Startup Fridays S2 Ep.12: For lasting societal impact, ventures have to grow into enduring businesses — Sandeep Farias

It was crystallized based on the successes of some of our early microfinance investing and then one extraordinary blow up that we had in a portfolio that we invested in a profitable company which grew up in our faces 18 months later. And so we looked at the mistakes that we made out there and then conceptualized what was working and what was not working and why we had made the mistake. So it's very simple there, we spend an incredible amount of time in the field and this is not market research. This is immersion of a kind so it's not even a go on a field visit, have a couple of conversations and come back. We're really trying to understand the wallet and the aspirations of the end customer, the underserved. Hi, welcome to Forbes India's The Startup Fridays, weekly conversations with accomplished entrepreneurs, VC investors and other folks who are doing significant work in India's startup ecosystem. You can find a new episode every Friday evening. You can also find us live on Instagram every Friday morning. I'm Harirakli and my guest today is Sandeep Farayas, founder and managing partner at Elevar Equity, an early stage VC firm that backs entrepreneurs who are solving large problems for the low and middle income communities in India and Latin America. In this episode, Sandeep talks about the Elevar method for identifying ideas that could become enduring businesses with significant societal impact. Sandeep started with an integrated honors degree in law and arts from the prestigious National Law School India University, 1996 and then worked for several years in two of India's biggest corporate law firms, Amarchan Mangal Das and Nishit Desai Associates. His work after the Gujarat earthquake in 2000 on behalf of American India Foundation helped Nishit Desai Associates win the Asian Law Firm of the Year award under the pro bono category by the International Financial Law Review. He was also part of the team that worked on Wipro's listing on the New York Stock Exchange. Before Elevar, Sandeep started the Indian operations of the well-known development sector-focused financial services firm, Unitus and through his work there became something of an authority on microfinance. Later he was chief innovation officer at Unitus. He co-founded Elevar Equity in 2008. Fantastic to have you with us this morning Sandeep, I am really looking forward to this conversation. Welcome sir. Thank you very much Hari and an absolute pleasure to be here. I must say you have done your research, you completely got my background so thank you. Alright, so anyway let's get into that background a little bit more, I know it's been a long 25 plus year career, just give us a kind of a snapshot of the journey that brought you to Elevar, before Elevar and then let's get into how you started Elevar and all that. Sure. So like when I meet entrepreneurs I always ask them for their life story so I will give you a short version of the life story. I often say I have three parents, so father, mother and state bank of India because I grew up in SBI compounds so that's an important aspect of my life but I've seen the north, I've seen the south, I've seen rural, small town India, cities, large cities, my mother was in education, my dad was in banking, lots of educational institutions, some fancy, some not so fancy, I went to the National Law School was the fourth batch, at that time the university used to say they are producing social engineers, not lawyers necessarily. I practiced in corporate commercial law, I've taught, I worked in house as a lawyer like you mentioned at Wipro, represented clients like Singapore, Telecom and Google but I think in all of this it all led me to discovering an obscure article in a journal which talked about a for-profit approach to development and this was in the early 2000s actually, which then started off the journey to say how do I think about the world a little differently, what was happening into perhaps what was happening through my entire childhood and my formative years. But I was just fascinated by the power of distribution and what one could achieve. One other transformative experience which I think is worth pointing out was the Burj earthquake and the time spent on the ground after that, just realizing that a lot more needed to be done. So that perhaps gives you enough of a snapshot of how my life went and then leading into what is today called impact investing. All right, so now tell us about Alibar itself, what's it all about, why, when and how did you all start it and maybe we can also get into how it's evolving now. Sure, so we've been at this for 15 years though Alibar formally was set up in 2008, in the early days there was a simple idea where we said we wanted to demonstrate that a commercial model could drive change on the ground. Everybody usually thinks about change as being driven by government or by philanthropy but we said that there is a way to do it through a commercial model and I think in some respects we were trying to prove that hypothesis. The other dimension that I think is very important which was kind of critical to the setting up of Alibar was if you look at the microfinance space, it existed for some 30 odd years in the non-profit space and then in a country like India, combination of regulation, maybe some of us were working in the early days, they were debt providers, all of that came together and those were very very interesting early years. Microfinance went from non-profit to mainstream banking whether universal bank or small finance banks in a decade in India which I think today something that is available very easily across the country to have made that kind of journey was very fascinating. So for Alibar and the founding of Alibar was a simple question whether we could do that in other essential services. So we solved maybe