Dhruv Sharma: Hey there, listeners. Today is Friday, October 9. This is stream 149. We are live. Today, we're covering pharma or the world of organic products. And then later in the stream, we're gonna be speaking with Rajan Anandan who's, you know, one of the MDs at Peak XV about surge 12 and his new books. So stay with us till the very end. Now we're super excited to welcome our first guest for the stream, who is Amit Chawla. Amit, welcome to the network.

Amit Chawla (Fundly.ai): Thank you so much for having me over here.

Utsav Somani: Welcome, Amit, to the event. Yeah.

Amit Chawla (Fundly.ai): Thank you.

Dhruv Sharma: Amit, let's just start with getting an overview from you about the business and your operating space.

Amit Chawla (Fundly.ai): Look. Fundly operates in, in the pharma space, in 2.5 lakh crore, pharma trade where we act as a coordination layer where network comes down to trade, pay, and, settle their, you know, settle their trade. We, essentially understand the market is highly fragmented, 90% unorganized, and we act as a trust layer, where buying and selling happens and then credit and, you know, settlements happen over here.

Utsav Somani: I mean, one very peculiar aspect when I started your business today was that you started off with credit as a wedge and then built out payments and, the marketplace. So why starting to burst? Because most people build the marketplace and then, add on credit and, payments later.

Amit Chawla (Fundly.ai): Yeah. So look, if you look at my history, I come from twenty years of, investment banking, treasury, corporate finance background. So credit comes naturally to me. And this all happened you know around COVID, you know when you know I realized I wanted to do something more, there was a, you know, regret analysis which was kind of, you know, developing much much bigger that hey I need to do something more and and that was a time where I where where I thought to kind of, you know, hang my corporate boot and jump into, what I'm doing today. Supply chain finance became the first wedge for me to understand the trade. If I give you statistics, supply chain finance is roughly 62% of the India's GDP, and India being a consumption led economy doesn't have supply chain programs, you know, running across. So chose that, tried to solve the same thing in downstream supply chain, pharma being an essential commodity at that point of time was in focus and also pharma being the clearest because it's fragmented, transactions are not very, you know, clearly visible, Thought to enter into that. Started working with supply chain finance and then realized, look. Hey. Supply chain per se is broken. Right? Because supply chain in pharma had been, you know, decades old and no modernization essentially happened. So started working around with finance, then build on trade layer, and then build on, payments and settlement. That's how it happened. So my sense over here is that it's important to understand the problem, and that's credit gave me an understanding of it when we were solving supply chain finance, invoices between different cities, different, you know, points. Price points were there, and we realized there is a much, much larger play to be here. So took a contra bid, to go deeper into, the segment rather than solving supply chain finance for multiple, you know, sectors.

Dhruv Sharma: Fantastic. So Amit, we're talking pharma. Give us a sense of what the value chain look like... Looks like. How do medicines change hands? How does money change hands? Where are the working capital gaps, and how are you fixing them?

Amit Chawla (Fundly.ai): Yeah. So, look, pharma, is around 2.5 lakh crores market going at a CAGR of, 8.5 person. So So by two zero three zero, we see this market going to 4 lakh crores. 90% of it is unorganized. Couple of guys have tried to, make it organized by acquiring a lot of distributors, but still India is 10% organized compared to 95% in US, 40% in China. 97% of the product or the medicines which are sold are generics. That means same molecule, multiple brands. So a guy, if he needs a paracetamol, goes to the market and say, hey. I need Dolo or Calpol or Crocin because, retailer has to keep everything and distributors can't keep everything. They essentially go and trade with other distributors and buy things. Now all of these things happen around WhatsApp, Cartabook, etcetera. That's the market what we are talking about, so no one carries all the brands, the situation, the tree in inner side trade happens on various unorganized matters And and the market per se has got roughly around 35% margin, 20% for retailers and 15 for distributors and distributors obviously are heavily intermediated with sub stockists, sub distributors, etcetera, which essentially have that. So that's the entire play what we are talking about. The question is why now? If... Because this this problem is already there for for, for many years is because non r x or where the channel essentially starts promoting, that is growing at much much more than eight percent ten to 15%, it is growing. Field forces of brands are not accustomed to kind of work with trade in such a large format and digital rails were possible because of UPI and GST And all of those things essentially kind of prompted us to kind of build what we have built.

Utsav Somani: And what's the sales pitch? Like, why would they move from this old world of doing things? Like, I mean, distributors, of course, have their ERP systems and other ways of tracking their, inventory and doing supply, management. And the unorganized sector, which is heavily the sector that you're targeting, how do you, like, bridge the gap? Like, what is the sales pitch when you do Fundly for them?

Amit Chawla (Fundly.ai): So... Look. Three things, what we talk about it. A, before before I answer that question, look. We have not asked people to change. We have changed for their trade. We do things what make their life easier, what make them smarter, and that's what we do. And, hence, people are able to connect with us in in in whatever sense. A, for building that trust, we sat inside the trade. We understood what they were doing. We gave them, you know, genuine product at better pricing, and that's what we started working with them. We started working with the secondary market, which is 25 to 30% of the market, which is highly organized. Prices in Agra would be very different in Chennai. We understood this thing while we were doing supply chain finance in May... Various cities. We understood that this is a large problem. We started getting into the trade of that building relationships, building trust and giving them more profits around that. Two, we we actually made tools which essentially kind of are the ways they work around we essentially help them in buying and selling of the products on WhatsApp, embedding our payment and Recon Rail around the ERP so they don't have to change various you know, Eurus platforms to kind of understand the same trade so we worked on interoperability, we worked around how do they trade and the pitch was very very simple we kind of dice down the supply chain into the kind of requirement what they have and worked around in in case the trade we talked about better pricing genuine product and they could also liquidate the products to us that gave them the canvas from being local to national that's how trade happened in payments, we essentially said you can go home in half an hour which you take four hours to kind of solve your recon and payments problem and people started coming in today I think not divulging a lot of numbers but we sit inside 12 lakh invoices, which essentially... And we have seen for $5.50 crore of, goods moving in just last six months when we started working around on the payments. The same applies to, you know, on on the trade. A large amount of trade is happening around it where, you know, most of the things are happening between different parties, and we're essentially becoming the coordination layer around that.

