European Preseeds, Secondaries, India EU corridor | Kaushik Subramanian EQT | Svagat Show Ep. 13

The precede is the hardest round to raise in Europe at the moment.

Depends on who you are and what you're doing. You worked at Palantir for a while and then you want to build something in cyber. Even if your idea is not well developed, you will be able to raise your pre seat quite quickly and there will be a lot of investors lining up. However, let's say you did not have the experience of working in some of these feeder companies to founders, the bar is much higher. I think India, Europe, for some reason, I think there is almost zero exchange. Certain spaces that are hot. Right. There is some level of consensus around like these are the top two companies and that consensus is not because they have the numbers, but however you see the market converging upon one or two of these players as the ones to back.

As a board member, you'd be open to giving a secondary to a founder at series a Half a million to put a down payment on a house.

Yeah, sure, why not?

Is fintech the thing that Europe exports to the world?

100% Europe is ahead of the US when it comes to financial infrastructure and when it comes to having a sensible regulator.

You mean like Figma?

You know, when I was at Stripe, I was working on this Fex product. I had to spend the entire product review just explaining this customer profile. But if you talk to any European, they'll be like, yeah, this is normal. A lot of times you see a really cool investor showing up at the first board meeting and then every meeting after that is the associate who. Who basically replace them on the board. I think it is easier to raise money in Europe than India. And the reason why I think so is because.

Hey everyone. Welcome to another episode of the SWAGAT show. So excited to have Kaushik Subramanian on the show. Kaushik is a partner at EQT Ventures, before which he was leading products at Stripe and Meta. Super excited to have you on the show, Kaushik.

Excited to be here. Thanks for having me.

Awesome. So I want to get started off with your opinion on. Do you think Pre Seed is the hardest round to raise in Europe at the moment?

I think it depends on who you are and what you're doing. So. And I'll elaborate on that. If you are founder who has some credibility in the space because of past experience in the space of what you're building, then I think actually Pre Seed is quite easy to raise. I think I. E. I don't know if you worked at Palantir for a while and then you want to Build something in cyber fraternity. Even if your idea is not well developed, there is a higher than average chance that you will be able to raise your precede quite quickly and there will be a lot of investors lining up. Right. Also we should talk about what the definition of precede is, but I think you mean first institutional round. So I think around a million to two maybe. So I think that's one category. Second one is spaces where which are, you know, consensus known to kind of be disruptive, where the founder might not have a background but there is a strong tailwind and there is a very well developed idea that the founder is pursuing I. E. AI sales agents last year or AI CRM. Right. Or legal AI. You know there's about 30, 40 companies doing that right now. But if you were raising a pre seed last year for any of these categories, I would say that you found and you had a well developed, well formed thesis on what you exactly were going to do and you had your good entry point mapped out. I would say that you would not find it difficult. However, let's say you did not have the experience of working in some of these feeder companies then I think the bar is much higher where you would just need to have a lot more depth in what you're building before you're able to raise a pre seed. And even then I think it might be a bit harder. I think it's just a question of like how much risk people are willing to take. And I think in the former case where the space or the founder is well known, I think it is sufficiently dear for someone to put in a million or two. But I think in the case where everything is ambiguous then I think that might create a lot more risk and for harder.

Interesting. Yeah, just that it doesn't feel like there are too many people who are putting in a million or two at that stage. They say they are and they might do one or two deals, one off, but just the number of startups which are starting up. I know this is the case in consumer for sure. Like if you're a consumer founder raising a pre seed. I was talking to Samir from Speed Invest a few weeks back and he's like yeah, like you just need a Hail Mary. Like there is, there's very, very little happening there.

B2B.

Obviously there's a lot more option but even then this doesn't seem like there seems to be a lot of 100, 200k checks that people want to put in. Many of them also waiting for a lead and things like that. But like the lead itself will put in like, like are there people who are going to put in a million in a, in a pre seed round and are there enough of those?

So I think, look, there are quite a few, I would say there's, I mean just off the top of my head, right, like there's concept, there is seedcamp, there is Playfair and it's just in London. There's also like smaller, I would say angel funds, you know, like Cocoa or Pietro's Fund, Firedrop, et cetera. Right. I think those exist. There's also angels who can cut pretty large checks, like you know, 100 to 250k checks. And there's increasingly more and more syndicates who, you know, who do like 200k type investments. And then obviously there's like the seed funds who also do pre seed, right. So Local Glove I think is a good example of a fund like that. So I think Moonfire is again like a really good fund. I think that also does a lot of the first check type investments. But I think it comes down to like what I like laid out initially. Right. Obviously consumer I think is a different ball game. But if you take B2B, if you take FinTech, if you take deep tech, climate, etc. I think it comes down to, you know, team, space, fit and how much of that development has actually happened. Obviously I don't think it's easy, but I don't think it's as hard as it was, I would say five years ago.

One point on that, around starting up. Unlike a lot of other regions, Europe has a dual nature, right. Where Europe is also a transit hub, you see a lot of people come here for a few years from all different parts of Europe, life and different countries. And one of the things that can happen in that kind of situation is that a lot of people come who might have worked in stellar companies in their countries, but the European ecosystem might not be aware about that. So like imagine somebody comes in, was a pretty stellar person at a Swiggy, right? Now how much of that experience is going to be valued in, in Europe, right. If you're working for a global Palantir, totally understand. But if you're coming from India, right, you worked in a Myntra or any of these companies which are stellar Razorpay, right. Like is that experience going to be recognized given the fact that not a lot of people in the European venture ecosystem are from India or from other nations other than Europe, Right. There is a diversity is still sort of an emerging concept in European vc, right?

I think that there is a very strong US India connection because of historic like, you know, migration and a lot of successes happening, you know, starting with like, I don't know, Sabir Bhatia or.

You know, starting with Vinod Khosla, man.