for microfinance and that journey had already started but could we do it in other kinds of essential services. But cut down the experimentation time, the innovation time where you don't need 30 years in the non-profit world, can we do it using capital within the context of a business model itself and that's how Alibar started and the Alibar method of investing evolved over time as we learned from our mistakes and we made mistakes so that's important to call out. Yeah so just briefly I mean for the curious amongst the watches and viewers and listeners tell us about the name Alibar, I mean I tried to look it up and I came up with some definitions like to alleviate and promote and encourage and so on. What was your thinking and also tell us about the Latin American connection briefly since you invest in Latin America as well. No this was the question where I was like you really done your research because forget about my background but even to go into the root of the word Alibar you absolutely hit the nail on the head. See we were thinking emerging markets, low income underserved communities across the world, we were not just thinking India if you go back to the early years. So we were thinking globally in that sense but we were also very clear that we had to act locally and so when we were thinking about connecting capital markets to low income communities we wanted something that spoke to what we did. So it's actually one of my co-founders Joanna, she's Mexican in origin who said this may be an interesting name and it resonated immediately. It's about elevating entrepreneurship but not just the entrepreneurs we back but it's also about elevating entrepreneurship that is of the micro kind it's the customer and their entrepreneurship, their resilience, their vibrancy of those kinds of communities and how they make their ends meet, build their lives etc. So it was that entire combination that the word Alibar really came about in terms of background. Now your second part of that question was Latin America. We were since we were thinking globally and emerging markets was a focus. If you go back to the origins of the founding team and particularly the investing partners of the founding team, so Joanna came from the Latin American context and so we felt the Alibar method of investing could apply in these different markets but are we honest, we can't do it in any emerging market. The premise of affordable products and services and massive scale which can lead to the levels of profitability and company performance needs a certain density of population. So there are some markets in Latin America, Mexico being a very good obvious example where that can happen and India being an extraordinary example where that can happen. So it comes from the origins of the founders but also I think importantly the kind of markets that we wanted to invest in so we put those things together triangulated perhaps you ended up with the Latin American branch. Tell us about a couple of your most interesting earliest investments and also maybe talk about what that taught you in terms of the challenges of having the mandate of an impact fund but also backing for profit businesses. Sure, interesting question. So when we started, I think most impact investors when they started, if you go back into the kind of 2000s, if you will, you were a very small cohort of people at that point of time, it all started with microfinance. For us specifically, we were looking at what worked from an investing standpoint and from a business building standpoint and that's where the origins of the LR method of investing and we can talk about that also in a little bit. Came across in the idea of customer centric businesses, replicable businesses, consistency of a business model and today we found that that method cuts across education, small business services, agri-supply chain, healthcare opportunities, etc. You go back to the ecosystem at that point of time actually perhaps it's not even fair to call it an ecosystem to get a high quality auditor for a company working at that point of time. The network of service providers didn't exist so you had to leverage the notion that you were an international brand working with an organization to be able to attract. Talent was extremely difficult to bring on board and investment capital beyond us was also extremely difficult. There was a certain skepticism about the end customer as being low income and therefore incapable of being, incapable of building their lives but our experience was exactly the opposite. Curiously, the only set of people who seem to understand it was some regulators and I think that's a very interesting dynamic. Now what's happened today, our biggest challenge because I'll bring it back to today, the talent issue and the capital issue remains. I think the proof of the business model remains but I think capital and talent tends to look for what is part of the broader ecosystem which is written in the press which is that kind of dimension which I think is very important. So even though the model is well established and there are substantial proof points, we have the data and we have the track record, it's sometimes challenging to attract capital into our companies and get in the right talent but I think it's gotten a lot better. What have we done? We've invested in, we've raised multiple funds, you're right, we've invested a few hundreds of millions of dollars, our companies, the co-investor capital is north of 2 billion into these companies. So an equity leverage of like 8 to 10 times, we've done 45 odd companies, we've done something like 18 or 19 full of partial exits that 45 million households that we've reached is a very important number that we track and that number will only go up on this cohort of the 45 companies because many of them are relatively young. So all meaningful numbers and so this is not something on the side anymore, this is the future of