Sajith has been constantly sharing his thoughts & thesis around the Startup ecosystem on social media since 2012. This probably reflects from his background, of being at the Times Group for over two decades and his love for reading and taking copious notes.

He joined Blume Ventures in 2018, in his 40s. As he didn’t have a background in VC & Angel investing, he humbly considers himself, “An Accidental VC”.

Some of Blume Ventures portfolio companies include – Unacademy, Dunzo, and Cashify among others. In this podcast, Sajith shares his experience of becoming a VC, from a Non-investing background and identifying startups that outshine during Covid-19.

Notes –

00:55 – A Day in the life of a VC during Covid-19

02:02 – Why does Sajith refer to himself as “An Accidental VC”?

07:09 – Building a personal brand & experience to enter the VC Ecosystem

09:44 – Emphasis on Note-taking for collating thoughts & ideas

12:56 – Secret to being an open-minded VC – “Having Strong Views, weakly held”

22:30 – Strongly backing Unacademy’s incredible growth journey

25:55 – Markets where vacuums have been created in situations like Covid-19

42:10 – What’s his perspective on “Moats” in Early-stage startups vs Bigger players in the market?

45:27 – What things did he have to unlearn to succeed as VC?

53:45 – What does he consider, as his edge as a VC, coming from a Non-investing background, at the age of 40?

Read the full transcript here:

Siddhartha  0:00  

This is Siddhartha Ahluwalia, welcome to the 100x Entrepreneur podcast. Today, I have with me, Sajith Pai, Director at Blume Ventures. Welcome to the podcast, Sajith.

Sajith  0:36  

Thank you for having me. A pleasure to be here.

Siddhartha  0:38  

Sajith, we would love to know, to start with because we are in unprecedented times, what does your day look like in lockdown?

Sajith  0:48  

Sure. So, days are pretty well defined in terms of every single thing is calendared. And that’s actually the unfortunate outcome of the pandemic, that every single thing to what would have been a random bump in the office, or just walking out for chai with someone now has to become a calendar entry. But when you look back strangely, it’s all a blur. Like if you ask me at the end of the day, every day seems to me like really like the other.. And of course, I mean, there are exceptional days when some companies reach a certain stage in funding or something like that, then, of course, you know, you say that’s a good week or something like that. But otherwise, every week seems like a blur, every day seems like a blur. So, yeah, I don’t know if that’s the answer we’re looking for. But yeah, so there you go.

Siddhartha  1:50  

So, Sajith, now coming to know about you before we proceed into the podcast, you know, I would love to know about your journey to Blume ventures, you say you have a very unconventional journey. Even you give advice that anybody who’s looking to become a VC shouldn’t contact you at all. I’d love to know how you became a VC and your journey to now. 

Sajith  2:16  

Yeah. So I call myself an accidental VC and which is the truth. So, I’m 45 now and I joined Blume two years back. I came from the Times of India group, where I’d worked for nearly two decades. I was fortunate to get into Blume because I knew Karthik who founded Blume and Ashish who is the third partner in Blume reasonably well. We’d worked together in Brand Capital, which is a division of the Times. And Karthik was my Boss, Ashish was a colleague. So, if it were not for that, and instead if they didn’t have that sense of comfort with me, (it wouldnt have happened). Blume, two, three years back was just about raising its third fund. And what had happened over the years from the first fund to the third fund was they were getting deeper and deploying larger checks. So they needed a  certain set of folks who are willing to kind of go deeper, can bring in that perspective. So, I kind of fit it into that. They knew I knew education, I knew media. So Karthik felt I would kind of be a foil for him. And they were looking for depth in research in thinking and I fit that bill. So, I would say that a lot of those factors came together. It helped that I was willing to come in as a non-partner and a lot of those factors help. But certainly, Karthik knowing me or Ashish knowing me was a big, big factor. 

And which is why it’s very hard for me when people reach out and say, how did you make it to Blume like at the age of 43, or something like that? What is the path for us? So I would say that, it’s very hard for you to get into a VC firm without knowing some folks or without having created a brand for yourself, especially if you’re like, you know, in the late 30s, early 40s. Someone like me, who’s been in corporate and did not have a startup background, I think it’s much, much harder. But don’t look at me and then try and say that if Sajith can do it, kind of you can because there’s a fair bit of chance and fate there. But yes, certainly the younger people who reach out to me, I’m happy to give advice because they’re in the 20s or 30s, and especially if they have a background in startups, etc, it’s much easier. So, that’s really what I meant. So I hope that answers your question.

Siddhartha  5:09  

And what was your decision-making framework for yourself to join Blume or it was a gut call?

Sajith  5:14  

I knew Karthik well, I knew Ashish well, I met Sanjay and I really liked the team. They’re wonderful people Karthik, Sanjay, Ashish, and I met Arpit, as well. So, the senior team at Blume came across as very friendly. I felt welcomed there. And I had enough awareness of the startup world, VC world, to know what my broad day to day job would be, I knew enough about VC. I read a lot about it. I had some queries, but once they were confirmed, I kind of felt that you know, this would be a good experiment for the rest of the next 10-15 years of my life. The fact is I was looking to kind of move on from Times because I had worked two decades in a company, I had worked across multiple divisions, I knew many members of the Times’ senior team, including the family (which runs it), but over time, you kind of get a sense of, there are sort of the things you want to try, certain things you’ve been thinking about, etc. And I felt Blume would give me that platform. And I felt there were very few entry points into VC or the startup world, which would come as conveniently as Blume did, because, they knew me, everything else would be through a conventional hiring framework where I would always be at a disadvantage. So those were factors which went into it, like all venture decisions, the downside was low, and the upside was high, like, you know, and which is always a great decision-making framework to have, you want that when situations present themselves like this, you don’t want to kind of say no, and this was one of those things where the downside seemed like pretty low risk and the upside was incredible, like, you know, so, that’s really my decision-making framework. 