I mean you have that bridge which is pretty strong and then you have like the India US SaaS playbook, you know, decade that has developed, etc. So that is super strong. I think the Europe US corridor is also super strong in the sense where I think a lot of the American companies are looked up to in the European ecosystem and a lot of American investors invest in Europe because Europe is so close to the US I think India Europe for some reason, I think there is almost zero exchange because I could say the same thing going back as well. Right. So if you leave wise Revolut Monzo, which are probably the three best known successes, you know, if someone worked at a Volt or if someone worked at a personio and went to India, most people like, I don't know what that is. Right. But they're probably more successful than, than a lot of companies in India. So I think, I think the problem is not, I think the problem is having an India Europe corridor is, is just for some reason has never happened. When I actually feel like both ecosystems can learn a lot from each other because there's some pretty cool things happening in India that no one in Europe knows about. And there's some amazing things happening in Europe that no one in India knows about. And I think it goes for investors as well. Right. I think Indian investors, I think, I mean, I think both ecosystems, without calling any one particular out has a local maxima problem. There is a local maxima, like you know, I am God in my ecosystem and then America is where it's at without thinking that, hey, like there's probably a neighboring ecosystem which is a lot closer than, you know, San Francisco where I could potentially do a lot. And there's a lot of cross pollination that can happen which could be anything ranging from European investors investing in India, Indian investors investing in Europe. But also like talent and also a lot of learnings. Right. A lot of European B2B SaaS and engineering talent is a lot more mature than a lot of I would say average Indian companies. Obviously there's some exceptions, but that exists.

Yeah.

Similarly, like I think consumer ops and a lot of that stuff in India is far more mature than it is here.

Any interesting learnings for the European ecosystem around what's happening in India?

Yeah, man. So I think there's a few things happening. One, well, I think, you know, just starting from the top, I think the average person even in tech in Europe has no idea of like how quickly growth is happening in India. And to me it is always kind of shocking how, how much that gap is. And also the average person in Indian tech think thinks that everybody's waking up and reading Times of India and knows everything that is happening in India. So there is like, there is this like incredible gap when, when I talk to people in India where they're like, yeah, of course everyone knows that like economy is growing fast, IPO market is booming, you know, third largest economy or whatever in 2030, like, you know, all of those like big headlines. Everyone feels that everyone around the world knows what is happening. But actually that is not true. Unless you have a keen interest in India, you're not actually tracking those things. That's number one. Second thing, as a result, I think what is happening is that in Europe there is a lot of gloss over on some of the amazing companies coming out of India. I think my favorite example is I think Postman. I think if I tell anyone that hey, like Postman is an Indian company, they're like no, it's an American company because obviously founders are in San Francisco, etc. Etc. But like I think both you and I know that it is quite dc So I think these successes, like I think there is a marketing problem and I think there is on the other side also there is a marketing problem where most people in India don't know what is happening in Europe and don't care. When there is a lot of like really good stuff that is happening which could be more immediate term learning rather than, you know, going to San Francisco as the be all and end all of everything. I'm not saying, I mean the US obviously is where everything starts and ends in, in a lot of, in a lot of cases. But I think there is a lot here that is happening as well.

And the reason that India doesn't care about Europe is because it's not the largest market or is just because there's no ecosystem, man.

I think there is just like not enough like cross pollination points like when does this happen? It happens when people move. Right? And if you think about it like when have, like when has high quality technical talent started moving from India to Europe? Last 10 years maybe? Yeah, kind of the visa system has started getting a bit liberalized. Global talent, visa, etc. Etc. That is when this has started. So now increasingly you will find people in, you know, from who've kind of studied in India, spent the first five years at, you know, Zomato, Swiggy or you know, any one of Indian companies and then have moved to London or have moved to Germany, you know, to work at a Wise or a Volt or a Revolut or any one of these companies. Right? That is happening now. But I think it's going, I think it needs to happen a lot faster because there is a, there is a lot of cross pollination there and a.

Lot of these guys then eventually it's the same US playbook, right? Which is you rise through the ranks and then eventually set up an India center. And that's how people in India find out about a company like Deliveroo, right? Which has like a bunch of people there or Revolut or any of these guys.

Yeah, yeah. And I think so that's so. Yeah. So I think the, and then the second thing I would say is that I think there is, there's a certain apprehension like like, interestingly I know this is not nothing to do with like my, like my bread and butter which is mostly like you know, B2B enterprise fintech. But if you, I was talking to a lot of like consumer investors and I was like, boss, you're, you know there's, there's obviously a consumer boom that has happened in India, right? Like you go like, I think the quality of consumer products in India, you know, apps and physical products are, I would say like have leapfrogged in the last three to four years, right? Like they're international great now. And I was talking to one of one like consumer focused investor and I was like, look, there's like you know, maybe 40ish million people in India at the premium, in the premium category who will actually buy stuff that's like 500 bucks or more know, discretionary high value spending. So why don't you just like start also selling in the UK because there is a lot less competition. These kind of products don't exist. Willingness to pay is a lot more. And I don't, because I don't do this for a living. I don't know what the CAC would look like, but I would be highly suspect if it is, if it is significantly higher than, you know, acquiring someone in South Delhi for example. And most people haven't even thought about it. It's just so far away. So that is what I meant by local maxima. And I think the same thing also goes to like you know, someone in Europe saying hey, why don't you set up A dev center in India. I think the perception and I think to some extent the reality also is, you know, bad infra like, you know, work ethic issues, etc. But also the good stuff that you can find really high quality technical talent. People have seen scale. You know, I know Rippling has a GDC in India. Stripe has now a delivery center in India. These are all not known, all of the slack, everything.

I mean it's, I think there's more.

Technical people in India than in San Francisco but like most people don't know that.

I think what's, what's going to happen is a lot of this I feel is going to change over the next coming decade just as the rise of of Indians in, in Europe and I think the cross pollination is going to going to lead to, to some big outcomes and I think you need like one of those one or two big stories, right? Europe in general has a bit of a challenge around PR and this is not even to do with the India Europe corridor in general. Right? Like European founders tend to be a bit more reserved, you know, and undersell. Like I'm surprised. Why? It's not like people in India are not using European products, right? Everybody's using Miro, everybody's using Zendesk, everybody is using, you know, I mean in many ways Stripe, Intercom Datadog, these are European companies. I mean Stripe is what Postman is to Europe, right? In many ways. And so, and so it's super interesting.

Even something simple like Typeform and I think Typeform is in Barcelona.

Typeform Berlin. Yeah. So I want to, I want to change gears a little bit around your bread and butter, right? Which is later Seeds, Series A. What's happening in that market and specifically which parts of Series A are making sense to you and which parts of Series A aren't making sense to you?

