Full Transcript

Utsav Somani: All right, listeners, episode 81. It's a Friday. So let's keep the energy high. Let's get down to business. So today we've seen three AI things drop, like Codex super app from OpenAI. We've seen Perplexity announced personal computer and Opus 4.7. So OpenAI, I think the move is clear. They're moving closer to Claude where they're trying to build this super app with Codex. I installed it today in the morning. So basically now you have 90 plus plugins, Slack, Gmail, everything that you can connect that you connected to Claude. But Claude has limits, which run out pretty fast if you're using 4.6 or Opus 4.7. So OpenAI is making a pitch that here we have no limits. If you have a plus plan, just come to us and use it unlimited. So basically that's going to be that play to win customers back. Perplexity personal computer is what basically Siri and I mean, Apple Siri should have been like, I mean, on your Mac, you can now literally give it commands and it does things for you like fully automate stuff for you. If you want to read iMessages, if you want to draft replies to emails, everything on your computer, files and all of this kind of stuff. So I think it's becoming a true powerhouse if you have the Mac subscription, which is $200 a month. Then we've got Opus 4.7, which is, of course, making significant improvements on many, many metrics, which you can look up online. Still not the MyThos model that we are hoping to see out in the wild very soon. Then we've got a podcast that went viral over the last two days, Jensen and Dwarkesh. They had a run in through what happened.

Dhruv Sharma: Yeah, they had, I think the things got heated a little bit. And I mean, for anyone who's, if you haven't seen that entire podcast, it's about an hour and a half long. But I think what we're talking about started somewhere around one hour, 20 minutes. And they were talking about the big theme they were discussing in that part of the podcast was how America can perhaps retain its competitive advantage over China in the AI race. And Dwarkesh's argument, I'm going to oversimplify it a little bit, is why should America be, you know, that export controls are good. Why should Nvidia be exporting their GPUs and basically feeding into the hands of competition? And Jensen had a counter to that, which was basically that, you know, what we make at the end of the day is chips. And if they're not going to get them from us, they'll make chips of their own. Basically, Nvidia's loss is going to be Huawei's gain. And that'll mean a lot of added revenue and America would lose the opportunity to be a part of China's AI stack, as it were. And as Chinese AI starts to diffuse in other parts of the global South, America will just lose out that opportunity. So that's what the debate was all about. But should I tell you something?

Utsav Somani: So there was China's 10% of America's compute right now, right? Approximately.

Utsav Somani: And also, there was a famous line that he used, which Mark Andreessen posted about the famous sweatshirt that he wants to make, did not wake up a loser.

Dhruv Sharma: Yeah, he said something like, you're not speaking to someone who woke up a loser. This whole loser premise. But I'll tell you one line that I heard, and it had nothing to do with this, you know, whatever the argument that the two gentlemen had, which stayed with me, which I've written it down, I'm going to read it out like it kept playing in my mind through the night in the morning. And Jensen said this about your business partners. He said, don't pick winners, either let them all take care of themselves or take care of all of them.

Utsav Somani: Beautiful. I thought that was very profound. Was it in reference to TSMC or no?

Dhruv Sharma: I think it was in reference to, so, you know, if you told this line to a VC, I don't know what they would say about what they would think about this. Don't don't pick winners. But he said this also about their own fate. Because, you know, 20 years ago, even in terms of graphics, Nvidia had like they had all the wrong architecture, per Jensen. But they were intellectually honest enough to go back again, quote unquote, to the drawing board, re-architect everything. And the rest is history, as they say. So I think he said that also in, you know, context of Nvidia's own past. But I thought that was like beautiful lines.

Utsav Somani: No, thanks for recapping that for us. Two things in India that are very exciting. UPI turns 10, launched by NPCI in 2016, 12,000x volume growth. I mean, it's just insane what they've done. It's one of the stories that we keep on repeating. But what India has achieved with UPI, I think is phenomenal. So congrats to them on turning 10. Cabinet has approved funder funds 2.0 on April 13th, a 10,000 crore corpus. So there's more funds going into micro VCs, manufacturing, deep techs, and they will back AIFs and not startups directly. And funder fund 1.0 was 25,500 crores deployed into 1370 startups via 145 AIFs. So there's more capital for funds if you're looking to start up. I think it's exciting. And with that, let's welcome our first guest, Aman. Welcome to the show.

Aman Singh (co-founder of S45): Hey, thanks, Ashavendra, for having me.

Utsav Somani: Yeah, it's super hot. So walk us through why you're building and what you're building with your AI native investment bank.

Aman Singh (co-founder of S45): Yeah, so we are building an AI native financial institution, right? Started with investment banking, where the premise is that, you know, humans take care of, I mean, humans take care only of the judgment part and agents are mainly responsible for the execution that happens. So this is what we are building in a nutshell.

Dhruv Sharma: It's like advisory meets intelligence.

Utsav Somani: When did you feel like the process was broken? Like what part of the process was broken? And what are some of the things that we've normalized as an industry that you've observed?

Aman Singh (co-founder of S45): Yeah, so I think, you know, look at the execution layer for that, right? A lot of that deal still runs on email, docs, follow-ups, and, you know, sort of a banker memory, right? So it's a very, very high, fairly high value industry, right? Investment banking, for example, right? So backend is surprisingly very unstructured. I mean, if you meet any investment banker, they keep on working for like 16 hours a day and there are lots of nuts and fixes that keeps on going.

