In our inaugural season of Young Turks Masterclass, we have joined hands with Matrix Partners India. Part of the Boston based venture capital firm that manages $4 billion in assets across the United States, China and India, Matrix Partners India was founded in 2006 by founder of baazee.com Avnish Bajaj. With a focus on start-ups in the consumer technology, B2B enterprise and the fintech space, Matrix Partners India has $700 million under management.
Over the years of Foundersfirst philosophy has come to define their approach to investment and managing their portfolio of start-ups, which include Ola cabs, Practo, Quikr, Cloudnine, Dailyhunt, Limeroad and mswipe.
On the show today, we bring you the story of Suchi Mukherjee’s e-commerce market place Limeroad.com.
Founded in 2012, Limeroad was focused on women’s fashion from day one but it has recently expanded to men’s and kids wear space. Suchi is also looking to aggressively build the strong brick and mortar presence and has opened the first Limeroad branded store in Surat, Gujarat this year.
The company has so far raised USD 50 million in three rounds of funding from Matrix Partners, Tiger Global and Lightspeed.
Today Suchi Mukherjee is in conversation with Matrix Partner India’s founder and managing director, Avnish Bajaj.
What made Matrix Partners the perfect choice to kickstart the series is their Foundersfirst approach. To tell us more about this philosophy, joining us today is Avnish Bajaj, founder and managing director of Matrix Partner India and to bring us insight on the founder in the Foundersfirst approach is Suchi Mukherjee, founder and CEO at Limeroad, one of Matrix’s portfolio companies.
Q: What is exactly Founderfirst, what is this philosophy all about?
Bajaj: I didn’t know I would have to answer it on television so I would have thought deeper about it. So if you look at investing, if I had to summarise it is about backing people more than anything else. In our business, I was an entrepreneur myself and when I started investing, there was a lot of thinking about what business to invest in, what idea to invest in. If I look back and look at my own success or success of firms globally, I reach the conclusion, at least for us, that we would back founders over markets or businesses. So we believe it is Founderfirst and Founderslast and everything else follows.
Q: As I said in my introduction, we have you in this conversation to give us insight on the founder part of it. You are one of the Matrix’s portfolio companies and I am sure you would have had to go through the places with them, did you get that sense that they were betting more on you over the idea of Limeroad?
Bajaj: She better have. I had no idea what she was going to do.
Mukherjee: If you are a founder, what does it mean to have a great VC on your side? It means two things at least to people like me. One is, you have a ear when you need it. Two, you are left alone when you don’t.
I think Avnish does that extraordinarily well and the beautiful thing about this relationship with Matrix and Avnish in particular on my board is that, I will always seek his suggestions and views and I think he has gotten over the point that he does not get offended if I don’t execute on it.
Q: There was a point when he got offended?
Bajaj: Most of the times she doesn’t agree with it and I don’t get offended. We were just chatting earlier today and I have learned this. Having been a founder myself, it is actually a little bit more challenging to – you may think it is easier to be foundersfirst but it is actually more challenging because you think you know and then you have to realise that if you have really backed a founder who knows, you have to back off. We have two examples of situation where both we and our co-investors, we have a great relationship, we felt a certain way and she said, you guys are wrong.
Q: What was that?
Mukherjee: In the very early days, there was a big conversation particularly at the time China, there was this class of companies that were doing really well when the backend was of a particular type. These were more referral type models and we had a very long conversation on that and I came back and I respect Avnish but he sent me to China and he said please go and he kept harassing me until I went which was a great thing. You want to respect people who force you to learn. So I went.
Q: What was the agenda for you to go there?
Mukherjee: Just to learn, to look at these companies that were growing really well.
Q: No possible collaboration?
Bajaj: No no, not collaboration. We are all in business of managing uncertainty whether as an investor or as a founder. If there is some place where you can go and get some forecast of what the future is going to look like, you should do it.
Mukherjee: It is just that you are learning. So we went and we looked at these companies. When I came back, I said, I actually think this will implode. It turned out like that. We didn’t move. We had a lot of debate, discussion.
