Indus Valley Report Reminiscences, Strategy, Tokyo Trains, and Birkin Bags
Sajith Pai's very irregular newsletter #27
Welcome to the 27th edition of my rather irregular newsletter! For the 850+ new subscribers who have signed up since my last newsletter, welcome aboard, and enjoy your first newsletter.
Quick housekeeping announcements. The newsletter has two permanent sections: Writings - where I usually write and / or refer to one or more original pieces that I published in the previous months, typically about venture or the startup ecosystem, and Readings - about what I read and learnt about. My reading diet is tilted heavily in favour of podcast transcripts (and of course books) and against articles / newsletters. This will naturally reflect in the reading list.
This is a long newsletter - think of it as akin to a monthly magazine from me (only the frequency may not be monthly!). I don’t know if you can read this entire newsletter (and peruse the links) in one sitting, and even if you do a second run (or more which I very much doubt), you will have to pick and choose what to focus on. A good way to read this newsletter is to certainly read my original writing(s) below, and then glance through the rest and pick 1-2-3 items that pique your interest. Anything more is a bonus!
Writings
The Indus Valley Report
Much of the first two months of this year went into working on and publishing The Indus Valley Report. Indus Valley is our moniker for the Indian Silicon Valley or Indian startup ecosystem. This is an annual report I conceived around two years ago, as a kind of a stocktaking of the Indian startup ecosystem. I work along with a colleague (this year there were three of us) to publish this report, typically around late February / early March every year. It is timed for release around our annual Blume Day (which happens late February). This was the third edition of the report. Links to past editions: 2023 edition, 2022 edition.
The Indus Valley Report celebrates the rise of the Indian startup ecosystem, and its emergence as one of the centres of innovation and enterprise in the startup world. Through 150 or so insightful, and some provocative charts, this year’s report identified key themes, patterns and trends in the Indian startup and venture ecosystem, as well as hinted at what is coming next.
This year’s report covered themes such as
How 30 million households are fueling the majority of consumption in India.
India's K-shaped recovery and the rise of premiumization.
How digital public infrastructure has made India a digital welfare state and also helped various startups flourish.
Why India is going through a booming IPO market and the rise of "SME IPO" as a new way to raise capital.
How digitally native Indian brands are rewriting international and domestic playbooks.
as well as a look at many more deep dives and playbooks on what makes India a unique market and startup ecosystem.
In addition, this year, we also did a youtube explainer episode where we unpacked this year’s report.
The Indus Valley Report has become an anticipated fixture in the Indian startup ecosystem. It is also heartening to note that it spurs the creation of further tweet threads / posts, explainer videos, commentary etc. Special callout to Varun Mayya who did a wonderful explainer of the report in his inimitable style (He did one last year too). Think School / Ganesh Prasad did another highly appreciated explainer as well.
There were a whole lotta memes as well!
The report does take a fair amount of time to create. We go through 100+ reports and surveys across various sectors (not to mention articles), and scrape around 3,000 or so charts which we distil / remix into 150 or so charts and a set of narratives. The report-making process starts around October with initial brainstorming around the structure as well a first run at the reports we have collected. This is a divergent / exploratory phase. By mid to end December we broadly lock in on the structure. Of course there are always some changes in the structure by the time we get to the end but it is more or less set.
January and February is when we narrow down our aperture – this is the convergent phase where we now start distilling / removing what is unwanted and figure out the essential. This is also when we start creating the slides. Since we do all the slides (no design partners / consultants), and regular venture work doesn’t stop, this does mean a lot of evenings and weekends kept aside for Indus Valley work. Since the last three years, I have been joking that given that Indus Valley Report’s prep work happens during what is the ‘festive season’ in India (November - February), I don’t get to enjoy the festive season and Delhi winters as much as I would like to.
I am not alone. Larry Fink of Blackrock publishes his famous annual letter, and it sucks hundreds of his hours during the September to January period. Here he is (referred to as LF) talking to David Rubenstein (DR), cofounder of Carlyle; this excerpt is from David Rubenstein’s book of interviews of well-known investors, titled How to Invest.
“DR: Warren Buffett popularized the idea of having a letter to his shareholders telling everybody what he thinks. You have, with him, become probably the most prominent person who writes a letter to shareholders. How long does it take you to write that letter, and how much time and thought do you put into it?
LF: It’s hundreds of hours. I generally don’t put pen to paper until September, but it’s a dominant component of September through January in terms of my life…. my letters are well received by our clients, and I do believe it helps drive the success of the firm.”
Then there is Dan Wang, who used to write a famous annual letter on China. He writes: “I’m not going to write many more of these letters. After five, the end is in sight. Writing these pieces demands an enormous effort of concentration. It’s the timing that hurts: I am working hard in the last ten days of the year, doing my most frenzied thinking when everyone else is in the happiest mood of relaxation. It’s getting annoying that I wish I could take a break from Christmas and New Year’s. Therefore, I’m trying to terminate this annual burden. I think I will write these again, but not more than one or two.”