Dhruv Sharma: Aman, can we ask you to, I'm sorry, but can we ask you to demystify what investment bankers actually do? Because people generally, you know, I mean, people have their own ideas.

Utsav Somani: So yeah, in the movie version of it, but what's the real version of it?

Aman Singh (co-founder of S45): Yeah, so essentially an investment bank is responsible for taking any company public or if you are, if you are a business owner looking to buy and sell your business, investment bankers are the guys who facilitate the transaction. So the deal that you as a retail user, I mean, you get to invest in those IPOs. So investment bankers are the backend to help getting those companies listed.

Utsav Somani: And you're trying to simplify this process by a factor of 10 to 20x. Like, I mean, you say that DHRP takes months and you're trying to bring it down to seven days. You say that IPO readiness takes maybe weeks to prepare for or check for. You're trying to bring that down to hours and you're trying to assess maybe 30 or 50 companies with AI. So what truly is the magic here that why are you able to do this apart from software? Are there humans involved as well? Or this is pure software led? And at what part do humans step into this?

Aman Singh (co-founder of S45): Yeah, so I think, you know, as you told, right, even getting just the basic draft of DRHP used to take like 30 to 45 days in case you have all the documents, right? And preparing the entire DRHP like takes at least six months. It's a 1200 page document. It's the entire history of a company that goes in, right? So the right way to think about this 45 will be right. Think of the org structure of a typical investment bank, right? It starts with an MD, then flows down to analyst, right? And there are three steps. I mean, if I have to define it in steps, it starts with an outbound rate where you first of all identify the sector you are interested in going after. So our org is getting designed in a very different way, right? Starting from outbound, which used to take like smart humans to go after, right? I mean, identifying those sectors, identifying those promising entire thing is done by, you know, AI, right? The idea is that finance and healthcare, right, I think are two very high value industry where there will always be a human in the loop because, you know, a company taking a company public is like founders lifetime work, right? So always in any step, right, if you start with outbound, then when a deal is closed, then the mandate execution happens. So each of the, I mean, agents do the underlying work, grant work that is there, right? But I mean, in the end, there is a human at every layer. So instead of having all those MD to analyst layer, there is one guy who acts as a reviewer for each of the things, they own the outcome, they run the agent. So this is how the org structure looks like. So typically, in a regular investment bank across the world, right, there are a team of bankers and capital markets team who run the world. We are the team of engineers. And then there are a team of, I mean, a few bankers who runs the deal. And the throughput is very high in comparison to what you see, you know, like a typical investment bank. Like, for example, we have already built agents. I mean, initially what used to happen, right, when we started, we saw that if we imagine you come, I want to go public. So how does the process essentially looks like? I'll, first of all, you'll send me all the documents, I mean, you know, these are all the things that we have done. So just creating that banker grade analysis, right, that are you even eligible for an IPO or not, right? It takes like 50, 60 page worth of analysis where we distill down every single thing, right? About whatever you have done in your entire life, where have you studied all the related party transaction, anything that you can think of, right? This used to take like 10, 15 days for a smart guy to just go into that depth of your financial and create that report. Right now, now what happens in S45, we do that in 30 minutes, agent does it in 30 minutes.

Dhruv Sharma: That's the first cut.

Aman Singh (co-founder of S45): Yeah. That's the first cut.

Dhruv Sharma: And how ready is the first, how ready is the first cut?

Aman Singh (co-founder of S45): Oh, it's a hundred percent correct. But I mean, we still don't rely on it. We still don't rely on it.

Utsav Somani: LLMs, tech stack visibility.

Aman Singh (co-founder of S45): So I think it's a mix of, I mean, you know, it's more of a context engineering. We are a multi-model AI architect system that we are building it, right? So back-end is on Python, I like, and front-end is on REST API, all these things are there. But yeah, it's a multi-model. I think the big thing here is the context, right? I mean, we have team of bankers where we, we have put in sort of one thing that keeps on recording their system, right? I mean, within the company, we run a TMF sort of tracker, right? I mean, we did like, it's been like nine months of operation. We raised $5 million in funding and did like $2 million in revenue. We are only a 12, 13 member of team, right? We are looking for the 10X journey from here this year. So, you know, and we are not looking to, sorry.

Utsav Somani: Yeah, you were going on to, I think, step two.

Aman Singh (co-founder of S45): Yeah. So I think, you know, we are looking to, I mean, there is a PMF tracker internally that we run within the company where each of the, I mean, 12 members, right? Whatever they do, we have started tracking it down. And, you know, we write down that if you took like 10 hours to do this task, we just write down that how much of this was AI, how much of this was not, we already know the high value workflows that our bankers bring in. So going after it, but entire org is being reinvented. The idea is to 10X the, I mean, you know, revenue, but the idea is not to 10X the workforce. I mean, we don't need 120 people to make say 70 to $20 million of revenue that we are targeting.

Dhruv Sharma: And how cost-comparative are you vis-a-vis traditional iBankers?

Aman Singh (co-founder of S45): So I think, you know, think of this industry in that way, right? Capital markets is a business of trust. First of all, getting into the market, it's very high barrier, right? Come from IIT, but I mean, that does not mean that you go to Bombay and you start dealing with people. So you cannot go and reduce the cost at the first go, right? We have traditionally, if you look at the small board companies, we are at least 4% cheaper than what a SME IPO banker typically charges, right? But the cost is more or less the same. We are just fast. We are more, I mean, internal cost of operation is pretty less, but yeah, we charge the same fee.

