This is episode 12 of The OpenVC Podcast. In this episode, Shubhankar Bhattacharya, General Partner at Foundamental, shares his journey from founder to VC and how he backed billion-dollar startups like Zetwerk and 1MG. He dives into spotting breakout startups, lessons from scaling giants, and why construction tech is an untapped VC goldmine.
Harrison Faull (04:01.735)
Shub, thank you so much for coming on to the season one of the Open VC podcast. It's an absolute pleasure to have you on and invest with so much experience and some incredible winners today in your portfolio. We're going to learn so much from you today. Thank you for coming along.
Shubhankar Bhattacharya (04:19.598)
First things first, Harrison, thank you so much for having me over. It's an absolute pleasure to be taking time out and thank you for reaching out. I look forward to an engaging conversation.
Harrison Faull (04:30.237)
Amazing. All right. Well, let's get stuck in. And to start, really want to go back in time, back in time to when you started this entrepreneurial journey, when you started having entrepreneurial thoughts. I know that your dad was a business tycoon who ran the Indian business of a global industrial company. Was it him that was sort of mentoring you a little bit to become a mini me and giving you some business lessons?
Shubhankar Bhattacharya (04:36.558)
Mm-hmm.
Shubhankar Bhattacharya (04:52.27)
Mm-hmm.
Shubhankar Bhattacharya (04:59.23)
You know, that would be very, I guess, poetic in so many ways. And I wish I could come up with some sort of, you know, a very theatrical version of this story. I think the real world version of that is unfortunately much more mundane, if you will. So not to say I didn't derive benefits from my father's, what he accomplished. And I think most importantly, it instilled a sense of working hard.
Harrison Faull (05:03.239)
You
Shubhankar Bhattacharya (05:26.914)
trying to strive for excellence, be it in academics or trying to always be the first in class, be the best in whatever I aim to do. And I think my life, especially my early life took a more, I guess, route, especially traditional from the point of view of think of someone in the Indian education system. The way we think of it is, hey, you know, we go through our exams, a whole host of them. For those of you who might not be familiar and it's
A bit of a rat race, I must admit. So, and you're always up there trying to get up to the top 0.1%, 0.5%, et cetera. And that's, need to get there in order to get a decent shot at the colleges and the institutions that you want to get into. And I think that definitely, you know, my father definitely played an influence there as well. But I think to get to the point of actually being a founder and starting up my company.
I think it was a bit more of, I guess, stumbling through various lessons that life throws at you, including, you know, going to, I guess, a regular job, if I may call it that, and realizing that you're not quite cut out to do this for the next few decades and realizing, hey, know, there's, you know, ambition plays its own role and you want to be your own boss and...
Harrison Faull (06:47.525)
I didn't need to learn when you're young. sorry.
Shubhankar Bhattacharya (06:50.298)
Now when I look back, I feel like we did so many mistakes when I started up along with my co-founders. So many mistakes to the point where if I were pitching to myself, I'd probably not give myself more than a few minutes. But it's fun how that's how things often turn out.
Shubhankar Bhattacharya (07:11.759)
Mm-hmm.
Harrison Faull (07:15.491)
It's the best time to learn. There's no family relying on you. Your risk appetite is much, higher. OK, so let's untuck that a little bit. You felt a little bit dissatisfied by the corporate rat race. You thought you could achieve maybe a bit more. And you actually did take that leap of faith and start your own diamond and jewelry brand.
Shubhankar Bhattacharya (07:19.022)
Mm-hmm.
Shubhankar Bhattacharya (07:30.126)
Mm-hmm.
Shubhankar Bhattacharya (07:36.366)
Yeah, that was... sorry, I didn't mean to speak over you.
Harrison Faull (07:41.861)
No, absolutely. want to know what was the idea and perhaps what was the main takeaway.
Shubhankar Bhattacharya (07:48.958)
Maybe I want to give you a sense of what the thesis was and it sounded completely harebrained at the time. And maybe I want to fast forward to how that thesis has in more ways than one played out when you fast forward to the present. So the thesis then, so this is around 2012, was that, hey, know, there will be in general an adoption, greater adoption of e-commerce by Indians, especially
affluent and middle class and jewelry is a very big spend. Sorry, just to, I guess, change tracks a little bit. My first venture, is Yux, that was an online e-commerce store for diamonds and precious jewelry. So the idea was that as India becomes, incomes rise, more and more people go into the middle class, more and more people switch to e-commerce as the preferred way of
Harrison Faull (08:28.291)
Okay.
Shubhankar Bhattacharya (08:46.234)
transacting. A lot of them will also value a more value-based transaction model to select engagement rings, precious jewelry and things of that sort. It was hard going, I must admit. We were around for about a year and a half. Ironically, never managed to raise any money, which is something I really, I see the funny side of it today, but it was really hard to pitch to investors, pitch to angels.
Harrison Faull (09:02.05)
So.
Shubhankar Bhattacharya (09:13.594)
and keep getting no after no again and again. We did actually manage to do some business. So of that, I'm quite proud. And at that time, I think the general verdict across all the people we met, both from the industry investors was that, know, people aren't going to be willing to spend big tickets, big ticket transaction sizes to buy diamonds, engagement rings and the like online.
Harrison Faull (09:31.874)
Okay.
Shubhankar Bhattacharya (09:43.13)
And obviously, you know, unfortunately, Yaksha had a death. I just succeeded in running it to the ground. You know, the truly fascinating thing is if you fast forward to about a decade, that space specifically, that is the online e-commerce space for diamonds and precious jewelry in India has already seen two unicorns. Right. So it's sort of like if you if I reflect on that
Harrison Faull (09:53.761)
So, thank
Shubhankar Bhattacharya (10:11.684)
phase of my journey a little bit. Sometimes you don't need to be right all the time. You just need to hang around, perhaps. And that's the difference. If you just survive long enough, that's how you get to participate in the bigger wins, I suppose. And maybe we'll touch upon this on how it turned out into us starting our fundamental as well, because it sort of forms a pattern, least in my mind, the pattern connects somehow in
what our thinking is with regard to what fundamental represents.