Dhruv Sharma: We'd love to understand how working and what you guys call a closed loop system helps you originate better, helps you, you know, keep the NPA's low in a sense, and also helps, you kinda match the repayment terms with, the borrower's actual cash flows.

Amit Chawla (Fundly.ai): Yeah. So... Look. Any kind of trader, I'm not sure if you have gone to any market or merchants. These guys are very well connected to each other. They trade. They, you know, play cricket. They play... You know, they they have tea together. So essentially, they become a very good source for us to kind of generate new new leads. So we don't go in the market and say, hey. This is the product and we want to do it. We essentially have a strong referral mechanism, strong referral kind of a thing, which essentially kind of gets the, you know, in trade for us. That essentially means that if I'm dealing with one distributor and he has referred me to another distributor, I can see through that what distributor aid us with distributor b. And that's how you start building on the density and understanding more and more transactions. And the more transactions you understand, the better underwriting you have. You become more smarter, and that's how you start working around on being intelligent, underwriter and thereby kind of helping you to reduce your NPAs also.

Utsav Somani: Tell us about the loan book size. And as a lending service provider, I mean, share more about the mechanisms you use and different data points for, doing a better job at underwriting.

Amit Chawla (Fundly.ai): Yeah. So I think, as I mentioned, the best way to underwrite is to understand the business, have that, understanding that niche, and to add on that compounding with the transaction data, what you have. I think that becomes our mode. In fact, I'll say the compounding wheel for us, is the trade essentially, you know, becomes invoices. The invoices becomes leisure and that leisure on which we kind of start funding. So that's the compounding loop what we have. And we we just don't don't look at, the normal GST or the civil scores or the bureau scores we essentially look at these compounding layers also to kind of work around with that we are not into, you know, we are not an NBFC, we don't lend we have partners, large partners, national level partners, which kind of work with us, and and these are the people who underwrite, and we provide them, you know, all the set of information, which is helpful for them to underwrite.

Dhruv Sharma: What's the typical cost of credit that works in this sector, Amit? And can you use timely payment discounts to offset that in a sense?

Amit Chawla (Fundly.ai): No. Absolutely. I I think, every trade is based on two fundamental. What kind kind of credit I'm doing and what kind of payment terms I'm making. I think every trade is based on that, and every trade and a credit can be structured accordingly. The cost of funds, you know, in this segment varies, from as low as 10 to 12% and goes up to as high as 24% depends on various, you know, parameters working around that But in general, what we work around is something, in the range of 12% to 18% is the range what we work around.

Utsav Somani: And can you share a little bit more about the operating, scorecard for you, like number of active customers, the commerce value, and any other details that you can share with us today?

Amit Chawla (Fundly.ai): We have, more than 10,000 customers onboarded. We are present in 52 cities. The brilliant part is that we have only got 10 FOS managing everything. We have a strong, you know, data pool, what we work around through AIs, agents, etcetera, which kind of helps us. In terms of, we are presenting 85% of our customers comes from tier two, tier three, and, and... Yep. So so these are the things which I can talk publicly. Yeah.

Dhruv Sharma: Amit, you know, I mean, there's obviously two types of b to b companies, horizontal, vertical. You guys are clearly vertical. Talk to us about the advantages of being vertical, the the discipline that comes from it, the depth of understanding, and so on.

Amit Chawla (Fundly.ai): No. Absolutely, Dhruv. This is a question which I've been asked multiple times, and and and that's what I relate to it, that when you essentially are working in one vertical, you understand that vertical well. You are able to create a customized products for the customers and that customization is large, right? And you understand the problem and create that. What it gives you an advantage, it actually creates less variables for you to look deeper into it, understand various other dynamics which impact the trade and then work around on solutions which is scalable in that sense. You know one obviously flip side is that you are reducing your time but health care per se is a huge market for us. So so that essentially didn't impact us.

Utsav Somani: And at what scale does, Fundly become interesting for a pharma manufacturer as well? Do you work with them right now?

Amit Chawla (Fundly.ai): Yes. So, I I think we are lot of pharma companies have got genuine interest with us. Look. This is a density play. Like, PAN India, how many distributors, how many retailers you can onboard, that becomes very interesting for the pharma companies because... Look. If if I'm a, you know, regional player in a in a pharma, I need to kind of go pan India. I'm going city by city appointing distributors, working around with them, building that heavy, you know, linear mechanism to kind of grow. You can come on Fundly and I can take you Pan India, right? And for for the national players also, I become very important because managing so many distribution, you know, with with so many FOS becomes very, very difficult for them. It's it's a it's a highly fragmented, model as I said. Lot of pharma companies, large, small, are all talking to us. Today, we are dealing 98% with distributors and 2% with pharma companies. I assume that as the density play, PAN India kind of increases, this number will kind of flip on the other side.

Dhruv Sharma: Fantastic. We keep hearing of people using AI and inventive ways to, you know, make the the profession of lending better. Are you guys also starting to do that using voice, something else perhaps?

Amit Chawla (Fundly.ai): So, Dhruv, I would not limit myself only to talk on the lending side. Sure. I think we're using AI on many, many aspects. Just to give you an understanding, look, we are doing trade with, with many, many distributors across 52 cities. We... When we are embedded with them on their WhatsApp, we essentially kind of use AI to find the best deals for us and also to prescribe them what deals they have... They can work around with us and they can sell it also. So all of those things happen around the channel of, you know, the AI and on the other side, you know, lending obviously has got lot of AI elements in terms of how do you look at the transaction, you know, work around on underwriting, and and the speed of underwriting can be done, you know, you can work around on those aspects. So I think AI has become a core to whatever we are doing. I think, and and that's... We we are using from growth to productivity.