Dhruv Sharma: Another interesting question to ask would be, you know, if you were using an AI native investment bank to lead tech IPOs, one would get it, but you're saying SME IPOs. And of course the, you know, from the outside, I think the mindset is SMEs will maybe be more skeptical of this. So when you approach them, typically what are the questions you guys get asked and how do you answer those questions?

Aman Singh (co-founder of S45): So it's not just SME. I mean, our focus is mid-market. I mean, very less deals that we run are SMEs, first of all, and mid-market is the focus. I mean, where, you know, typical big banker does not look. So in the end, client does not care about, you know, are you doing it with AI or are you not doing it with AI? They are coming here to raise some capital. Are you able to get it done? It's just our internal process of ops is very, I mean, we pitch it, right? I mean, we have a very interesting way to pitch to our client. So as soon as I get to know the name of the company that we are going to pitch, right? We go with that 60 page report where we have the entire structure. You did this entire thing during your entire life cycle. This is how you can be better. So first of all, that is a very high touch point, right? Because I mean, if I meet you today, I can come with that analysis by the evening, right? And I can explain you through. So that's a very high key dude. This guy has studied so much about my business. He knows the entire throughput, right? So AI is just a way, I mean, people in this industry, in capital markets, people don't care about AI. It just changes the way our org is built internally.

Utsav Somani: So that brings me to my next question. You're using AI to basically prepare the DHRP and get them ready for an IPO, at least on paper. But what happens in terms of getting them anchor investors and everything that happens after you're approved by the board to get listed?

Aman Singh (co-founder of S45): Yeah. So after you are approved by the board to get listed, right? So there we, before even, I mean, before that happens, right? You have already mapped down investors, which might be interested to invest in this company, so that is again AI driven, right? I mean, we have an intelligent system that if you give me a company and we have our own investor database that we are networked with, right? And so essentially it just maps you down to the right set of investors, right? That you should probably run through this. This guy has made money in the similar sort of space in the past. So just go and run through it, right? Then the idea is most of the anchor investor thing happens before it, right? So it's just, you just wire the money posted. I mean, people are already interested that, okay. So it's just the money wiring happens. And that part, I mean, it's taken care of by humans.

Utsav Somani: And what are you proud of? Like, what is the number that you feel that you've made great progress? Like number of SME IPOs, number of main board IPOs?

Aman Singh (co-founder of S45): I'm not proud of anything. I think we are just started. I mean, we are just started.

Utsav Somani: No, I'm proud of at least what you've achieved. I think, I mean, capital raise is just one, but I think what you've built and from what we can see, I think AI native definitely seems...

Aman Singh (co-founder of S45): Yeah. So I think what we are, I mean, if I have to tell you what I'm fundamentally proud of, I mean, I have the clarity of how, you know, the first thing is that capital market is a 100, 200 year old business, right? As soon as the capitalism started, capital market started, right? So fundamentally it has never been changed, right? Jamie Devon has been running JP Morgan for years, but the process are still the same, right? Because technology was not that. So one thing we are proud of is we are fundamentally going, I think we are going in the right direction of how, you know, an AI native thing should look like. It cannot be a chart GPT for bankers. It's entirely org revolving around that. So the progress that I'm making week over week there, how companies, I mean, entire process is getting restart. You need less of the thing. That is what makes me excited.

Dhruv Sharma: Yeah. I think this is a point that a lot of people raise that if you have to do something in an AI native way, then you can't like, you know, you can't just bolt on capabilities. And if anything, you have to redesign the entire organization as well. But coming back to the process itself, how did you find places where you could compress the timelines? And the other question to ask would be, can you introduce us to some of your agents? I believe it's like a multi-agent system. So what are their names and what do they do?

Aman Singh (co-founder of S45): There are, I mean, the entire, it's been like nine, 10 months of doing this thing, right? So the entire focus has been that, you know, can we just, you know, think of a DRSP for that sake, right? There is a thing called capital structure where, you know, in your entire capital history of your company, there are like 700, 800 documents that you have, right? Where you have done some sort of transaction before you are taking it public. So it used to take around a week to two weeks for any banker. If you have all sets of documents, right? First of all, getting those documents and stuff, then, you know, once you have those documents, it will take around one to two weeks to get it right. Now, you know, system is so intelligent in our case, right? You drop in all the 700 documents. It maps down what is missing. It just gives you the throughput exactly the way it goes into DRSP. Now as a human, as a banker, your job is only to just verify this thing and place it in the placeholder. And now you are ready to go, right? And typically if you'll go into any lawyer team of a main board IPO, they charge around $1 million to write a DRSP. That is sort of the thing. But yeah, it's just getting started. These are the few things that we have done. I mean, even in terms of distribution, the system is pretty capable that if I put in a company, it analyzes itself. It's mapped down to the right set of investors. It sends follow-up email from there. You know, the fun thing is entire agents are doing most of the stuff and it will keep on doing the most.

Utsav Somani: How many IPOs have you done? Like what does the number look like for you right now?

Aman Singh (co-founder of S45): Oh, we have done. I mean, as I told you, right last past year, it was like three deals that we did. Two were SME IPO and one was a private market case. $50 million.

Utsav Somani: And the sweet spot for you mid-market, am I correct in defining that it's 50 to like say 500, 600 crores?

Aman Singh (co-founder of S45): Yeah, that is where we are focused. Because I mean, these deals are typically underlooked by bigger banks across the globe.

Utsav Somani: And they are mostly suited for SME IPO space?

Aman Singh (co-founder of S45): No, no, I think they are mostly suited for early main board. I mean, it's a main board IPO. If you even go to raise say 200 crores for someone, they probably get listed on the main board.