Bajaj: This was the early days and then there was another instance and that is where we will rather not name the companies, there were two-three companies in India that were making a lot of noise and their numbers basis, whatever we get a lot of data, were looking much steeper trajectory of growth than Limeroad and Suchi would tell us, this is not real. Meaning not that the numbers are fake but that the way the model is working is going to implode. For example, either it could be highly discounting driven or it could be that the vendours are not getting paid or something is going on.
We invested in 2012-2013 when there was a burst. She came back to India and I actually remember sitting at lunch with her I had said, you are giving up – the same thing like I had done few years ago but why would you want to make the same mistake. You are giving up a great job, there is nothing happening in e-commerce, what is this idea, why do you want to do this?
Q: Is this a former entrepreneur talking that way?
Bajaj: But it was partly also a test. And it is not as much of game-playing, it was truly how I felt. I felt cynical, I was cynical at that stage and I gave my cynicism to her and then this women are not even on internet, what are you going to do? Women are 13 percent on the internet and 45 minutes later, I walked away fully inspired saying, I don’t understand what she is doing but I am going to invest in.
Q: What was that pitch because that is going to be a good takeaway?
Mukherjee: I will tell you two things. One is Avnish was investing in a founder whose kids and husband had still not moved back and he said to me several time in that process, I have never invested in somebody who doesn’t even live in this country.
Bajaj: Every rule was getting broken. Fortunately, we hadn’t invested in a lady till then so she is the first one. Moving from a different market and not knowing the market. But the best investments are when you break the rules.
Mukherjee: and Avnish called me one day and I said, Avnish I am driving. I was in Delhi, kids hadn’t moved back yet and then I said I will call you back. Then I called him back and he said, I now think we made the right decision. You are driving in Delhi means you have come back to India. You can deal with India. I am just feeling so much better.
Q: In one of the many tests that Avnish had laid out for you.
Mukherjee: There were no female users on the internet. There were like 10-15 percent but everywhere in the world, shopping was dominated. Fast moving consumer goods (FMCG), stores, I was going into kirana stores, most of the people who are doing the shopping are women. Some day they were going to get educated, they were going to come on the internet, there was no stopping that tide. It was just a matter of timing.
Bajaj: That was the pitch. You just heard it and then this thing came out what just came out.
Q: So we got behind the scenes of what made Avnish bet on Suchi. Let me ask you, what made you go to Matrix Partners, what is it that made you choose this investor over anyone else?
Mukherjee: The thing with Avnish was very simple. He was an entrepreneur and then he became a VC and he was an entrepreneur who had done pretty much the same journey as I had done. He had gone abroad, he had done a bunch of stuff like investment banking consulting, stuff like that. He chucked all of that, he came back, he built something. He understood what platforms meant. So he had seen the grind, the frustration and now he was a VC and all I could expect is that he would be able to teach me a bunch of things.
Bajaj: We went through a very hard laboured negotiation because she is very seasoned, she knew what she was getting into and I would say the reason we still got through to the other side and I would say excitedly was because the nature of the interaction not just her and me, there is a co-investor of Lightspeed. So the nature of the discussions used to be lot of disagreements without being disagreeable and very respectful. I don’t think, in this group, we have every lost the tone of voice or lost our temper or any of that.
Q: Common questions that investors are asked - of course how do I raise money but the other one is how do I stumble upon a big idea? I think most people imagined that they are just going to be sitting one day and a big million dollar idea is just going to fall on their lap. I would like you to quickly take us over how you landed on your big idea and what is that one big vision that you had?
Mukherjee: You have to fundamentally believe in one big event or trend was something that must happen because if it didn’t happen, the laws of physics would overturn.
For me the thing was that women would get on the internet.
Bajaj: There are a lot of what we in our own lingo classify as information based entrepreneurs and wisdom based entrepreneurs. Information ones are that are reading about stuff externally and I also sometimes – I am an MBA, so I call that MBA entrepreneurs or consultants versus experiential entrepreneurs. They should say what are the biggest problems I faced today that are yet consoled or they should say what are the biggest problems around me that people are facing. Like, I can tell you from my house, if I were to say one of the biggest problems, my wife would probably say managing the staff is still a big problem. Now is there any internet-based solution I don’t know, could there be a massive service which is on demand if a staff is going on holiday, Ola equivalent, hit the button, you get a very qualified person to come home. There is an opportunity, I can tell you an idea right now.