Harrison Faull (10:45.249)
Okay, no, we definitely need to unpack that. But before we do, I think you've already touched upon
why you were a great hire for Kae Capital because you were messing around, you're a solo founder, you've been beaten up, but you're actually right on top of these trends that are about to explode. So all the thesis is correct. It's just the timing hasn't aligned for you. E-commerce, India, high intent to purchase, high value items. Can you tell us a bit more about jumping from the venture into Kae Capital? Was there a rigorous interview process?
Shubhankar Bhattacharya (10:55.276)
Mm-hmm. Uh-huh.
Shubhankar Bhattacharya (11:07.311)
Mm-hmm.
Shubhankar Bhattacharya (11:11.449)
Yes.
Harrison Faull (11:21.459)
Was the fund already well known? And what enticed you away from being a founder into being more of an investor?
Shubhankar Bhattacharya (11:26.456)
Yes. So let me pick up the last question first. I must admit I had no intentions of getting into venture. It was very much an accidental detour, if I could phrase that term. So I think the idea at that point was very much to just maybe join a startup, work in a startup, preferably at an early stage. And at that point, I was talking to a few other firms.
And then through mutual friend, I got connected to the folks at Kae Capital. And, you know, I remember even the first couple of discussions I had, I even told them, hey, I'm not an investor. I don't consider myself an investor. So actually, I'm not sure if this conversation is going anywhere. But nevertheless, I've been told I should speak with you guys. So let's see where this goes. And then I was told that they're specifically looking for a failed entrepreneur.
Harrison Faull (11:58.238)
Okay.
Shubhankar Bhattacharya (12:22.286)
And in a very peculiar way, and I guess that's how life is sometimes, it had a very, I mean, it endeared them to me. That's the response they gave to me. you know, with regards to your question on the interview process, it was, I guess I could call it a series of assessments of different kinds of opportunities, different landscaping exercises, specific deals on the table. And I must admit, I had a tremendous intellectual high. I had a real blast.
Harrison Faull (12:24.669)
So, thank
Shubhankar Bhattacharya (12:51.438)
doing those exercises, just doing it as part of the process was some of the most enjoyable work I had ever done up until that point. And I think eventually when I think we came to the point of, you know, even aligning on something that could work at that point, I was like, Hey, if you're going to pay me for this, which I enjoy anyways, I'll do it. So, so that's kind of like how we got into it. And, you know, also you asked about
Harrison Faull (12:58.941)
Okay.
Shubhankar Bhattacharya (13:21.102)
Kae's reputation and the like. Kae I mean, it's an undeniable truth. It was one of the pioneers in India for the seed investing model. And I think that for that reason, the brand and the franchise has gone very far. And I think for that, even Kae Capital's founder and my ex-boss, Sasha, he needs to be credited for that. In some ways, he's one of the forerunners of the seed investing model in India.
Harrison Faull (13:47.688)
Wow, okay, this is amazing. So you didn't even want to be a VC. They happen to be looking for someone that could empathize with founders that had been through the wars.
that wasn't sitting on a soupy yacht, sipping their pina colada. So the timing was right for joining K Capital. I mean, it wasn't just an intellectual exercise for you, though. I mean, the onboarding process, you must have absolutely shone. But you didn't just hit the ground running. You absolutely exceeded all expectations with some of your portfolio investments whilst there, just to call out a few. So Zetwork now has an over
Shubhankar Bhattacharya (13:56.281)
Yes.
Shubhankar Bhattacharya (13:59.866)
Yes.
Harrison Faull (14:25.882)
Okay. So just to call out a few, Zetwork has over a $3 billion valuation. Healthcart just raised a huge funding round at a $500 million valuation. And 1MG has had a unicorn status for years. So you're sitting on north of $5 billion worth maybe of enterprise value created during a four-year time stint at Kae Capital What were you doing so well?
Shubhankar Bhattacharya (14:31.759)
Yes.
Shubhankar Bhattacharya (14:37.422)
Mm-hmm. Mm-hmm.
Yes.
Shubhankar Bhattacharya (14:45.305)
Mm-hmm.
Shubhankar Bhattacharya (14:54.83)
I mean, look, often with these things, I must admit, it's about being at the right place, right time, which, as it sounds, also involves a tremendous amount of luck. I think with a lot of these opportunities, as well as stuff that has worked well for us at Foundamental luck did play a part. I'm not saying that luck is the only determinant of what happens, but it would also not have happened without luck. So let me not...
deny being the beneficiary of luck.
Harrison Faull (15:24.792)
Okay. That's it. Successful and humble. Got it.
Shubhankar Bhattacharya (15:30.778)
I appreciate that. mean, look, look, the other way of saying it is if you have had luck not go your way a few times in life or at work, that's when you realize, you know, when good luck comes along, how much how much of a needle mover it becomes. And for that reason, I'm very grateful. So the reason I actually mentioned this is there's two truly memorable deals or
Harrison Faull (15:46.242)
Yeah.
Shubhankar Bhattacharya (15:59.578)
two deals that are truly extraordinary in how they came about in terms of the circumstances surrounding what went into the deal and obviously the financial outcome following them in my career at least thus far. One of them is Zetwork, the other is InfraMarket, which we may touch upon later. And I think in both, the first deal was truly, I don't know if you'll get to it or if...
the details might be a bit too sensitive to be shared out in the open, but it was truly quite extraordinary and which is why I think luck did play a role. I do think there was some skill involved, but I'm grateful for that circumstances turned up the way they did. In Zetwork's case in particular, what I think I'm particularly proud about as well is this happened in early 2018. So this was at a time
when B2B commerce was pretty much a non-existent theme in India as a theme. So you usually look at B2B commerce as a theme which could not yield large outcomes at all in India. So people far more articulate than me have coined the expression narrative violations. We at Foundamental like to call these kinds of anomalies vertical singularities.