Utsav Somani: Okay. So because I think the SME IPO is probably between 25 to 50 to 100.

Aman Singh (co-founder of S45): Yeah, yeah, yeah. I mean, the range of raising is 100 crores for SME.

Utsav Somani: Like I mean, Kotak and Bofa, Bank of America and like Motilal, all of these guys don't play in that space?

Aman Singh (co-founder of S45): They play in that space. No, but yeah, because I mean, their team is entirely built around human, right? I mean, if on a 500, the piece don't change for anyone, right? So if you, I mean, the money that you make won't be suitable to run the, you know, the team that they have designed around. And in our case, we'll be profitable with that deal as well, because technology is the fundamental enabler. They look for that, they fight for the main deals. I mean, the 58 top IPOs that you see in the country raising 10,000 crores is where they are focused on getting buy of it. And we are looking at the bottom layer of the stock.

Utsav Somani: All right, Dhruv, any final couple of closing questions?

Dhruv Sharma: I mean, more than a question, I have this interesting thing for both of you, which is so Bill Gurley of Benchmark, like previously of Benchmark, he for the longest time has been an advocate for direct listings. And he's been against, you know, perverse incentives in the banker community when it comes to US tech IPOs. And he once calculated that, you know, this underpricing the IPO business so that your large institutional clients can, you know, benefit from the money on the table, I think leaving money on the table has cost Silicon Valley $171 billion over 39 years. That's the Gurley math on that. Yeah, which is just like, but I do have a related question on that. Maybe one of our sort of closing questions for you, Aman, in terms of pricing it right, what are you able to do with AI that people can't do, you know, can't do without?

Aman Singh (co-founder of S45): I think there are two things. I mean, you know, there are two ways to look at pricing, right? So we typically on the small board, right, when the raise is small, we charge like sort of 4%. What AI is doing here, I mean, AI is not able to negotiate.

Dhruv Sharma: I mean, pricing the company, the asset, the securities.

Aman Singh (co-founder of S45): Yeah, so it's typically human judgment that takes care of it. I mean, yeah, I mean, I don't think AI should be given. We do have, I mean, we do have to care of the, I mean, we do have to care of the brain of our bankers, right? That they value it. But eventually it's a negotiation that happens with the, with, between the company that we bring in and the founder and then calculated. Yeah.

Utsav Somani: I think one final closing question. So you have a 15 year age gap. I'm with your co-founder. How did you guys meet? And also is that, I mean, he breaks, I think the banking chops and you bring in the AI enabled services chops, like how did that combination happen?

Aman Singh (co-founder of S45): Yeah. So, I mean, I, when I graduated, I mean, when I was graduating, I was running a different company called CF while I graduated from campus. So during that time only, I met one of my cofounders, Deepank, right? He's again, IIT Delhi alumni. So we kept on chatting over WhatsApp. I was planning to shift to Bay Area for the company that I was working. I mean, after CF, I mean, I exited out of CF then was working for a company in Bay Area called Skyflow. So I was planning to move to Bay Area. Then I came to Delhi and I ended up meeting Deepank. He told me something can happen here. I see this as a white space. And I told that, yeah, I mean, Dhanda does not excite me, but disruption will, and I'm seeing AI doing certain things. So then he knew Pankaj and then, you know, all three of us came together. So yeah, I bring in the future thinking thing and these guys are heavy into business. And, you know, one is a capital market expert for like 20 years. So this is how the team bought in. Deepank collected all of us together and connected the dots. Yeah.

Utsav Somani: Wishing us all the best. Thank you for coming.

Aman Singh (co-founder of S45): Thank you so much. Thank you. Okay.

Utsav Somani: Thanks, Dhruv.

Aman Singh (co-founder of S45): Thanks. Yeah. Thanks.

Utsav Somani: All right, listeners, it's time for our next and final guest. Super excited for this one. Also very, very nervous. I'm going to try and introduce him. Dilip, first, let's welcome you on the show. Dilip, I think you're on mute.

Dilip Kumar (Investments, Rainmatter by Zerodha): Just like always. Sorry, guys. Thank you. Pleasure to be here.

Utsav Somani: Before the show started, Dhruv told me that Boston Marathon is this weekend. One of our common friends as well is going to run it as well. You finished at 255. You were an overweight person at 32. And now an endurance athlete at 40. How does somebody go about that shift?

Dilip Kumar (Investments, Rainmatter by Zerodha): Oh, well, I can just go about saying all the fancy words. Great persistence, perseverance. But I think tragedy now makes it much easier. You just have to say out the plan and the goal. Yeah. Just so to also correct you, I think the Boston Marathon is on the Monday. Not on the weekend. So yeah, it's always the Monday of the week. I think it's the Patriots day. So it's always the Monday.

Utsav Somani: Okay. All right. So yeah, we'll get started. So let's introduce Rainmatter. For anyone who's hearing about Rainmatter, if they've been living under a rock in the startup ecosystem or just entering the startup ecosystem, how would you define Rainmatter to them?

Dilip Kumar (Investments, Rainmatter by Zerodha): Yeah, so Rainmatter is a venture fund. You know, it's by the team at Zerodha. So we are a classic venture model where we invest in startups. There are three areas where we focus. FinTech, which is more strategic to the core business, what Zerodha does. And two other areas, which we believe are more passion and interest area to all of us at the core team, which is climate and health. And of course, we feel that that's an area where we need more and more startups and innovations and products to be built to build a good living ecosystem. So we invest mostly in these three areas. And of course, now we cut across a segment, which is deep tech, which might be intersecting at climate and health. And then we are also looking a little more deeper in manufacturing space, a bunch of other areas. But yeah, so we've been in existence for around 13-14 years now and mostly invest in Indian companies, Indian founders who are building products for India.

