Infinity Entrepreneurs

"I had started talking, maybe 2 - 3 years ago, that the aspiration is not a billion dollar company which is a unicorn; of course it is. But again, that's the 1-10 journey. The aspiration is a billion-dollar profit per company and fortunately I think we have 4-5 in our portfolio heading in that direction; our peers also have some. I was reading about a firm that has probably 20 times our capital to manage, plays across all stages and they have a total of 12 such companies over a 25-year history. So that to me, is infinity. Billion dollar profit over I have now 20 companies; that would be nice." shares Avnish Bajaj, our Founder, and MD, on the latest episode of Matrix Moments. Watch him with MD, Rajinder Balaraman.

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Avnish:

I will tell you one statistic, December 2022 BMW and Mercedes

Both had their record sales in India. Iphone is now increasing in penetration.

So what explosion happened in China between 2008-2009 actually who knows maybe 2006-2007 till about ’2018, that whole period. Luxury took off, bunch of these things, everything is taking off. Here’s the unique thing about India, it’s digital first. So digitization of GDP is helping us leapfrog so it’s just you and I can debate the Math but to me just digital companies alone should generate 1.5-2.5 trillion of value, hence infinity. There should be like that to me is close to infinity.

Rajinder:      

Happy New Year and best of luck to everyone for 2023. In continuing with the spirit of our episodes on founders, Avnish, we’ve done two, Experienced Founders and Founder Market Fit. Today I thought it would be interesting to talk about a new term that we’ve been talking about which is infinity entrepreneurs, founders effectively who can scale infinitely. So let’s get to it, what’s the trigger for this topic and why has it come up internally?

Avnish:         

So just very exciting time, so first of all Happy New Year to everybody. And I noticed you wished everybody luck so it sounds like that's going to be some of the theme. We just had Five Star go public two months ago. Over the last two years even though it’s been very difficult and choppy a bunch of digital companies have gone public. That's the ultimate goal of starting up a company in my view and venture capital. So the panacea, the ultimate goal is here and hence with deepening markets, seeing IPOs, generally we have spoken about three phases of a company, 0-1, early PMF, product market fit, 1-10 scaling product market fit.

Typically we say 10-100 and I was just thinking why 100. Some of the -- we’ll talk about in the context of infinity entrepreneurs they’ve unlimited ambition, hence the term infinity. With IPOs there’s no cap on value creation. If you're selling your company in an M&A you’ve capped your value creation, there’s no cap on value creation so I know you're old enough to remember this movie Toy Story where the character said to infinity and beyond, that's the thought. So I think infinity entrepreneurs are the ones who can transcend all these stages and take the companies to that level.

Rajinder:      

That's very exciting and maybe a little bit on how this is more relevant in India because we’ve seen these infinity entrepreneur stories in other markets. But why is this a really exciting time to be talking about this in digital India?

Avnish:         

And in fact honestly this hit me about a month or two ago. You and I were working on some and we were doing GDP projections in 2021 and how the world changed in ’22. And we thought India would become third largest by 2030. Then we crossed UK, then you look at the size of Japan and Germany which are above us and then today we say 2028 but actually economists are saying 2026-2027.

So that sounds interesting, that's relative. But if you look at the absolute our current GDP is --

Rajinder:      

3.5 trillion.

Avnish:         

3.5 trillion. How much are we adding nominally every year?

Rajinder:      

13-14 percent.

Avnish:         

Correct. So if you do that Math we’ll have add 3.5 trillion somewhere between 5 and 7 years. If we get lucky and hit a year of 9-10 percent growth which I think a lot of the drivers are in place can you imagine? In 5, maybe 6-7 years we will add the same amount of economic output that we have done in our first 75 years of existence. I don’t think we ourselves understand what will happen. And I will tell you one statistic, December 2022 BMW and Mercedes both had their record sales in India. Iphone is now increasing in penetration.

So what explosion happened in China between 2008-2009 actually who knows maybe 2006-2007 till about ’2018, that whole period. Luxury took off, bunch of these things, everything is taking off. Here’s the unique thing about India, it’s digital first. So digitization of GDP is helping us leapfrog so it’s just you and I can debate the Math but to me just digital companies alone should generate 1.5-2.5 trillion of value, hence infinity. There should be like that to me is close to infinity.