Harrison Faull (17:02.039)
.
Shubhankar Bhattacharya (17:28.108)
as to how rare they are and how you need to go against the grain of popular, let's say VC speak or what the narrative says or what the consensus is. And I remember in 2018, a lot of folks saying, hey, B2B commerce, there's nothing to be done there in India. It's quite fascinating things have changed tremendously since then and quite a few B2B unicorns have happened. A few IPO's as well have happened, about to happen, et cetera.
And so that's where I'm actually very, proud about Zetwork because it was one of those deals where it happened in spite of all that negativity and went as far, has gone as far as it has, and I'm sure it will go much further. And it's one of, again, one of the forerunners of this, let's say, new wave of B2B commerce firms in India.
Harrison Faull (18:18.1)
Did you have to fight for it the investment committee? it? Well.
Shubhankar Bhattacharya (18:21.314)
Yes, I mean, I wish I could go into all of the details. It was definitely not a consensus deal. And in a different set of circumstances, it might not have even been done by us. So it did need quite a bit of pushing and prodding, a little bit of luck. And thankfully, that that's all the deal through.
Harrison Faull (18:42.758)
So you're willing to put your neck on the line for Zetwork. For someone, for a young VC out there that currently thinks, I want to make this contrarian bet, but I know my principle isn't too convinced. What kind of tools and techniques do you think are worth deploying at that point to find out be a bit more persuasive?
Shubhankar Bhattacharya (18:46.212)
Mm-hmm.
Shubhankar Bhattacharya (18:55.001)
Hmm.
Shubhankar Bhattacharya (19:01.461)
So you're going to make me perhaps go in a very different direction with the use of your phrase tools and techniques. So the thing here is, maybe I'm going a bit off tangent here from your question, but I'll come back eventually to what you asked. My personal opinion here is that in recent years, most VC professionals, unfortunately, don't think of themselves as investors. They think of themselves as brokers.
or quasi-investment bankers. What do I mean by that? So when you invest, basically are prepared, your default position is to hold or maybe invest more for the next, five to 10 years. And you know what the value of the investment is and you're prepared to hold your ground regardless of what the others are saying about it. And that is that your understanding of the value or the potential of the investment does not change depending on
Harrison Faull (19:55.507)
Mm-hmm.
Shubhankar Bhattacharya (20:02.404)
who comes in in the next round or whether there will even be a next round. Now versus what I refer to as the broker or the quasi investment banker mindset is in that sort of mindset, you're doing an investment based on the assumption or understanding that you already think a next round will happen with so and so fund based on some conversations you've had or your friend works there.
Harrison Faull (20:26.966)
So
Shubhankar Bhattacharya (20:30.414)
or someone else has told you that this is what they're looking for. Or in the truly horrible case, and I know that's not what you intended, a deal like this will help, will make your case strong for the next line of promotion. Which, I mean, it is, you know, unfortunately the reality of the industry today, but it leads to a lot of short-term thinking, a lot of transactional style behavior.
on why deals are done, why certain deals are pushed, et cetera. Sorry, the reason I went down this rabbit hole was just to, I guess, answer this question of tips and tricks. So, I mean, if there are young slash not so young VC professionals listening to this, wondering how you get ahead, look, either approach is fine. It depends on, I guess, what you're in the profession for. If you're in it,
With the transactional mindset, that's also fine. But then don't use the deal to justify your actions. Use your own motivation to justify your actions would be my suggestion because then basically you're in it for other reasons, perhaps. Assuming you are an investor, I think it needs a bit of conviction. And hopefully you derive that conviction from a great deal of groundwork you've done, quite a bit of research or analysis you put in.
Harrison Faull (21:47.632)
.
Shubhankar Bhattacharya (21:54.81)
And there is a reason that you get that conviction even though there's a lot of pressure or contradictory feedback, contradicting feedback that you're getting either from within the firm or from other firms or from the wider market at that time. So it needs a bit of conviction and standing your ground, which is not easy. I will also acknowledge that it is not easy.
Harrison Faull (22:10.471)
Okay.
I couldn't agree with you more. There's a lot of short-termism. I think that's going to get amplified with companies staying private for longer because investors want that on paper markup rather than real value created. So coming back to the conviction then, can you remember certain data points or reasons why were convinced that work was going to be the exception to the rule?
Shubhankar Bhattacharya (22:32.026)
Mm-hmm.
Harrison Faull (22:46.05)
and why B2B was going to work in this case. We are relying on our data.
Shubhankar Bhattacharya (22:51.386)
Not so much on hard data. On the second, on the first, sorry, my apologies. I didn't frame my response correctly. I was relying on hard data on the founders here. So we had done a great deal of work. So the founders, we done extensive reference checks and they came with a very clear source of unfair advantage because one of the founders,
He had ties to several manufacturing businesses because of other things his family had done. And he also was previously one of the co-founders of a firm called Off Business, which coincidentally also happens to be a unicorn in the industrials space in India. And we spoke to many different people around that sort of constellation to get a sense of what that unfair advantage truly entails.
and how much of a head start that gives them in getting this business off the ground. And at that point of time, would say, look, I can call it a hypothesis, I can call it analysis. It was a hunch, it was an educated guess that at some point, if you just remove this friction of SaaS or software or any other kind of fees for admission and just allow businesses to get stuff done to manufacture.
and serve needs of local businesses as well as businesses outside whom they want to import from India, because that was also part of the thesis that more and more manufacturing for the world will shift to India. This could become tremendously valuable. And the question was, if this thesis plays out, if this is what the macroeconomic, the winds of change, if they're blowing in this direction, can I find a better team to do this opportunity?
and I could find none and I think that answer holds true even to this day. That is where a lot of my analysis focused on at the time. And I think the rest, I must admit it was a punt, it was a guess, right? And the guess played out. Yeah, I was about to say if I was trying to be intellectually honest with myself to see if I was any more rigorous on the market, I think no. I think I was quite rigorous on the team if I'm being honest.