mainstream that we have to solve for that mass market if you will. If I use regular investing language to say this is the mass market opportunity, for us we were coming of course from a different lens and a different purpose and a different intentionality. Okay, you've mentioned the Elevah method a couple of times, tell us what that's about and give us a sense of how that framework has kind of crystallized over the years as you learned more about your entrepreneurs and their markets. Sure, so I like the word crystallized that you use because it's very important to call that out. So crystallized based on the successes of some of our early microfinance investing and then one extraordinary blow up that we had in a portfolio that we invested in a profitable company which blew up in our faces 18 months later. And so we looked at the mistakes that we made out there and then conceptualized what was working and what was not working and why we had made the mistake. So it's very simple the Elevah method, we spend an incredible amount of time in the field and this is not market research, this is immersion of a kind. So it's not even a go on a field visit, have a couple of conversations and come back, we're really trying to understand the wallet and the aspirations of the end customer, the underserved. Now once we understand that we're really tracking that wallet, revenue opportunities, expenditure patterns, we're kind of looking at what their priorities are and then we ask ourselves the question is there a business model that's capable of addressing that affordability because that's very important. Impact investing has to be premised on the idea of affordability, it cannot be on a maximization of margin strategy. So that's the second component of what we look at is the business model capability affordably is a very, very important dimension. Now assuming we check the box on that front, then there are two very, very important dimensions of the Elevah method. We have to address the issue of scale because scale is impact, impact is scale. There's no point solving for 10,000 people, we have to solve for millions of people. And so then we kind of asked ourselves the question, who are the kind of entrepreneurs we want to back? And we decided we needed entrepreneurs because of the complexity of the problems who had a certain life experience. And so the Elevah method therefore is about time with the customer, the business model scale and the right kind of entrepreneurs that we want to invest. And putting them all together in the context of how we invest is a very, very disciplined structured approach. I think the one thing I'll point out is even though we invest early, we, I think in something like 40% of our companies, we wrote a startup check and something like 85% of our companies, we were the first institutional capital. We like to go in early. In India, our loss ratio of capital at that stage is actually single digit, it's 6% if I remember my numbers right. So we're not a classic VC in that sense, we don't have this two in 10 or one in 10 kind of success model. We're really going in and figuring out a business model that works that is important to the customer and then we're scaling it by backing the right entrepreneur. So it's been a lot of fun, but it's incredibly hard work also. So yeah. Tell us a bit more about the kind of sectors that you focus on today and maybe within that specific segments and maybe give us a few examples of companies that you've invested more recently in. Sure. So like I said, we started with microfinance, then we moved into broader financial services, small business lending, we went into affordable housing, finance, et cetera, et cetera, because we were playing to strengths. And I think that financial services trend, we've continued and it's still an important area that we invested. We evolved our thinking on how, what kind of business models we want to back. But we then started to apply the LR method beyond that. So we've looked at the healthcare space a little bit, not that very much, it's increasingly becoming more important. We've looked at the education space and employability space, we've looked at agri-supply chains, we've looked at the broad space of MSME business services. So these are the themes that we look back and what's the common thread among all of them is they're all essential in nature, they're all focused on the underserved, they're all extremely important to the end customer. So the essential service dimension where when we invest, we're not going out to seek product to determine whether there is product market fit. We know there is product market fit. The question we're really trying to address is can a business model deliver and can it scale. So very often when early stage investors, you're actually backing a company to prove its product market fit, we're not doing that. So the sectors now are all kinds of essential services and as the customer needs evolve and get more and more sophisticated because let's say more and more fundamental issues, distribution does get created, we'll evolve based on that construct as far as the end customer is concerned. So yeah, I can take you through some companies if that's of interest because sometimes this is all very conceptual but it needs to be applied in very, very concrete ways. So we have a company called Cloud Physician which we realize that in rural areas, critical and emergency care is a very, very important area because otherwise transportation to an urban hospital or something like this is extremely costly. So tele-ICU model in remote areas, they can revolutionize emergency and critical care once they build scale and if they're successful. We've invested in a company called Lead School which is fundamentally changing the way children access in the affordable school market quality education. For something like 200 bucks a month, you're actually able to drive grade level outcomes quite