Utsav Somani: And is health a personal focus for you within those verticals?

Dilip Kumar (Investments, Rainmatter by Zerodha): Yeah, so I lead the health investments. Health is a large focus for us as a fund as well. We've invested, I think, over 45 companies now in the last three years. So it is a focus area.

Dhruv Sharma: Did it correct me if I'm wrong, but have you guys partnered with companies in such a way that put together, they act almost like an interconnected ecosystem or will at some future point in time?

Dilip Kumar (Investments, Rainmatter by Zerodha): Yeah, honestly, that was not intentional on our part. I think people ask us what our thesis is. But we told we really don't have a thesis. We have a very first principle driven approach. So almost all the investments what we have done is essentially from the lens that these products should exist. The founder seems to be the right person to be building this and the problem what they're chasing is something which is very legit to be attempted and solved for now. One conscious effort what we took is that we said, the reason I said in the beginning, we are not like a typical fund is the reason is that we don't really chase for category leaders or market leaders. On the contrary, we are trying to build a category. So if you look at health and climate in particular, that's an area which hasn't attracted a lot of venture money per se. It's because it's very hard to build a category and also drive an outcome both to the stakeholders and to the consumer. But it takes a lot of time. A country like India where health is still, you know, an alien language. It is, of course, a common language now, but amongst a very few section of people. But overall, as a market, it is still an alien language. So which means we need to create a category and an effort. What we took on that part is let's go out and build an ecosystem. So if you look at our portfolio companies in health in 45 companies in particular, you will see patterns there. I think some 12, 13, 14 companies, some 8, 10 sports companies, there are wearable companies, there are elder care companies. So you will see some pattern. And the reason is we tell the founders that, look, we are not backing you because we think you are the market leader. We are backing you because we feel that there should be more and more people who should go out and solve for this problem statement. And we may actually go and support them as well. So it's an ecosystem what we're creating.

Dhruv Sharma: I'm thinking one of the common threads between, so you said fintech, healthcare, climate, but at least between fintech and healthcare, with fintech, you've got to earn people's, people have to trust you with their money. With healthcare, people have to trust you with their health. So with the vantage point that you have, what is the definition, the language, the, you know, that almost the, I really can't think of a word, but how is trust is different in those two domains and designing for trust, building trust, yeah.

Dilip Kumar (Investments, Rainmatter by Zerodha): Yeah. If you look around, look, if you look at what truly has been healthcare companies in India for the last 20 years, there's largely been the hospital companies. I do the Moneypulse and the Apollos and the Fortis of the world. And what stood out, what stood out was for the end consumer, they trusted the brand or they trusted the hero doctor. They trusted Dr. Devi Shetty or they trusted Dr. Nareshwaran, right? So the trust is an extremely important part. And rather I would say the mode in the healthcare business. And that has to somehow get transited into anything, what you're building in the healthcare segment, whether it's consumables, whether it's wearables, any form factor you say, right? Because here, what you're talking, unlike any other sector is that, hey, you are building a product to help me drive an outcome, whether I have, you know, any lifestyle disease or any other goals I've got, I have to trust you as a founder first, whether there is a founder product fit. So it's very unlikely you will see, I mean, you know, I don't mean it in a negative way, but a very unfit founder trying to build a health company, you know, it kind of doesn't sink well, right? But that doesn't mean their founders have to be a six pack or, you know, biceps, that's not the intent. The point is that...

Utsav Somani: The same goes that you can't trust a thin chef, right?

Dilip Kumar (Investments, Rainmatter by Zerodha): Yeah, I mean, essentially you have to walk the talk. That's what we look up, right? I mean, is the founder really walking the talk when they really mean, or are they really seeing that, you know, some big consulting firm has created a report and therefore they think there's an opportunity, let's go and crack it. Very unlikely a founder can really build a meaningful business in health in India. So I think the trust part kind of, you know, transits from there to say that, how can you build the same mode in new age healthcare companies? And of course, then another, you know, in addition to the trust, what you asked, the one aspect is that how do you build distribution? But that becomes very typical in a market like India, where if you constantly spend money to acquire users, there's no longevity to that. So if you can own the distribution, that's an IP I see in the business.

Utsav Somani: And there are two others that you mentioned when you described your preventive health playbook. Trust is the only mode was the first one. Distribution is our IP. Product is the outcome, not engagement. And in India, you're fighting inertia, not incumbents. Pick the one that most founders get wrong and who is the recent one who got it right very well.

Dilip Kumar (Investments, Rainmatter by Zerodha): Yeah, that's a tough one. But I think most people...

Utsav Somani: I'm getting inspired by your writings on social media. You write very, very well. So we've learned a lot from you.

Dilip Kumar (Investments, Rainmatter by Zerodha): No, no. Thank you for the kind words.

Utsav Somani: And before the show, we were also discussing you're one of the rare ones in the ecosystem who's not trying to pull anyone down. And I think that truly stands for Sirota as a brand and what you've done at Rainmatter and of course, your founders as well, where I think it's a very positive ecosystem that you've created around yourself. So I wanted to highlight that on the show also.