Man, a lot of it is not making sense right now. Like I said, I think I have coined this new term which I'm trying to, trying to really promote which I'm calling consensus risk, which is not flight to quality, right. I think what is happening is in a given space there are certain spaces in fintech that are hot, right? I think a good example is office of the CFO, right? Which is basically, you know, APAR, Treasury, FP&A, et cetera, et cetera. And for some reason there is an entire batch of companies that have all started at the same time three years ago. Ish. And are all kind of graduating towards Series A, C or have graduated already. And in each of these Spaces that are hot. I think generally now there is some level of consensus around, like these are the top two companies. And that consensus is not because they have the numbers, but it's like a whole picture and everybody has independently arrived at that consensus. Which is quite interesting for me to see as a new vc. Like, I think I've still, like, I'm still more of a product person and I've done a lot more product work than I've done VC work. But for me, as a VC and having been an angel before, what is most interesting is to see this, right? Like you take a particular like space, you have a number of companies in that, in that space. It's not like any of these one companies has broken out yet in terms of revenue. But however, you see the market converging upon one or two of these players as the ones to back. And it's not like they have a distinctive, like, you know, some of them may have a more distinctive team, some of them may have a more distinctive product someone, some of them may have a more distinctive take. But there is no proof that this formula works for fully yet. And so I think that is happening right now in the market where there is a lot of like consensus risk and this is in a lot of spaces. Like, I think there's like Office of the CFO is one. I think there's a lot happening in procurement software. There's a lot happening in, I would say payments, I think quite similar.

Walk me, walk me through this a little deeper. Is the issue here that there's so many companies and people are arbitrarily assigning this thing, like, how is it different from how it was 10 years ago with Help Desk software? What's the so what of this?

Right, So I think the so what of this is that I think as a founder, you need to realize the game which you are playing because I think like, when it comes to fundraising, I think founders, like the really good ones at least, are so focused on their lane that, you know, you should not put your head up every day and see what is happening and who's raising water. That's annoying. But I think it's important to know, like, who is the cohort that you are, you are being pegged against, especially if you're trying to build a global winner, right? So if you are building, for example, in, you know, again, I'll come back to Office of the cfo. There are about five or six companies in that cohort that are at the same level of maturity. And I think those founders will then need to acknowledge that those are the five companies they are going to be pegged against. And how do they portray themselves as the winner? Some of it could be numbers, but some of it also could be, like, extremely strong hires. Some of it could be great logos, or some of it just could be a very smart fundraising strategy. And there's nothing wrong with that. Legal AI is like, a good example. Right. There's like 20 companies in that cohort right now, and obviously one or two of them have now developed as the consensus candidates. It's too early to say flight to quality, because there aren't really many numbers yet to prove that that is quality. Does that make sense?

So on that point, there's two ways to look at it, right? One is that, hey, the cons. I mean, the positive part of it is that the consensus folks are the incumbents. They are the ones that will be able to attract the largest rounds of funding, but at the same time, they are also the ones that are expected to do well. So a lot of the price incorporates that. Right. Like, if you look at. So in the legal tech space, clearly one of those companies is Harvey. Everybody wants. You know, I've probably heard three different revenue numbers of what people think Harvey is at.

Yeah.

But all of them are fairly high. And it's like, hey, maybe after the next round it will become too big to fail because everybody has just gotten into it, on it.

If you look at Leah, right. I think, like, Leah's European Harvey. That's the general consensus. And is it. I don't know. Like, I mean, there's a lot of companies in that space. Because.

Because. Because in the same space, I'm also aware of another company where I spoke to the CEO. They're doing like 20 million in revenue. Nobody's heard about them, Only raised one round.

Please WhatsApp me after.

Yeah, yeah, absolutely. So and so. And so I think it's. It's sort of interesting because from a founder's perspective, you could be under the radar and continue executing, but that's a much more difficult proposition to do in 2024, where you have so many competitors. Unless it's. Unless it's, I don't know, very special kind of a company where the founder is so adamant that they can just build the entire company without having to raise a lot of money or a.

Very special kind of founder. Right. Like, I think that also works. Like, I think if you just think of. I wasn't at Equity when, when that happened, but, you know, my colleagues who did the vault deal yeah, very early. It was not the first player in the space. And it was also not, you know, for a long time I don't think it was the consensus candidate in the space, but it was, you know, clearly a winner both in terms of how the company is done and in terms of what is returned to its investors. So I think you could also just say, you know what, I don't really give a shit about this noise. I'm going to build a great company and my revenues will speak for itself. And when you have revenues, funding will come and then it doesn't matter what everybody else is doing. You can keep playing the hype train. I'm going to play the revenue train because ultimately I'm here to build a business. There's absolutely nothing wrong in that. And I actually think that's a better long term play. But obviously, like, you need, you need someone who's going to be strong enough to power through that. And also you need, you need to, you need to still understand the game that you're playing. Right? You need to, you need to, you need to make that choice. You can't be caught out. You can't be caught out. I didn't know this was happening. If I knew this was happening. I wish I'd done this. But now I'm stuck and now this is the only path I can pursue.

Yeah, one, one, one question beyond Series A is, and something I've been thinking about is when I look at the European IPO market for tech, I think a lot of companies that went public probably regret doing it now. If you look at what's happened to the Wise stock. Absolutely. If you look at the Deliveroo stock. And so when I look at companies like Revolut, which might go public soon, I'm wondering if. So maybe Revolut is not the best example because they're big enough that they could maybe list in the US as well. But for a lot of other companies, right? So companies which are in the, you know, 200 to 500 revenue kinds of companies, There's a bunch of those in the equity portfolio as well. I'm just wondering, like, what do these companies do? There's a crazy part of me which thinks that should they go list in India instead, given the amount of liquidity, especially for consumer companies or fintech companies, because US is not an option in Europe, they're going to, I don't know, I mean, like, and M and A, is that, like, is this something that you end up discussing internally, like as larger companies? Where, where do they list?