significantly up inside the affordable school market. We've backed a company called Samunathi which is changing the way small holder farmers actually through farmer producer organizations and agri enterprises are able to access finance and market linkages. So fundamentally that's a very, very important approach that we're taking. We backed a company called Sarvagram which is a household centric company. So starting with capital but then moving into a range of other kinds of products and services that are relevant to rural households. So you think of the household and its entirety in the way you understand that proposition and then you think about solutions that work for that household. So multiple companies, each of them has the potential to transform something very fundamental on the ground and that's core to how we think on an overall basis. We've done a couple of embedded finance companies called, one's called Stride, the other one's called Nero. But the approach out there is to say how do you build customer centricity, do it in a thoughtful manner, do it in a way which can scale in a way which is profitable so that you're there becoming an enduring company for the future. One point I'll quickly make and maybe I'm rambling and I apologize for that. For us, companies need to be enduring. We can't have a company that's focused on the impact segment which disappears in three years or four years. It's very important to try to solve for them being enduring because once they become important to the end customer, they need to continue to exist. That's very, very important. And so that's the reason we've not really backed high loss funded companies with large amounts of equity capital, etc. In fact, if there's a shortage of equity capital that's coming in for growth of these companies, these companies within a couple of quarters can actually pivot and become profitable and actually move forward because they have to be enduring companies for the end customers. We can't disrupt traditional parameters of access of those essential services for customers by offering a different construct and then because capital is a constraint, these companies disappear or because of some other macro condition, these companies disappear. So we have to think a lot more thoughtfully and that's been very important to our journey. Okay. Allow me to ask a slightly longish question because I wanted to kind of call out some of the things that I learned by listening to your other interviews and reading a little bit on your website. Over the years, you actually made the effort to kind of codify your learnings in some frameworks. I came across this, what was that, low ARPU, high wallet share, then the customer business value. And I think somewhere along the line, you've also talked about looking at entrepreneurs and companies that can go from one product or service to a platform or even an ecosystem kind of thing and not necessarily in the tech sense, but an ecosystem that makes sense for the low income, middle income communities. So the question is as follows, how do you, I mean, you already made some of these points just to get into that a little bit deeper, how do you decide on an investment and also kind of walk us through how that process of descending on investment has evolved over the last 15 years for all the things that you have learned and maybe you can take one example also and talk about all of these points. So since you raise some of these frameworks and the articulation of these frameworks and just make an interesting point, as during the pandemic, two of my partners based in India, Jyotsna and Vipul and I, the moment the government allowed people to start returning to office and I think at that time, they said 25%. The three of us ended up getting back to office. And since there was nobody else in office and everybody else was working from home, we sat in the reception area and we said, this is a good opportunity to think about what we've done, why it has worked and why it's not worked. So kind of like, sometimes strategy is about looking backwards and conceptualizing what you've done as opposed to, you know, naval gazing into the future. So that was an exercise. And we realized that actually what we've done was this low-arpo, high-voluntary share because the essential services nature meant a high-voluntary share of investing. It was important to the customer. But because it was the affordability of margins, it was a low-arpo. So we just put down and put it out there saying these are frameworks. But I think your question about how do we decide on an investment, right? I'll be very honest, we're early stage investors, right? So ultimately, beyond the analysis, beyond everything else, it's coming down to the people we're backing and the alignment we can build with them. Now let me break that down. The people we're backing is, can we work with them? Do we have a similar view of the world in terms of the problem statement and the solutions? And that leads me to the alignment factor. Very often we may meet an incredible entrepreneur with an incredible business model, but maybe because of our own work in the field, we have a different view of how to solve for that problem. So we wish them all the success in the world and be a friend, but we won't be an equity partner. For us, we're looking at where there's alignment. That alignment factor is very, very important and it's a friendship alignment, it's a business model alignment, it's a distribution alignment, it's how we think about the world alignment. We can only do this hurry if we are doing two to three investments a year. If we were the classical VC doing 10 investments or 20 investments a year, I don't think we can build that kind of alignment. It would be exhausting to be able to do that. So it's about the person ultimately and the kind of alignment we can build with them. So why did we back many of those companies? We mentioned this because