Siddhartha  7:05  

And you mentioned a little earlier that you need a brand. Right. What was Sajith Pai’s brand when you entered into the VC world? 

Sajith  7:16  

It’s a great question. And I always feel that you know, when you present yourself to a VC firm, it’s fine if you are in your early 20s, say you’ve studied in one of the good undergrad institutions, IITs, NITs and BITS, SRCC, Stephen’s, and then you work for two, three years in consulting, and even if you haven’t done any startups, you don’t need to have a startup exposure, and then you can apply as an analyst or even an associate. It’s fine. I think at that point, your brand is like your pedigree to an extent, the signaling that you do through your work experience, etc. And the firm is really buying you for your brainpower. But as you get older, as you get into your 30s etc., then I think the firm is also buying you for many other things such as like driving leverage, or driving access to certain networks. So if you’re a founder who’se done a startup, then sold it then you know, you bring that experience, you can counsel other founders within the portfolio, you have enough relationships within the ecosystem…so a firm will take a chance on you and say you can come in as a Principal or a Partner.

So, I would kind of say, in some senses, you and I are both on the same sides. We’ve kind of build brands for ourselves through creating content in this space; so I used to write a lot, and I certainly think that had a lot to do with how attractive I was to a venture firm like Blume because, and I’ve been writing systematically since 2012. And Karthik told me that they used to share my articles internally in Blume, as I used to write on EdTech opportunities, I used to kind of analyze various opportunities, etc. So, certainly, I think if you are, like me, if you’re from an unconventional background for a venture firm, not in one of those hot startups or not in a VC firm, not in the financial world, then I think it makes sense to kind of double down on certain aspects whether it’s like launching something like a podcast, whether it’s writing, whether it’s evaluating, these are great, great entry points, because, you know, they show how much you care about the startup world. They show how serious you are about it, how much investment you put into it, and it’s a great signal to have.

Siddhartha  9:44  

Yeah. And you mentioned about writing. Right? So, what are your habits patterns around note-taking, learning, and writing?

Sajith  9:52  

Yeah. So note-taking is an interesting one, we can talk for hours about it, and so over a long period of time, I’ve come to the conclusion that it’s the process, not the tool. Now there is talk about Roam Research and Notion. And I think it’s just good to not get distracted by shiny new toys. So, I do all my notes in Apple notes. And I remember you talking to Gaurav Munjal. He said he currently has like, 8,000 apple notes and I said, wow, great. So, all my notes are on Apple notes, and really it has to do with why I take notes and I think that’s the most critical thing. I take notes to remember. Okay, sometimes, if I’m having an interesting conversation, I then capture it on Apple notes or text editor and just paste it to Apple notes to kind of, want to reference it later. So in Apple notes the search is reasonable, you know, and so I’m really more of what I call piler, not a Filer. I just type out these notes and just put it into Apple notes. And I search for it later but I put thought on labeling these things like a quote on XYZ or something like that. And sometimes it’s good to kind of go back from writing a particular article, then I can always go back and search on those keywords, and I can see if it’s useful or not. So like, for example, I am writing a particular piece on strategy. And let’s say it comes to two-way doors and one-way doors, and I faintly remember that Bezos had written something about this, then if I have that quote, it’s also easy to search it on the internet, but sort of like this…so, I take notes to remember in a meeting and I take notes to reference later. So I really think the true superpower in note-taking is actually not the tool and maybe not even the process of note-taking. It’s having some regular cadence of frequency to access these notes later because when you access these notes and like, like, you know, after six months, three months, you just start going through your notes, you start seeing, sometimes you come across very interesting things, you know, and that to me actually is…. if you can build a process by which you actually go back to your notes, that’s a true superpower. So to me, notes is not so much about the tools, it’s not so much of the process of writing notes, as so much of the process of accessing notes. This is how I think about it. And different people have different perspectives, this is mine.

Siddhartha  12:39  

You are you know, what a word comes again and again in our conversation is Process. It’s been building your brand like a process from 2012 by writing articles and note-taking for you is a process. Is this how you approach your investment theses also, building theses around markets, and building theses on some companies? 