Shubhankar Bhattacharya (25:12.59)
Perhaps not as rigorous on the market size other than a few hunches and I guess with the benefit of hindsight well-placed guesses.
Harrison Faull (25:26.655)
Okay. No, thank you. That is extremely interesting.
You remember what stage you actually invested in? How much traction did they have at the time?
Shubhankar Bhattacharya (25:38.232)
At the time it was two guys with an idea. Yeah, yeah. About a million dollars, give or take, at a four and a half million post. Yes.
Harrison Faull (25:40.937)
Okay, wow, pre-seed. And how much did you invest and what was the valuation? Is that public?
Harrison Faull (25:56.221)
Wow, that is a fantastic venture investment there. That's well more than 100x. Okay.
Shubhankar Bhattacharya (26:02.606)
Yeah. Yeah.
Harrison Faull (26:06.571)
So you're doing so well. You're doing so well at Kae Capital. You've got all this paper gains. You've got rocket ships that are taking off.
Shubhankar Bhattacharya (26:16.323)
Mm-hmm.
Harrison Faull (26:19.034)
you decide to leave? Help us fill in the gaps. Why does this make sense? Not only do you leave, but you then go and co-found your own VC fund with two other partners. Based on some of your track record and their track record, but you don't raise a small fund. Your first fund is $60 million. People want to give you money hand over fist. Talk us through that decision to leave. Just on a personal note, you have to forego any financial benefits
Shubhankar Bhattacharya (26:27.716)
Mm-hmm.
Mm-hmm.
Shubhankar Bhattacharya (26:38.798)
Yes.
Harrison Faull (26:47.859)
that you would have had from all the investments that you made.
Shubhankar Bhattacharya (26:51.513)
That is right.
Harrison Faull (26:54.089)
Okay.
Shubhankar Bhattacharya (26:54.158)
That is right. That is right.
Yeah, mean, look, again, it was a question of certain things that I discovered along the way. Actually, you know what, before I start, I must admit the four years that I spent at were truly tremendous, right? As I mentioned before I went in, I didn't even think I was an investor. I didn't want to be an investor. And I think that's the thing I'm most grateful to Kae for, for helping me find, I guess, my purpose and mission in life.
Harrison Faull (27:27.184)
Yeah.
Shubhankar Bhattacharya (27:27.202)
which I only discovered after joining Kae So many thanks to Kae for that. And as a result, I realized, like, hey, there's a few other things that are very important to me, which I was not even aware of. But now, it really mattered in the sense. So there was this trip we had all done while I was at Kae in 2017 to China. And that's when I saw, so keep in mind, this is pre-COVID.
up until 2019, China was actually the most, I would say sometime between 2015 and 2019, China was the most impactful VC market out there. The most unicorns, the most funding, more than the US, just to put things into perspective, right? And when I visited, that seemed like a completely different world. And I was like, how do I, not necessarily get a piece of the China action, but how do I?
Harrison Faull (28:03.399)
Okay.
Shubhankar Bhattacharya (28:26.145)
I embed myself in an ecosystem or a network where I can be part of a global setup, where the limits of what I can achieve and what I can access are not limited to one country. So that was kind of like a thought process. The wheels were set in motion at that point of time. And that's something I realized as time went on that's becoming very, important to me, that I didn't want to be limited by one geography.
Harrison Faull (28:54.582)
Okay.
Shubhankar Bhattacharya (28:55.462)
And I think I also realized what really mattered and what appealed to me a lot was being able to learn from one place or one market or one model and applying those learnings in different settings, in different markets, across different models. And I think that started this chain of events where I thought, I need to find the next...
thing to do in life, whatever that means, right? Started speaking with a whole bunch of people and one thing led to another and I ended up getting connected to two guys, as you mentioned, who ended up being my co-founders. All three of us were, I guess, at a similar point in our journeys looking to start something. And one of us actually had the idea to start a construction tech-focused fund.
investing globally. I must admit my initial reaction to that was, you know, I love the idea of, you know, a unified global fund, even sector focus, but construction tech, I thought, is this really, you know, the sector to back? I remember at that time going and seeking opinions or feedback from a few people. And some people even reacted by saying, what is construction tech?
Harrison Faull (29:58.569)
Okay.
Shubhankar Bhattacharya (30:24.026)
Right? So that's how esoteric the whole concept was. You know, were alarm bells going off in my mind, you know, saying, hey, is this going to be a good idea? Am I going to regret this? And then I also asked myself, hey, could this be an example of something where it seems like a terrible idea today, but if we just stay in the game for a decade or so, with
Harrison Faull (30:31.813)
Thanks.
Harrison Faull (30:42.432)
you
Shubhankar Bhattacharya (30:50.906)
eventually it'll become an obvious thing which will take off. And I guess that's where maybe a bit more rational rationality and analytical thinking came in. And I mean, I don't want to bore our viewers with stuff, but if you look at it, construction represents 10 % of the global GDP. I think about $12 trillion in terms of total spend, but it's barely, it's barely 0.1%.
Harrison Faull (30:57.699)
Wow.
Shubhankar Bhattacharya (31:19.374)
Construction tech is barely 0.1 % of the total VC funding. So contrast 10 % of the real world economy with just 0.1 % of VC funding, which to me seemed like an unsustainable anomaly. And I felt this, has to revert maybe not to 10%, but it has to achieve some sort of parity with other sectors. Think your FinTech, your...
logistics and many other kinds, travel tech, etc. Many other kinds of industries that are seeing funding. the thinking, the thought process was if we give ourselves say 10 years or 20 years, etc. If at some point during that, even if it goes from 0.1 % to say 2 or 3%, it'll be a tremendous outcome for all of us. A, the industry itself is growing and even as part of a growing pie,
Harrison Faull (31:46.606)
Mm-hmm.