So think about the problem.
Mukherjee: Yes, but I would add one thing. You think about a problem and then you have to do a passion test.
Q: So you have hit the big idea and now you are talking about this test. So I want to ask you, as entrepreneurs, what is the best way to pursue that idea, should you just keep that idea to yourself and just put your head down and work towards it or should you grow a thick skin and go out there, discuss your idea with several people, get opinion, get feedback, spot the land mines and then take it forward, what is the best approach?
Mukherjee: I think the first thing is you have to look at yourself in the mirror and every day you have to still be in love with the idea in the morning and it has to persist. There has to be something linked deeply to your value system that makes you want to do it ten years from the time you decide to do it. It takes ten years to build a beautiful world-class business, it will take that much time. So you have got to have that. That is number one.
The second thing is, you have got to believe that ideas are a commodity. What differentiates the great from the ordinary is incredible execution.
Q: Did you do that though?
Mukherjee: I went and spoke to so many – I came here, I spoke to a CA, he looked at me and said, you are a woman, you never lived in India, you want to build a business, go back.
So many people said, are you nuts. There are no women on Indian internet space, what is wrong with you? I spoke to my mentor, I said, Michael everybody is telling me this. He said, now is a good time to join. When everybody is saying yes, it is already too late.
Bajaj: Coming back – the first option is the wrong option. It has to be the second which is go – let me just give a little bit of remark that may be helpful to the viewers. Operate at the intersection of passion skillset and opportunity. If you are getting an idea, that means you have thought about an opportunity. Do you have the skillset for it? I will give an example of that. If you are building a AI data analytics kind of a business but you are a commerce graduate, you don’t have a skillset. Either you better co-found it with somebody who does because you have the opportunity there or it is something that you should think a little bit harder about and then the passion.
We invest behind the intersection of passion and skillset even if you don’t believe in the opportunity. As a company we did that with, it is called Ola. So we went and did all the survey of the taxi market - we are very good with doing all these thesis - and we said, this is a very crappy market, we should not invest in the taxi business.
We had met every company and then we met Bhavesh. 99 percent of the business of Ola was telephone based, it was like Meru and all these companies. I said, how are you going to make money, this is a very crappy business? He said, come to my office. We went to his office which was in those days was in Powai. There was these maps, people think that this was a copy of a western company, he didn’t know about the western company at that point and there were maps, there was load balancing everything and he is like this is how this thing will make money because the cabs are run, they don’t know where the business is, they don’t know where the demand is point being the founder created the opportunity.
Facebook was not the first social network. Myspace was the first social network. Friendster was the second social network, Facebook is a USD 700 million company. The founder created that opportunity.
Q: What are you more attached to, are you also betting on yourself or your idea, what do you feel is this entire philosophy?
Akash Bhatia, CEO, Infinite Analytics, an AI platform for customer acquisition and customer attention: I would weight both of them unequally but I would say that it is the founderfirst followed with the idea and it is also the execution that matters and your idea will change every single day, every single month.
Bajaj: I would love to invest behind all the successful ideas, forget the founders. It doesn’t work like that. I have debated this a lot with people who are much more experienced than me. She has been in business six years. I think her business is taking off now. We have seen number of cycles of ups and downs. What has been constant, the founder.
Q: It has to be founders and when you are putting that much trust in a founder and you are aware of that, what do you do when you make a mistake or there is a miss, is there any example of that?
Bajaj: Suchi doesn’t make mistake.
Q: What would you say is one of the biggest mistakes as a founder that you have made during your Limeroad journey?
Mukherjee: There are some people who didn’t scale, I should have made a decision about them sooner. You often in the heat of execution, foolishly believe in retrospect, that oh if they go then there is going to be a big hole. Trust me, hundred times out of hundred times, hopefully you don’t have to do it hundred times, but each time sooner you take the decision, faster it is, better it is for everybody.
Q: That is a very good way to talk to all the other start-up founders who are with us right here building the right team that is so essential, I think that almost comes in the priority list, next after having a passion for the idea and having tested that is building a right team. Do any of you want to add to that?