Sajith  13:03  

That’s a great question, Siddhartha. Yeah, I think you’re right. In fact, if you were to go back to Blume and internally ask them, about some keywords for Sajith, say a tag cloud for Sajith, then process certainly would feature in one of them. And I think, one contribution I have made is to kind of try and work on some of the processes within Blume. So yes, I try to be systematic about the process. And I think there are broadly two ways in which you can kind of approach investing. One is to kind of build a great network and wait for inbound. And I think, to be very honest with you, I think almost every single great investment decision typically is inbound. It’s not outbound. When I say that what I mean is that it does happen that someone may say, hey, I want to do something on say fertility tech, or I want to do something on HRTech, and then someone goes reaching out, etc. and then finds something. This does happen, but it’s rarer in early stage. In early stage, typically whatever thesis you make, and recently we did this EdTech thesis, and I told Radhika, my colleague who worked with me on this thesis and did much of the heavy lifting, that it’s completely fine if the EdTech thesis becomes useless two months later, one month later, as it will be, because founders are not waiting to read…great founders are not waiting to read EdTech theses, because every thesis looks backward. It does look forward, but predominantly looks backward. So I would say that at the early stage, it’s good to have a strong thesis…it’s good to have a forward-looking point of view, but it’s very dangerous to kind of get tied down by it. So the map is not the territory and all great founders, nobody reads your thesis and decides. They launch companies out of a deep desire to correct some friction or do something, right? So when Gaurav Munjal started Unacademy in 2015, or for example, one of our successful entrepreneurs, Mukul Rustagi and Bhaswat started Classplus, they didn’t read investment thesis, they didn’t look at what VCs are saying. They just said, there’s so much friction here… let’s go and build an interesting product…dekhi jayegi. And I think all of what you do, and all of what I do, as investment process, my writing my thesis is to really make it easy for great founders to reach me. What I want to say is that if you’re a founder, reasonably senior founder, wanting to start something or not even reasonably senior, if you’re a passionate founder wanting to start something in Edtech, then certainly, they should find that they should be able to reach out to Sajith because Sajith thinks about EdTech. And even if, you know don’t want to raise from Sajith and Blume because there maybe somebody else he want to raise from, but at least he thinks a 30 40 minute conversation with Sajith will be interesting enough. So, if I kind of position myself like this, then I think I will get access to at least 70 80% of the investment opportunities in Edtech, maybe more. And I think this is what the process that I follow is….it is to do with a certain amount of kind of thinking forward and writing it out. It’s a certain amount of tweets that I do. So this is really the process, but fundamentally all of it if I mean, I don’t get tied down with the fact that all of this has to directly lead me to something. It has to create the conditions for serendipity to happen. And that’s what would do. So, all great investment opportunities come out of these serendipitous circumstances, and what you’re really doing is creating the conditions for that to happen.

Siddhartha  16:46  

And one great thing you said, Sajith that the map is not the territory. So, however, how much planning you do around the sector or mention how much note to take around a sector. Yeah, you know, you will find something extraordinary out of your bounds, which you didn’t think about.

Sajith  17:06  

Absolutely. Yeah. 

Siddhartha  17:07  

If you’re open to it, Right. You will get the opportunity whether you are an investor or an entrepreneur.

Sajith  17:14  

Just having a prepared mind and not getting stuck by what you have thought through previously. Having strong views, very weakly held is, I think, a great advantage to have in our business, in the investment business, especially in the early stages.

Siddhartha  17:31  

And you also mentioned before, you know, we started recording the podcast that whatever you write on LinkedIn, or as your blog, you might not agree with it after two months. 

Sajith  17:42  

Yeah. So there is a wonderful story about this Naseerudjin Hodja character, and you could change the character, some one asked him at 10 am what the time was, and he said it’s 10 o’clock. Somebody asked him in the afternoon what the times is and he said two o’clock. They asked him why are you telling me different times? So, he said that you asked me at different times?! So that’s the point that if you come and ask me now, something, and if you will come and ask me like, two weeks later, I’m gonna have a different point of view. And I think, I genuinely feel that that doesn’t mean that I’m a hypocrite, or that I kind of changed my stance conveniently. But it’s just that I think having a perspective is important, but not being tied to the perspective is actually equally important. Because there’s so much information that’s coming, and when you kind of create that perspective, and when you create that hypothesis, you just have limited information, and, when you have new information, then why would you not kind of change that perspective, or kind of improve that perspective? So that to me seems like a sin. And I think a lot of the effort that I do, I do plan a lot but I actually, don’t think I end up using much of those plans. So, planning is great. The plan is useless. And I think I didn’t say this. I think Dwight Eisenhower said this in some similar vein. So I think that’s probably what I think, Siddhartha, I can double click on this if you want, but yeah.

Siddhartha  19:22  

Really appreciate when you said, you know, having Strong Views, weakly held.

Sajith  19:28  

Yeah.

Siddhartha  19:29  

Sajith, coming to your investments at Blume, what are the sectors you look at? And what are the companies that you were working with closely or have led at Blume?

Sajith  19:40  

Yeah. So, Edtech is clearly the most critical one that I lead at Blume; it is also the hot sector right now. And in media I have kind of slowly reduced my interest because I am struggling to find good opportunities there and one of my colleagues looks at it now a lot more than I do. So, there is Edtech, Agri; and HR and Edtech both together, then there is Marketplaces, then I do look at Martech and Adtech. So, sort of the primary one is really Edtech and Agri or primary ones are rather, Edtech and Agri and so in Edtech we have Classplus, Leverage Edu. Then in Agri marketplaces, we have Procol, which I was very involved in at an early stage. There are a few stealth-mode investments. Then of course, I also have two other companies that I handle which are really from the previous Fund, which means when an investment professional left they kind of moved it over to me, but these are the ones I would have led, Siddhartha. So, Classplus, Leverage Edu, Procol.

Siddhartha  21:01  

And also the companies on Blume which you are working closely are I think Future Of Work, Frapp and Rocketium?