we had alignment of that purpose, of the intentionality of the model and sometimes it's so clear that the alignment can exist that even the first email when it comes saying, this is my deck, this is what I'm doing, you can read it and you can get a sense that there can be alignment. It happened with lead school for example, I mean just when the email arrived, we kind of like knew that this was likely to become an investment but when we met them then it became very obvious we were backing them. Samunathi, the moment the Anthapunas told us, that was Anil in lead case, it was Sumit and Smitha, Anil in the context of Samunathi, the moment he said Agri Finance is where he wanted to start but then go into a solutioning mode, it became very important and that brings me very quickly to the idea of a solution. It was in the conversation with one of our Anthapunas himself who kind of said you guys don't realize you think about it in two flywheels so to speak, you're thinking about customer success and business success and you're trying to find models which actually integrate the two where the business will succeed when the customer succeeds and that's when we conceptualize this twin flywheel effect and we said the way you build distribution is very, very customer centric and the usage of frameworks. So when we look at companies at the early stage, we're trying to assess what it will take to succeed, how do we build the alignment with the entrepreneur and then go forward on that basis. So yeah, slightly long answer but the question was a very loaded question. So, fair enough and just to continue this a little bit more, you've talked about in this conversation as well about not getting into very high levels of loss fundedness and so on. So what have you learned over the years about what characterizes a successful venture with a strong social bottom line but also something that can tap into a large market and become profitable. What are those, I mean are there any fundamental things that characterize such ventures? So I won't want to put out a framework and say this is something which characterizes all successful companies because I don't think I have that kind of clarity. I can tell you what's worked within our portfolio and I think that's very important because you also land up backing and maybe there's bias of the land up backing entrepreneurs with a certain kind or taking a certain approach. This is again, actually a framework that we evolved based on mistakes. We think of companies in three or four stages and there are many entrepreneurs of think of them in very similar ways. So the first stage is can you prove the distribution of the unit economics and we like business models that can do it within 12 to 18 months. So if an entrepreneur is disciplined and we are disciplined about that idea as the lead investor if you will, for 2 to 5 million dollars you can actually prove that out if it's essential services focused. Then the question is can you take another 18 months to build out the organization for scale but not yet scale but build out the organization for scale and you typically can do that with about 5 to 10 million dollars. What's amazing at this point of time is something between 10 to 15 million dollars you've proved out a business model that has mass market appeal and you've got the organizational strength for scale. So the companies that succeed actually are able to do this well within the time frames that we're talking about and then it's a function of how much capital and what's your ambition and your internal capability from a scale leading to impact standpoint. So that construct of how you build a company is very, very important and near to how we think and you know that's part of that early process of evaluating and investment building alignment but it's also the process by which we work with companies because the nature of your work with companies has to change and so our value proposition to the portfolio also is not standard. It's not like we have these 5 tools and then we keep applying it, we have to curate for their success. So when an entrepreneur may have a blind spot on debt he may not have the networks and another entrepreneur may have the debt networks. What's the point in inducing them if they have the debt network? So you have to customize and say I'm curating for your success, you have this gap, I will help you solve it. We may have the solution internally, we may not, somebody else we may have to bring on board to be able to do that but you have to think about that discipline and focused execution to build enduring companies and that's very, very important in how we are built. Give us one quick example maybe from one of your earlier investments because obviously this takes time to go from a single product or service to more like an ecosystem, yeah. So yeah, I'll give you a couple of examples as the headline because I think it will become very obvious. So if you take lead for example, they started with solving for educational outcomes of children in a school but along the way they realized that the school also needs to succeed for the benefit of the children. So you start to solve for the school and that becomes an additional, so you're becoming much more solution oriented. You take Samunati, you're starting by saying I will provide you the capital to a small farmer to be able to be produced whatever is needed from a agrarian economy standpoint but then you realize that market linkages are extremely important to the farmer. So you have to think from the customer standpoint and then you say okay, can I therefore evolve my product construct and not be product construct but be solution oriented based on the need and how do you build your business model and evolve on that. We have another very interesting company which is called Bike Bazaar which started with two wheeler finance, both used two wheelers because the certain economic segment could not