Turing Distinguished Leader Series: Sandesh Patnam, Lead Partner at Premji Invest
Turing Distinguished Leader Series: Sandesh Patnam, Lead Partner at Premji Invest
Hello, everyone! Thank you for the fantastic response to the Turing Distinguished Leader Series. In this episode, we have Sandesh Patnam. Sandesh is the Lead Partner anchoring both the private and listed equities investing practice at Premji Invest (PI) in the US. Premji Invest is the primary investment office for Azim Premji, Chairman of Wipro Technologies.
Engineering leaders discuss hyper-growth post the unicorn phase. CEOs and their companies must be open to continuous change.
*Read the Scaling Unicorn’s interview here — or if you prefer to listen — the live interview is included at the bottom of the page.
Welcome to Turing Distinguished Leader Series. I am Jonathan Siddharth, founder and CEO of Turing. Today we’re talking about how to scale unicorns in a remote-first world.
And we have with us an extraordinary guest, Sandesh Patnam, VC at Premji Invest. Sandesh will share more about what he’s observed with companies going through this exciting growth stage.
Sandesh, you have a decade of experience as a Managing Partner at Premji Invest. You’ve guided several companies through this hyper-growth phase, i.e., the post-unicorn growth phase. And before we get started with specific questions, I’d love to hear more about how you got into VC. What excites you to stay in the industry for as long as you have?
Hi Jon. It’s good to be here, and thanks for having me. It’s a pleasure speaking with you. I’d say I’m an investor by chance, not by design. And if I go back to my early days in the mid-90s, doing engineering work, I was an architect thinking about high-end microprocessor design and looking at cutting-edge next-generation systems. I was at Stanford, doing my master’s and running a group called BASIS, the Business Association for Stanford for Engineering Students, and trying to recruit VCs to be the leaders in business plan competitions.
One thing led to another. So I tried to recruit a couple of VCs, and the interaction was great. Also, I was called upon to do diligence on a bunch of calm, focused IC companies. And then I did a startup that eventually got acquired at the peak of the first bubble to a company called KMC, Sierra in Canada. So I was trying to figure out what to do next. And one of the VCs that I interacted with said: “Look, we enjoy how you think about technology. Why don’t you try this for a few years and see how you like it?”
My company was around only for about two years, and we had a quick exit, and this was back in the day. So I thought: “Hey, this is kind of easy.” We would go in and define the idea and get a few customers. And everything that we did after I became an investor for the first year for investments had the same playbook. We made the investment, defined the architecture, and within maybe about 15 to 18 months, these companies got acquired.
So we never really experienced the scaling journey like what you have experienced today. And then the second bit would be the hard part of the next decade, of really building companies. So you learn venture in a way that I don’t think you would learn otherwise if you don’t go through a significant downside. So for me, the journey to venture was more happenstance at the end of the day, not by design. But once I got into it, I loved the entire journey.
I’ve had the opportunity of doing early, mid and late-stage ventures and then running public markets at scale on a long-biased fund and in a market-neutral format for many years before joining Premji Invest to build out a crossover strategy.
But look, I think the journey is phenomenal. I love the excitement of the entrepreneurs, new ideas, the scaling. I think you hit upon a great topic. I mean, people think about getting to become a unicorn, but what after, right? I believe that is the more challenging part. And to me, it’s phenomenal to kind of go through that scale piece.
That sounds great! And Sandesh, so let’s assume a company has reached the unicorn status, and now they are in that post-unicorn scaling phase. What do you find as the primary shift in the way companies that you advise?
And what do the founders and CEOs have to change in that post-unicorn phase versus the earlier stages of company building?
It’s a great question. There are so many elements. These are not in a specific order, but I’ll sort of walk through a few things in my observation that I’ve seen people do well. And I think the other side of the same coin is if you don’t do it. It is not the end of the road, but you have to pivot and move things around to get back on track.
So, what I would say is, valuation aside, the scaling journey has two elements to it. So, if you think about your market sizes as the first aspect, there’s a specific segment of the market that you’re good at. And let’s just hypothetically say, from the 100% of the market, the first 15 or 20 percent has specific exit criteria, right?
So you build a product that works for the first 10%, and you are prosecuting that path. And if it’s a large enough market, you’ve got tons of runway to access that market.
But generally, the remaining 70 or 80, or 90% of the market has some other issues. So whether it’s tied up in some fashion it’s attached to something else, it’s not easily accessible with this product suite. So your go-to-market motion needs to shift, and you have to start thinking about how you have to change the company on all of its elements: Product, go-to-market, and all of the other things you have to do to address the perks that are locked in some way, right? And so this could be price elasticity, it could be the scale economics, thinking about how you have to move up market or down market or side market.
You have to think about that. I find very few management teams and entrepreneurs who can prosecute these things nearly simultaneously. And you have to do it nearly simultaneously because when it hits you, you won’t realize it’s hitting you.