Sajith  21:10  

Yeah, so Frapp is something that I handle directly, and there’s TapChief as well which like Procol – so Karthik is on the board of Procol and he kind of runs it and I kind of co-lead that with him – similarly there is TapChief which I, kind of, support Sanjay on. So, TapChief is actually a very exciting play that we have in the Future of Work. So, Frapp and TapChief are two of the Future of Work plays. Rocketium is slightly different. Rocketium is Ecommerce SaaS helping companies personalize and optimize on video and graphic units, used by a lot of eCommerce as well as many content companies. So, Rocketium is an interesting one. It’s not something I would normally have led, but it’s hugely interesting. Lots of learning because it’s a pure SaaS company. So, that way, it’s been very useful to have this diversity of companies, because I get to learn a lot. 

Siddhartha  22:12  

Yeah, So these are some wonderful companies, but certainly speaking about Edtech, Blume has done really well. You were the first investors in  Unacademy. And you participated in six rounds, continuously in Unacademy. Today the company is at 1.2 billion valuations in the recent round, and if you also measure by revenue, they are doing phenomenally well, which Gaurav has said in some of the public conversations like they’re like achieving at 80-100 Cr. Am I right?

Sajith  22:49  

Well, I can only reveal what Gaurav has revealed. So, they’re doing extremely well. And I think they will get to the kind of numbers that you mentioned in valuation. The last round was the General Atlantic and Facebook-led $ 110 million-dollar round, which valued them at $ 510 million post. Yes, we invested in them from the first round as part of the seed check. And then we’ve stayed invested and that’s really a deal that Karthik led. Karthik’s had huge conviction in the space. And I think primarily his conviction came from a theme of a computer in every pocket. And he sort of saw education, health and FinTech as the new Roti, Kapda or Makaan for Fund II. And out of that he said like, when he heard Gaurav’s pitch, etc, he saw it as that the computer in every pocket is the mobile phone. Anyone who wants to think mobile-first in education, and Gaurav, of course now, he is a force of nature, formidable… one of the great entrepreneurs who’s come out of India. But at the time you know, of course Gaurav was very different, but Karthik saw promise in the team, it was a young team and Roman, of course, you know, who left IAS to start this so, we saw believers, we saw very passionate actors, and he bet on this. And it’s something….it’s a tiger and we’ve ridden the tiger and it will do well. It’s one of the great edtech companies of a generation, I feel. And so Karthik being on the Unacademy board for a while, and of course, I have come from a different perspective, I helped launched a university. So I studied education from the other side, kind of as an operator, and so it’s given us a lot of perspectives. And that has helped us get access to great entrepreneurs. Classplus has done very well for us. It’s a very intriguing SaaS cum marketplace play, which has got a lot of love from the investors and they’re doing very well post COVID because they are helping all these tuition centers go live, through live classes. Leverage Edu, for example, is a very, very differentiated play, very Hatke, very passionate founder, one of the great founders, Akshay, is building a very interesting business. And so it’s given us access, a few more stealth ones, which I can’t talk about. But so Edtech is one area in which we have strong views. We have lots of, you know views, we are not always right, but we have got a lot of things wrong. So, and what happens is typically when you talk about success, you don’t talk about failures. But you know, there are a lot of failures. In the Edtech thesis, for example, we have one slide where we chronicle all our successes and failures and we have far far more failures than successes. So, we get a lot of things wrong. All VCs get a lot of things wrong. So yeah.

Siddhartha  25:53  

But Edtech has also seen you know, today’s tailwinds as vacuums created in the market by the current situation, for example, students don’t have access to physical coaching classes. So that’s why they’re looking for tutors online. And Unacademy has done wonderful work, I think the best in the country right now to bring the best of tutors from all across the country onto their platform and build a brand around it, which they have been investing from very early. So that kind of vacuum just the audience latches on to it. 

Sajith  26:38  

Interesting thesis, interesting. I like the way you talk about the vacuum. Very nice, go on.

Siddhartha  26:44  

And similarly, the parents who have you know, the other vacuums I believe, are currently in the market because so many things which would take 10 years to happen have happened in a span of six months. the COVID, lockdown.

Sajith  27:01  

COVID is a time machine. It takes certain industries forward by 3,4, 5 years, and certain industries backward by, you know, which is PVR, for example, backward by so many years. So COVID is a time machine and you’re absolutely right. Vacuums is a good perspective, good way to look at it, Siddharth, if you will allow me to say it.

Siddhartha  27:22  

And Sajith the China app ban has left 200 million users, active users of TikTok,

Sajith  27:29  

That’s another vacuum…

Siddhartha  27:31  

on Google Play Store. And they’re trying out various apps too, which can give them a similar taste of TikTok. These are not your Instagram users. This is another huge vacuum of 200 million active users in India of tik tok, which are fueling the likes of the current apps which we see in the market. 

Sajith  27:55  

Absolutely. Chingari, Yeah

Siddhartha  28:01  

So,  coming back to Edtech again, you know talking about vacuums, parents who are especially in IT jobs, there are millions of parents in India. And both, husband-wife working, have 10 to 12 hours of job a day. They’re working from home. Earlier schools were serving dual purposes, educate them, and also keep them occupied at school.

Sajith  28:28  

Schools are daycare products as much as education products. Absolutely right. Yeah.