afford brand new bikes. So it was used two wheelers but also new bikes but I was now saying wait a minute, I need to think about the entire ecosystem of what a bike owner needs because it's a key instrument in terms of livelihoods and mobility being important to livelihoods because it's a way people on bikes go to work, this is not about entertainment or something like that. So you have to start thinking much, much broader and so when you take that customer centric thought and I'll give you three examples, then you have to evolve your product construct and so that evolution of the product construct based on the customer need within that domain is what we call solution orientation and we've seen multiple companies actually build success or it. But I think your point is right, this takes time, you can't start with like the mindset of solution orientation needs to start from the beginning but you can't start with the entirety of solution upfront because it's too complex, you have to be disciplined and focused and build it over time. And again just to sort of close out the learnings part of this conversation, you mentioned that one investment blew up, I'm sure a lot of people are curious about what happened, maybe tell us about that briefly. Yeah, so it was a company called Comat, it's an investment we made in 2008, we were actually a CDC investor and we were not the lead investor of that round but we went in and 18 months later it just blew up on our faces. So what were the learnings out there, right? The Comat story is a very complex story, so we'll keep it aside, that's the difference, well can you from our standpoint because I think that's the important part of the question. So it had 800 what are now called common service centers, so that time they were called internet chaos, etc which were offering a range of government services, education services, financial services, etc which existed in the state of Karnataka and they were doing well and they had mandates to go into other states. But when they went into scale we realized that 80% of the units were contributing 20% of the revenue and vice versa, so fundamental unit economics perhaps didn't exist but then they also ran out of cash because the financial crisis had come in, debt providers had pulled out, there were a whole range of additional complexities, now all of those complexities maybe the company would have run into trouble irrespective but our learning was fundamentally that I mentioned those three stages of company development really came out of when we understood what went wrong, we realized that you can't look at unit economics in a totality of units, you have to really understand at a unit level what is really happening and what is working and is that capable of replication became the next level of the question that we needed to answer. So clearly in that case they had combined unit economics at 800 units but they didn't have the capability to replicate yet that had not been mastered and so it was that big learning which then informed the rest of our investing including the conceptualization of be very disciplined for 12-18 months, don't scale, few units, prove out your distribution economics then build out the organization and then start to scale. I still wish that company had succeeded, it was doing great work but it is what it is. Okay slightly different question, you did say that you're not a VC firm in the conventional sense but still you do have your LP's and you have the mandate of returning a decent return to them so how do you, in the impact sector, what's the tension like between you know allowing an entrepreneur his or her vision and your mandate of returning a good multiple on their investments to your LP's? Sure, so great question and I'll come back to the alignment question, the way we think about the alignment question is customer to company, company to founder, founder to us as investors, investors to LP, we need to think about that as a full continuum of alignment which is very very important. We've been fortunate to be very honest, very fortunate that we've had aligned LP's who have been very supportive through the journey, it's been a mix of LP's, we started off much more individual oriented in our early days, it's much more institutional today as we built a crack record but ultimately people who are investing in us want to see a certain view of the world implemented so to speak. So it's also fit well within our strategy for the simple reason that we don't focus on raising large amounts of capital because I went out and raised a 500 million dollar fund, I can't do the early stage investing that I'm very interested in helping these business models really emerge for the customer. So we've kept our fund sizes relatively small, obviously we have pools of capital for Latin America and India which are separate but then ultimately what we've been able to do and I'm very thankful and I think we've acknowledged is that we've had aligned LP's as far as that journey is concerned. So but the question of tension is actually what you're talking about between the returns and the impact, from my standpoint there are many funds within the impact ecosystem will say they prioritize the impact over returns and there are many funds who say where finance first, the returns, if you push comes to shove the returns are a little bit more important than the impact. For us we're operating in the quadrant where we're hoping there's a strong correlation between the two that if you can get high returns you can get high impact and vice versa because vice versa is very very important and so that means we're trying to play within that one quadrant very very specifically if you put impact on the x-axis and you put returns on the y-axis. Now what that means again is it comes back we have to have a concentrated portfolio, we cannot be a broad-based portfolio and from our pipeline standpoint we can only find two to three