Dilip Kumar (Investments, Rainmatter by Zerodha): No, no, really. Thank you. Kind words. No, like I said, it's coming from the lens that I've been a founder for most part of my life, most part of my career, right? And I still feel if you look around my socials, I don't write myself. My title is not a VC or investor when I say I'm an entrepreneur. And it also kind of works for my ego boost, right? So I think it's because we need an ecosystem where we are genuinely trying to help people with no strings attached. And I don't see that happening a lot in the ecosystem, right? But the previous point that you said, you know what? I think most health companies in particular, they almost are getting most of it wrong because I mean, the founders I'm meeting today, the first impression is that they can create an app. There is an AI chart to it. They can throw some money to do app store optimization. But what they're trying, what they're not understanding is the end user doesn't really care whether you have a foundational model or how strong your LLM is. They care whether you can help me drive an outcome. You know, I'm a diabetic. Can you help me drive an outcome? You know, or I'm a 28 year old woman. I have PCOD. Can you help me get through that? Right. So I think most people over-engineered product. You know, they try to position it as like a very engineer-first driven approach, but they don't look at it from a healthcare lens. And one reason if you see why we had a lot of skeletons in the digital health, telehealth play was largely because there was a trust deficit. People rely, I mean, companies got built and they over-engineered accessibility, affordability, but that is not what people were looking. People were looking that do I trust the guy who is giving me that advice? And how do I go back to them? You know, and the form factors of chat, voice didn't really work. And that you see hardly any telehealth companies exist today. As a product, maybe as a feature, a bunch of them guys are doing that. Right. So on that aspect, I think almost all are getting it not right. And it takes a very different approach, a bottom-up approach to really understand what those tenets are. And you can see through, like if you look at a company like Protein, right. If I may ask what Protein brand stands out, I'm sure I'm guessing the right name. Do you want to take a shot?

Dilip Kumar (Investments, Rainmatter by Zerodha): Why Whole Truth? Why Whole Truth? Because he built the trust. The founder has, there's a moat around the founder. You trust the founder. You, and you know that he started with a bar. Today he's a protein powder company. And when Shashank and I were chatting three years back, protein powder was never part of his business plan. Today he's into kids. That was never part of the business plan. It's because the consumer has earned, gotten the trust and they know that, okay, whatever they're going to build is a genuine product. So I think that's very important. And Shashank is a classic example, which comes out to say that if you own the trust, build your own distribution, right. You can build, you know, multiple stuff around that. And that is also, it's a very hard muscle build.

Dhruv Sharma: That ties the thread around trust and distribution, Dilip. But if we talk about outcomes, right. And in the case of healthcare, what people want is personalized outcomes at scale. What are some examples, both from within the portfolio and just companies you look up to around the world where, where one can draw on learnings?

Dilip Kumar (Investments, Rainmatter by Zerodha): Yeah, I'll give you, I answered it both. First of all, I think around the world, you know, one of the mistakes which I realized when I was a builder and now in the early days of my investing career, I realized that in health in particular, what works in the West will never work here. And the reason because the infrastructure is very different. If you look at kind of zoom out US in particular, which is the largest market. It's a, it's an insurance paying market. It's an employer paid market, right? So the motivations, the incentives, the metrics are very different from India market. India market, if you see 85% is an out-of-pocket market. So, so, you know, everything changes from a build point of view, everything changes, right? So I'm yet to see any, any category within health, which has worked beautifully and scaled very well in the Western world, which has also worked in India. I've seen the other way around. So I'll tell you when it's a classic dump, right? It came out of Indian company, India company, build products for India first, but realize that there's a global use case. And it's a global company. 95% of the revenue is global today. Very unlike to be heard a hardware company, software company, a health tech company, right? They started, they came up with a fitness use case. And now they're like a broad health spectrum company. I see their opportunities, which will go the other way around that you build in India and you realize the use case can apply, of course, to the developing countries, but also to developed countries. And they can be a classic example. I'll try them. And like I said, there's a classic example. There are a bunch of companies again in the medtech space, which a lot of people don't know about it, but that's a good example on the sorry, I lost my train of thought. What was the first question?

Dhruv Sharma: Well, that's that's that was basically it. I think you've speaking off. Did you guys read about Sabi? The, the beanie that sits in your head without drilling a hole in your head.

Dilip Kumar (Investments, Rainmatter by Zerodha): It was, it was on my feed. I think neurotech brain health is the next thing. We are spending quite a bit of time. I should, I don't know if I, the brand see, this is something which I'm experimenting today. It's a variable, which goes on your head. It is not me. It is not me. It's, it's another interesting company. I spent some time with me and a bunch of other guys, but actually the brain health is the next wave. I mean, we all are victims of brain fog, right? But we are not, we are not accepting it. So I think that's another opportunity which will come up.

Utsav Somani: Extreme overstimulation. I think attention spans are going down, which is bombarded with dopamines. We've like our receptors are gone, but let me ask you the question that we invited you to ask. Basically, this is the moment. Hirox, 800 athletes participated, paid 9,000 rupees. That's the number going around on the internet. And there was a lot of debate about this. I'm sure most people are still looking at this very, very positively. But I think the fact that stood out to me, and we mentioned your tweet as well on the show last time, you mentioned that Rainbattle is an investor in a bunch of these companies, Bosca, which is the Indian partner, the Devil's Circuit. Then you've done, I think Ironman as well. You've done Hirox also. So I think let's get into the Hirox part, where you tell us how did that investment happen? Why is this category important to you? And why is this important? Is this the IPL moment of fitness?