Sohel Lalvani, Founder, Toniq Retail Brands: The challenge we faced is when you start and you aren’t funded and we aren’t yet. It is attracting that talent because you are not going to be paying them through the roof and that isn’t the opportunity but it is to prove to them that the idea or infrastructure is inspiring enough, it is showing them the vision of where you can see and that goes back to founderfirst because it is them then investing. It is also those people and those employees and your teammates investing back in you having that faith that they are not wasting their time in that journey that you are taking them on.
Q: Isn’t that a litmus test when you are not funded and people are joining you believing in you and the idea?
Bajaj: Absolutely. I would just tell you one thing that one of the questions we ask ourselves is does the founder sell well, does this founder sell well to investors, does the founder sell well to potential employees, will they be able to get followership? You know what we do? We got back to their college, we check with their college people, you see it in the college. So that is the kind of stuff because you are right.
Q: That is some crazy background check that you guys are doing.
Bajaj: Yes. I was explaining to my son on the weekend how we do stuff. He said, you guys should be called ‘’creepy stalkers’.
Pankaj Poddar, Co-Founder, Hipcouch: I just wanted to emphasize. I come from a corporate background. I have been an entrepreneur for about five-six years now. So coming from that background, you have a tendency typically a corporate hiring revolves around how you hire people for lack of weakness more than strength per se.
Bajaj: We call it spikes. What are the spikes? We don’t care about – what are the real spikes and two-three spikes make up for weakness.
Mukherjee: At Limeroad there is a concept of benchmarking. So you benchmark the spikes. We have one quality where this person is top 10 maybe 15 percentile of the existing team. That is what pulls the team up every cycle.
Sanna Vohra, Founder & CEO, the Wedding Brigade, which is an online content e-commerce and sources portal for Indian weddings: I think I actually looked at it a little bit differently. I first look at what do I not know. Going into the business, there are some things that I feel that I have a good handle on some things I don’t but based on what I don’t know what my weaknesses are, I make hiring decisions.
Sanil Jain, founder, CupShup: In CupShup we specialise in advertising over paper tea cups and distributing it to different set of people. When you did not had that much of funding, when you did not have – when you just had enough funding, is there something which you did different, that was something out of the box?
Mukherjee: This is the first year and it is Diwali. Everybody in India is going berserk, billion-dollar day sale, yeh day, who day, kharido, aur kharido, all of this is happening. I make a call to Avnish and I said, I need to ask you a question. Everybody is going mad around us, everybody is discounting the hell out of their P&Ls. I don’t get this. Women don’t buy all their clothes at Diwali. What will I gain by burning all this money and getting this high when I know that there is a lot of purchasing that happens throughout the year, what am I proving? So I have decided not to do it.
Bajaj: I said thank God.
Mukherjee: So we never used our P&L to discount.
Q: Founder driven business versus a professional CEO driven business?
Bajaj: Let us make it simple, what are the largest marketcap companies in the world, Apple computer - did it when the founder came back. Amazon richest person in the world, founder runs it. Alibaba, founder runs it. I think you get the idea.
Mukherjee: There was a time when ebay had written Amazon off. I was in ebay UK at the time. It was going nowhere.
Bajaj: This is an interesting data point. Ebay was USD 100 billion marketcap, Amazon was USD 22 billion or something.
Mukherjee: The narrative there was this is going absolutely nowhere. And Bezos came right back in and the rest is history.
Bhatia: You have mentioned a lot of names of founder driven companies but then for each of those there is also a google, the founders were then replaced with the Eric Schmidt, who took it to a different level before those guys came back.
Bajaj: I am going to disagree on that. The founders brought in Eric Schmidt, this is the only relationship where they are still very close. They said we need adult supervision and I think the best founders - Steve Jobs brought Tim Cook.
Bhatia: I think there was a very tight coordination between the three of them and that is what is needed but the fact that they recognised that there was a gap.
Narration: I think the first thing we said when we started recording this episode was foundersfirst, founderlast and if there is one take away from this entire discussion starting from stumbling upon an idea to the big mistakes to creating an ecosystem and finding synergies with your investor picking the right team or even a future CEO for your company, it is foundersfirst and it is founderlast.
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