Yeah, So I think it's a good point. I think it is definitely. There's definitely a gap. Right. I think in a utopian world is flat era where there was like no information asymmetry. You're right. Maybe like, you know, the best thing to do right now is to go list in India. Like I was reading about that Yamaha dealership like being oversubscribed some thousand times or something which is ridiculous frankly. I mean I'm not sure if that really talks to the strength of the market or something else. But. But I think on a, on a more serious note. Yes. I mean that might work and I think there was this by Gokul Rajaram exactly about that. Right. I think a few months ago. But I don't think any, like that's not a serious option for anyone today yet. Maybe in the next decade that will change if the same path continues. I think there is a gap. I think you list in the US or you get M and A. I don't like, I like. I don't think that there is unless something fundamentally changes. I don't think that like a European listing historically has proven to be the best outcome. And American has an M and A. Has, but that's about it.

Does it mean that, I mean a third option obviously is something that not everybody likes but is like a buyout fee and just related to that like a lot of investments that I'm seeing recently that VCs are making feel a bit more longer term horizons where you're seeing a lot of investors getting excited about hardware. I mean there used to be a time when hardware was a tiny portion of your portfolio. More like a moonshot bet if it works out great. But now if you look at it, a lot of the generalist funds have like a person dedicatedly looking at hardware materials. Like, and I'm just wondering like, like do these things make sense? Or they're thinking of, you know, setting up these complex structured rounds.

The companies that you spoke about like materials or hardware or deep tech, for example, we invest a lot in, in this space. And we have an electric plane company, we have a electric hydrofoiling boat company. So we have, we are investors in nothing. The phone company. So we have companies like that. And I think my hypothesis. And that is.

Actually, actually, let me, let me rephrase that.

Right.

So yeah, either they're moving more towards a PE style, which is the structured notes and more clauses and that kind of stuff, or they're going into like university research kind of stuff. Right. Which is like the other end like the way that you know, ARDC or DARPA started venture capital back in the day. Yeah.

So we have like company called exploration company that you know, is sending capsules to space. And I think what is my hypothesis on what has happened, like why that is now being funded is that now there is capital to support it and very simply there was just no capital to support it 10 years ago in Europe. I think now there are larger funds that are willing to take those moonshot bets and that, I'm not saying that hey, like you know to raise a series A you need to have this much revenue and obviously deep tech doesn't work that way. So, so you know, so they would struggle. But I think now people, there is a deeper understanding, the ecosystem has matured and there is a lot more capital to support those moonshot bets. Which is I think what is happening because I think.

Do you think a big part of that is just SpaceX and Tesla? The fact that these were venture funded companies and they now.

Yeah, yeah, could be. Because like that has been proven, right. I think if you, if you pay European SpaceX for exploration company, it gives you an illusion, it gives you a hope that like hey, there is a, there is, you know, this could be a great company that could deliver great returns in the future and that there is a model that has been proven by someone before. Obviously the first person who does it is the hardest and that's been done by SpaceX. But I think there's, there's a lot more companies like this, like the plane company I told you about, like we backed them I think seven years ago and you know, they'll have a flying plane soon that's fully electric. That was like. I think you also didn't have founders. I guess even if you had founders taking such audacious bets, you didn't have the follow on capital which now you do. And if the plane flies, you know, pun intended, there is that you would have, you know, flying return, right. Which, which is great because then you have.

But in these kinds of companies, so you know how typically in the software world you're like, hey, pre seed means that there's like maybe a 95% failure risk, right. No product, nothing at seed that might become maybe 70% at CDC. When you do your portfolio modeling with the expected outcome with all the risks priced in with something like the plane company, for example, does the same logic hold? Because if the plane is not launched, there is a possibility that you can be a series B company and still not have your product out, which is What Fisker, which is the earlier competitor to Tesla, realized and so that like how do later stage investors think about something? Like if you're investing in a chip, right, there's a chance that even at a series D level it might just completely go bust. At which case, what is it? Is it an Acquihire or does it work? Or are these things sufficiently de risked when they raise a 200 million?

Well, I think you need a specific kind of investor to do those deals, right? Like for example, I am not that kind of investor because I don't have the depth. But if you look at for example, someone like Ted in our team who's done the plane company and who's also done nothing and has also done the company, like he gets it and he's, he's able to figure out that this has a higher than normal chance of success. I do enterprise software and Fintech, so if I, if I set out to do those, maybe I'll learn in a few years on, on matching those patterns. But I think there is a strong pattern matching there. The other thing that's important is to realize that these companies take a lot of capital and can like, you know, in true venture fashion, can amount to nothing. But the returns are asymmetric if they do amount to something like for example, like Candela, which is a company I'm very excited about. We saw their boats last week in Stockholm in the archipelago. They're electric flying boats. Ridiculous. That can carry like 30, 40 people. That can open up waterways globally. Now obviously the boat exists, now you have to sell it and then you have to convince public authorities to use it and all of those things. But I don't think those are dissimilar risks to what, you know, you would have for category creation and enterprise software. Obviously the capital at play is much higher, capital at work is much higher here, but also the return profile is much higher. So if, if you are a, if you are an investor who is fairly deep and who is able to develop a portfolio and who is able to evaluate those risks, then I think, then I think it's a damn good place to be in because you're not investing in a 2x3x outcome there. If it succeeds, see if you're getting in at the A. Yeah, I'm just.

Wondering if there's also a reason for some sort of nationalistic angle for this. Because unlike software, where you know, you could be an Indian company today, tomorrow you just reincorporate as a US company. Like all that's changing is really just Your talent profile, I mean, obviously that's a big thing, but like it's easier to move people versus if you have like a manufacturing setup. Like there's a reason why there's a Made in India movement. Right. And it's tied to manufacturing because there's a physical thing. So I'm just wondering like if with, you know, the kinds of companies that we've been discussing, there is a sort of a nationalism angle which is fueling a lot of these investments as well.

Some more than the other. Right. Like, I think if you think about like, I guess, LLMs, there was this whole thing about like, hey, like, you know, what is, what does a European LLM look like? And then, you know, you had a couple of companies like developing a European LLMs of which are quite successful models. I think it's going to be quite similar in areas like space. And I think that that will exist to an extent, but it's not the driver. Like it's, I think it's a, it's a, it's a, it's a plus plus. But I think ultimately the driver is obviously making sure that you have highly successful company. I think every country in the world has wondered why can't a Google Facebook be outside the Bay Area in their, in their country. Right. But no one has succeeded. And you wouldn't call that nationalism. I think you would call that just, you know, wanting strong economic outcomes in your own country. And there's nothing wrong with that.