Utsav Somani: Awesome. I mean, thank you so much for coming on to you, and, really appreciate the insights you shared with us.

Amit Chawla (Fundly.ai): Thank you so much, guys. Thank you so much, Utsav. Thank you.

Utsav Somani: Alright. Listeners, we're moving on to our next guest. We've got Satyajit from Two Brothers Organic Farms. Satyajit, welcome to TON.

Satyajit Hange (Two Brothers Organic Farms): Hey. Hi. Good evening. What's up?

Utsav Somani: Where are you dialing in from?

Satyajit Hange (Two Brothers Organic Farms): I'm dialing from my village. It's in, it's a small village called Bhodani on the outskirts of Pune, in the rural part of Pune, one fifty kilometer south of Pune.

Utsav Somani: That's where the family farm started. Right?

Satyajit Hange (Two Brothers Organic Farms): That's where the family farm started. That's the village I was born. My parents are farmers, and we grew that farm, and that's become the soul and heart of what we do now.

Utsav Somani: And I think a key part of, everything that we've read about your brand and learned about your brand online, I think, is the story. So why don't we start with that?

Satyajit Hange (Two Brothers Organic Farms): I also see, me and Ajinkya both, are sons of farmers. We grew up in this small village called Bhodani. My parents are farmers. And, you know, when I was born and for the last, I think, more than fifty years now, farming has become a very unattractive, profession. It's not giving you money. It's not giving you social respect. So our parents put us in a boarding school. We studied in Pune in a boarding school and then did our MBAs like everyone else would have at that point of time and got working with corporate banks. But I think, our visits to the farm were limited to the valley and summer holidays, and we love the farm as such. But we were conditioned to believe that this is not a career you take. And so while doing a banking job, I was working with Citibank and Ajinkya with HSBC. We soon realized that you are not cut out for a banking job, and this is not something you would love doing. And when we question ourselves what we would love doing, it is always farming and stuff. And finally, we have the guts to leave our job, I think, twelve years back and come back to the farm. There was no idea about creating a brand or a business when we came back. It was about enjoying the farm, being amongst livestock, living that slow life that people live in villages, and being amongst those people. But I think soon, I think a year down the line, we realized that the kind of farming practices that were going on since the last forty odd years, fifty odd years, especially after the green revolution, has ruined soil fertility, has compromised biodiversity both below and above the soil, and food is now grown without much nutrition. And, you know, farmers are facing a, a problem where there is a lot of water required and there is no soil fertility. And we started then finding solutions for this, and that's how we turned towards sustainable farming, organic farming, converted our farm into an organic farm. And I think those experiments took us three, four years to learn nuances because, you know, this kind of farming is not taught in any organized course anywhere. For example, the BSC agriculture that all the universities teach you does not have even four weeks of curriculum on organic farming. So we learned it by visiting farmers, by attending online lectures, by reading books, and by doing experiments on the farm. After four years, we realized after one incident where we tried selling our farm produce, which was papayas in the market and not getting the right value for it, that only growing holistically is not the solution. We'll have to get across to the right consumer and sell it at the right price because when you switch to sustainable farming, your yields drop. You need to get compensated by the value of the produce and, hence, the brand was born two brothers, started off in farmers markets, and then, you know, plugged in the online shop and the app and grew it completely bootstrap for the longest period of time on our own website. And today, we have consumers across, I think, about 60 plus countries and a team of more than three, 400 people working for us and more than 7,000 farmers whom we are hand holding from the seed stage to the harvest stage.

Dhruv Sharma: Fantastic. What a story. So, Satyajit, I'd love for you to connect the dots for us between, you know, using organic farming practices and then also more traditional food processing and then regenerating the earth in the process? I think those are things that you briefly touched upon. We'd love to go deeper.

Satyajit Hange (Two Brothers Organic Farms): So, you know, since the nineteen sixties when green revolution came about, governments and especially after the World War governments across the world, started using nitrogen as fertilizers. You would have never heard about urea, potash, phosphorus used by our great grandfathers or grandfathers. In our father's time, you know, the earlier generation time, these chemicals came in. The idea was that you get chemicals to increase yield. And, you know, the the propaganda behind all of this was that after World War two, a lot of facilities across Europe that produce nitrogenous ammunition were left underutilized, and they wanted to make something out of these large facilities that gave them a commercial realization, and they started making nitrogenous fertilizers. And especially third world countries were told that take these fertilizers, administer them, and increase your yield. Well, they did increase yield because till that time, all of India was doing, sustainable farming, organic farming, and the soil had a lot of carbon in this, you know, in in in in itself. When nitrogenous fertilizers give a good yield, that means that soil carbon is high. But over time, over the last fifty, sixty years, farmers stopped what they were doing traditionally, which was, practices that increase soil carbon and soil microbiology, and they only went about administering chemical, petroleum based fertilizers. And slowly, the soil lost its fertility. The microbiology vanished. The soil particle size reduced. Soil became compact, and food became nutritionless. So this took fifty, sixty years to pan out. And now farmers are faced with a with a situation where how much of our increase in inputs is not leading to a commensurate increase in output. The water holding capacity of the soils is literally gone for a toss. My farm, sixty year back, needed two times or three times water in a month. Today, you know, my neighbor's farm... My farms have grown organic, so the difference is there. But my neighbor's farm needs water at least twice a week. That is how water holding capacities have gone for a toss. So after knowing all of this, we realized that in the long term, if we continue doing conventional monocropping, and chemical based farming, we will hit a dead end. My farm will not be able to produce anything. Over the last fifty years, my own farms that were producing up to ninety hundred tons of sugarcane and acre have come down to thirty thirty five tons of sugarcane and acre. So we put one is to one and we realized if we don't change practices, we'll soon face this reality, and that's what made us change our practices twelve years back. What we do as organic farming is everything done is to ensure that soil microbiology is replenished. The major show source of soil microbiology is cow dung and organic matter, And this microbiology then starts making unavailable nutrients to available formats to the tree, and that's how the tree gets its nutrients and that's how fruits and vegetables grow. It is a cumbersome, patient process, but it's the only sustainable process.