Byron Wien of Blackstone used to write his famous 10 Surprises till he passed away. From his NYT obituary: “One place the list was not popular was his own home. “My wife hopes I give this up as soon as possible,” Mr. Wien told The New York Times in 2001. “While people are enjoying the holidays, between Thanksgiving and Christmas I am in a total panic, working quite hard on developing these.”
Other Writings
I wrote two other pieces – one on strategy, and my take on it, and the other was a review of First Round’s PMF Method framework and program that they launched recently.
In my essay on strategy, titled ‘Reflections on Strategy’, I take a deep dive into strategy and culture, two of the most ill-used terms in business, and how they relate to startups. I share a definition of strategy, and drill deeper. If I could leave you with 3 takeaways from this piece, it would be
- Strategy is about choices and tradeoffs around ‘where to play’ and ‘how to win’
- the most important choice is around where to play
- a winning business system (interlinking of product, rev model, GTM and team) needs to be married with the right capital structure, to arrive at a solid how to win.
Link to ‘Reflections on Strategy’.
In the first week of April, First Round Capital's PMF Method framework launched. Given my obsession with PMF and past writings on the topic, I had the framework forwarded to me by multiple people! Now, having digested this over the past few hours, I do feel this is *perhaps the the most important advance in PMF lore and craft since Eric Ries’ Lean Startup*. Here is my review of the First Round PMF Method including a few minor areas it comes up short. Overall, I think this is a very well-thought out and put together body of work. Link to my review of First Round’s PMF Method.
Readings
Books
After a slow start on the book reading front (largely because much of free time in January and February went into the Indus Valley Report), I have been able to get a regular reading cadence going. Despite my best attempts, I am not reading as much fiction, and older books as I would like to.
Here is what I read
1/ More Money Than God (2010), by Sebastian Mallaby - A history of the Hedge Fund industry by the author who gave us The Power Law, a history of the venture industry. Readable and entertaining in most parts barring some pages covering deal structuring which was a tad non-intuitive. Skimmed through those parts.
2/ India is Broken (2023), by Ashoka Mody - Good breezy read on India's economic history since 1947 with a deep dive and discussion of its economic failings. Skewers both the Congress and the BJP.
3/ How Big Things Get Done (2023), by Bent Flyvbjerg and Dan Gardner - Bent Flyvbjerg is an expert on megaprojects and why most megaprojects are delayed and overbudget (only 0.5% of megaprojects are underbudget and on time he says). In this book, he covers why most megaprojects 'fail' and how you can get them done in time and underbudget. Good easy read with lots of examples.
4/ Private Equity: A Memoir (2024), by Carrie Sun - Roman a clef novel that is about the author's stint as an executive assistant to Chase Coleman of Tiger Global, and how the stress and pressures of the job nearly broke her. In the second half of the book it also covers the author's dysfunctional relationship with her parents, who were immigrants to USA, as well as her complex and toxic relationship with her boyfriend. Readable but ultimately not deeply satisfying; somehow I could not generate deep empathy or sympathy for the character, not sure why.
5/ Tokyo Express (1958), by Seicho Matsumoto - Lovely short crime thriller / police procedural set in 1957 Japan. If you are into trains and schedules, you will love this book even more, as the plot is built around the protagonists' clever hacking of train schedules.
6/ The Grid (2007), by Philip Schewe - History of the electric grid and its evolution. Unfortunately, not a good book. It is interesting in parts given the topic itself, but the bad style of writing (excessively lyrical, ornamental and not so direct writing) lets it down.
7/ The Learning Trap (2023), by Pradip K Saha - Not so well-written (and edited) book on the Byju's scandal. Could have covered much more (such as Byju the person, the investor dynamics around why the Board didn’t push harder etc.,) but doesn’t, and does not go as deep as a book should. Felt like it was rushed out to take advantage of the Byju negative buzz.
8/ Snow Leopard (2022), by Nicholas Cole, Eddie Yoon and Christopher Lochhead – Heard about this book from a Lenny Rachitsky podcast appearance on Colossus’s Making Media. This is a book about the principles of category design (pioneered by Chris Lochhead) applied to writing books. Essentially the books says to create non-obvious content and / or invent your category and dominate it (like Ryan Holiday and Stoicism). The broad idea or thrust is interesting, but is ill-served by the length and the poor structure. It is like a series of paragraphs sprung together. There is a fair amount of repetition as well. There are some interesting passages as well as a section where they look at the top-selling non-fiction books and derive insights from that. Overall I felt the book could have been a 40-50 page monograph.
Podcasts
Many of you know that I have been deliberately eschewing articles in favour of podcast transcripts (given the higher signal to noise ratio in these). That trend continues.
Here are five podcasts whose transcripts I enjoyed reading, with my learning notes on them. For the last three podcasts in the list below, I organised the transcript, as the podcast publisher doesn’t provide the transcript. You are welcome!
A/ Nick Kokonas, Tock + Alinea Restaurant Group, on Colossus w Patrick O’Shaugnessy
Link to podcast + transcript.