Yeah. I mean, on that point, it's just incredible for me to imagine the impact that DeepMind has had on global AI. Like, I think every major company in the AI space can probably trace some sort of a connection to DeepMind, some intern, some VP engineering. Like, like, it's just incredible how all of this has really sort of happened from that one tiny thing in India, from these two founders in North London. And somehow there isn't that much fanfare or talk about it, which I think Europe should absolutely be really, really proud of it. And one can debate whether they would have been able to achieve so much without Google and all of that stuff. But like, it's amazing that bulk of the team is still in Europe and in London and they've done just such a massive impact on the global AI sphere.

I think this comes back to the same point that I started with. I think Europe is really bad at marketing its successes. If DeepMind was American, for example, you would have, they would have gotten the.

Nobel Peace Prize by now, have this.

Whole American dynamism thing around it. And God bless America and all of that coming through. But you don't really see that happening with Deepak. I think, personally, I think that's a bad thing because if you look at like, you know, even, you know, the EU accelerate movement, which is great, but like Europe just gets so much shit online and I feel like some, like a lot of it is not warranted. Like, it is not that bad. Like, you know, if, if you, if you just went onto Twitter and, you know, followed a certain set of people, I'm sure both you and I follow you would. You would finish two days of Twitter and you would think that, you know, Europe is going to go to zero, when actually the opposite of that I think is true in a lot of ways because there's a lot of like, quiet work happening here that is quite successful and very, you know, growth driven, whereas the narrative is completely degrowth driven. And I don't understand why. So, like, someone needs to take control of that narrative and fix it.

I want to shift gears a little bit. What are you noticing in the secondary market? I was just talking to, you know, a bunch of folks from the Indian diaspora who were saying that, you know, there's. There's so much secondary that we saw in India. It's obviously become a thing where a lot of companies are doing secondary and then talking about it. In the US it's absolutely known that companies do secondary after a certain point in Europe, beyond the, you know, the crazy story of the hoppin founder making a ton of money, it's not something you hear about and obviously I know it's reduced quite a bit from the heydays of 20 to 2022, but what is it that you're seeing? Like, are secondaries happening beyond founders? At what stages, what kinds of numbers?

I think, look, I think on the founder side, personally, my philosophy is if you're a founder and your business is taking off, you should not be worrying about like making the rent and can you send your kid to school and things like that if you're. So I proactively have offered and saying, hey, what if you want to do some secondary to buy a house or make sure your kid's educational future is secure or something like that, please do it. Obviously not tens of millions, but like, whatever it takes to be comfortable and focus on building the company, especially at inflection points like series A or B. So that's on the founding side, I think. On the team side, I think Europe is a little. I think the practice of doing secondary with every round has for Some reason not hit Europe yet. And I think that is a bad thing. I think I'm personally trying to change that with the boards I sit on where I'm like, hey, like you know, if you're raising around and you can do a little bit of secondary and offer liquidity to some of the early employees, that is only a good thing because that will increase loyalty and more importantly, it will increase the value of your equity. I think in India, it happened in 21, if I'm not wrong. Correct me like 2021. I think there was a, because there was so much demand and the ecosystem was booming. I think there was obviously a lot of capital and a lot of people are like, okay, let's just do secondaries as well and offer employees incentives. Which ended up becoming a damn good thing because now a lot of, I would say series C, D + Indian company equity actually has value and people will assign value to it when they're taking jobs. Um, but I think it's not, it's not that widespread in, in Europe yet at that stage. Maybe if you're like a Monzo, obviously your equity will be like if I was negotiating for a job with Monza, I would value their equity, but if I was negotiating for a job with a series VC company, I would value their equity, but maybe not by that much. And I would have a 5, 7 year horizon for liquidity.

At least you'd be as a board member, you'd be open to giving a secondary to a founder at series A.

Not, not crazy numbers. But if the founder said, hey, you know what, like I've, I need to.

I need like half a million to put a down payment on a house.

Why not? I mean obviously this is assuming that.

Company is doing well and it's all.

Of the, all of the caveats, etc. Etc. But like they want money to put a down payment on a house and that gets that, that frees them up. That's the whole job, isn't it? To make sure that you free up founder bandwidth.

You wouldn't, you wouldn't resonate with what some of the other investors would say that hey, like this person is not going to be hungry anymore. Like they're anyways taking a salary which is increasingly towards market. But like what is this secondary stuff?

And if half a million is going to change that founder's life to the point where their hunger is satisfied, then I would argue, I would basically say you invested in the wrong founder, right? If, if, if half a million is the number at which, even if the founder is economically incentivized or economically driven. If that number was that, then I think you just invested in the wrong founder.

Yeah.

So I think most of the founders I know will, will just say no to even that offer. And even if they took it, they would just be more hungry after that.

Got it, got it. Okay. You obviously spend a lot of time.

On fintech, specifically that number. Also if you think about it, half a million after tax is 300k or something. It's like 250, 300. It is a very high quality founder. You're basically saying that boss, I will give you, I don't know your stock grant equivalent if you went and joined Facebook. Like that's not life changing. Yeah, yeah, it's just, I would say increase their peace of mind. That's.

Yeah, I mean it's, it's, I think it's less to do with also giving the founder versus that money could be used to plow back into the company. Because say it's three founders, all of them take. And now you're raising like say a 12, 13, 14 million dollar round. I'm not talking about the 200 million Series A's, right. Which are outliers but like typical Series A, $15 million. If like 2 million of that ends up going into secondary, that 2 million represents maybe three months of Runway or whatever.

Right? Like the round accordingly you could, you could raise more money. Like I think if you can raise 15, you can raise 17. It's not that big of a difference. And if the company is doing well and you know you have committed leads, then then why not like if the company is not doing well, it's a different story. But like if you are able to raise a $15 million round with, with a lead investor that's high quality, you're probably also able.

Yeah, yeah. You spend a lot of time on fintech obviously given your background. There's this whole thing of, I mean if you look at a lot of the fintech success stories that have come out from Europe historically they have been very localized because they started with banks. Fintech, naturally, at least on the banking side, one of the moats is regulation. And so you end up creating these local giants which end up becoming bigger revolut obviously I think showed us that European fintech, even in the banking or payment space can go global. Is, is fintech the thing that Europe exports to the world? The way India looks at SaaS or whatever. Right.