Siddhartha  28:33  

And these schools, kept the children busy and not parents are out of options, right? These kids are at home. And the parents have a second challenge. They want to limit the screen time because the screen is not good for kids, you know even for adults, screen time is harmful beyond a certain and we are talking about young eyes here. Correct. Another vacuum which we see correct. Right. The third kind of vacuum which I believe is for fitness enthusiasts, you call yourself a fitness enthusiast. I have read it from your blogs, fitness enthusiasts relied on fitness centers who gave them a daily dose of discipline. Now, these are also, you know, stranded. And these guys are looking at a workout for home options. So my next question to you is, what are the other kind of vacuum you’re seeing? Because what happens is certain markets get built over a period of time. But these you know, black holes or vacuums when they get created, they, you know, accelerate everything, whoever it is, they don’t create about what is the quality of an entrepreneur? A, B or C? if you are in the right place at the right time and the vacuum. You are in the vacuum, right, you’re building for it unconsciously because these happened overnight. What are the other vacuums you believe are there in the market right now?

Sajith  29:55  

Oh, interesting. Yeah, I think, this is a great perspective. And I think it’s a good way to look at it. I think one of the things you need to double click on this is it a temporary vacuum or a permanent vacuum, like, you know, so has something changed intrinsically? So, I think certain things are temporary vacuums, like all of the jump into number of online classes, online class apps that we’re seeing. It’s good. Some parents will certainly use it. But a lot of parents who see these classes as quasi-daycare, or time for kids so that I’m free like parents used to take their kids to like ballet classes, or like French or whatever language classes, and then they should take an hour and a half free and have coffee or meet someone else, etc., or do the shopping, etc. So don’t forget that all these extracurricular classes are also quasi-daycare opportunities, which suddenly now if parents have to sit with the kids…kids have to be at home, suddenly, you can’t go out and do much. So in that sense, I think, especially in tier one, maybe some of the larger tier two towns, I think some of the bump up maybe slightly temporarily. But in much smaller towns, they may allow it because they are solving a permanent access problem. They historically never had access to a ballet class or, I mean, or something else, something like a coding class, for example, you know, so which was coming online? So I think, so I would actually look at that. Is it actually enabling access to non-consumers because of COVID, do you have the courage to launch a fully online product which you should have launched earlier, and because of that, suddenly, you’re seeing appetite from historically nonconsumers? So I think then it’s a kind of a permanent, good thing. Otherwise, with temporary vacuums you want to be a little more careful because you know, people are going to get back to some semblance of normalcy. Like, for example, there is a vacuum in restaurants now, people are not able to go out and eat or drink, you know, people are making do with, you know, either cooking at home, or they’re making do with ordering and mostly cooking at home. But at some point this will change. People do want to go out, people do want to party, etc. So I think movies, for example, people will want to go back to a certain kind of experience. But what kind of movies they want to watch will now matter…maybe they will want to watch more spectacle movies. So I would say that, I don’t think that I see very many too many obvious vacuums beyond the ones you cited. Because they are to do with kind of gaps I would say. The big big vacuum, I would say it’s still not really solved for and I think we are beginning to see interesting attempts at it…. interactions and friendship and you know, because on dating apps, now you can, you can interact online, but you can’t complete the loop. So, to that extent, I kind of wonder what is being done and we begin to see a lot of interesting, like, you know, all the lunch club.ai apps, etc, coming into make all these serendipitous friendships, etc happen. So it’s kind of interesting. I don’t think, there are too many vacuums beyond what you’ve said or I can’t instantly recall. But I would say that, while this is an interesting perspective, I also want to see, if I were to invest in a company which was solving for this vacuum thing, I really want to see: are they solving for a temporary or permanent one? And in the permanent one they’re solving….are they solving problems of access for historically non consumers? So fitness is an interesting one. I think I’m not hundred percent sure. Is it the new normal? So I genuinely remain confused because I think people do want a social experience…people do want to work out with others, it’s as much social, it’s a place to make friendship, space to see, but you know, but they’re also bringing in certain consumers like yoga people, via yoga classes, or meditation or something like that. So it could kind of create new sets of consumers there. So, that is how I would think about it. I don’t know if I really answered your questions. And I think, certainly not able to recall. But if in the course of this, I don’t recall I’ll come back to it. But this is really how I think about this, hope it’s a useful perspective.

Siddhartha  34:38  

Yeah. But certainly you believe because you are bullish about Edtech that Edtech is a permanent vacuum. Right, the kind of opportunities are suffering.

Sajith  34:47  

Yes and no. So yes, it is a reasonably permanent vacuum because it’s also bringing in non-consumers, people who don’t have access. So for example, in smaller towns, COVID has spurred that, you know, kind of because of Jio and digital, any way, have been consuming Unacademy, Vedantu, Topper, but a lot of the content became free and they got to kind of taste some of this. What was typically paid for earlier became free. Two, because they were forced to suddenly not go (to physical classes) they started looking at some of the content and they found that this content is actually good. This content is better than anything that we get in our hometown. Like if you’re in Satna for example, these are towns where I don’t know how many Cafe Coffee Days there are or how many flyovers there are – these are 2 markers of modernity I look at. So there I mean, typically if you need a good JEE or NEET coaching, you would go to Bhopal or you would go to Gwalior, the nearest town. So, now suddenly you’re able to kind of get access to Unacademy, Vedantu, Topper all of this good content, you know, and I think it sort of spurs, and, yes, where it solves for access for non-consumers. I think it’s a great model, I think COVID sort of spurs that thing along. COVID is a catalyst, which kind of makes that happen. Forcing function is a favorite word of mine. So, COVID is a forcing function that enables non-consumers to consume, but in fitness, I’m not sure….you know…. but I don’t know… I could be….. I am happy to change my views, like I said, Because Curefit…Healthify Me in our portfolio has begun has begun to do well in these. So let’s see what happens but if it solves for a non-access to access problem, I’d be happy to change my tune. But EdTech, it is predominantly solving for access and there is a genuine vacuum. Yeah.