Rajinder:      

And I think we’ve spoken about founder mark evolution as well in this market, first generation like let’s call it – let’s not think about 20 years ago, let’s say 10 years ago, 15 years ago it was largely first time founders in their 20s. Then it kind of moved to experienced founders, now infinity, what’s changed with the founder?

Avnish:         

Just coming back to this overall digital nation-building piece for a minute by the way we’ll talk about in various episodes in closing valuations what’s happening currently. Last year was a very difficult year globally and they talk about always counting your blessings and having gratitude. I think we all should just take a step back and we’re so blessed to be living in these times in the kind of businesses we’re doing in digital in India, I would pay to have this job -- don’t tell the investors that, I would actually pay.

And I think I would actually potentially also pay to be a founder I just can't. So I just think it’s fantastic times. In terms of what it takes I mean what is your view on like you said archetypes seems to have changed. But when you think of 0-1, 1-10, that will be the crux of it, what have you seen.

Rajinder:      

So what’s really encouraging is – I used to think about it as first phase is product market fit, next phase is scalable product market fit, then the third phase is scalable profitable product market fit. And that profitable product market fit unlocks a different ambition within founders and companies. And with the number of companies that are now figuring out the business model towards either a path to profitability or many of them in our own portfolio getting to that.

Avnish:
Already profitable.

Rajinder:      

Already profitable, the ambition has just unlocked to the next level. And seeing those founders and their ambition unlocked to the next level the next set of founders are then inspired to create even larger companies.

Avnish:         

I mean the first set was inspired by the Sachin Benny, the Bhavishs, the Kunal Bahls of the world which brought in the – Deepinder I guess also of that gen and Harsha and a bunch of these. So, you're right, and I think the good news is what we do here from a bunch of these guys is they’re aspiring to create publicly listed companies. Now there is no science to this, but if one were to say and we’ve discussed this in I think the Ashish episode that what are the traits that change.

So 0-1 easy ideally in domain you hustle you have a founder market fit so whether you're obsessed with that problem or you’re working in domain you tend to have speed and hustle and basically resourcefulness. I think so you have found something, and I think the best way to think about this is to a business is built around customers. So track your journey with the customer, so 0-1 you found some customers, 1-10 you have to delight them, not satisfy them, you have to delight them.

Then you start scaling with those customers, I think and we’ve seen this with people like Amazon even Apple also I think you start so I would say customer delight starts getting layered in, I also think velocity becomes more important than speed where you're more directed and you're clearer about what you're doing and absolutely you need to see team building.

But coming to infinity I would say number one what I have observed strategic clarity. And these people are just and we can unpack a little bit of it. There’s vision mission that people talk about but you don’t wake up every morning, executing to a vision or a mission. You wake up every morning executing to a strategy and so I think – and I was watching one, there’s this founders podcast and he talks about all the biggest founders in the world starting with JP Morgan and Rockefeller, like he goes way back. And it is about strategic clarity, just clarity of thought and strategic clarity.

And we’ll talk about how some of these can potentially be developed because somebody may just say okay, I don’t have it or I have it, so I think that's key. Org scaling starts happening, right, you cannot scale a business if there’s no institutional memory left in the business. So you take some steps, some work some don’t, but people keep learning so I think that is very critical. In our Org3.0 we have discussed how first version has doers, second version has doers with thinkers and third version has thinkers who manage doers. So I think org scaling comes in for infinity entrepreneurs.

I think customer delight graduates to customer obsession and I think these are different things. Delight, you show up in the office, you listen to a few customer calls and maybe even and you're happy, obsession you can't sleep. And I think what happens with obsession is it’s a much higher bar and what you end up finding and we’ve discussed this in the context of competition versus customer, where should you focus. If you're obsessed about your customer your competition will never get to you and you will potentially surround them with other goods and services and find a way to grow the business.

But very importantly capital efficiency in the public markets I can't tell you when we talk to public market investors how differently they think, it’s all about return on equity, return on capital employed. By the way they may invest in loss making businesses but within that which is what we call unit economics they’re looking for proof points to say what is the long term because they have to underwrite that. Public markets may go through bubbles and busts but these managers have to mark to market every year, every quarter actually or maybe in some cases every month. So they’re much more focused on that.

You know how the first principles of stock prices is it’s a present value of future cash flows. So interest rates, capital efficiency, all of that becomes important. Two other softer points I think the infinity entrepreneurs in the ones I have dealt with even though I would love to have a relationship where I hear bad news first it really happens because they’re super forecasters, we have that book that we talk about they know their domain, they know their customer, they know all other external factors such that they’re not getting negative surprises.