Like 100%. I think this is like my big, big bet which is I think Europe is ahead of the US when it comes to financial infrastructure, when it comes to maturity of the ecosystem, when it comes to talent and when it comes to having a sensible regulator. By sensible regulator I mean someone who is safe, someone who has the right controls, but someone is also forward thinking and just not blocking things out of being risk averse. Right. I think mean like Figma, you know, but, but you know like I generally a big fan of the European fintech landscape and by Europe I'm also including, including the uk. If you look at like all the successes and early successes you're already seeing like I think for like wise is kind, I would argue is like one of the biggest global successes in fintech. And that has changed. It has changed the lives of many people, including you and me. Right. I would say Revolut is kind of on that similar path. We have a company for example called Banking Circle which not many people know about, but it is like a keystone company in European fintech. And anyone who works in payments knows about Banking Circle. So I think these kind of companies, like Cross Border for example is a good example. Banks, payments, all of these actually cannot have a local maximum or do not need to have a local maximum. I think historically payments has had a local maximum because of licenses, right? Because you have license in one jurisdiction, etc. But now if you think I believe payments is getting commoditized. So if you think payments are getting commoditized and then you have a software layer on top, all of that is going to be global and I think all of that is going to start in Europe because that is where the talent is and that is where also the environment is for it to succeed. You know, fun example is I think when I was at Stripe, I'll give you a Europe versus US example. When I was at Stripe I was working on this FEX product, right. Which, which used to do like for like payouts. Which means that if you are a merchant in Italy and you opened a USD denominated account with an Italian bank, you were able to settle your USD transactions in USD but in an Italian bank. So the typical use case that had written out in the PRD was a German merchant who has a French bank account and does business in sec, nok, dkk, pur, gbp, USD. Right. And needs to have accounts denominated in all of these currencies but in their French bank. This is the customer I'd written customer profile I'd written in the PRD and this is very common in Europe. I had to spend the entire Product review, just explaining this customer profile. But if you talk to any European they'll be like, yeah, this is normal. But I think for most people outside, it is just mind blowing how a German company can have a French bank account and it can work locally. That concept itself is pretty mind blowing. And on top of that, how will they have a USD account in that French bank is something that is just not easily, you can't grok that easily if you are, if you haven't spent a lot of time in this ecosystem. So I think because this kind of maturity exists where this, in this ecosystem, this level of complexity exists and is normal and is par for course, I think Europe is very, very well set up to kind of go build the next global fintechs because I think the next wave of fintechs will not be local maxima fintech.

Any particular sort of broad areas that you think are ripe for disruption here?

If you think of like City World, Link and all of these like terrible infrastructure that exists, there's no reason, there's no reason why that should exist in 2026 or 2027. And I think that is another area. I think that's, that's super strong. Third one I would say is financial software, by which I mean, for example, a category I like a lot is accounting closed software.

Right.

I have an investment in that space, but I love that category. Most people haven't even heard about it. It's SaaS closed on monthly books. The public company called Blackline does 4 or 500 million in revenue, 4 or $5 billion company. Right. There's one or two unicorns in that space, but other than that there's no startups in that space. But Europe is uniquely positioned to build a very large company in that space because honestly if you can, if you can, if you're able to do accounting in Europe across multiple jurisdictions, everything else is just seem like a piece of cake to you. If you start from the most complex use case and then you go to the simpler use cases, it is just going to be a lot easier for you to export. So I think these are like some areas I'm quite excited about.

Very cool. And, and do you see European founders in Europe having those kinds of global ambitions? Like are they thinking about it or is it something where you need to open their eyes and prod them? Like what's, what's.

Yeah, yes, founders. Unless they have that kind of ambition, I can't also because like just considering our fund size and the kind of outcomes we need, we cannot invest in European Winners like it. I mean, there's very few spaces where a European winner would support the kind of outcome that we want. Yeah, ideally we would.

You see a difference between, between people who. So if I look at all the, like a lot of big success stories that have happened in Europe, obviously Eastern Europeans have led sort of that way initially. We are now seeing people from other countries like Iran, India and so on. So do you see like the future of Europe being immigrant entrepreneurship, like a lot of these sort of outsized outcomes that people want to create. Like, do you think there's some sort of a correlation there or not really? Because that's definitely the case in the U.S. right. Like, like you said, like a lot of European founders have done incredibly well there. Indians, Chinese, they're not minorities anymore in tech.

Probably the top, the top unicorn producing nationality.

Yep, yep. So, but what, how does that play out in Europe?

I look, most likely it plays out in the same way. I think generally you are more motivated to take risk. I mean, we'll see how it plays out. But my guess, I think you are more motivated to take risk. If I think you come from scarcity and suddenly you see abundance. That has kind of been my theory because that has been my background also. Like, if you, if you come from a very like, resource scarce opportunity, scarce environment where you're constantly being judged and you know, people are putting you in boxes and then suddenly you reach a place of like, you know, egalitarianism, no power, distance, abundance, you know, you are going to use both hands to grab every opportunity that comes your way because you are just, you know, it just opens up life to you in that sense. So I think that is going to, that is, that is already happening. And you can see that in, you can see that. I think in a lot of the, I would say early founders, not successes yet, but I think you can see that. I think the Miro founder is Russian, if I'm not wrong. Revolut is a Russian founder. You know, those are two massive successes. UiPath, I think, is a Romanian founder. Yeah, yeah. I mean, three massive successes. I think these are the, you know, three big companies in Europe. There's obviously a lot, but I think it could be one of the things, like, I don't think it's, it's, it's the be all and end all of think obviously people come from different backgrounds. You know, they might not be immigrants, but they might have, you know, other experiences that might have shaped them that also motivate them to be that hungry. Because fundamentally you have to be, you cannot be rational and be a founder, right? Like I think you have to be crazy. Like, otherwise you're not going to like, why would you do something like that? It makes zero rational sense to be a venture backed founder who wants to build a global winner. Like you have to be crazy. So in order to be crazy, you have to lose. I think a sense of your way of viewing life has to be skewed in a certain way. And yeah, you can't do it if you're thinking straight.