Harrison Faull (31:56.865)
Okay.
Shubhankar Bhattacharya (32:15.3)
you have expanded 20, 30 times in percentage terms and in absolute terms, it's even larger. And we were like, all we need to do is just have a few good companies from around the world and we'll do very well for ourselves. So that was kind of the high level thesis. in a very bizarre way, the decision, at least for me, at a personal level, the rational and analytical side took over for me. And it was not a pure...
snap judgment sort of thing. Fundraising again, I would say for the first fund, have to say this, was very much, I know I'm maybe repeating myself a little bit. It was also again, I have to say a right place, right time sort of a situation. So luck did play a role in the first fund because I mean, if you're being truthful to ourselves, we were all very early in our journey as
investors and definitely very, very early in, you know, we had not been proper fund managers of by ourselves before. I mean, even Zetwork, by the way, was a non-entity at that point. mean, nobody outside of a few folks in Kae knew about it very well. So I think we definitely got lucky there, I must admit, but I'm glad that luck went my way again.
Harrison Faull (33:38.674)
Wow. Okay. So for those that don't know, fundamental
You're based on the thesis that construction tech is the need of the time. There's a huge labor shortage of over a million workers in Europe. The demand for housing is only increasing. There are these non-cyclical macro trends that are only moving in your favor. It's very under-invested. You want it to be an early mover into that space.
Shubhankar Bhattacharya (34:08.004)
Mm-hmm.
Harrison Faull (34:10.431)
How are you able to bring LPs along with you on that journey? Because our LPs are a bit more like investors. They're a bit more like sheep. They want to invest in what's known, B2B SaaS in Silicon Valley. How are you getting them excited about construction tech?
Shubhankar Bhattacharya (34:22.467)
Mm-hmm.
Shubhankar Bhattacharya (34:26.17)
So there I would say what has worked for us so far, it may change over time. Over time what has happened is most of our LPs that we have today, these are folks that are either corporates or family offices who are in the construction industry. So in other words, they're either construction corporates themselves or families where the primary source of their wealth has been construction.
Harrison Faull (34:50.686)
Okay.
Shubhankar Bhattacharya (34:56.41)
The cool thing about that is it took, so in some ways it took the pressure of us having to be construction veterans in a weird way, believe it or not. So what they valued more is, and it holds true today as well, what they value more is a very professional investor approach, a very analytical investor first approach rather than a construction first approach. So that's the distinction I'm...
Harrison Faull (35:20.925)
Okay.
Shubhankar Bhattacharya (35:26.126)
I'm calling out here, being investors first rather than construction operators first and who design a fund in a way where they strategically get more insight and more benefits and more access. So that's sort of our product or our value proposition to our LPs. Will it change over time? It might, I guess we will see. So we are also...
I guess, growing and hopefully, hopefully leveling up as a firm. And we'll also have to respond to what the market and what future prospective LPs want from us.
Harrison Faull (36:04.311)
No, that makes a lot of sense and LPs must be loving it because you're on your third fund, assets under management are near enough quarter of a billion dollars at this point, people can't get enough of what you guys are doing. Okay.
Shubhankar Bhattacharya (36:10.074)
Mm-hmm.
Shubhankar Bhattacharya (36:14.724)
Yes.
Harrison Faull (36:18.992)
But there's a team of three of you. There's a team of three of you and you do something a bit counterproductive, which is you go for this global approach. Each partner has a certain region. So you cover North America, the India Pacific, and also Europe. How can three partners cover such a large global remix?
Shubhankar Bhattacharya (36:19.194)
So far so good,
Shubhankar Bhattacharya (36:35.118)
Mm-hmm.
Shubhankar Bhattacharya (36:42.094)
Look, I think one thing that helps us to a certain degree, I think it's still a lot of ground to cover, is we limit ourselves to construction tech and adjacencies like manufacturing, design, logistics and things of that sort. Having said that, that's still a lot, right? And the sheer, the absolute number of companies in these sectors, I think since the time we started has exponentially exploded. I think as more and more success stories have emerged,
Harrison Faull (36:59.515)
Thank
Shubhankar Bhattacharya (37:10.308)
the number of companies have emerged as well. I must mention we have a, I would say a small team by VC standards, all in all investment, we have about seven investment professionals, including the three partners, which is not a lot. I'll acknowledge that to cover the whole world, but that's what we have. And they do a fabulous job as well. Look, in terms of how we go about doing it, I think if we relied on,
let's call it the traditional model of VC, which is a lot of in-person meetings, lot of judging people based on impressions in in-person discussions and so on. This model wouldn't work. I'll be the first to acknowledge it. So what we actually rely more on, excuse me, is what we say is like a...
Harrison Faull (37:59.634)
Okay.
Shubhankar Bhattacharya (38:06.554)
double pyramid sort of approach. I wish I could illustrate it over here, but our ambition is to look at as close to 100 % of the companies as possible, but make sure that the very top 0.1 % only want to work with us. So that's kind of the duality of how we approach it. So in other words, I guess we do the usual VC things of reaching out, mining social media and stuff like that. But
Harrison Faull (38:34.488)
Okay.
Shubhankar Bhattacharya (38:36.122)
We specifically focus on what's needed to be done to make sure for the top 0.1%, we are top of mind. So this is basically evangelizing our co-investors, the founders we already have, other important people in our network. What's also been going quite well for us over the last, I would say year or two is using content. I mean, who would know it better than you? I think content is very powerful as a means to...
Harrison Faull (39:00.344)
So
Shubhankar Bhattacharya (39:05.914)
drive home what we're looking for. And we found that's actually created a very compelling value proposition where people relate. So firstly, it's a nice proxy as a substitute for a lot of in-person meetings, people get a flavor for who we are because a lot of our podcast conversations are very unprepared. There's no real script. So we kind of just shoot off the hip all the time. So people get a flavor for what to expect.
Harrison Faull (39:25.016)
Yeah.