One of the best podcast episodes I ‘read’ this year. It is not new, but after it was referred in a Colossus annual wrap as one of their best episodes, i decided to give it a go. Any one who is a restaurateur (esp offering mid to high priced food) or in strategy will enjoy and learn from this podcast. One of my big learnings from it was on how to figure out your revenue sources (essentially all of the experience touchpoints that customers may be willing to pay, or pay differential prices for) and make that visible to your org. Time-based pricing, and having the courage to go all-out on that, then using advance bookings, and leveraging the float to buy in advance at lower prices from your vendors, so as to price the menu lower, and be competitively advantaged, were other learnings as well.
This below is one of the best examples of the strategic use of working capital i have read. Getting your customers to pay your early, and then using that neg working capital / float to get crazy good deals from your vendors. I believe Trader Joe's does similar stuff too.
B/ Ben Gilbert + David Rosenthal, on Hermes, in Acquired
Link to podcast + transcript: https://www.acquired.fm/episodes/hermes
Excellent episode, where the hosts dig deep into the Hermes history as well as their manufacturing process, with lots of fun facts sprinkled across such as how they never openly reveal their highest-selling and most prestigious products, the Birkin and Kelly bags. Overall an excellent episode to listen to, and one of the many that have come on luxury brands such as on Ferrari, Rolex and Patek (all in Colossus’ Business Breakdowns; the Rolex one in particular was v good). Common to all is that you cant just walk into a store and walk out with a purchase. Often the one you want will not be available or you will be told the ones in stores was reserved for a specific buyer. Purchase of choice products is subject to you building a track record or purchase history over time and spending a lots of money on what you really dont need before you get to buy what you want:)
C/ Sarah Tavel & Eric Vishria, Benchmark Capital, on Turpentine VC, w Erik Torenburg
Link to podcast. Link to Transcript (organised by me).
Benchmark is such an interesting firm, given the strategic choices they made around equal partnership, and working without any support (no analysts / associates, just an occasional Principal, and no platform team). In this episode, there are interesting discussions of the implications of these choices and tradeoffs. The bad is that this can mean insufficient coverage (not enough cold bodies to email) or support to founder, but the good is that it is a forcing function to focus on what is truly important, which is direct time to the founder on key inflection points, and build greater and better context about the business which informs future decisions. There is also an interesting section on how they think about future Partners and recruit them. Benchmark is a one of a kind firm. It is very unlikely there will be too many more like it, so it is unlikely any of their strategic choices will fit those of other firms, but it is fascinating to see the entire set of choices and tradeoffs, and how they make for a firm like them, and the implications of these choices.
D/ Logan Bartlett, Redpoint Ventures, on Turpentine VC w Erik Torenburg
Link to podcast. Link to transcript (organised by me).
Good episode for venture nerds. Covers a diverse range of topics including why venture is oversized as an asset class, why we have exaggerated the barbelling (boutique at one end and supersized at the other) of venture, the rise of funds such as Founder’s Fund, Thrive, Amplify, how Redpoint uses firm brand to enter the room, and partner brand to win the deal, and so on. Consistently interesting. The story of how he was hired - the other Redpoint Partners wearing Wu Tang Clan sweaters - was fun. It reminded me of the story on Sequoia’s website on how Jess Lee was won over by Sequoia Partners Roleof Botha and Jim Goetz dressed as Woody and Buzz Lightyear coming over with the offer letter.
E/ Howard Morgan, BCapital Group, on Turpentine VC, w Erik Torenburg
Link to podcast. Link to transcript (organised by me).
Fun enjoyable podcast with the Forrest Gump of Venture and Investing, Howard Morgan, who has been part of cofounding three iconic institutions (Rentech, Idealab, and First Round Capital), and is on his fourth, B Capital. It is of course an enjoyable chronicling of his journey and adventures in venture capital, but it is also a glimpse into how First Round Capital and great venture firms are built and the processes underpinning these cultures (like instilling a written vote / note before the Investment Committee discussion so folks don’t try to read how the firm’s seniors are leaning and are forced to share their independent views). Some fun anecdotes here like how Josh Kopelman (First Round Capital’s cofounder) got a town in Oregon to change its name to his startup’s name, how they monitored Bill Gurley’s twitter feed to get investing signals and so on. Enjoyable treat for venture (history) nerds.
Bye
It is time to wrap this! As I shared earlier, you should think of this substack as akin to a monthly magazine - you don’t have to read it all in one sitting, and you don’t have to read all of it!
That is all for now folks. Feedback, or your own ruminations, in the comments or at sp@sajithpai.com (Please don’t send pitches or CVs or anything work-related at my personal id; I won’t respond to them; instead please use sp@blume.vc for pitches please).
It can be a wierd ask , but as far as I have read and known about you , you document your learnings in a very organized manner , can you share me a link of podcast transcripts that you really loved? Maybe a gdrive link..
Here's my email : nitin786pandey3@gmail.com