And by the way infinity entrepreneurs in our portfolio I’ll call out for example other than OneCard which is obvious, Ola Electric but even LiquiLoans with Gautam and Achal they have been through so many bust cycles in financial services but almost every time they anticipated it including Covid. And how do you actually take measures during that period, have your deeper balance sheet or whatever such that you don’t – so I would say just knowing obsessed with unknowns, looking around corners, complete control of destiny, complete control of their own destiny.

Fully resourceful, will never come asking for a bridge round, will never come asking for handout, they have fully control of their destiny. Finally what you said, unbounded ambition in a positive sense. They’re just never satisfied and we have discussed this before, let’s not hold our new digital entrepreneurs or what we call industrialists now to a lower bar than what has excited us in the past. I mean the Tatas, the Birlas, the Ambanis, the Adanis they’re industrialists across industries.

I think amongst the ones we work with in our portfolio and in the industry there are a bunch of these. So again just very exciting. Any other, any reflections or thoughts?

Rajinder:      

No, I think if I connect two things you said, super forecasting and strategic clarity, the one thing that I have really enjoyed about some entrepreneurs that we work with is just planning. So there’s actually a very strong planning DNA and there is scenarios that they think through to the point where like for example is 2023 going to be a block buster year or is it going to be a really bad year. Most people today expect it to be let’s call it an average year. But what if it turns out to be different.

And the best entrepreneurs actually have a plan for different scenarios and it will actually show up in the financial plan, it will show up in their org plan and the conversations you have if this happens then I will likely do this, those are the kinds of conversations which one tends to have with these kinds of entrepreneurs which is truly different.

Avnish:         

And I’ll put it in another framework but there are like so many like even Five Star just went public, kudos to Pathy. He’s also seen so many cycles, regulations keep changing, RazorPay, there are so many and we don’t have to have the conversation. Mosaic Wellness, Park Plus, like so many, we don’t have to have the conversation of saying hey, focus on this now because this has changed. They are actually recognizing this, so the nature of the conversation ended up being very different.

Rajinder:      

So I guess we’ve called out 7-8 traits and that's a lot, so are all these traits truly required in your view, would two or three, or which ones do you think are more helpful.

Avnish:         

So some of these are obvious, right, without clarity your org will be all over the place, without org what can you do. The customer obsession is interesting. I actually believe customer delight gets you retention, customer obsession gets you growth. The whole land and expand and stuff like that so I actually think that can differentiate people. Capital efficiency we have discussed, but let me ask you this ambition. So I don’t want to say all are required but it sounds like but tell me how many five billion dollar plus listed companies are there in India.

Rajinder:      

Listed would be three.

Avnish:         

No, no, there are many more.

Rajinder:      

Oh, I was thinking digital. Listed total will be many more, there’ll be probably like 40-50.

Avnish:         

It’s about a 100 over a 75 year history. So the point is it’s not easy and if we’re saying infinity entrepreneurs and they have to scale five billion plus let’s call that the definition that they scale their companies to that level plus. I actually believe there’ll be I don’t know what’s your guess in the next five years 30, 40, 50?

Rajinder:
Oh, easy.

Avnish:         

Actually 20 are now.

Rajinder:      

So that's private and public, public is probably three or four.

Avnish:         

Or maybe 40-50 more, so I do think the bar is very high because that would increase the universe of publicly listed five billion dollar plus companies across India by 40-50 percent, the bar is very high.

Rajinder:      

That's massive, yeah. Conversely I was thinking we didn’t talk about culture and everyone there’s the famous whatever culture eats strategy for lunch or breakfast and it’s key to scaling an org but we didn’t really talk about it, I'm surprised.

Avnish:         

I'm a bit confused on this because if I look at some of the – and I can't name those companies and I'm not talking about Indian companies. If I look at it globally in the bull markets all that culture seemed great but when the tide turns you hear New York Times articles come out about the culture in a bunch of these companies. So I don’t know, I feel that these traits we spoke about, let’s take customer obsession, maybe that becomes the culture and at Amazon maybe there wasn't a focus on culture creation but customer obsession is their culture.