Siddhartha  37:01  

So, these are the obvious ones, because we have seen them playing, you know, over a period of time and we are seeing that the last one what are the things, you know, you think in tech are there which others are not observing or the spaces which, you know, you have a belief in, but there, there is no company at a huge scale, which is doing it, which also creates an opportunity for you to invest in early stage.

Sajith  37:29  

Hmm, can’t give all my secrets away, ha ha ha! But, yeah, so I think the dilemma for me in EdTech has always been to do market size, so, and so, anything which serves a large mass of consumers, it’s mobile first, it fits into existing consumption patterns of Edtech, which is really about test prep, preparation more than learning.Then it’s typically easy to say that yes, so, I mean… the biggest beneficiaries have been in this. Byju’s, is of course, slightly more of a learning product. But now it’s getting into preparation as well. But all the others which have done really well whether it’s Unacademy, Vedantu, Topper or all of them have come from test prep, but we are beginning to see the first wave of learning tech products. So whether it’s Lido Learning, there is Mastree, then there is for example, companies in the coding space, for example, White Hat, Camp K12, etc., so we are beginning to see the focus on beyond test prep, and it’s especially surprising to see White Hat’s performance. It’s been exceptional, kind of for them to hit this $40 million run rate or whatever we’re hearing and of course, they are the perfect storm of… affluent parents, kids at home, coding, which is kind of like the new math, you know, COVID, all of that helped create that perfect storm condition. And they’ve benefited from it. But it’s kind of interesting to see. And I think the next wave will have what I call distinct products…like for India2, it will be products that really solve for access, and for India1 it will be products that go beyond just academic preparation to non-academic things. So could be new ways of organizing hobby classes, for example. Is there a systematic way to kind of access that, is there’s anyone enabling discovery in that space? That would be a kind of interesting one for me to look at. And I keep looking at that. Pre-School is an interesting one. And I feel like as we have more and more of what we are seeing in EdTech is that our education historically had a strong bundle. So take schoo; it l is a perfect example. It’s daycare, it’s learning, it’s socialization, right? All three together. You can’t go to a school and say, hey, you know, I don’t think the socializing is a good thing. I don’t want my kids to socialize with any of the other kids. So I only pay for learning and daycare, like, you know, can’t happen. But in Edtech, you can actually do that. Because if you’re doing online, you’re largely paying for the learning, right? Maybe a little bit of the socialization, but certainly no daycare. So will we start seeing products which bundle these back, you know, which will become like friendship for kids or daycare for kids as a separate thing. 

Will we start seeing like, what wonderschool is like, like, which enables parents to, for example, set up quick daycare institutions within the society, like I’m a mother….I observe all facets of safety. And I want to earn a extra bit of extra income. So I know that parents dont want to go and give their kids to large daycare centers, etc., So leave the kid with me…. you’re part of the society and are people like us, and you go andwe look after them for eight hours, nine hours, because …. so can such products come up, which is daycare as service, socialization as a service, for kids. So what I’m saying is earlier, you’d never think of giving only one part of the bundle and so the bundle of education had daycare, status signaling, which is like you know, a kind of signal of the institution you’re from or completing it signals that you had the ability and intelligence, and then you know, socialization, meeting friends, network, etc. So today, if you just bundle out every thing then of course learning can come online, but what about the other parts? Who’s taking care of the other parts? So if all of us are studying online, how do we make friends anymore? So is there a way to kind of add back socialization or daycare as parts of the bundle back? I don’t know. These are things I think about a lot. Don’t have easy answers. But this is Yeah, this is one part I think about.

Siddhartha  42:15  

And how do you think about moats, especially in the sectors you are interested and some of the companies you invested in? 

Sajith  42:30  

So, moats is an interesting one, I think about it…it matters and it doesn’t matter. So, I think at very early stages, you shouldn’t worry so much about moats, as much as a consumer friction you’re solving for. If the consumer friction is compelling, then in the consequence of operating, you will gather enough data which could become a moat or you will become a compelling brand which is a moat or you will become like a marketplace which is a moat etc. So, at the early stage, I think we shouldn’t think about moats, we should certainly put it in the marketing material to sell to other investors. So I certainly make sure we put that. But now I think maybe at the early stage not having a moat is a moat, you know, because paranoia is a moat. And certainly speed of operations could be a moat but it’s hard for other people to understand. So I think, typically, in Edtech, consumer / user data is a moat, e.g.,, Doubtnut. If I am on Doubtnut, and I query X number of things and I have doubts, and if Doubtnut is able to aggregate that into a pattern, then that’s a moat right? They know that Sajith comes and looks at probability, looks at organic chemistry, and Sajith is weak in all these aspects because he keeps asking doubts in all of these subjects. User data is a moat today. Tomorrow, like if you’re able to kind of serve me using that data, etc. that’s very valuable. So, brand is a moat as well, because brands stand for multiple things; we forget that. For a lot of consumer brands, look, when you go to buy soap, or coffee, you don’t have so much energy to keep researching things. A brand is a huge mental shortcut. So, that’s a moat as well. And certainly in education, I think some assurance of outcomes, certainly linking it to outcomes is a moat. If you are able to, for example, for Upgrad, if they’re able to get you two to three interviews, that would be a terrific moat as well. So, I think these are ways to think about but I also feel that we should not overdo this moat thing because you are solving a huge consumer friction, then how you solve it compellingly in itself will become your moat, the process will become a moat. And I think all great companies, like Amazon is a great example. I think its moats, of course, are I think over time, the operations, I think, relentless focus on operations, Prime is a moat, etc. But when it started out, it was no different from any of the other companies. Right. So I think other than for software products, it’s very hard to come up with network effects or any thing as a moat. It really is your process, which becomes a moat etc. That’s how I think about it. Happy to change my views, but yeah.

