? What are the potentials you can go to, in the coming 12 months or 24 months, let’s say, right, so, that is always kind of, like, you know, a balancing act of thinking broadly and acting narrowly, which is, I, you know, it’s a bit subjective, but that is what do you mean and for us is basically just pushing them to go out of comfort zone, because sometimes I have seen that entrepreneurs, always even their broader thinking also gets resource constraints. So, they start first thinking that Okay, I have this much. Now, let me think about what we can do with this resource. Our approach is to just reverse it saying that first unconstrained, can you think through that given the potential given where you are, can you decide, I mean, one is the inspiration, but can you say that, you know, this is possible to get to this in 12 months, or this in 24 months, and then map the resources to it, not the other way around. Don’t start with where you can go assuming that this is the resource because if there is a potential and genuinely there is you know, credibly you can get there, possibly resources can be managed, and if not, you can later readjust where your goal, right, but don’t get constrained in deciding your goal by starting with the resources first. So you know, things like that. We want to kind of engage all the entrepreneurs we’re working with, like you know, we engage very deeply on those dimensions. 

Siddhartha  54:12  

Jishnu, there’s a couple of companies in your portfolio which have crossed hundred million ARR right. One is Dhruva.

Jishnu  54:21  

 In Nexus portfolio quite a bit like you know, I mean, partly I’m either fully involved or partially involved Dhruva, Kaltura. Aryaka is also in that line. Postman should also not be too further behind, you know, things like that. So, there are quite a few of the companies which are there and, yeah, I mean, for us in a way just, again, like basically keep on working with the companies and hopefully helping them doing the best thing at one possible time. And these are the milestones, which would happen. I definitely think that for most of the companies like Postman, for us ARR is a lagging indicator. Like we, among all the metrics that drives the company, I will definitely say that, in most cases, it’s not the ARR, which is the main goal. ARR, of course, is an important goal. But often like, you know, ARR follows versus ARR driving, like, you know, all key decisions.

Siddhartha  55:36  

But how market rewards and how other investors would follow Nexus, this would be one of the key metrics.

Jishnu  55:46  

Yeah, it would be, but the problem is that, you know, if, at least from a company perspective, what you’re saying, Yeah, outside in how people look at, yeah, I understand that. And at the end of the day, like, you know, ARR becomes a metric for a lot of things, and the company is going public, and all that, but if you’re building it out, you know, every other day, you can think of ARR, because what leads to ARR is most important, and sometimes actually, just being driven by ARR will lead you to take a lot of suboptimal decisions. Yeah. And, you know, that can be harmful. So, so, which is very important, it’s like, you know, in consumers, also, we never, never drive any company based on GMV targets never. Right. So here also, it’s kind of that like, you know, we always say, if you ask Abhinav, he will say that, you know, he is not even thinking of ARR on daily basis. ARR is a lagging indicator  him. 

Siddhartha  56:32  

So, what are the key indicators, which help company drive, one, you have already indicated in the Postman case, that is a number of users, what would be other indicators? 

Jishnu  56:44  

Uasge I would say like what people are using, how engaged people are, and all that, in terms of many foundational indicators, right, you know, product roadmap, like, the product market fit based on market feedback, you have decided on product journey, and how is that evolved, suppose you had, you know, whatever product launch product version launch, and all, are those being used, the way you thought it would be, are these yielding. So, there is lot of kind of, like, you know, micro kind of feedback loops that you are always getting from the customers. And that is leading to, if you are thought of, like, you know, so many customers you would need in Q3, and you’re saying that, you know, you’d add a new 50 new customers, you know, wherever you ended up on those goals, if you think that, you know, now the next 12 months focus will not be on the existing ARR. How you have come on to those. So, what I’m saying is that you know, that each company by the way, and to your point, each company is quite different, you know, how Druva will be measuring and kind of coming up with all these OKRs and Postman will be is quite different. And, you know, it’s situation specific and we do it kind of like you know, on a regular cadence, definitely in every board meetings and in many kind of discussions in between board meetings.