Utsav Somani: And behind the brand that you've built and the company that you've built, you have a network of 5,000 farmers. You mentioned your neighbor's farm. You started off with your family's farm. How do you build systems that scale to 5,000 farmers and beyond?

Satyajit Hange (Two Brothers Organic Farms): So, Sam, in the in the starting, we were doing experiments on our own farm. We didn't want to extend it to anybody because we don't know how the results would, you know, be. So initial four, five years experimenting my own farm, losing, gaining, converting a monocropping sugarcane farm to a pomegranate orchard, then to a drumstick orchard, then to a polycropping multi food forest orchard, mulching it with a lot of carbon, growing border trees, making a veritable, jungle in the farm. After five years, we realized that, though if our output was less, our input costs were far less. We were using heirloom varieties, and these are freely available if you keep last year's harvest. And the fruit had more nutrition and more taste. And after these experiments, you know, farmers around us started coming in, looking at the fact that we were needing lesser input cost. During a flood year, my farm didn't flood. It would soak in all the water because soil porosity had increased. During a drought year, I didn't need as many tankers of water because already the water holding capacity was high in my farm. This... When farmers saw it, they were attracted. And, you know, I think initially, there were two, four, eight, 10, 15 farmers who came, who plugged into our system, and we helped them share, our experiments to take forward to their farms. And then the brand was relatively built for online shopping and for farmers markets. We took their products also, started making, you know, products out of it in our own kitchen and then a small facility, and then started selling it with our own brand on the farmers markets and online, shop. I think it's taken twelve years now, you know, and, of course, later than we have a... We have had a team who joined us, whom we call the farmer relationship managers, who handle farmers from seed stage till harvest stage, and, many other, you know, aspects have come in. Infrastructure has come in. And today, we have grown to a strength of around six, 7,000 farmers, farming over eight, 9,000 acres across India.

Dhruv Sharma: Fantastic. And, we let Satyajit have a sip of water. We'd also love to hear your learnings from, you know, drawing attention to the brand and all of these different channels in which customers can today discover the brand, whether it's your own website, QuickComm, you know, the farmers markets where you show in pop ups. And you also expanded internationally. Can you talk to us about learnings from each of those journeys?

Satyajit Hange (Two Brothers Organic Farms): So Dhruv, I'm an MBA student, but I didn't start marketing in the conventional form. I literally started by... With two tables in the Bandra Farmers Market every Sunday driving down 350 kilometers, putting up our fresh farm stuff, the jaggery that we made, the ghee that we made, the wood pressed oil, talking to consumers, you know, building community, crowdsourcing ideas, inviting them over to the farm. For the first five years, we were just a farmers market brand. But I think, looking back now, you know, I realized that that strong community that we had built in the initial days led to a very good word-of-mouth. And, I think for the first six, seven years of the brand, we did not do any performance marketing, put up an online shop, shared a lot of, practices and everything on social media, and, organically, the brand grew. So, you know, I think that is noteworthy. And after that, then, you know...

Utsav Somani: The fees are also quite high in your brand. Right?

Satyajit Hange (Two Brothers Organic Farms): Yeah. The fees are around 70%. I think because the quality is, uncompromised for... And everything is transparent. People didn't come and see, stay, observe, everything very transparently. Very few brands work at all three stages, creating a brand, manufacturing, and working with farmers. So I think that vertical integration, you know, imbibes a lot of trust in people. So I think that that marketing, you know, how you... How we kind of build the brand, it was because we were enjoying it and, you know, small scale community, that that kind of shot off. Later than we used what people across b two c use performance marketing and, you know, everything else that I think more or less people know about. To mention about the international community, I think seven years back, we had got a call from a guy called Sidhar Shukla from Michigan. He said, you know, he's been living in The US and didn't get access to good ghee. He's a North Indian who has... Who loves ghee, and he said, I'm not getting good ghee out here. In case you can send us some ghee, I would be happy. So we... You know, it took us nine months to make, the import export license, the dangerous goods certificates, all that formalities that you need to send ghee abroad. And after nine months, we could send it to him, and he then tasted it and give a superb testimonial on YouTube that we pulled up on YouTube. And, again, word-of-mouth out there grew, and we realized that if you could service one Sudhak Shukla, we we could actually service anybody across the world. And it took us only four days or five days to express courier to him to anywhere, to any consumer across the world. And then I think for the first three, four years, that community grew very organically till about two and a half... I think two years back in September, we, paid a visit to The US to figure out who is our consumer, why are people ordering. At that point of time, there were eight, 10,000 customers in The US. And, you know, for a forty day period, we went across East Coast, West Coast, and the Middle Of US visiting, I think, around 14, 15 cities. And for forty days, doing thirty two chime meets, and we were surprisingly hosted by community out there. For all the forty two days, our stay, our travel was taken care by consumers. And every evening, we formed a small community out there of 30, 35 people in the vicinity and spoke to them about clean food, about sustainable farming. And then when we came back, our business, grew and we realized that, directly communicating, directly talking, the aspect of building community had helped. Out of those people, I think 1,200 people came to meet us, out of which more than 24, 25 people actually traveled back to India and came to the farm and stayed on the farm for three, four weeks. And, you know, from there, then I think they have become like family in those cities in The US now. So the aspect of community is something that I would, you know, highlight that the brand overemphasized and benefited from.

Utsav Somani: And food also, I mean, goes through, I mean, a full spectrum. Right? There's the timeless stuff. Be it, ATA, the key. But there are also these trends which other brands follow and, like, sort of market, fiber, protein, even protein at all these days. So as a brand, like, how do you think about where to position yourselves on the spectrum?