Shubhankar Bhattacharya (39:34.298)
if we partner with them. And what we also use that to do is broadcast specific models or themes or traits we're looking for. And every now and then we find there's a bit of resonance with what a founder might be working on or thinking on. There's a bit of a philosophical match that happens even before the first meeting as a result.
Harrison Faull (40:01.834)
So.
Shubhankar Bhattacharya (40:03.322)
And generally we found that also has been working quite well. I mean, I'll also acknowledge it was not easy for us the first two, three years. I mean, as crazy as it sounds, the first year we didn't even have a website, believe it or not. So people talk of stealth startups, we were truly a stealth VC in our first year, operating without a website. That's how actually we got started.
Harrison Faull (40:20.366)
Shubhankar Bhattacharya (40:33.018)
in truly in stealth form. More recently, what I'd say the last couple of years or so, we have been helped by the success of some of our earlier portfolio firms, which have gone very well for us. And as you know, that also has a nice bit of network effect, quite literally, and it creates a source of unfair advantage for us. So I think we're now seeing, now sort of benefiting from being in that cycle of the business.
Harrison Faull (41:02.664)
Can we tuck into those? So you're in your third fund, you're seeing the fruits of your labor already.
Shubhankar Bhattacharya (41:04.665)
Mm-hmm.
Harrison Faull (41:09.044)
What have been some of the most significant exits of your portfolio to date that reinforce what Foundamental is doing and that you're able to return strong performance to your LPs?
Shubhankar Bhattacharya (41:23.962)
I must admit the exits we've delivered so far have been relatively small, but we are in the wait for two IPOs this year and two more IPOs hopefully in 2026. How much we choose to exit from those IPOs, I guess it's we'll wait and watch depending on how the markets respond and so on and so forth. So again, just not to say that
That's money not that the will not soon return to the LPs, but it's the quantum and the timing may vary a little bit depending on how the markets go. Sorry, I missed another one of your questions somewhere perhaps.
Harrison Faull (42:08.116)
Well, no, that's fine. So it is early in journey. You're on your third fund, but you haven't been able to hold on to your best performers for too long. And actually something that Fundamental does is you hold back a lot of capital to second deployments. think 55 % is the number I saw on the website. Is that still true? Okay. So you'd love to double down on your biggest outliers.
Shubhankar Bhattacharya (42:23.31)
Yes, that's right.
Shubhankar Bhattacharya (42:29.112)
That is correct. That is true, yes.
Shubhankar Bhattacharya (42:35.267)
Mm-hmm.
Harrison Faull (42:40.072)
Could you tell us about some of the largest private positions that you currently have? Is that possible?
Shubhankar Bhattacharya (42:45.976)
Yes, of course. Yeah, yeah. So I think the most valuable position we have right now is with a firm called InfraMarket, which also, by the way, is on the verge of an IPO within a few months. That's a company we entered around late 2020 or so, done tremendously well for us. I think when we choose to exit from the IPO, it'll be a very
It'll be a tremendous outcome for the first fund. All right. So obviously we are all looking forward to it as a source of celebration and many other things that comes along with all of these events. That's also, you know, as I hinted at earlier in this discussion, the first round of investment that we did in the infra market. I mean, I wish I could go into all of the details, but there's one particular transaction there, which is so wild and
so wild in all the circumstances around it as well as in the upside it immediately for us that it is one of the two most memorable deals by a long shot and I'm also very...
Harrison Faull (43:44.311)
Okay.
Harrison Faull (43:53.81)
No, don't let me stop you. We're on a podcast. We need to tell people the stories.
Shubhankar Bhattacharya (43:59.914)
okay, so I think I'll have to hold back on some of the details, but let me, let me nevertheless use the opportunity to create a bit of theatrics here. Look, I first met the founder on Valentine's Day 2019, which is something we like to joke about a lot. I remember saying, hey, I'll be in, you know, Bangalore on so and so date, and then I'm flying back to Berlin. Are you around? He said, yeah, you know, I'm there the same day.
As I found out much later, he actually just flew in to meet me. And I love these kinds of traits where the founders do whatever it takes to get stuff done. I really respect that. The cruel thing is we could have invested in that round, but I decided to pass on that round, which was the very first venture round, which obviously would have boosted our return so much more. I took the call for other reasons.
to pass, which with the benefit of hindsight now was a terrible mistake. And we got the second time there was a round happening again, it got subscribed too quickly and we couldn't get in. Now the cool thing is, and I promise you there's a happy ending to all of this. The third time around was happening. It again seemed like the round was subscribed too quickly, but then COVID struck. Right.
Harrison Faull (45:15.223)
So.
Shubhankar Bhattacharya (45:27.778)
And then I reached out to the infromarket guys to say, hey, you know what? I know you told me there's a round that has been stitched together, but hey, know, COVID has happened. A lot of people are not feeling so good. By any chance has your term sheet fallen through? If yes, I'd love to talk to you at a lower valuation. And you know, that's where things got started for us. And one thing led to another. We got a deal where
Harrison Faull (45:43.375)
So.
Shubhankar Bhattacharya (45:58.2)
So there were two, I guess, tranches or two rounds that happened at a very similar time. One of those, because as this round was happening, we got yet another term sheet for a much more larger, higher valuation round. As we are wiring one of the investments, one, I'm deliberately being guarded in how much detail I reveal, but it's up to the viewers and for you to figure out what.
Harrison Faull (46:22.19)
So.
Shubhankar Bhattacharya (46:27.162)
what I might be saying. So for one of the components of the investment, by the time we actually wired it, it was already worth 10 times of the amount we wired. If you can fathom that. So it was already worth 10x when we wired it. So that's how crazy the deal was. But look, that aside, I don't want to give the impression that was some wacky stock which just went randomly up.
Harrison Faull (46:43.404)
Wow.
