Hangout with Yash Jain (Kalaari Capital)

(IIT Roorkee Batch ‘13)

Yash Jain is an IIT Roorkee Alumnus (2013 batch). He has worked with Deloitte, Flipkart and is now currently working at Kalaari Capital as an investment analyst.

In a Hangout session with Yash Jain on ‘Startup for tomorrow’s’ India that was held on August 31st 2016, he explained what has changed in the nation, emphasising on “Massive adoption of mobile and connectivity.”

In conversation with Yash:

Q. What is Kalaari Capital looking for?

A. We are looking for teams, startups that are reimagining financial services and are coming out with financial products; something which really increases their market penetration.

Q. What should we do to start up?

A. Let me solve this myth, starting up is not easy. Do so only when you are absolutely sure you want to do it. See, out of 100 startups that are starting up today only 20 get to series A in India and out of that 20 only 1 or 2 get to series B. It’s really that difficult!

I’ll give you a realistic example: Let’s say that three young guys want to start a logistics company. Now when you get on the ground, logistics is a very dirty business. On the other hand if there are three people who have worked with Fedex, DHL then I will obviously bet on them. So you have to be very careful in playing your bets especially In a country like India where B2B selling is very difficult and execution even more difficult. Thus, the dynamics of Indian markets are very different than those of west.

You have to be really wise and build the right team. If your solution is sales centric, then you have to have a sales guy. As VCs this is what we see. If it’s a tech business, you need to have a tech co-founder. You can’t really build a tech business with founders having no tech experience at all. You can’t hire techies later and hope everything else would fall into place.

The team is very very important. Especially for you guys: when you pitch to people, team becomes very important. We are more comfortable betting on young teams who are building tech products and product based companies. You really need to get the right people and right advisors on board. And network a lot, it’s very important. When you are starting, you need to talk to a lot of people. Believe me, your first five clients will come on their own if you network properly during college. That’s the real advantage of being in cities like Bombay, Delhi. Networking becomes easy when you live in big cities- The sole reason why IITB guys are starting up so much. This is where IITR is left behind and you guys need to catch up on it.

Don’t start up from Roorkee (chuckles). If you are serious move to Bangalore/Delhi where everything is. The whole ecosystem is pretty good in cities like Bangalore, Mumbai etc. Build a network here but start there.

Q. A lot of startups are bleeding money nowadays. How does that makes sense ?

A. The idea is that there is a big market waiting to unfold. When the stakes are too high, everybody wants to join in. A very nascent early market gives you a lot more returns. Everybody wants to make money. You can say there was a euphoria because everybody wanted to kill competition but the whole VC model is based on rapid expansion; when you are in a VC model, it is expected of you to burn money and get to that level of scale and you need to acquire customers.

Q. How do I identify problems?

A. Read a lot. I am a voracious reader, from economy to books to talking to lots of people. I take out a lot of time to consume content and discuss all the inputs I get. So, there is a lot of brainstorming behind all the stuff I said. We, all the folks at the firm, brainstorm a lot. If you are really serious about an opportunity, get everybody in a room and just brainstorm. I am sure you will find lots of things. Understand a problem; go out and talk to people.

As a student at IIT Roorkee, what you guys don’t realise is that you have a lot of power to email someone or ring someone up and get connected to them and have some of their time. They will surely want to listen to you. You can use your alumni network. People are very open to discussions.

Q. Do you think that the hype of Service Startups is justified?

A. I can tell you my view, but that’s completely my view:

Any business falls in either of the three sectors — Technology, Assets and Services.

Traditionally the businesses would do all the three things themselves. Then Uber, Airbnb (who provided only the technology) etc came in the west, and those business saw massive scale because assets and services were an integral part. These businesses grew much much faster than the rest. So people thought that same things would work in India as well. Looking at the stats, I can’t see any such thing happening, be it Oyo or Flipkart. In India, the service layer is broken. You need to control that layer and it depends on category to category. Even in the product startups, there is a bit of service element because the whole service layer is broken. So service start-ups are justified.

Q. What according to you is the fate of flipkart and similar e-commerce giants, looking at the way they are burning cash?

A. I don’t know man.

Q. Would you invest in a startup covering less value but more volume?

A. More volume in itself means more value. And those start-ups are better which are spread over more consumers. Occupying more volume is defensible. If you say I have two customers paying me 100 billion dollars, it doesn’t makes sense. If one of them gets angry tomorrow then you are gone. It is better to have 100 million users transacting with me at 10 dollars each. Whatsapp is a classic example, they don’t monetize at all. If today they say that they want to charge 1$ per year, I am sure everyone’s gonna pay.

Q. What is the role of an Investment Analyst?

A. The role differs from firms to firms. Sometimes it is only back end research work. Sometimes it is just to source out deals using your network. Sometimes it is the post investment part.

With Kalaari I get to do a lot of things, from sourcing deals to working on the transactions to building thesis around investing into them to working with partners and helping them in analysis. With Kalaari the learning has been amazing for me. I have done a lot of things, have met a lot of people.

Q. Importance of UI/UX in VC firms?

A. UI is very important, I think the highest paid engineers in Silicon valley are the people who do UI. Earlier the customer touch points used to be shops but with the boom in E-commerce, the touch point has shifted to Apps. In big start-ups there is a team of UI people dealing with single elements of a page and keeping a record of how customers react to each and every change they make in design. In VC firms there is an investment team, portfolio services team, then there are Marketing guys, HR guys, legal Finance people, and Admin Team. When UI/UX becomes critical there will be a guy in portfolio services team, like if any portfolio start up needs some advice, this UI guy comes in and helps them out.

As for the blog, this is an open blog and you can contribute your opinions and suggestions for improving the campus entrepreneurship culture. Mail your posts to ecell@iitr.ac.in and keep watching this space for more.