So related to that is you have to be crazy as a founder. But founders are also answerable to the board. You've now I think started taking on board positions in companies. What's it like being a board member? Because obviously as a, as an operator you sort of get your hands dirty. The board member early stages, it might be similar where you're sort of working very closely with founders but you still have like, you're still a fiduciary. So like what, what's that experience been like for you? Especially coming from an operating background and now, you know, taking on more responsibilities. What's that experience been?

So I think one is, I think the obvious like urge if you're an operator turned VC is to say, okay, let me do this right now. Thankfully, I did a lot of angel investments before I became a full time vc and I also joined a board about two years before I became a full time vc. Just the founder who wanted, wanted me on the board and I had the privilege of joining that board. So I learned how a lot of board dynamics work and like how to actually be a good board member from that founder because that was actually my first board seat. So when I took on my first board seat as a vc, I felt like I knew a bit more than what I would have if I'd, if I had not done what I would have. I think there's two things. One is, I think as a board member, your job is to make sure that you are able to provide good direction, good advice and provide help in founder wants. And if the company or if the founder is like thinking of something completely wrong, make sure that you are able to have those hard conversations with the founder which in the moment might not seem very friendly, but that's not really the job of a board member is to be, is to make sure that you know the founder is heading in the right path. But at the same time I will also say that the best founders don't listen to you and do what they want anyway. Obviously, as long as you Know it is within. It is within reason and it is not jeopardizing the company. I think it's fine, man. I think you, like, you've invested in a founder because you believe that this founder is going to build something that is meaningful. If I thought I could do a better job than that founder, then I should just go build it myself. I don't know if that makes sense. And I also like the board, like, advice role quite seriously because there's obviously a lot of like, okay, as a. Maybe as like a more. I would say, you know, someone who hasn't done this for a living for the last two decades or something. I'll tell you. I'll tell you what it feels. I think when you first get on a board, I think you feel like. Like someone's asking me for advice. But I think then you have to think and you have to be like, am I the best person to give this advice or am I just giving this advice on the basis of first principles? And most likely is the advice I'm going to give bullshit, right? And I think I don't want to be that person who gives bullshit advice. So what I do instead is I either, I instead ask questions to help the founder think through it, which is good. And in cases where there is something that is specific, such as how do I deal with this upcoming regulation or how do I do this, then I try to make sure that my job then is to find the best person who can offer sensible advice and make sure that that person offers that advice. There's obviously a third bucket, which is like being a therapist for the founder, which I'm happy to do. Like, which. Which is fine. That's not really advice on the company or something like that. But I think it's important that you take the advice role quite seriously on a board and don't give future advice that's not based on experience.

And how is it working with other investors on the same board who might have different ideas than yours?

Yeah, I think a founder has assembled a board because they believe that these are the best people to help them build a company. And so, you know, everyone has the right to their own opinion. And if someone's opinion is not great, I will say that. And then. But then the founder can pick whose opinion they want to take.

Got it? Got it. Okay.

But the, like, I mean, you saw the. I don't know. I don't know who said it. I think it was Vinod Khosa, I think who said it.

90% of the boards don't add any value.

Yeah, yeah. I mean, so I say, like, I, I take that almost as, like, you know, as someone, I would say, relatively new to this space. I, I actually try to keep that bar to make sure that I'm always on the 10%, otherwise I shut up. So it's. That is personally quite important to me.

Got it. Um, do you see board dynamics changing as the company grows, grows bigger? Where you know how in every startup, the early few years are the honeymoon period, Right. Everybody's super nice, helpful, friendly, and then somewhere, as the company grows, starts changing. Because you might also start thinking from your fund's perspective, like, is that something that you think about or it's too.

Early right now, I think no. I've seen that happen in a few, in like a few other boards now. It's been what, 4ish years I've been on board, so seen some of those things happen. I think the good investors don't change. I think you have conviction in the founder, you have conviction in the company. Obviously, you know, there's a bridge to be done. You do the bridge now, at some point you have to say, okay, like, is this actually going to take off? But then if you are able to have those conversations at regular intervals with the founders saying that, hey, it looks like you're one degree off track. Right? And then have a conversation three months later, say, you're actually like five degrees off track now and you don't see it going back on track. None of this should come as a surprise to the founder. I think the, the worst thing you can probably do is say, wow, amazing. Cheering you on. This is great. And then, you know, say, actually, I'm, I'm, I'm going to, I'm going to pull out my board seat and I'm not going to invest in you anymore and I'm not going to spend time with you anymore. Just a surprise on one day or do like some other, like, pretty terrible stuff that has happened on board.

Yeah, One of the, one of the things that I was at an investor conference and you were having a bunch of sort of intimate sessions, and one of the things that came out is as the size of your portfolio increases, one of the thoughts that came out is, how do you manage? Because there'll clearly be some breakout winners and then there'll be some companies which you're like, TBD to be seen, and then there's a bunch of companies where you're like, you know what? Like, it's not really going to make that much of a difference. It's not like the founders are bad, but like the company's founders in a spot and the cap table is in a certain way or the space has changed. And I think one of the things that came out was that, you know, a lot of investors said that, you know what, we are just going to focus on the first two buckets. Probably the first bucket we might not even be required that much because later stage investors have come in. It's the second bucket where we're going to spend a lot of time and the third bucket where we sort of lost faith. We'll still be around but we're not going to proactively try to go guide or tell the founder or something because they're like, you know, what your company do what you want to do. But like from my perspective I've sort of, I would rather take that time and spend it where it can make a tangible sort of difference.