Shubhankar Bhattacharya (46:57.164)
It's a phenomenal business. To give you an idea, with the exception of I think maybe one or two months in early COVID, the firm has always been net profitable. That is, always has a positive net income, paying tax on that net income, etc. And today operating at significant scale, like 3 billion annual revenues and significant profits. And it's a firm which operates at a scale where
It's one of the largest building materials companies in India in many of the categories it's active in. And there's not too many startups out there who actually managed to achieve that in a span of, in the infromarkets case, about seven years or so. Not too many firms which can achieve that in these sorts of industries in construction, where it's actually legitimately one of the largest players in many different categories.
Harrison Faull (47:52.564)
Yeah, so thank you for going into detail. I do appreciate it. And I know it's not the easiest thing to do when certain things need to be kept confidential.
So we'll keep everybody happy with what you've said.
What was it doing so right? was it doing so well that made you want to get in and actually chase the deal and swallow your pride and reach out even though you didn't know whether or not you get allocation? Because some founders might enjoy saying, no, you've passed on us twice. There's no way I'm letting you back in on this deal. But actually, there was persistence and perseverance from your end to actually say, no, I
Shubhankar Bhattacharya (48:22.394)
Mm-hmm.
Harrison Faull (48:36.552)
I've seen enough now to completely believe in you and have the conviction. Please can I come in?
Shubhankar Bhattacharya (48:42.424)
You know the interesting thing, and this is something I think I only properly started to appreciate two years or so in since Foundamental, is I think in the sort of gritty real world industries like construction, manufacturing, industrials, for the most part, with the exception of stuff around robotics and new age applications, for the most part, a lot of
core supply chain applications. Startups, I find, can't really hide behind tech or product as a source of innovation or for being cool. And maybe this is my personal opinion speaking more strongly. And therefore, the way you actually demonstrate how well you're doing or how good the company actually is, is through sheer force of execution and excellence in consistently delivering good numbers, consistently...
Harrison Faull (49:35.751)
Yeah.
Shubhankar Bhattacharya (49:41.124)
doing better each month than the previous month and that compounding effect showing up. And I think in this company, more so than at least so far at least any other company I've come across in my career, this company is like a beacon when it comes to compounding excellence, consistency and compounding. I won't share the numbers now just to be clear, but the numbers are truly phenomenal and the consistency and what they...
achieve and they have kept achieving over the years. It is something where it goes beyond the vision or the power of the business is communicated through the execution if that makes sense. At that point you don't need a visionary to fire you up through a a version of what's to come. You can see that there is something very special under the hood if this is what
Harrison Faull (50:25.676)
Okay.
Shubhankar Bhattacharya (50:39.79)
the firm keeps producing consistently, to whatever means available to it, every month or on a month, every month on month. And I think to me, it just seemed like a firm that was destined to be a compounding machine.
Harrison Faull (50:54.339)
So that's really interesting. How does that feed into your due diligence of founders at the pre-seed and seed level?
Are you doing extra checks? What are you trying to identify to hone in on their ability to execute? Because I know you guys do pre-seed and seed, right? You do really early, 500k to 5 million. So you don't always have the luxury of waiting to see if they can actually execute.
Shubhankar Bhattacharya (51:09.038)
Yes. Yes. Yes.
Shubhankar Bhattacharya (51:18.39)
Excellent question. So we look for quite a few things. Some of the things obviously look, you don't always have the benefit of actual numbers as you rightly observed and pointed out. So what we like to do is test this out in a few other ways. So our hypothesis is the way you get very good at execution is that you put your numbers and facts first and don't go into it with a...
salesy or a defensive mindset with the thing of, I need to sell this to someone. But you have a mindset of, hey, how can I remove all bottlenecks and areas of improvement upward first? So what you'll usually find in founders with traits, these kinds of traits is they'll actually first point out why things may not go according to plan. And I love seeing that because that means they actually
Harrison Faull (51:57.382)
Mm-hmm.
Shubhankar Bhattacharya (52:12.524)
are aware of what might go wrong. So they're working on removing possible bottlenecks. What I also find is when you tell them that, you know, what if so and so goes wrong or have you thought about this? They're usually not brushing it aside or even, you know, even by the way, some of this criticism may also be negatives you pointed about the founders themselves in terms of who they represent as individuals. And quite often they'll actually acknowledge it very, very directly.
And again, that is something I personally love to see because the way you become very good at execution is when you preempt the problems and don't hide behind them. Once you preempt problems, you're in a problem solving mindset and you also use your investor as a sort of partner in helping you. You use the investor as a sort of GP or a doctor, if you will, to figure out what's ailing the body.
Harrison Faull (52:55.204)
So, thank
Shubhankar Bhattacharya (53:08.972)
and to get rid of the ailment rather than like, know, I'll not show anything that's wrong to the GP, right? And I think that's kind of like how I approach my partnerships. And a lot of times when the founders also reciprocate, I find that's a very nice recipe for a very harmonious relationship because if I'm supposed to play my role as like a quasi GP to help figure out what's going on,
I can't do it with someone who pretends like everything's well and there's no need for any tests or whatnot. You know what I mean?
Harrison Faull (53:52.779)
Thank you. is so good. I don't want to stop. Okay. Are you able to give an example or two of how you've stepped in and helped a portfolio company in a time of trouble?
Shubhankar Bhattacharya (54:07.342)
Hmm. Look, I think the most obvious answer, which I guess most people want to hear in response to a question like this is, hey, have you financed the company with additional monies and whatnot? The answer to that question is yes, we have done that if we like the company, right? And if they have demonstrated excellent execution before. As difficult as this may be to say or as unpleasant as this may come across.
Harrison Faull (54:25.763)
So.