Satyajit Hange (Two Brothers Organic Farms): So, firstly, you know, I grow what benefits my farmer's soil ecosystem and, what traditionally we have been eating. Because there is... Inherit a lot of wisdom in, all traditional practices on the farm side and on the consumption side. So we, you know, got to fold this very famous atta that people eat now, and now it's pretty well known, Kapili atta. So ten, twelve years back, nobody knew about this wheat variety. And we realized that this has 50% more fiber, 50% less gluten. And after doing the lab test and stuff, we started, spreading awareness about it. Now everybody in India has wheat. But over the last sixty years, we have changed our wheat variety to the hybrid variety, for the green revolution. And the hybrid variety has produced grain that has higher gluten and lower fiber because they prioritize yield more than nutrition in the wheat. When we got back this older variety of Kapli, people started benefiting. You know, their gluten intolerances were reduced. Their sugar spikes were reduced. There was more fiber so they could digest it better. And we figured out that everything new doesn't have to be made in a laboratory. Sometimes older wisdom men got to four can become a new product that suits newer requirements. And today, Kapli is a hit because it is rich in protein. Today, we have a variant of that Kapliata, which we call the high protein atta, which is made out of Kapli, ragi, and, soybean extract, and which has close to 30% protein in it. So I think while these newer trends come and we are riding that newer trend, I'm not, you know, missing them, but I'm riding it with a lot of traditional wisdom and with the philosophy of not over processing my food. I don't wanna give you protein with something that is highly processed. You know? I wanna give you food that gives you protein that is easily digestible and that is not... That is minimally processed.

Dhruv Sharma: Yeah. Satish, we're almost out of time with you, but I guess one final quick question. So, there's a lot of emphasis in food integrity right now. There's a certain public official everyone has their eyes on. I'm gonna make an assertion. I'd love your quick reaction to it. Do you... Would you say that, you know, adhering to food integrity is good for business long term?

Satyajit Hange (Two Brothers Organic Farms): Absolutely. It is.

Dhruv Sharma: And why? That's the answer we've gotten from you.

Satyajit Hange (Two Brothers Organic Farms): So, you know, what I what I understand on this question is that do we stick to, you know, producing good food instead of taking shortcuts? You know? See, today, the kind of awareness that is there, the kind of, I would say, lethargy that is built towards established legacy brands because they have lost trust. They have prioritized their bottom line rather than your health. And when a brand like us, the only, space that we can come and get registered in our mind is by being truthful, being transparent to the kind of food we are producing. And, in today's world, I think people are emphasizing a lot on what they consume. Disposable income is very high, and brands like ours will stay and grow.

Utsav Somani: Awesome, Satyajit. If our listeners were to order and experience two browsers for the first time, what is one product they should order right now?

Satyajit Hange (Two Brothers Organic Farms): They should order the ghee and the Kapli Atta, both of them.

Utsav Somani: Oh, that's two. Add to cart, guys. Thank you so much for, joining us, Satyaj.

Satyajit Hange (Two Brothers Organic Farms): Thank you, sir. Thank you, Dhruv.

Utsav Somani: Thank you. Bye bye.

Dhruv Sharma: Thank you.

Utsav Somani: Alright. Listeners, moving on to our final guest today, we've got Rajan of Peak XV, who's a freshly minted author as well.

Dhruv Sharma: Hey, Rajan.

Rajan Anandan (Peak XV Partners): Hey, guys. How's it going?

Utsav Somani: So, I mean, my Twitter timeline is full of pictures from the book launch event. So let's start with the book. What are the central ideas behind it? Who are you writing it for? And what can we expect when we pick up a copy?

Rajan Anandan (Peak XV Partners): Yeah. Firstly, thanks for having me, having me on, guys. And, look, the the the title of the book is, Liftoff Nation, and the theme of the book, the book is focused on Indian innovation entrepreneurship. Right? And the theme of the book is time is now. The time is now for Indian innovation entrepreneurship. And the core of the book focuses on why the time is now, and you can get into it. Right? And it also then talks about what else needs to happen. Right? How do we go from lift off to the the the goal is to land in orbit, you know, and and at the right place in orbit, not just any place in orbit. So that's really what the book is about. You know, it's it's really meant for a broad audience. We are hoping that it's quite readable. Dhruv was with us yesterday, so he's got a copy already. And, so we are hoping that it inspires many more Indians to start up. It... We hope that it inspires many more investors to, invest in our ecosystem. And, also, most importantly, I think it... We hope that it inspires our policymakers to continue to do more to enable innovation entrepreneurship. I think, they're already doing a fair bit, but, you know, we have a long way to go as as we've articulated in the book. So that's really what the book's about.

Dhruv Sharma: Fantastic. So, Rajan, you've been saying we enter... We've entered the global AI race, this year. Like, this is year zero. Also, a couple of years ago, you'd asked, Sam that famous question, which I think he regrets to this day. But how are we faring, and what are the next five or ten years gonna look like?