You and I were discussing about Apple, also is the do these things have to be measured over a very long period of time or a short period of time. Tesla is obviously clearly innovation and breakthrough speed and scale. So the reality is there are many examples of infinity entrepreneurs and of infinity companies which have over some measurable period of time not demonstrated great cultures.

Personally I think it’s very important but we have to look at data also, I don’t know what you think.

Rajinder:      

I think to be very honest I think culture is a very tricky topic to discuss and over the last like 5-10 years one can argue that there is a culture of entitlement also in the startup industry with startup industry companies ending up like doubling pay versus traditionally you know sectors.

Avnish:
But it was created by the companies,

I mean some of the freebies that used to be considered great today are being panned.

Rajinder:      

I'm not entirely sure like most people say culture and then automatically you think of Foosball tables and whatever playstations. I'm not sure entirely like what exactly good culture is but I think --

Avnish:         

We have a token culture here, those small ping pong tables.

Rajinder:      

There used to be some people who would play but as we were talking about this but like Apple hasn’t launched a new product in 5-7 years.

Avnish:         

You were saying that's very big.

Rajinder:      

And somewhere culture does get defined by founders and the founding team.

Avnish:         

I think that's a good one to double click into. So Steve Jobs came back ’96-’97 let’s say took about two years to settle in and then he kind of became ill 2009 plus. In those ten years how many products came out, iPod, iMac, AirPod, iPad, NewMax, iPhone of course. You're right, there’s no big --

Rajinder:
Breakthrough products.

Avnish:         

I think the only thing they’ve done which again it’s interesting because maybe it’s the CEO’s personality that reflects in the culture. What Apple has done the best and all of us who have switched to the Apple laptops with their own chip that's a non-incremental shift. Now they’re going to make their own LCD screen. So I guess the question is how much of a personality of the leader tied into the culture and what it values and therefore what do you see coming out.

Rajinder:      

I'm not a hundred percent sure but yeah, one can argue that it matters. In closing I was thinking we’ve talked about founders, VCs invest in founders. And for founders we’ve kind of drilled deeper. How should one think about infinity VCs because we are also part of this eco system.

Avnish:         

Yeah. And you know the last 4-5 years what’s dawned on me and I used to joke with the founders I’ve worked with that every time we’re telling them something like I often look back and I say why doesn’t it apply to us and I do think it does apply to us. So I think there is a concept of infinity VCs ultimately to be in business with infinity founders if you're lucky an infinity founder will take you if you're not a infinity VC or I think you have to be a infinity VC.

So let’s just talk about like just I think this will be useful maybe for people who are looking at venture capital as an industry, the frameworks we have borrowed and we use internally we say thesis, evaluation, network, winning which in this new world and which is where I think an infinity VC really counts is very critical, winning the deal. Does the founder want to work with you and then value creation and exit.

Importantly this external framework which we borrowed from Mark Souster which is personal brand network and pull. So if you were to map the same three stages of a company and a founder with the three stages of a VC I think it’s very simple, 0-1 you find your first few customers, you find some product market fit. So you hustle and you get into some good companies. 1-10 you demonstrate a method where it’s no longer just hustle, it’s scalable repeatable.

What is the flywheel, and typically that flywheel is based on sectoral expertise -- .

Rajinder:
Franchise building.

Avnish:         

Network building, franchise building and stuff like that. How does that demonstrate itself you start getting maybe in the first phase you get one or two mark ups, in the second phase you start getting more and more mark ups within the same sector. So we spoke about internal flywheel and external flywheel, I think the internal flywheel becomes more complete and the external flywheel starts turning, you start getting recognized. Okay, there are people where whether it was Vikram with Fintech, okay, he’s become the Fintech guy, you were doing commerce – so we start getting recognized that is very important when you come to the third phase.

Because by the third phase you're not picking founders, founders are picking you and that's a big shift. And that is not going to happen unless you yourself are able to transcend and get to the infinity flywheel journey. At the infinity flywheel we’ve discussed this before you have to be recognized by the founder, you have to have the pull where people want to come to work with you. You know, I’ll just on a lighter note talk about some of the matrix that one could actually associate with each phase.

So some mark ups in 0-1 consistent mark ups maybe a unicorn or two in your sectors in the 1-10. I think the 10-infinity is where it’s IPOs, IPOs, IPOs it’s realized gigs or maybe not IPOs but exits, exits, exits. Funnily enough – so, you know, I’d started talking about a few years ago maybe 2, 3, years ago that the aspiration is not a billion dollar company which is a unicorn, of course it is. But again that's the 1-10 journey, the aspiration is a billion dollar profit per company and fortunately I think we have 4-5 in our portfolio heading in that direction, our peers also have some.

