DTM E57. The Future of VC & Deep Tech in India, Transitioning into a VC Career and Understanding the VC Structure - Arjun Rao, Speciale Invest
From the Deep Tech Musings Podcast - Get actionable and tactical insights to take your Deep Tech startup from 0 to 1 [Idea to Traction].
Listen now on - Spotify, Apple, Google
Arjun is the Founding Partner at Speciale Invest, a seed venture capital fund focused on deep science & tech startups in India, the USA, and Israel. He is passionate about working with exceptional entrepreneurs building emerging tech start-ups in the super early stage. His core expertise has been in product development/management, marketing strategy, org building, fundraising, and finance for over a decade.
Prior to SpecialeĀ Invest, he spent over 15 years in the technology and Internet start-up ecosystem in India. He started his career with Yahoo! and later joined Ibibo as Product Manager. The entrepreneurial bug led him to start an Edutech startup and also a travel tech startup, Travelyaari. He has led tech and product teams, and strategy and fundraising at all phases of a start-up lifecycle. At Travelyaari, he built the company to achieve revenues of $40mn and raised $12mn in seed, Series A, and Series B funding.
On todayās episode, we discuss
The Founding Story of Speciale Invest & Why It's One of the Best Places for Deep Tech Startups
Understanding VC Firm Structure
Skills and Abilities to Transition into a VC Role
The Role of Networking & Mentorship in Advancing Your Career in VC
Future Trends in the VC Industry and the Deep Tech Startup Ecosystem
Listen to the episode here,
or on the platforms below
Links & References:
Arjun Rao-Ā arjunrao (LinkedIn),Ā @raodyboy(Twitter)
Speciale Invest - specialeinvest.com, LinkedIn, Twitter
Eric Newcomers Substack on VC World - www.newcomer.co
Ho Nam, Co-Founder of Altos Ventures - Twitter, LinkedIn
Pronojit Saha, DTM Podcast -Ā pronojitsahaĀ (LinkedIn),Ā @pronojitsĀ (Twitter)
Show Notes & Summary:
(0:26) Overview of Speciale Invest: Motivation and Investment Thesis
1. Me & my co-founder started Speciale about six years ago.
2. I have a background in engineering and startup operations, while my co-founder has a finance background and experience in venture capital investing.
3. We both have a strong interest in supporting and advising early-stage startups.
4. We decided to focus on backing startups that have tech innovation and depth in their products, as we saw limited differentiation in other areas already being invested in.
5. We believed that the timing was right for India to start creating deep tech products and businesses, considering the evolution of the Indian tech ecosystem and the growing talent pool in the country.
(4:26) Speciale's Impact on Portfolio Startups: A Showcase of Growth and Credibility
1. I focus on investing in cutting-edge deep technology startups in both hardware and software with an emphasis on enterprise software and AI.
2. I also invest in deep tech/frontier tech startups that combine hardware, engineering, sciences, and software to solve complex problems in industries such as space technology, robotics, automation, and sustainability.
3. I have invested in companies like Agnikul Cosmos, which is developing 3D printed rockets for satellite launches.
4. Agnikul Cosmos has made significant progress in the past five years and is ready for their first test launch with the help of ISRO.
5. Cosmos has received multiple rounds of capital since the initial investment and continues to innovate in rocket technology.
(8:35) Transition from a Product Person to a VC: Factors and Inspiration
1. My journey into venture capital and investing was not planned, but happened due to various factors and events.
2. I gained early experience at Yahoo as a software developer, which gave me insight into Silicon Valley companies and the process of building products.
3. I transitioned to business school and became a product manager at an early-stage internet company, which taught me how to work with various stakeholders and balance requirements.
4. My experience as a product manager motivated me to become an entrepreneur and start my first company, which was not successful.
5. After shutting down my first startup, I started a second company in the bus ticketing space, which taught me valuable lessons in scaling and becoming a holistic entrepreneur.
6. I began advising and investing in startups, realizing that my experience and skills complemented those of the founders, leading me to become an investor.
(17:03) Understanding the Structure of a VC Firm
1. VC firms pool in capital from Limited Partners (LPs) and manage that capital by investing in startups.
2. Funds can vary in size and focus depending on the stage of the startup and the industry.
3. The goal of the VC firm is to build a portfolio of companies based on a specific thesis or theme.
4. The fund cycle typically lasts 8 to 10 years, with the first half focused on making investments and the second half focused on scaling up and exiting companies.
5. The economics of the fund include management fees (typically 2%), which cover the costs of running the firm, and carry interest (typically 20%), which is a portion from the firm's profits.