Dilip Kumar (Investments, Rainmatter by Zerodha): Sure. No, I'll take a step back and first probably set a context why we invested in companies like that and also very double down on Hirox. So our thesis has been, like I said, health. You know, the understanding has been that there are different motivators for everyone to stay healthy. For someone who's walking into a gym, for someone who's into swimming, someone into meditation, whatnot. We believe movement is a very important pillar. And that translates into sport, that translates into participatory activity. And everyone needs a goal. So my, you know, the story of my X to Y version was largely because I took up running. And if I'm sure, you know, you guys are into some form of sports, you will realize that for any kind of sports, you know, you need a goal and you work backwards. And it works beautifully well, right? I mean, you sign up for an Ironman or a marathon or a 10K six months down the line, and you work backwards to say that I have to train, I have to eat right, I have to sleep more. That has been our understanding. And we thought, okay, events becomes a very important layer to this entire pyramid. And we should help. And we need more of that in the country, right? And then we started looking around companies, like, who are these people? And, you know, because we are the users of all these experiences. We run marathons, we do Ironmans inside the companies. So we understand what it takes. So we met a bunch of companies.

Dhruv Sharma: Even the Devil's Circuit, right?

Dilip Kumar (Investments, Rainmatter by Zerodha): I think you've. Yeah, we're invested in Devil's Circuit as well. So we realized that there are different form factors of participatory sports. What India is not today is not a sports loving country. We are a cricket loving country. Maybe people on the screen might hate me, but we are respected as sports country. We are not a participatory sports country. So we wanted to change that. We want to see if we can be a participatory sports country. And that has worked well in the U.S. If you see, they have a strong sports and fitness culture because they participate in sports. So we want to build that culture. And we said, okay, why not go out and support these companies? So Yosca, which is the Indian franchisee to Ironman and Devil's Circuit, sorry, Ironman and Hirox, Spectacom, which is the company which does the Yoda race, Devil's Circuit and a bunch of other IPs. There's FitPage, which does a lot of marathons. There's another company called Sister in Sweat, which do only IPs for women. So the idea has been that Indians should have more and more such IPs where they set a goal and they go out and train each for its own. Someone can do a triathlon. Someone can do an obstacle racing. Someone can do an Hirox. Coming back to Hirox in particular, I think when we invested in Yosca, I think this is early last year. The founder told me that he's going out and trying to get in Hirox to India. I looked up on YouTube and I said, dude, this in no way is going to work in India because look at these guys. You know, these are all white, good looking, jack people, you know, and this entire vanity around that. And it's $120 equivalent ticket price. It's not going to work in India. And now you look at it, the first event was 1600 people. The second was 3600 people. Third was 6000. The one which happened last weekend is 8800. The one which is going to happen in July, Delhi, the team tells me it's close to a sellout. We might do around 10,000 to 12,000 people. And what has changed is the most important pattern, which I realize is that it goes back to the same entrepreneurial trend. Unless you don't do, people don't know what they want. Till three years back or before Hirox came, India has only seen marathon participation where possibly the max one group pays 2500 rupees or 3000 for a marathon. This is three times to that, right? And it's not like you go out and ask, do a survey and say, hey, would you do that? You know, you create a product, a good product, give it to them. They will take it. And there's so much of demand. I heard somewhere there's a grey market to it also, right? So yeah, so that's the story of Hirox.

Dhruv Sharma: I'd say very quickly that Hirox, logistically speaking, is closer to Formula One than it is to, you know, organizing a marathon because there's all of these goods that have to be shipped from place A to B around the world. And so, yeah.

Utsav Somani: Measuring the volunteer, the tracking, like, I mean, it's just a proper, I mean, experience. And I think, I mean, people spend.

Dhruv Sharma: And they execute like flawlessly, you know, from the venue that they pick to, you know, the race and everything else. We have a question from a, you know, a listener of the show sent in a question, a Hirox related question for you, Dilip, which is, when do you think Hirox will, or the Hirox veneer will peak in India, if you were to hazard a guess?

Dilip Kumar (Investments, Rainmatter by Zerodha): Yeah, I mean, I have to, I have to, I have to be balanced here. Like, so I think it's, it's already at the peak right now. We are talking about a three-day event happening in Delhi in July. I think we will very soon might see before the end of the year, it will be a four-day event. So it's a carnival. We are talking about festival, right? I mean, unheard of in India where there's a, over the weekend, four days. And this was even unexpected of market like India. If you look around in the world today, UK, it's a seven-day event. You know, New York is a five-day event. So it's a carnival, right? And we already seen that in India. We didn't expect this kind of growth in India. And of course, we know why all of that, the UGC content and all of that.

Utsav Somani: But I think because of this, like, I mean, of course a very niche kind of tourism, but like, I know so many friends who went to like high roads, Bangkok, they're collecting those badges across the world. So I think it's, yeah, yeah, yeah. I mean, Dhruv was mentioning some of them on the last show because he's on one last year and just fascinating. You can collect that badge and then they have a photo. Yeah. They've mastered the, I mean, in hindsight, all of these look obvious, but I mean, what everything is, everything is antithesis.

Dilip Kumar (Investments, Rainmatter by Zerodha): If you look around, like there's no medal at the finish line, you don't get any t-shirt. There's no break first, right? All you get is a small patch. That's about it. Right. And you also have to pay extra for the photographs, right? I think this will just go out to be a big thing. I mean, we are more than an investor in the company. There's a lot more you will hear from us. But on your tourism bit, you're going to put some data out. 30% of the participants in the Bangalore one were international athletes. They're international participants. 30% from probably I think some 16, 18 countries, right? So you could just imagine now India will become our tourist destination. These are people who want to come to India as part of maybe participating in these events and probably also travel around and it's vice versa. Like there was a strong contingent from India who went to Bangkok, Singapore, all of that. So I think it's a good cultural point where fitness is just blending into culture.