Rajan Anandan (Peak XV Partners): Yeah. So, look, basically, you you know, if you look at the different aspects of AI, right, like, most important is compute. If you don't have compute, you don't have AI. What's very interesting, Dhruv and Utsav, is at the end of 2025, India didn't have any compute. I think the whole country had, like, 10,000 active GPUs, like, really active GPUs. If you look at it, it's about 10,000. And I mentioned this last night at the, you know, university of... Like, a university like Stanford has 10,000 GPUs. Right? So so with 10,000 GPUs, we can't have an AI ecosystem. So the first thing we had to address was compute. I think the good news is, in the first six, seven months of this year, we've had over 300,000,000,000 of AI compute CapEx that has been announced by the three large conglomerates, Tata, Adani and and Reliance, the hyperscalers, especially Google and, AWS, GCP and AWS, and also our Indian, NeoClouds. Right? So Yotta, NASA, and E2E and several others. So x up from where we were in December, and I think this number will continue to significantly increase. So I think that compute, which was our single biggest constraint, is beginning to be addressed. It's still a constraint, but it's not the constraint that it was. Let's call it eight, nine eight, nine months ago. Second is models, Luke. And that was, I think what you were referring to a couple of years ago. Look, in in February of this year at AI Summit, Sarvam was the first Indian company to launch, you know, AI models that were trained ground up in India, 30,000,000,000 parameters, 100,000,000,000 parameters. They also have voice models and vision models, which they launched lately... Early last year. Right? And then since then, we've had several other companies. Indian companies actually launch models, including Bharat Chain, which is the IIT Bombay effort. Right? And the government's got, as you know, 12, 12, 11 companies and Baruchain that they've funded to actually build sovereign sovereign models. And I think this is this is very important because, you know, as you guys may have talked about from other guests on your show, you know, most of what enterprise needs can be solved with models that are in the 30 to 100,000,000,000 parameter range. Right? Mhmm. Example I say is, look, in the finance function, let's say you wanna AI transform your finance function and you need an accounts payable agent. You know, agent that does accounts payable. You don't need a trillion parameter model for that. Right? You need a you need a much smaller model. So so so... And and we actually are getting very good we are getting very good at that. Okay. Sorry. I've got an inbound call. So, and similarly with consumers. Right? If you look at most of what consumers need, you don't really need a trillion parameter model, for that. So so we think that we are gonna have several... Quite a number of companies that are gonna be very, very good that are going to make these 30,000,000,000, 100,000,000,000 parameter models. And then Saurabh has already started building a trillion parameter model. By the way, at a trillion parameter, then you start addressing coding and cybersecurity, which are the two remaining sort of enterprise specific AI capabilities that you need. Now the frontier models are still very, very important. Right? But they're going to be super important for discovering new drugs, for discovering new materials, and so on and so forth. And and look, the reality is, you know, you know, today to build a 10,000,000,000,000 model, you're talking about billions of dollars for a run, right, a single training run. And our companies are not going to be able for that. But for what India needs, I think at the model layer, we've started making progress. The third is on applications. I think, look, India will be the largest, maybe together with China, the largest consumer of of AI simply because of the massive connected population that we have. Not surprisingly, you guys may know this, but India has more consumer AI startups today than The US. So all the rage is about instinct and muse, but the reality is actually we have more consumer AI innovation in terms of quantity of innovation, right, than, than The US. And even in the enterprise, we have large number of companies now, startups, that are building agentic AI for Indian enterprises, either horizontal capability or, or or or or vertical vertical vertical companies. Right? And and, Dhruv, I spoke about a couple of them yesterday at the launch. Yeah. And then finally, look, on the, on, on on semiconductors, I think that's the longest 10 to the poll. Right? But even there, you know, we've got some mortacious attempts. There's a company called Agrani. You guys should have founder of Agrani, Dimant, on this. They're building inference CPUs. It's an ex Intel AMD team. There's a company called c two I that was building power chips. They just got acquired by, by by Infineon. So I think we're gonna see even in in in semiconductors, which which really is, you know, the the ultimate, ultimate capability to build. On the fab side, you know, I think we'd be at the 28 nanometer fab, so we still can't make the... You know, we won't be... We still don't have fabs coming up that can make the super advanced chips. But at least on the fabless side, I think we'll see that. So when you look at it across the stack, you know, we are making progress, Dhruv and Utsav. Right? So our view is and if 2026 is the year that India entered the IRAs, I think we need to give it a few years before we have a verdict because, you know, the popular narrative is we've lost the race or we're not in the race. Actually, we are in the race. But that being said, look, the public narrative, especially around the public markets, is true. The reality is we do not have pure play public... Publicly traded AI stocks, and that accounts for a large reason why a lot of foreign capital is leaving, leaving our market. But when you look at the private markets, the picture couldn't be more different.

Utsav Somani: And the geopolitics, I think, are forcing nations to be more sovereign, more, sort of self, I mean, become more independent. Right? I think there's a reindustrialization wave that's happening. So India 2047, what do the next twenty years look like for us?

Rajan Anandan (Peak XV Partners): Yeah. Look. So, you know, I I, you know, I'm, you know, I think I'm very confident we will get to VIX at Bharat. We will be a developed, nation. And a lot of it, would serve will be powered by our innovators and our entrepreneurs. Because, you know, in the book as, as hopefully you'll read it, Utsav, at the conclusion we talk about, you know, what Indian entrepreneurs are very good at is, you know, population scale innovation. Right? Nandan Nilekari, you know, sort of coined this phrase called population scale because of Aadhaar and UPI and so on. Right? But now what we are beginning to see is that in the in the in the book, we've got a lot of examples from health care and so on and so forth. You know, every industry, right, just being able to reengineer and build, not reengineer, but ground up design and engineer products and services that can scale to a billion users. Right? So so what does it mean to be a developed economy? Right? You have access to high quality services and products that you need. Right? Health care, education, transport, and so on and so forth. Right? Housing and so on and so forth. Right? So so we believe that, you know, because of the ingenuity and the design and engineering skills that, you know, our entrepreneurs have, we're going to be able to, you know, deliver high quality products and services that Indians need, 1,400,000,000 Indians need, you know, possibly at a lower GDP per capita than what is today thought about. By the way, in the book, Devi Shetty, who is the, you know, founder of Narayan Health, talks about the fact that India is the only country where health care costs per capita is coming down. Right? You all know, like, health care costs around the world are going up. And by the way, Narayan Health just one one one hospital chain does more heart surgeries than the top 10 hospitals in The UK. Right? So that is what we call about India scale, right, is this sort of giant scale. So so so, look, I'm confident innovation will play there. And when it comes to critical technology areas, Utsav, you're absolutely right. We are now in a very different world order and at least my view and our view, Saurabh and myself, Saurabh is my co author, our view is that this is only going to get more intense. Right? There'll be spurts of calmness, if you will, as this global geopolitical order, you know, goes into transition, right? So so it's going to be very, very critical for us to have, sovereign capability in all the critical technology areas, AI, semiconductors, defense, quantum, energy, and and so on and so forth. And I think the exciting part is, you know, we try to highlight this in the book. I think this government, when it comes to innovation, entrepreneurship is is doing a lot. Right? And, and and, you know, we just need to, obviously, and we will talk a little bit about this. But what else needs to happen? Right? More needs to happen, but I would say, you know, I think we we have the talent. We have the mandate. You know, we have a great start. Right? Let's take SpaceTech. Okay? We had one SpaceTech startup in 2015. Today, we have 400. By the way, India's entire private sector space startup ecosystem has has raised less than a billion dollars. Yeah. Think about that. Okay? And we have 400 startups. Now, of course, we don't have a SpaceX yet, but we have had a company, which is the third country in the world to put a private sector, you know, for the private sector company to actually put a put a rocket up, into orbit. So, long answer to your question, but getting to Vixit Bharat should be our aim as a nation to uplift sort of 1,400,000,000 Indians.

