Yash Jain

It is very funny to see the latest psyop on Indian VCs, who are probably some of the smartest and hardest working people I know, and are largely in it for the game We'd probably make twice the much money with half the effort in public equities. And I'm fresh from a weekend, so let's dive in: a) There is very little genuine risk capital in India: Everyone loves talking, and preaching about the American VC model. But we want to see American outcomes without building American capital structures. Our funds are in years 4 and 6 of their 10+1+1 lives. Our portcos are developing alternatives to petrochemicals, finding oncology drugs, running the plants of major European pharma giants using their software, and building satellites to launch into orbit. Yet, almost every conversation with an existing or prospective LP eventually brings the same question in the first 15 mins: when are you returning capital? Nobody asks if our outperformers need additional growth capital, or there's an opportunity to participate directly in their next rounds. We want deeptech built over decades, and to finance it in a way capital will be returned before the next leap year. b) The natural pools of long duration institutional capital are largely inaccessible: American university endowments and foundations have helped build an entire ecosystem of patient capital. They can underwrite illiquidity over very long periods, supporting venture firms across multiple fund cycles. Indian charitable institutions face far more restrictive investment frameworks. This matters enormously. These are precisely the pools of capital whose liabilities and investment horizons are naturally suited to financing companies that might take 10-15 years to become important businesses. We want semicon cos, new drug platforms, aerospace, and advanced manufacturing champions. But where is the domestic institutional capital structured to wait for them? LPs want capital returned before the time for even one qualification cycle and a clinical trial is over. c) Domestic tech adoption exists mostly in press releases: Every Indian company talks about innovation, digital transformation, AI and working with startups. One of our portcos has won competitive global RFPs to deploy its software across vaccine and pharma sites of global top 10 giants. But struggles to find buyers for the same technology in India. Other companies in our portfolio can get demos and paid pilots quickly in SEA and EU. But in India only manages an MOU, a press release and then 12 months of silence afterwards. Most dont want to be customers of Indian tech preferring to pay outrageous sums for foreign players. There is a remarkable reluctance to become first serious customers of indigenous tech d) Secondary liquidity is a mirage: Conversations often begin with a substantial (often 50%) discount to the last funding round, followed by requests for additional governance rights and preferential terms. Understandable for companies underperforming. But those have no market. This 50% haircut only applies to the best performers, growing rapidly. For most emerging VC portfolios, a functioning secondary market is nonexistent. A surprising no of acquisitions are really acquihires dressed up as exits. The company gets acquired, the founders, and employees move on, and investors recover little or nothing e) Running a regulated venture fund is an increasingly expensive administrative exercise: Regulatory requirements keep evolving and compliance keeps accumulating. Reporting is literally an industry of itself. And every capital call becomes another round of explaining the same portfolio updates already covered extensively in quarterly reporting. Followed, inevitably, by the question about distributions. From a fund in year 4 of a 10+1+1-year life f) And actual capital deployment is extraordinarily time consuming: A $ 1mn cheque sometimes takes 6mos from sourcing to wiring. I've previously moved more money than that in public equities with two clicks, barely giving it a second thought. Of course, the work is part of the point. In venture, we underwrite incompleteness. But it does make the economics of the job amusing *g) All of this makes venture investing a consensus game: Every participant in the ecosystem is behaving rationally from their own position. LPs want distributions, enterprises want proven vendors, secondary buyers want discounts and downside protection, regulators want accountability, and GPs need to raise their next funds Put all these together and you get an ecosystem that increasingly rewards consensus investing. Companies with visible revenues (come back when you have X cr revenue), established customers (who is buying), familiar business models (consumer), recognisable co-investors (who else is ivnesting) and clear exit pathways find capital (where else will you get capital from). The ones attempting genuinely new things, with long development cycles, unknown commercialization timelines and no obvious comparables, struggle The irony is that venture capital is supposed to be the business of underwriting things before they become obvious. But we've invariably built an ecosystem where everyone wants someone else to take the first risk, validate the technology, establish the market and preferably demonstrate an exit before they participate. As Munger said "show me the incentive and I will show you the outcome", it is visible The strange thing is that none of this changes how fascinating the underlying work is. We get to meet founders building things that should not be possibe. We get to see technologies move from labs to factories and hospitals and orbit. Sometimes we get to be a small part of making that happen. I suspect that's why so many of us stay India has no shortage of people building with extra ordinary risks. She has an acute shortage of institutions who have the willingness to finance through the timelines required to deriskUntil that changes, we'll keep trying to build 20-year companies with capital that starts asking for its money back in year 5. But we'll keep doing it anyway Apparently, we really are in it for the game