(20:46) Roles and Responsibilities within the VC Team
1. The main tasks of a VC firm include raising capital from LPs and finding companies to invest in.
2. The team is responsible for identifying and evaluating early-stage deep tech companies and building a knowledge base.
3. Post-investment, the team provides support to portfolio companies in areas such as customer access and team building.
4. Exit management is an important aspect, requiring networking and connections with larger investors and companies.
5. The firm's structure typically includes partners, principals, investment managers, analysts, and associates.
(24:03) Key Skills from Product Background Useful in Role as a VC
1. Understanding and appreciation of product technology and innovation are important skills.
2. A high level of curiosity is necessary to constantly learn about new technology and products.
3. Building relationships and networks is crucial in the venture capital industry.
4. Leveraging past relationships and networks is essential for finding and evaluating founders.
5. Maintaining relationships over a long period of time allows for access to the best founders in areas of interest.
(27:18) The skill of decision-making in ambiguous situations
1. Learning to live with ambiguity is a key skill, especially in the early stages of a company.
2. In the pre-seed and seed stages, there are numerous unknowns, such as projections, costs, pricing, and customer adoption.
3. Being comfortable with chaos and adapting to changes is crucial in early-stage startups.
4. As a venture capitalist, it is important to fill in the gaps and understand the key aspects of a founder's story and pitch.
5. Evaluating founders and taking risks requires intuition, experience, and optimism, despite the lack of data and facts.
(30:41) Acquiring and Developing New Skills During Role Transition
1. My ability to quickly switch between tasks is critical in my job.
2. I work with multiple founders in different areas of technology and at different stages of development.
3. A typical day for me involves listening to pitches, presenting my portfolio to investors, and fundraising for the fund itself.
4. I must be able to switch contexts and tasks quickly and effectively.
5. Time management and being knowledgeable in various aspects of the job are key skills in my role.
(34:15) Developing Context Switching Skills: Training or Experience?
1. Becoming more efficient and knowledgeable in managing information is difficult.
2. Experience helps improve efficiency and compartmentalization.
3. Time management and maintaining a well-organized calendar are crucial.
4. Preparation is important for successful execution.
5. Experience is the best way to learn and become better at managing tasks and information.
(36:05) Are Financial Analysis and Valuation Skills Essential for Effective Planning?
1. Understanding how companies are valued and how negotiations and pricing of equity are done are important skills in the business world.
2. These skills are more tangible and can be acquired through reading, learning, and hands-on experience.
3. Soft skills, like communication and negotiation, are considered a priority and can be easily learned and developed.
4. Experience allows for a better understanding of edge cases and a more holistic approach.
5. Having mentors is important in career development.
(37:23) Mentors and Role Models During a Transition: Reflection and Thoughts
1. Mentors and people to look up to are critical in my journey.
2. My co-founder partner Vishesh has been a guide for me due to his experience in venture industry.
3. I have taken guidance and help from successful entrepreneurs, learning from their journeys.
4. The support and advice from my early managers, teammates, and enterprises has also been important.
5. I have had multiple mentors and picked up advice from many people throughout my career.
(39:43) Questioning the Existence of a "Right Mentor": Active & Passive Mentoring
1. There are many sources of knowledge available today, both active and passive.
2. It is beneficial to find someone who is willing to listen to you and provide feedback.
3. Having someone to share your thoughts, struggles, and experiences with can be helpful, even if they are not able to solve your problems.
4. Peers can be a valuable resource, as they can provide different perspectives and insights.
5. There are various avenues, such as podcasts and blogs, to seek feedback and learn from others.
(42:58) Transitioning from Product to VC: Recommended Resources and Advice
1. I follow a lot of VCs on Twitter for their thoughts and insights on their journey in the industry.
2. I find Eric Newcomer's Substack newsletter interesting for VCs domestically and globally.
3. I believe longevity and sustainability are more important than success in this field.
4. LinkedIn offers advice, but I prefer curating my feed on Twitter to follow specific people.
5. VC Ho Nam is popular and has valuable experience and insights to share.
(44:39) Future Trends in the VC Industry for Individuals Looking to Transition
1. The industry is seeing a trend towards specialized, smaller funds with deep expertise in specific areas.
2. Capital itself is becoming commoditized, so entrepreneurs value what they can get in addition to the capital.
3. Soloists and operator voices are emerging in VC, with experts in specific functional areas building VC funds.
4. VC firms are keeping lean and small with depth of expertise, rather than being full-service.
5. The future of VC lies in vertical specialized funds.
(48:08) The Future of Indian Deep Tech: Predictions and Projections
1. I'm incredibly optimistic about the deep tech evolution happening in India, especially in the next ten years.
2. Space Tech is a major focus with promising companies emerging in areas like satellite technology, rocket launches, and space manufacturing, as exemplified by InspeCity's work.
3. Climate Tech remains exciting, with innovations in carbon capture, efficient heating and cooling, advanced batteries, and sustainable materials offering solutions to global challenges.
4. Biotechnology, at the intersection of synthetic biology and data-driven approaches, shows great potential in producing eco-friendly alternatives to traditionally sourced materials and proteins.
5. These three themes - space tech, climate tech, and biotechnology - represent the forefront of innovation in India's deep tech sector.
If you enjoyed this episode, please leave us a rating on Spotify, Apple, or wherever you listen to podcasts. It helps us reach more people who are interested in deep tech & grow the community.
Also, donāt forget to subscribe to Deep Tech Musings Podcast on pronojits.substack.com so you never miss an episode.
Thank you for listening! See you next time!