Shubhankar Bhattacharya (54:36.922)
In our opinion, being founder friendly does not mean you keep financing them round after round, regardless of how they're performing. We don't consider that being founder friendly because we have responsibilities to ourselves because we also invest in the fund. We also have responsibilities to our limited partners and it is also responsibilities to the best performing portfolio companies. Right? So any money you give to floundering portfolio companies,
just out of a sense of continuity or not not hurt feelings or whatever, you're depriving better companies of the same capital. So in that sense, are, I guess if I go to the extent of saying we are, maybe we could be seen as being cold and calculated perhaps because we do tend to adopt that approach. Now with that said, what I will say that quite often, unfortunately in between startups and founders and VCs,
The nature of helping startups at difficult times is quite often reduced to, do you fund them or not? What I find is the willingness to have very difficult conversations and be comfortable doing that, it's surprisingly rare. And that is not to say that only founders are to blame. I think VCs are to blame as well, because what I mean by that is sometimes you need to have these difficult conversations of...
Hey, for example, being able to tell the founder, hey, what you're doing just completely sucks. Right. And. Right.
Harrison Faull (56:10.242)
Getting ahead of it, yeah. Giving them warning signs before it's too late rather than letting them crumble, yeah.
Shubhankar Bhattacharya (56:15.972)
Correct. telling them it just completely sucks, for example, or their co-founder sucks, right? Or telling both co-founders together, hey, one of you sucks, the other doesn't, or you are not getting along, please figure it out. Or to do other things, for example, of that nature, the art of having difficult conversations in a trusted, in an environment of trust and in a manner where everyone respects the other.
It is incredibly rare. Firstly, I will say if you are a founder or if you're a VC and you have that going, you should be very grateful. It's a recipe. It's truly a recipe for greatness, right? Because once you reach that point where as a founder and VC, you can have completely uninhibited conversations in very difficult times, you actually can go very, very far. Right. And I think that you'll be surprised how many founders actually want that.
But it's also, and I totally empathize by the way, it's also something that is very hard for the founder to ask for because the founder is putting themselves in a very vulnerable situation at that point because they are admitting that they haven't got things figured out. And similarly for a VC to acknowledge this is to acknowledge that, you know, I made mistakes with my thesis and obviously with my partners and stuff, I'll have to acknowledge that things have not gone according to plan. But look, belief at FounderMental is...
That is how you find great investments. You've got to get very comfortable with doing these uncomfortable conversations, including discussing what is not working well. And I really wish more VCs would take a proactive role because the founders have more at stake here. And VCs would maybe literally get off their high horse and like do have these difficult conversations instead of pretending like to be these formal board member types and not...
I think more founders want to have these kinds of conversations. I think what we generally do, specifically in positions that are meaningful for us, is to not hold back at all with these difficult conversations. It doesn't always go down well, I will acknowledge that, because it also takes a certain kind of personality to receive it well on the other hand, on the other side. But in the best of cases,
Harrison Faull (58:15.229)
Yes.
Shubhankar Bhattacharya (58:42.572)
it actually causes an immediate leveling up of the relationship. And for that reason, at least for me, it is well worth the initiative because if I can get through that hurdle, I know that the firm and the partnership and the outcome, it's probably sorted. It'll take care of itself in the future.
Harrison Faull (59:03.261)
Wow. No, that's really insightful and actually refreshing. So many VCs want this image or persona, but they'll do anything whenever the time comes calling. And then the founders are under this impression that they have this support system. Well, actually the reality is they might not speak to you again. But there's plenty of examples of VCs not replying to people in their portfolio in times of need, especially when it comes to financing.
Shubhankar Bhattacharya (59:25.88)
Yeah.
Harrison Faull (59:30.926)
It's the belly of the beast. As soon as you accept VC Capital, you should be aware that a significant percentage of anyone's portfolio is going to fail. And it's your job to not be in that cohort. But it is inevitable. So yeah, no.
Shubhankar Bhattacharya (59:47.994)
The other thing perhaps I'll add to this is, I think in a discussion recently that Vinod Khosla had with someone, I forget who it was. So he mentioned that 90 % of VCs add no value and 70 % add negative value. And my hypothesis on why that is the case is I think most VCs have a very
Harrison Faull (01:00:03.724)
Yeah.
Shubhankar Bhattacharya (01:00:14.618)
this is my personal opinion, very narrow minded definition of what value represents. And I think quite unfortunately, quite often value in their eyes comes down to either a financing decision or pretending to be like an operator, somehow, you know, making operator decisions on behalf of the founders. So our view is that if we have invested in a company or a founder or a founder team, they must be better operators of the business than we are of the same business.
Harrison Faull (01:00:31.954)
So.
Shubhankar Bhattacharya (01:00:44.184)
And therefore we cannot be operators of that business. That can't be the role we play. Right. And literally what I find and that doesn't mean that's the way to go about it, but literally in the best cases where really the problem is not operating the business, somewhere else. Sometimes I choose to just take on the role of a therapist, believe it or not, or like a coach to an individual sort of a thing. And I find that actually helps unlock some bottlenecks.
Harrison Faull (01:00:59.354)
Wow, okay. Look, I've picked your brain for a long time there. Where can founders find you? yeah, no, where can founders find you? Where should we post them? I'll include all the links in the description, but someone that's building
the next generational company in construction technology or adjacent? How can they reach out to you?
Shubhankar Bhattacharya (01:01:35.706)
So look for us on foundamental.com. I think what we try to do is put a great deal of emphasis on our philosophy. We put our letter to people who show up on our website to find out just what our philosophy is and hopefully you find that resonates with your line of thinking. You'll find we also have a very unconventional profile page for each of us, which hopefully gives you an idea of what kind of people we are.
Harrison Faull (01:01:59.392)
Thank
Shubhankar Bhattacharya (01:02:04.026)
You can find us on LinkedIn on FounderMental. Each of us are available. Our emails are also available on our website, by the way. So feel free to reach out to us. We run a few podcasts as well. My partner Patrick and I, run a podcast called Practical Nerds, where we talk about what we are looking for as companies or founder trades. So if that's something that appeals to you and you have time to spare, check us out. We'd love your comments on that.
Harrison Faull (01:02:30.917)
Amazing, and look, I can personally testify the philosophy part of your website and the bio on yourself are phenomenal, very insightful.