Dhruv Sharma: Yep. And, Rajan, in order to get there, what role will the domestic, private capital ecosystem have to come to play?

Rajan Anandan (Peak XV Partners): Yeah. Look. So, well, a lot a lot lot more of it has to go into r and d, and a lot more of it has to go into funding startups. Look, I would say the Achilles' heel of India's innovation and entrepreneurship story is r and d. Okay? So, if you look at r and d spend by India, we are at about 0.65% of GDP. So in dollar terms, it's about $18,000,000,000.01 8. Okay? The US is at three and a half percent of GDP. China is at two and a half percent of GDP. Now both those economies are magnitudes bigger than we are. And to give you a sense, so Israel, a country of 10,000,000 people, spends more on r and d than we do. Right? We spend $18,000,000,000 And the right number for us should be about $100,000,000,000 a year. Right? So that gets us to about 3%. We also have a lot of catch up to do, in a in a in a bunch of these areas. So how does that come? That would be a mix of both public and private, Dhruv. Right? All of it can't be government. In fact, today, by the way, even of the 0.65%, so call it 18,000,000,000, two thirds is actually coming from government. So Indian private sector actually doesn't do much at all. Right? It's only one third. So we need to go from $18,000,000,000 to at least $100,000,000,000 Now we can't do that overnight. It'd take a couple of years, but we do need to see a lot more capital, private capital going into sort of r and d, and that could be in the form of funding, funding research. You know, ANRF is a fantastic, initiative. It's the science... You know, it's the... It's basically, you know, funding basic science, you know, TRL... Think about it as TRL up to TRL four, and then RDI takes it from TRL four, onwards. Right? So some... Funding a lot more basic science, funding a lot more, core r and d type development. And then I would say even on the venture capital, you India, India's this year will probably land at somewhere between $14,000,000,000 and $15,000,000,000 So despite being the third largest startup ecosystem in terms of number of startups, right, India only attracts 3% of global venture capital dollars, right? So so one is we have to free up, and catalyze or mobilize the domestic capital, you know, and we have large... You have vast sums of it today. Right? If you look at, our pension funds, they don't invest in, innovation, you know, in technology directly or innovation directly. Right? They don't invest in venture funds and so on so forth, right? So we do have these large pockets that really need to be unlocked. But the other thing we should... We really need to aim to do is unlock a lot more global capital, right? Because, you know, I mean, given the potential that India has, you know, just the fact that we only have 3% of global venture dollars, really, you know, we are underweight when it comes to global capital. So actually, if you think about it from that standpoint and say, look, we're only at 3% and, of course, the global number keeps going up, right? It's not a crazy idea to think that, you know, of course, going from 18,000,000,000 to 100,000,000,000 in a year or two may not happen, but over a couple of years, we start catching up. And if you look at a 7,000,000,000,000 economy, let's say, ten years from now, right, and you say you wanna have 3%, you're looking at about 200,000,000,000 a year that needs to go into R and D. Now a lot of that r and d will... Should be done by large companies. Today, you know, very little of that is happening. But in India, that... It may very well happen that a lot of this r and d is gonna be driven by startups. Right? Certainly, when you look at space with the exception of ISRO, which is state owned, all the innovation in space is happening, in in in in startups.

Utsav Somani: And talking about private startups, Surge twelve, when you were building this cohort of 18 companies, raised the ceiling to 5,000,000, put in 50,000,000 from Peak XV as well, what were the thoughts, and how were you doing it differently compared to the first cohort?