Siddhartha  58:09  

And how do you think about you know, the next age of SaaS companies, you know, do have some blueprint on you know, because each year it will be completely different. For example, when you explored or met Postman for the first time and now currently 2020.  What are what are the things you are seeing in the market right now on which SaaS entrepreneurs are innovating and building on 

Jishnu  58:38  

So, if you look at right, you know, I firmly believe which also goes back to our thesis of India being the hybrid of China and Israel, I firmly believe the real kind of innovation coming out of India and startups coming out of India would be driven by product leadership, technology leadership, something that they are introducing into the market and they are gaining leading position, I mean, it may not be a new thing that they’re introducing, but whatever they come up with. They have to b a leader in that. Druva is a perfect example, I mean, they are hands down the best the Pioneer cloud for data production and they have the best offering in the world today, Postman not even a competitor, right. Similarly, Observe killing it in many different dimensions. And again, these are all product driven innovation. The reason I wanted to emphasize is that you know, so, there are two leverage points that you have in a startup and more so when you are building out of India, one is of course product leadership, right. And the other part is and this is not one versus the other, both has to come in the other part where you can use India is the operational efficiency. Like you know, Freshworks which is not a portfolio but talk about what Girish has built in Freshworks is fantastic. I mean, the way way he has built his machine is like, an unimaginable, right? So I think a blend of two is the right thing, right? Where your innovation is not like, I mean, one way of saying is that, okay, you know, there is an established category in US, let’s say, right, and I will come up with maybe, you know, a simpler product, which is fine, you know, which offers 80% of the functionalities, but I can be able to sell at one fifth of the cost. Now, that is one approach, I can see that, and we have, you know, several efforts and several companies out there, and the and the other approach is product leadership, where you’re saying that, hey, you know, I am coming up with a different approach, or I have come up with this product, which is clearly, you know, has a path to beat the best in his category, right, and it may not define always a new category, I’m not saying that, but in the existing category, you have the potential to be the best, my view is that what I would love to see over the coming decade is a nice blend of the two, where you are coming up with that kind of global product leadership capability, as you are building kind of product first companies and marry that up like build your engine leveraging that operational efficiency that India can offer today, which is amazing, right? You know, the level of you call it inside sales, Operations Support, and how the machine everything and everything can be integrated with product, it can be driven by data, all those things, you know, how do you marry, so I am looking forward to, you know, more startups with more product leadership, with even better operational efficiency, if that makes sense. And across sectors honestly, like, you know, I mean, we don’t think about sectors and we want to be surprised, and we want to be like, these are the things I think, you know, entrepreneurs would have the best pulse, if they are building something on certain sector or certain kind of functionality, that is because they would have experienced it themselves in some ways, right. So, we keep a very open mind on on sectors or functionalities and use cases, but I would love to see, like great product leaders coming out of India with which are, which are backed by fantastic operational efficiency. 

Siddhartha  1:02:07  

So, just know, I have one message from Observe.AI founder as part of the podcast research, you know, Pratik helped me get it. So, Observe.AI for our listeners is a India, US based company. And with GTM in San Francisco and engineering team in India, Nexus invested in a seed round and has been tremendously helpful while navigating the typical early stages, challenges of India, US setup, in the early days, Jishnu was instrumental in product feedback and positioning to help accelerate a product market fit, given his understanding of the SaaS GTM, he was able to set us up our initial GTM team in US help us decide the right sales motion, inside versus field channel versus direct, Jishnu has a great sense for SaaS metrics. And he has made sure the company start tracking these metrics from very earliest days, that’s a very profound feedback. Jishnu it’s almost like you are the co-founder, one of the co founders in a company, how do you get, you know, so much of your bandwidth for each company, to investing?

Jishnu  1:03:19  

You know, honestly, it’s very kind of Swapnil honestly, you know, I feel that as my role as a venture capitalist, and which is true for all of us at Nexus is really kind of like, you know, doing proactive thinking and asking the right questions. I always tell and Swapnil will tell you that, you know, I mean, none of these I can decide, because I don’t understand, like Swapnil, Akash and Sharad the level they understand their business, right, you know, I don’t even understand one 10th of that. But what I forced myself to do is that, you know, take an approach, common sense oriented approach, look at the business, as you would see as a businessman, and maybe like with my, you know, whatever understanding I might have developed over the last decade working with so many companies and all that, and then can you ask the right questions. So, that’s what I do. And, some of the things I might have strong views on, I always tell my entrepreneurs that please push back, because which is also very important, and which, you know, Swapnil does all the time, all the time, you know, so that’s the interaction. It is not so much about, to your point, Siddhartha. It is not so much about the time involvement. And I won’t necessarily say that, you know, I’m spending a lot of time with Observe, not in that way. But it’s kind of like, you know, whatever time you’re spending, you know, is it right and sometimes I also ask myself, see what happens is that I am on the board, right? For any company, I’m on the board. Naturally, there is a kind of a de jure influence. I hate that kind of de jure influence. I want de facto influence. 