Siddhartha  45:23  

And so just coming on to your two years of investing. Yeah, you know, just yet now we have discussed the portfolio, and the teams and building dive into it. What have you learned in the last two years or so?

Sajith  45:38  

Yeah, I am really surprised by how much companies can chang…. how much the idea can change from week to week. Sometimes you invest in a company and like over the next 10 to (since it’s very early) 10 12 15 days, it can change from one to the other. And kind of, you know, we have this kind of a troika of factors which matter in early-stage – markets, products, teams –  and I, kind of, think that I’m markets first, but also feel like in the early stage, typically great founders can actually bend gravity, you know, so they can actually kind of create, they can actually pivot, they can rethink many aspects of it. So fundamentally, I think, much as you believe in market size, markets can be created. And I think I’ve kind of learned to be a lot more humble about not reading too much into what the product is very early because the product evolves and great products can create large markets. So, sort of, I think the biggest thing is not to look so much about the initial business model, initial product but worry about the problem…is the problem big enough, and the consumer friction massive? Worry about the team. What is in between, don’t worry, help them because if you actually look at it, I would say that the problem can change, the problem that you attack can change, the attack vector can change, etc. Right? The teams will evolve, you don’t have a guarantee of that, but people learn, founders learn incredibly fast. That’s what I’ve been astounded by. Like, month to month, they can learn so much, you know, the product can evolve much faster. So, of all the three I think the product can evolve the fastest, team the second, the third, of course, is the toughest which is consumer behavior or consumer friction. That evolves the least. So this is how I kind of think about some of these aspects. And I would say that the biggest thing that I’ve unlearnt is, don’t worry about the attack vector, worry about the size of the problem, don’t worry about how they’re solving for it, how they are attacking it. Maybe that’s not even important at this stage, don’t worry about the product, the product will evolve, the product will change, like, you know… as long as you’re convinced about the team, and the problem they are after, the friction they are after, if it’s large enough, how the market is defined etc., that matters. And in many cases, you don’t even know what the market they are after is. Like when Uber came in, there was so much confusion about what the market (size) is. So great products also end up creating great markets, massive markets. So, all in all I’m saying is my big unlearning has been around the product that, don’t take the product as is, don’t take the revenue model as is just don’t give it too much importance. Yeah. 

Siddhartha  48:56  

Sajith, you know, that’s an interesting take I would say, but as an investor, do you obsess about markets? Because if it’s a large market today everyone would know about it. Right?  But what I have observed, you know, doing so many podcasts with investors.is their obsession that what is the market of future? Yeah. And who’s who’s creating that? Yeah. Right. And because investing and also about reaching their first Yeah, getting the best company first.

Sajith  49:28  

Matters. Yeah, we obsess over it. Like for example, one way is to look at certain things, like for example if you are now investing in a mental health startup, I would say it’s not a bad idea, because I think a lot more people are becoming open, especially in our circuit about accessing mental health and going to mental health clinics will be the new going to a spa for a massage. So, it’s like the mental equivalent of a massage, so it’s not a bad idea. Who will do well, I don’t know? So, now the market is there. It’s not very large, but you’re hoping it’ll grow. But now the attack vector matters, the approach matters, second is that certain things you don’t even know what will happen, like, you know, so there it’s much harder. So, what do you not know that you don’t know? And there you’d wait for the entrepreneur to come….like, for example, I’ll give you a bizarre example. Like, you know, someone come and say that we made, for example, protein from artificial meat, right? So, someone could say that I’ll make protein from insects or something like that, and people will be eating it, I don’t know. 2030 will be eating like this? 2040, will we will be eating like this, dont know, so, in these matters, it’s much harder to estimate the market size. And here, I think you are really then again, coming back to the way the problem is defined. The reasonableness of success and the team, and here you’re really betting on the team. So I think, it’s good to be obsessed by markets. But the problem is, again, the map is not the territory. It’s easier to estimate markets for known problems. But known problems, everybody knows, right? I’m not the only person who knows about mental health. Every VC will probably have some thesis, that haan yeh grow ho sakta hai. So if it’s a good founder, like, whether it’s a Zomato founder or whether it’s one of our founders, they will launch the product in that space. So, I think that the tougher thing is the markets, which you don’t know are big and how do you, you know, systematically come up with some process or formula to tap them or at least tap founders who want to work in them.

Siddhartha  51:54  

yeah, but, you know, I think we are here it’s not an answerable question.