I was reading about a firm that has probably 20 times our capital to manage, plays across all stages and they have a total of 12 such companies over a 25 year history. So that to me if you really want infinity that's infinity. Billion dollar profit over I have now 20 companies, that would be nice.

Rajinder:      

Amazing. I wanted to just to bring this together like also share one or two case studies because I think it’s helpful especially on the traits. I think most people and I was also surprised to connect the dots on this one but OneCard and Ola Electric both companies in our most recent in fund 3 both actually didn’t launch their first product for 18 months or maybe even longer after they raised their first round of capital. And through that period the clarity with the founders.

Avnish:‍

Jupiter also took --

Rajinder:      

The clarity with which the founders were building, forecasting where regulation was trending, where government policies were trending, figuring out what the right org would be to scale those companies once they hit market. All of those things literally I can't imagine like in the past folks would have been wondering hey, what is this company doing.

Avnish:         

Yeah, by the way we were wondering and we learnt how to work with them and if you ask me Anurag was here yesterday, Amit is here today, Revant was here last week, Chirag interacting on Saturday, we had learning from them all the time, Ashish like, you know, Pathy. One of the things we learnt is that hustle is not the right metric in the infinity stage. And remember even in the US there is this concept of hustle culture and this that. It is the thoughtful hustle, you do need to hustle, ultimately you have to hustle but it’s a thoughful well directed hustle. So definitely something that is different.

Rajinder:      

You’ve talked about habits, maybe something for the entrepreneurs listening or others how can one cultivate some of these things, any learnings from your own personal journey?

Avnish:         

Yeah. Well, it’s not so much from my own personal journey I think some of this is theory which I believe and I try to practice but I think others do very well. There is this concept of neuroplasticity of the brain, you know what that is?

Rajinder:      

Yes, I’ve heard of it but I don’t want to venture a guess.

Avnish:
Neuroplasticity means you can change your brain

the way you want to. So what are the parts of the brain that often get talked about?

Rajinder:      

Lower brain.

Avnish:         

No, no, that is separate. Left and right. That's it, we left it at that. For the last centuries left brain, right brain. Actually it is lower brain, middle brain, upper brain. They had this neuroplasticity there is the single line that summarizes it, neurons that fire together wire together. So essentially you create new pathways. So now if you look at Malcolm Gladwell’s Outliers 10,000 hours. Why are those 10,000 hours people successful, they have gone and connected certain dots or certain neurons in their brain where they become an expert in it. So I personally believe you have to treat your brain like a muscle and you have to – and sadly for my children this is what they hear almost on a every day or a second day basis and actually simulated from all sides, there is no left or right brain. There are only three parts, best judgment comes from the highest portion of it, and there are absolutely practices that you can follow that actually unlock it.

So I think I will only encourage people that this is something that is very much a acquired skill and the traits that I have seen and you should add to this like for these infinity entrepreneurs how do they actually exercise their brain, voracious appetite for learning. Whether it is I mean with many of these we’ll get grilled when we meet them. And constantly learning and then following up saying can you send me this, that. So voracious appetite for learning, unbelievable curiosity, serious personal growth mindset. I think if you have this then you start practicing these things that kind of put it all together and create this infinity entrepreneurs.

I did want to go back to one of the things we didn’t cover fully in the VC conversation is ultimately for an infinity VC don’t lose sight of the fact that you're still an investor. And an investor comes with an investor mindset and how is an investor different from everybody else investor thinks a lot about unknowns and what do I not know and doesn’t take things at face value and then tries to become an expert in the subject. And I really wanted to bring this out just because it was interesting that in the bull times 2020-2021 I read so many articles how Warren Buffet has lost his edge.

Now again last five years again Berkshire returned the best, he didn’t get swayed by the FOMO, by the noise. So I think that clarity and by the way infinity entrepreneurs, infinity VCs, both need this clarity. And I just have patience, zero FOMO, clarity, become a domain expert and I think some of these are similar. I just think what the founders do is much more much harder and inspiring.

Rajinder:      

Thanks, Avi, enjoyed doing this with you.

Avnish:
Super. Thank you.

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