Siddhartha  1:04:48  

What is de jure effect?

Jishnu  1:04:48  

Oh, okay. So, by de jure influence, I meant that since you’re a board member, you are saying something that means it is important, right? Yeah. It’s not the right approach. It’s not the right philosophy that an entrepreneur should follow not the right culture that the board member should foster. Board member should say something that is inherently de facto, which means that the board member has very good understanding of what they’re talking about. Right? They have kind of, like, you know, internally internalized so that they know that if they’re giving an advice, it is actually relevant for the company at that stage, right. And that’s something that can be considered by the management team and entrepreneur not to be followed. And once it is considered, once they internalize it, of course, you know, I mean, they would get into a discussion with it, and sometimes they will accept it, sometimes they don’t. Right. So, I think that that philosophy I really, really always remind myself and that’s how I kind of like, you know, I try to try to help the companies and I think that’s the best. I think there is learning, I’m learning every day, you know, level of learning I’m having from entrepreneurs, I’m so blessed for this job, honestly. I mean, it’s like every day is a learning opportunity. And, you know, excellent people, and if I can have any positive influence in their journey, I mean nothing beats that.

Siddhartha  1:06:08  

Jishnu, you might be getting a hundred SaaS company pitches every year. Am I right? Or more than that? 

Jishnu  1:06:13  

Yeah, as a team, we are getting more than that. Yeah. 

Siddhartha  1:06:16  

So, how do you pick up or select the two which you decide that you’re going to work with them? Because each year you pick only one or two investments to work as a board member?

Jishnu  1:06:26  

So, I mean, of course, this is probably something, we are learning every year. And I will say, first thing first is entrepreneur, I mean, as much as we want to say other things is, it’s not as much of that is what is not said versus what is said you know, pitch, pitch deck and all that are kind of just collaterals, which are not, I mean, which are good to have important to have, but those are not the decision-makers is really the person, like, you know, what drives the person, what really kind of like, you know, I mean, I mean, why somebody is doing what they’re doing, of course, they would need to have the smarts, a complimentary founding team, I find that, you know, two to three, people team are probably the best, beyond that it becomes like, one is maybe maybe too few. And beyond three sometimes becomes a challenge. So, things like that. And then, you know, resonance, you know, if I, if I can’t resonate with, what their vision is, then I conclude that, you know, I won’t be the right venture capitalist for them. So I need to resonate, sometimes I am actually learning for the first time on so it’s not that I need to go always a space before I invest in it, not that way. But I pushed myself to kind of very quickly come up to speed on at least the basics of what is happening. And can I relate to the entrepreneur, can I add to in his journey, this is something you know, I ask after, after I get sold that, you know, this is the entrepreneur I need to work with. And yeah, and that is true for all next, as entrepreneurs, I also look up to my partners’ feedback, my colleagues feedback on on entrepreneur, sometimes you know, I have inspiration on the space. And that also can lead to me drinking my own Kool Aid, because I think that you know, the space is great. And which might be true, but the point is, you know, you need much more important is the entrepreneur need to deliver and, and that’s why I actually count upon my colleagues who may not be as familiar with me on the space, to just look at the entrepreneur, just focus on the entrepreneur and where their business said that they’re all businessman at that, at some level, they are all technologists at some level. So just hear them and give me the feedback on how you feel if you are meeting that person for the first time. So that’s some kind of like, you know, we as a team, we become more effective than what we are as individual investors. And, you know, we practice it every day and we want to foster that culture. internally.

Siddhartha  1:08:57  

Thank you so much, Jishnu, it’s been wonderful to have you on the podcast. You know, it’s great to hear a very different and fresh perspective on how you’re thinking of building new SaaS companies and helping entrepreneurs along the journey. 

Jishnu  1:09:15  

Thank you very much Siddhartha you’re doing an excellent job. I’ve heard some of your series and sessions and keep up the great work and we look forward to collaborating with you. 

Siddhartha  1:09:30  

Thank you so much.

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