investments realistically which meet all our criteria including the fact that there is a correlation between the impact and returns because we very often meet wonderful entrepreneurs wonderful business models where there is a trade off between the two and that's not an L of R investment typically that's how we think at least. Now of course in times something else may happen no business model plays out exactly the way you predicted it but at least our underwriting criteria selection criteria takes that factor into consideration that we think if we drive customer centricity from an impact standpoint we should do well, the company should do well commercially as a consequence because it's customer centricity. Okay let's talk a bit more about your own personal journey let's start with what got you thinking about law school I mean I would imagine thirty or years ago in my own class in school I think I had two batch mates who wanted to go to national law school and incidentally both of them managed to get in and everyone else was either medical school or preparing for IITGE and I had no clue what I was going to do. What got you thinking about law school? So well I think an environment at home my father actually did law but never practiced because he joined the state bank of India. I think an environment where you discussed a lot about issues around the world I was an active debater during school I think that probably played a role so I actively thought about law as a potential career but the other alternative I was honestly considering was a career in mathematics. So my question was if I get into the national law school because there is an all India entrance examination it's certainly an option but it wasn't as structured and well thought out I mean I was perfectly fine with the maths in fact I was thinking that's more likely so it's only when you got admission and keep in mind this was the fourth batch it wasn't as competitive as it is today so there are no smarts associated if I remember the numbers right I think just short of 600 people wrote it in those days because that was the fourth batch it was not that well established yet but when I got in I said okay they might as well do this but mathematics was the other option that I was considering and the kind of mathematics where the answers can be expressed in multiple ways but I think the core to both of these was I was very very I think I was the kind of person who was very open to the idea of multiple answers to the same question I think laws about that and I think the kind of maths I was interested in that was also probably true of so that was probably the core DNA that I was trying to explore from a career standpoint it just so happened by a chance that it became law I wish it was more thought out okay and this and the transition from law to becoming an investor and also specifically focusing on the development sector how did that happen I mean I know I know at Nishit Desai you did from work in the development areas but what got you thinking about being a VC investor in the development sector yeah so I think I talked right in the beginning about the various influences right in terms of my upbringing etc so the idea that I wanted to do something more meaningful in which I had purpose probably emerged out of that but the notion of becoming an investor was that's a different choice because that's in the evolution you kind of start working in a sector and then I decided to become an investor so after the early years after I left law and working with the microfinance space and helping some of the microfinance institutions think about scale I worked with some of them even in terms of moving from non-profit into regulated models and we got our their approvals for that etc so there was a lot of work associated with that I was actually thinking of going entrepreneurial in an operating company style so I was actually exploring that idea and but simultaneously I also realized that within what has now become the impact space or the impact investing space I had reached an interesting point in that entire ecosystem where I could actually play a fairly interesting role to bring capital to a multiplicity of entrepreneurs so that's when the idea of becoming an investor I don't think it was planned it was just circumstances and I just realized where I stood within the ecosystem that I think there can be a very powerful approach to actually transform things initially even as an investor I was like oh microfinance seems to be working let's try it in two more financial services models and then maybe I'm done there was no long-term aspiration to say you know this is something I want to do for the rest of my life but then when that started to happen then you start getting ambitious then you're like let me try it in education and then try it in agriculture and then it started to work more and more and so now you're kind of like you know maybe the ambition needs to go 10x we need to we have so many people that we need to solve for let's let's take up the ambition so the next few years hopefully we'll ramp up on the ambition considerably to be able to solve for essential services for underserved communities at scale and that will be kind of the journey so again the investor choice I think a lot of my choices in life have been circumstances guided me in a certain direction I wish maybe I you know I do think about a lot of things in life but my career choices are not necessarily being the most well thought out I think in very gut level intuitive reactions based on a set of circumstances that have made those choices that said looking back what would you say are some of the biggest lessons I mean from a career development personal development point of view I mean you know you know sort of allow me to qualify that in the following way I mean one of my most favorite ideas in life in general as well as in career is that people often you know