Rajan Anandan (Peak XV Partners): Yeah. So, look, firstly, you know, surge is the approach we take to seed stage investing, Utsav and Dhruv. Right? We meet companies every week. Companies that we like, we'll invest in. We have a full time investment team and operating team that works with these companies. From the time we invest, they'll... They go public or they get acquired, or they or they wrap up. And then we have a company building emotion. Right? So it's an eight week, sort of program that helps companies really understand what does it take to build an enduring company. Right? Like, so how do you how do you deep it, make sure that you make all the design choices early so that you improve your odds of success? And then finally, we have a community. So all these four pieces put together is sort of surge. Right? So surge is not an incubator. It's not an accelerator. It's just the approach we take to seed stage, sort of investing. I would say, look, we have more has stayed the same when it comes to our approach to seed stage investing than what's changed. Right? So what what stayed the same? Right? We have... We basically wanna focus on finding the absolute best founders who are building in markets that we think can be, gigantic. Right? We, we want to basically invest in the absolute best in a small number of companies. Right? So we meet, like, just to give you a sense. Right? I think maybe it's five or 6,000 companies, and we had 18. You know? And these are companies we actually met. Okay? These are not just, these are companies we evaluated. So so so so, you know, keep the keep the bar, you know, very, very high. And and then thirdly is, like, look, really provide full stack support. Capital operator support, you know, learning programs, and then a community really... So so those are really the... And the last important design choice we made upfront, guys, is open architecture. Right? So every single one of our 18 companies is co investors. Could be tier one firms, could be smaller funds, could be angel investors, and that that happens both at seed as well as the next round. It's very open architecture. Right? So so those things have not changed. I think what's changed is two or three things. Right? One, when we started, we had one or 2,000,000. Today, we are up to 5,000,000. That's because the market has changed. Right? Because today, the reality is, you know, with AI, you can build faster, but also you need to build a lot more, you know, and you need to drive distribution very quickly. Otherwise, you're not gonna be able to catch it. In deep tech companies, that's one category of companies. Second category is sort of deep tech companies. They just require a lot more capital. Right? Like, we have a company called Ulook, which is gonna launch a constellation of RF satellites. You can't do that with $750,000 You can't launch. Therefore, you know, they have to get three satellites launched next year, right? So you can't do that. You need actually a much, much larger seed round. So that's one change that we made. I think the second change is really a factor of the market. It's not something that we do. The market has become much deeper, right? Today, if you look at it, you know, India, there are companies innovating for India and there's innovation in every part of the Indian economy, right, from brands to commerce to healthcare to financial services. It's very interesting to listen to the founder you had before, right? You know, the breadth of innovation in... And by the way, that's what we try to capture in this book, this extraordinary breadth of innovation, that we have in India. And so that's building for India. And then then we have 40% of new seed stage investments that were made in 2025 were companies that were global from day zero. Right? Now that used to be SaaS if you go back to 2021. But today, it's sort of AI. It's advanced manufacturing. It's consumer brands. It's health care. I mean, it's a broad range of range of companies. Right? So so I think because of that change, right, the the mix, underlying mix change of the kind of companies that are being started, the mix has also changed for us. So in our first cohort, it would serve 10% of our companies were building for the world from day zero. This scored 70%, seven zero. Right? That's the change. Now, by the way, the market is about 40%, right, which is Indian... 40% of Indian companies are are building for the world. So so I'd say that's that's the, that's the second change. I'd say the third change is, look, companies are just scaling much, much faster. The top 10 search companies have crossed a billion dollars of annual revenue. Right? Many companies over 100,000,000 revenue. But they took, I'd say, between five to seven... Five to six years. Okay? But now we're seeing it just happened much faster. Right? But that's, again, the the market changing. And we have to also change our playbooks. Right? Like, how do we really support these companies, you know, so that they can grow so much faster or if they're growing so much faster?

Dhruv Sharma: Rajan, I know we're almost out of time with you, but what might come in the way of lift off, and how can we get it out

Rajan Anandan (Peak XV Partners): of the way? No. So look, the single biggest thing we have to address is r and d. Right? Because especially in this next wave of of, you know, deep tech is the final frontier for Indian innovation for the Indian startup ecosystem. I think that train has left the station, by the way, because I think a lot of people say, do we have any deep tech? Of course, we do. Right? Just look at space or, you know, look at any of these sectors. But but that's an r and d... Those are r and d intensive industries. Right? So we just need to find a way to five x our r and d spends as a nation. That's not easy to do. So that's number one. Number two is, look, we have to, you know, we have to address ease of doing business. I think as India, we've gotten much, much better at ease of doing business, but it's still very hard, right? If you're a young entrepreneur, Manish Sabrawal, who's been quite vocal about the topic, right, we have a subchapter on ease of doing business, largely sort of from Manish's thoughts. He's coined this phrase called regulatory... Sorry, you know, regulatory cholesterol, right, which actually is the ease of doing business. And and if you're a young founder starting up a company, you know, especially if you wanna do something in the physical world, right, where you have to manufacture things and so on, it's very tough. You know? It takes you have to get so many approvals, and you're a young founder. How do you go do that? You know, we had a company, by the way, a deep tech company that we invested in Bangalore, young founder. It took him two years to get approvals for the factory proof. He ran out of the seed funding. You know? That's all good. Right? Hey. If you wanna shut down a company, in India, it takes two years. So so I think these are the sorts of things we need to address. And I'd say the last thing is, look, we've been very, I think, by and large, very positive regulatory moves to support innovation ecosystem. By the way, the reason India is the number one IPO market... If you look at number of IPOs, right, India is the number one IPO market third year in the running. 2024, we had over 300 IPOs, number one IPO market. Well, I'm not talking about dollar value, but number of IPOs. Same thing 2025 and 2026. Despite the Iran Conflict, we're on track to be the number one IPO market. By the way, that happened because of one regulatory change in 2021, right, where unprofitable companies could list. Before that, actually, you know, if you're a startup, if you're not profitable, you couldn't list. Right? So so we've had many, many changes like that that have been net positive, but there have been, you know, regulatory actions, that have not been positive for the innovation ecosystem. Right? And in fact, my coauthor, Saurabh, has some very interesting thoughts on how to think about regulatory frameworks so that they put the consumer first, national security at first, but also are much more pro innovation. So I'd say those are the three things. But if you ask me for that one thing, it's R and D. We've got a we've got a five x at a minimum the r and d resources that we're putting in. And a lot of it needs to come from private sector. Right? The large Indian companies invest very, very little in r and d.

Utsav Somani: Rajan, this was phenomenal and inspiring. Thank you so much for coming on our show.

Rajan Anandan (Peak XV Partners): Thank you. Thanks, guys. Take care.

Dhruv Sharma: Congrats on the book. Thank you.

Rajan Anandan (Peak XV Partners): Thank you. Thank you.

Utsav Somani: Alright. Alright, listeners. That's it from us, for Friday, October 9. We'll see you on Monday at 4PM, same time, same place. Bye bye. Have a wonderful weekend.