Utsav Somani: And are you trying to recreate this carnival atmosphere at peak state?

Dilip Kumar (Investments, Rainmatter by Zerodha): Yeah. So that's one of our new initiatives. I mean, I said we were sitting on the fringe for the long time. We had an itch to build something ourselves. We thought being an investor is great, exciting.

Utsav Somani: Learning the founder tag on your Twitter.

Dilip Kumar (Investments, Rainmatter by Zerodha): So there's no better fun in building something. But the intent really is to go out and build an ecosystem again. Like I said, we need more and more players in this space. We need a hierarchy. We need all different formats. So the intent of, I mean, I can't speak much right now, but peak state essentially would be a very large platform opportunity, what we are trying to experiment with, which would have different form factors of sports, fitness, and all of that. So also, I mean, outside of these IPs, we have invested in a bunch of sports companies alone, sports tech companies, sports, like pay and play, coaching businesses. So the idea here is to build a large ecosystem, a strong community of people. And we are not talking about pro athletes. We are talking about your weekend athletes, people like you and me.

Dhruv Sharma: This is something I keep having on wearables. Dilip, let's ask you a question. Do you think this is possible? Do you think there's a chance?

Utsav Somani: Also your stack of wearables. I saw the Ultra Human Ring is there.

Dilip Kumar (Investments, Rainmatter by Zerodha): I have all sorts of, sorry.

Utsav Somani: All sorts of practice on you?

Dilip Kumar (Investments, Rainmatter by Zerodha): I have a Whoop, I have Ultra Human, I have another ring, I have a Garmin.

Utsav Somani: I keep alternating between a Whoop and Ultra Human. Dhruv is like, I don't know if it's going to be a good day or a bad day. So Dhruv, your question.

Dhruv Sharma: Which brings me to a question. You think we are over-measuring and under-acting at some level?

Dilip Kumar (Investments, Rainmatter by Zerodha): No, I truly concur to it. I think there is a cohort of people where they're probably doing fairness to the tracking and acting upon it. But I think for a large part of the population is still vanity. I also feel the wearable ecosystem is also going through certain evolutions. Today the wearable, I wrote about it sometime back, that today if you see most of the wearables are telling you what's happening with you. I think the future would be they will tell you what you should do to fix it. So you have to close the loop. So a wearable will tell you your sleep is broken, but how do you fix it? So we recently invested in a smart sleep mattress company, which is in stealth mode right now. They're launching in a week's time.

Utsav Somani: But the idea is here. They will probably come on the show and announce also.

Dilip Kumar (Investments, Rainmatter by Zerodha): Yeah, sure. I'll definitely ask them to do that. But that's, I think, the evolution of wearables, right? I mean, we had a generation of wearables which were telling you this is what's happening to your glucose. This is happening to your sleep. This is happening to your HR. But I think as we get more and more data, it will become personalized. And it will tell you that, hey, you're in a one hour meeting. Your heart rate is spiking. Your HRV is dipping. You should probably get up, hydrate yourself. You should go for a, you know, do some breath work and so on and so forth. I think that will probably close the loop. But I agree with you. I think today there is some sort of overindexing on all the tracking what you do. But I think it's each, like for me personally, it's a curiosity. It's, I run like a project to myself. So I keep a bunch of data tracking and try to understand the pattern.

Utsav Somani: As I think it's about at the end of time, but I have one final question. So you host this podcast as well, where, sorry, I think my phone ringing. Surprisingly, I had notifications off, but apologies for that. So you host a podcast as well. The other side where you interview founders, investors, and athletes as well. What is one question that you would have liked us to ask you from the other side, what we missed out on?

Dilip Kumar (Investments, Rainmatter by Zerodha): Oh, well, yeah. I mean, that was a side project, which is on the back burner right now. But I usually, usually tend to ask people that, you know, what is that one thing, what they did, which fixed their health, which possibly they can share with the world.

Utsav Somani: Alright, so let's have you answer that.

Dilip Kumar (Investments, Rainmatter by Zerodha): Yeah, I mean, I think it's basically cutting out distraction. That's what has worked for me, you know, spending as much time. I mean, as cliche it might sound, but spending as much time with the people you really care about, your family, your friends, and really building a guardrail around yourself on allowing whom to, you know, intervene in your life. That is distraction and, you know, just creating systems. So, you know, if you can create your own operating system and create your non-negotiables. Like I have a few non-negotiables in my life right now. And I don't like to, I don't allow anyone to mess around with that. And I don't want to mess around with that. So if you can create that, I think that's a very good operating system. And I think it evolves. I mean, the definition of longevity, health span differs from people to people. For me, it's just been the happiness in this, which allows me to be mentally healthy. And I think physically something what you can always build.

Utsav Somani: Awesome. Thank you for coming on the show. And this was really, really fun. Really appreciate it.

Dilip Kumar (Investments, Rainmatter by Zerodha): No, thank you guys. Thank you for all the good work, what you're doing and cheering.

Utsav Somani: Thank you. Thank you. All right. Cheers. That's it from us today. We'll see you on Monday. Have a wonderful, wonderful weekend. Take care. Bye.