So I think different funds have different philosophies when it comes to this. Right. And I think this is actually a good point. So I'll give you my. So I think number one, I think as an investor, this is something that, you know, one of my mentors who's a long time investor told me saying, hey, you're going into vc, remember that obviously you have to invest money, but remember that you have eight slots because you can maximum be on eight boards at one time. So every time you're doing a deal, whether it is a pre seed deal or whether it is a series A or a series B, obviously the check size and all is important, but what is more important is that every deal that you do is one slot gone for the next, you know, 5, 10, 15 years even. Right? So and you cannot get that slot back again because you know, you're not ideally you're not going to drop boards. So I take that quite seriously. I think that matters to me more than the amount of money I invest. Like I think saying that hey, like this is going to be, you know, me giving my time for the next X number of years to this person and there's only eight of these I can actually build. That's, that's one. I think the second thing is, and this I keep telling founders all the time, like who is actually going to be the person you're going to be working with? Because especially in a lot of like hot deals, I think you have a lot of these, you know, without naming names you have like a lot of these like really cool established investors, you know, but are they actually going to be the people on the board, like are they, are they actually going to be the people you're working with? And it's a good thing if they are, and that's great. But if not, a lot of times you see, you know, a really cool investor taking showing up at the first board meeting and then every investor, every meeting after that is the associate who basically place them on the board. So I think that's also an important dynamic. I think the way we work so far, obviously I've been here for coming up to two years now, is to make sure that we stay on the board to the extent possible. They're active investors. The stories I have heard from a lot of our very successful companies, from some of my other partner colleagues, is that a lot of the companies were underperforming for a very long time and suddenly something happened. Either, you know, regulatory change happened, some tailwind happened, they figured out something and then the company went from underperforming to, you know, top quartile, top decile, top percentile fund returner in a matter of like a year. Now imagine a situation where you've pawned off a company to someone, you're not active, suddenly the company takes off and you're like, hello, like remember me? Like we're best friends. Now I don't think that like any founder is going to take that very kindly because I think people will see through that. So I think it's better to kind of make the right call and stick to the decision. But ask me in four years and I'll tell you. I'll tell you where I am. That's my current thinking at least.

You spent a bit of time just going back to you spending time in India. Do you still feel bullish about Indians moving to Europe and doing incredible things here?

Yeah. So I think it depends on which Indians and what they are optimizing for. I think if you are extremely technical and you're in the top percentile of tech talent in India and you want to do some cutting edge work early on in your career, then I think you'll be better off here than you would be in India because you would be able to work, you know, at a company like a Mistral, or be able to work at a company like a DeepMind, the likes of which still don't exist back home. If you are someone who really wants to get like additional exposure again, you had a local Maxima issue for a while where, I don't know, you worked at Sigi and then you worked at Zomato and then you Worked at, you know, XY Razorpay, let's say, and all three great companies. But you've only done India ecosystem for a very long time and you want to increase your global outlook a little bit so that you can then go back to India later. And then I don't do something but do it with a new flavor, then I would recommend it. I would also recommend it if you're generally, if you've had bad experiences with work culture in India. I think there's a, there's a lot to say about work culture in India, how bad it is. Not, not in some companies, but I think the median at least is pretty terrible. And if you want a good work culture, lack of power, distance and, and I think then Europe is great. I think if you want to make money and optimize for earning, stay in India or go to America, like go to the Bay Area. Like I think Europe is not the place to do that. I don't think, I don't think there's a world in which that happens. Unless of course you are in. You've read that Pragmatic Engineer blog on like trimotor nature of software engineering salaries, right? Yeah, but then maybe it might make sense because I don't know, let's say you are like, you know, a mid senior, senior level engineer at Rippling in India and you know, you get a like nice L7 offer at Facebook. Like okay, that's a good change. You don't like actually compromise on your earnings that much. You have a good for a few years and then you go back. Yeah, but it's not going to make a meaningful difference to your earnings.

And also that's likely to happen if you've already spent enough time in Europe and you're attached because otherwise you'll be like, let me just move to the US because if I can command that salary in Europe, why not just move to the U.S. yeah, but like a.

Lot of people also just want to change in lifestyle and not actually make a permanent change because I think the US is like, it's very hard to escape the green card trap. I think you know it very well, right? Like once you go to the US there is a hamster wheel in the US and obviously the amount of opportunity, the amount of money is so high that is very hard to get off that hamster wheel. A lot of the people I meet, like a lot of, I would say senior product engineering people are also like, hey, I just want to change. Like I don't want to be in Bangalore for the next Five years. I just want to change where I'm not compromising significantly on the quality of life. I'm still close to India. I can go back and I want my kids to have a more like international experience for like four or five years. You know, maybe I'll come to London and I'll work at Facebook or Google or I'll go to Amsterdam and I'll work at Netflix or Miro or one of these companies and then I'll go back eventually. That's also not bad.

Got it. And what about, what about people from India coming to Europe to start up?

I actually think, I think, I don't know this for a fact, but it's just looking externally, I think it is easier to raise money in Europe than India. And the reason why I think so is because I think there is a larger number of funds with a good amount of capital in Europe, whereas in India there is a smaller number of funds with a very large amount of capital. So in India there's probably six, maybe 10 funds. If you are a founder, let's say, Rishabh, you want to start a company, you said, okay, you know what, this VC thing, not really that interesting. I'm going to go start a company. And you went to India. How many calls did you make? Probably 10.

My view is that what you are saying is true at the Series A level. I think at the pre seed seed level there's many more. But at the Series A level you're right, there's like six funds that pretty much do it. That number would probably be 50 in Europe, if not easily Germany, UK, US funds are very active and active at the Series A level. So I think that's though I do feel that for that story to play out you still have to be somebody who's moved from India, worked in one of these companies in Europe because if you directly just jump ship and land up here, then you run into the same challenge that the European investors have not heard of any of these companies. And so you have to then, you know, sort of run around in a circle and stuff like that.

Like do you have like what kind of founding team you assemble? Right. So maybe, I don't know, maybe we keep coming back to Sigi. Let's use Razorpay. Maybe you worked at Razorpay, but then you moved to. You move to London and then you assemble a team. And that team is not entirely people who only worked in Indian companies, who also worked in European companies then. Yeah, things like that.

Yeah. Yeah, that's interesting. Yeah. And I think that's why you see a lot of. I think that's been the pitch of places like EF and Antler.

Right?

Like. Like, yeah. Like, if you look at, you just landed up here, you don't know anyone. It becomes a place where you find a co founder or you. Or you work in a company for a few years, find a colleague. That colleague may or may not be of the same ethnicity as you, but, like, you work together. And so now when you go pitch to vc, you have a much stronger sort of story, just sort of fits in.

Yeah, yeah. So I would say, like, there's a bit like, I have. I have advised, actually, if you found us to do this, I know it's a bit like unconventional playbook, but I would say it is easier and better to raise in Europe than India.

I think it's a hot take. And with that, we'll end the show. Kaushik, thank you so much. It was awesome having a chat and thank you so much for the time.

Thanks for having me. I really had a lot of fun.