Sajith  52:00  

Yeah, I would say, look at consumer frictions, and I think the way to estimate market is to look at proxies of consumer frictions. Are there things that you’re doing which are like via media, etc. So, I mean, I don’t think it’s very easy for me to kind of come up with ones because specifically, it’s hard to figure out some of these things. But certainly, for example, if there is a particular consumer friction, that’s particularly large…..or say, in B2B, for example, one of our startups, Procol is really after the entire friction in the procurement chain. So, it’s a large friction for that industry. It’s very sizable friction for that industry. And in consumer, there may be another friction, which I don’t know what it is like. So if it is a large enough friction, then I think there is a pot of gold at the end of it. So long as as you can capture some of that value. And I think these are ways to see when you come across a problem, and when you come across a startup, and what they’re talking about seems like a large, very large market, then there is scope. So yeah.

Siddhartha  53:36  

Because, you know, I think VCs are themselves looking for founders, you know, especially you have mentioned in your articles, Karthik has mentioned in the podcast a while ago that you are looking for founders who were obsessive about the problem they are solving or the consumer they’re solving for. So I’m trying to look from that lens, you know,

Sajith  54:01  

So, I think it matters because if you take a particular consumer friction or a problem, you need to be obsessed with it to keep attacking it from multiple perspectives. Because the solutions will invariably not be right, you know, but if the problem is big enough, and you’re attracted by the problem, you’ll keep persisting, so that eventually you kind of succeed. And I think our worry is like, if you kind of define the problem too narrowly. And for example, it’s always good to kind of look at health, like, HealthifyMe and say, it’s about living better. I mean, defining it more broadly living better through better eating, like access to better food, right? Even fitness now, which is slowly kind of coming in. So if you define the problem very narrowly, then you’re limited by the market size market opportunity. So, I would say that, yes, I think Blume, that’s one of our thesis areas, how big is the problem they are after? And how obsessed are they with it? Is there a strong founder market or founder product fit….is the founder right for space, like so. So those are things that we look at as well.

Siddhartha  55:30  

Yeah. No, for just coming towards the conclusion of the podcast. You mentioned earlier also in your blogs that, you know, you joined a VC firm in late 40s, very, which is very unconventional, coming from a non-founder or a non-VC background. Yes. What do you think your advantages, you know, because even VCs are building themselves as moats? Yeah, there’s a brand Sajith Pai. Once a founder is there with you. You and You are mentoring him? What is your advantage as a VC?

Sajith  56:06  

So, it certainly helps that I have seen how large companies function, which I think is a good trait to have, because a lot of our founders are selling into those companies as much. It’s also good that I’ve also seen the Indian consumer evolve. And I’ve seen sharp discontinuities. So, I am confident that if I’ve seen some of these sharp discontinuities, then I know that I can take certain leaps of faith. I think these are some of the advantages that I bring. I also think it’s good to have even if you are a VC, a certain functional skill. My functional skill is certainly not very sharp, but sort of at the conjunction of marketing, business strategy sort of corp Dev; some aspects of it sort of are hugely helpful to my founders and so this is something that I’m able to give because I’ve worked for many years, etc. but also think that beyond the point you should not overthink it. I am stunned by how young the founders are. And it’s certainly something I’ve spoken about that you can actually spend days here, you know, in the venture world and not meet someone about 30. Of course, there are older founders too, not denying that. And, and I think there is a lot of unlearning needed to be done in that perspective, that 90% of what you think are typically wrong because the context is different. And your context was different…you worked in a large company. I mean, as a large company, I’m also saying large tech companies like Amazon, Microsoft, these are as process-oriented as some of the other analog companies. So they move slowly in a very process-oriented fashion, and maybe Google is somewhere in between. So, I would say that while it is good to have some of these things that I mentioned, which is the ability to see patterns, understanding of how large companies function, some functional skill set. It’s also….you shouldn’t depend on that too much. I think the ability to kind of see everything on first principles also helps because you are actually in a very, very, different world now.  Hope that helps. 

Siddhartha  58:36  

 There is a book called Range, Sajith. I don’t know if you have read it.

Sajith  58:38  

I have read it. Yeah, 

Siddhartha  58:41  

David Epstein. And yeah. It says, you know, don’t fear to arrive too early. Yeah. Because once you have like varied experiences and you’re continuously exploring, yeah, that is what makes it ingredient of best artists, who kept on lowering and didn’t achieve mastery from day one..

Sajith  59:07  

Yeah, Range is my story like, you know, and I heard about Range and I went through it….but a lot of it is accidental and I just had this really curious mind, never could settle on one thing. Always. I mean never could specialize in anything. I  was always this kind of….any company that I work in, any division that I work in at Times, I was always this interesting guy that they would pull into meetings, you know. So I kind of paid the price for that, of having a very curious unsettled distracted mind. There are advantages but there are disadvantages, too. And so yes, I think Range is my story as much and I really enjoyed reading that book, though I actually enjoyed reading David’s previous book (The Sports Gene) a lot more. And absolutely right Range is in some senses your story and my story too. Yeah.

Siddhartha  1:00:08  

Yeah. Thank you so much for it. It’s been an awesome experience and a wonderful experience having you on the podcast.

Sajith  1:00:15  

Thanks for that. I really enjoyed this. Yours is one of the great podcasts of our startup world and ecosystem. Really good stuff and I’m glad and privileged and honored to kind of be your guest. Thank you. 

Siddhartha  1:00:33  

Thank you so much.

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