overestimate what can be done in the short term and underestimate what can be achieved in the long term I mean obviously not my idea and something that someone at Amazon told me some years back they're trying to describe Amazon's approach to work so that's just really stuck in my mind so so with that qualification tell us about the you know biggest lessons from your career yeah so I wish I had something as profound as that because that's a pretty profound statement actually so I wish I had something like that I'll go with something much more people oriented I think I'm not a big organization person I'm a small organization person so with the exception of my repro stint I've by and large worked in small organizations even the firms that I've worked in was small when I worked with them they're now very large if you go back to my legal days so for me actually the biggest lesson is work with close friends and when you start working them if they're not your friends invest in them so that they become your friends because I think there is a certain honesty there's a certain clarity when you work with people who can challenge you and I think that's been a very important aspect of the choices that I've made in life so the best teams that I've been part of also or the best teams that I've run when I run teams people were friends again so I think that's been an important aspect in terms of the biggest lesson for me that it's people centric it's human centered and for me that's how I would actually recommend people make choices because ultimately you have to enjoy working with the people that you're with and that's very important again from a professional or career point of view can you think back about probably the most memorable mistake or low point and what that taught you maybe we can contrast that next with a high point interesting question so maybe there's a fatal flaw in me I'm just going to be candid about this I realized very early in life that very high points are usually followed by very low points and I'm not saying there's a high and then something goes wrong I I've just felt extraordinary fatigue at a very very personal level as the adrenaline I guess withdraws from the system after the high and so I've realized that these highs and lows are very momentary as a consequence so I'm a very intense passionate kind of person and I like to go after things that I can get excited about etc but I'm very calm about these highs and lows so I kind of look at all of these circumstances as fundamental influences in life so for me the question is who are the people I don't like for example put anybody up on a pedestal saying wow I think it's about influences I've been as influenced by some of the customers of our portfolio companies to maybe some wonderful extraordinary people who've changed the world so but their influences and even these moments of highs and lows are also very much so what are like highs in my life right I mean in my law school days I represent the country twice in certain law competitions certainly very highs followed both times by incredible lows that's when I discovered this this dimension of the lows right working with some of these companies which have achieved real scale and you start to see them actually achieve the potential extremely highs but then there are companies which really start to face certain crises and then you feel the lows associated with this so I see them as a continuum I don't see them as but each one of them teaches and I think that's very very important so actually it's very tough to single out because so much has been taught but many of the frameworks that we've talked about from a professional context come out of lows because lows teach you how to think about things but the same time you have to celebrate your highs personally I'm much more human in the way I think about the world. Fair enough I mean Payne is the biggest teacher so okay let's let's end with a simple sort of standard question what advice would you have and be as specific as you want for you know someone aspiring to do what you're doing or even an entrepreneur who wants to get into this sort of social impact bottom line based for-profit business. Sure so I think one of the biggest things when I talk to a lot of people about entering the space whether they're at a portfolio or even otherwise I'm probably like two to three conversations a week because a lot of people reach out to me for this and this is what I tell people this needs to be about hard work this is not about finding balance in life because the problem statement by entering the space is so huge that you've got to be obsessed with solving for the end customer it needs to occupy your mind space. So don't become a player in the impact space or an impact investor unless that's going to be obsessive for you that's very very important. I meet too many people who are at a stage in life who are saying I now want to focus on doing something meaningful and I never understand what is now want to focus because it sounds like a journey into doing something simpler you're actually making a journey to do something much harder so I think that would be my advice to people is just pause understand your motivations and if your motivations are about obsession for the end customer then jump right in because it's an incredible journey. Very nice wonderful conversation truly insightful and really enjoyed it Sandeep thank you so much for making time for this definitely hope to keep the conversation going. No thank you Hari and thank you for the opportunity I loved the questions and I hope I was able to give some kind of flavor but just enjoyed this conversation myself so thank you very much. That's it for this week's startup Fridays I'll be back next week with another conversation until then wherever you've been listening to us I hope you're staying safe and doing well. Have a great Friday and a wonderful weekend ahead. [BLANK_AUDIO]