These challenges are not atypical, right? So you’ll go to the board meeting or have discussions with the team. And they’re like: “You know, our sales efficiency has come down. We probably hired the wrong people.” Or something like: “We had to respond to an RFP, and we have to change a few things in the product.” And it looks pretty linear, but it’s linear because you haven’t thought through what the other side needs to look like.
And then you’re trying to connect the dots, and you’re always a step behind. And the result is this: The margins profile breaks down, or your growth slows down for some reason because you have introduced this new product. So then, if your founders don’t see the vision on the other side, they start thinking about an exit.
So I feel like that journey of understanding what parts of the market you are addressing, being very maniacally focused on the understanding that and where the next segment lies, is important. So I think bridging those two things is something very few management teams do well.
And if you can do that near-simultaneously, you can have this growth rate that allows you to forget about evaluation. You get to the 100, then the 200, and the 500 or the billion. You can only sustain that growth rate if you think about both elements.
That’s one aspect of it, and I know it’s a very broad way of describing it. But if you double click on it, there are so many elements, right? It’s the people, the processes, the culture, how data-focused you are, and all these subtle things at the outset.
But in many cases, the processes and the people that get you to the first 100 typically are not the people who get to the next 200 or the next 500.
When do you feel like you’ve hired the guy that gets you to a billion or hired the guy that gets you to 500? And the answer to that question was you never hire that guy because you are always recruiting. You’re always recruiting for that next layer, right?
So the A-team is the A-team for now, and the A-team for the future is different. And you can do that in many different ways. The one thing I would tease out mostly is [thinking about] people, processes, and that next unlock.
Sandesh, that was super insightful. So [as you mentioned], continuous change is required. And whenever you have to make a change, what metrics would you look at [for that]?
It’s always in the go-to-market function, right? The first line of distress comes when your product and vision meet the customer. You have to pay very detailed attention to this feedback.
You will see many discussions [on this feedback] at the board level everywhere. When you hit this first kid, these are the questions you get asked.
But nobody asks the fundamental question: Is there something changing in your customer base? Is there something changing in the market? Are you moving upmarket? Are you moving into a new vertical? Are you going to new geo? What does that unlock? Does that require something else?
And so, you need to have an excellent understanding of what that next unlock is. If this first 20 percent gets you something, what does the next 50 percent look like? And I think drawing those two things in parallel will allow you to make those decisions much more pronounced.
That sounds good. What advice do you give to CEOs as they think through whether they have the right team and whether they need to make changes to that team? How to manage the shift during those phases when somebody needs to be layered or replaced?
This way of thinking may sound too capitalistic or too brutal. A lot of CEOs tend to be very loyal to that initial team. And I think there is no fault in that. That’s what engenders so much success and value. But you need to be very brutal about your thinking about scale, right?
So it’s always a hard decision because it’s the same thing in products and processes. It’s all about the people at the end of the day. So the first thing you may think about is coaching the existing team member. In some cases, I would say yes, it works.
But you know, you have so many battles, and startups are hard to do. It’s a lonely journey for a lot of founders and CEOs. So having that equal thought partner and the person who can do the execution at that scale is necessary. So if you are doing their job or have to think about it, you’re not thinking about something else.
Many CEOs say that they should have probably let that person go a year or six months earlier when they first had that thought. And so, I’d say that it is most important to make sure when to let go. So be a little more brutal about that.
In this pivot from early to late in the growth journey, you don’t think about processes as much as you do in the early journey. You’re trying to break things, and you have to have a fast-moving situation. But when you have $ 100 million or $ 200 of revenue, when you try to double or triple that, the kind of person who can do that is slightly different. They do focus on people development, they do focus on processes, and they do focus on repeatability. And I think those are the metrics.
I think that allows you to get to that next phase because you can’t have what worked in the first 20 or 30 and the first 50 customers work for the next 1000.
Yeah, and for me, one clarifying part is to remind myself of my primary job to grow business value. It’s my primary job to make sure the value of the business is maximized. And if I do that, I’m able to help everyone who has access to equity in the company, like employees, shareholders, and investors.
That’s great. I agree with that. There’s a book that I recommend sometimes. It’s a book called Seven Powers by Hamilton Helmer. And it talks about the potential value, market scale, and power, along with these seven things that one needs to think about.
It lays out the dynamic between strategy and power and how you can continue to think about potential value. It’s a book that is interesting. It’s a little dated, maybe five or six years ago, but it’s worth reading.
And are there any other books, blog posts, or videos that you consistently recommend to your CEOs?
There are lots! I listen to your podcasts. But, I think it depends as a lot has been written about culture, an owner’s mindset, or things of that nature. But I think this type of thinking about the built culture is critical.
I find myself recommending High Output Management by Andy Grove, Zero to One by Peter Thiel, and Blitzscaling by Reid Hoffman to a lot of my exec team.
Yeah, all great books.
That’s great! And for the next question, what are some common mistakes that you see companies make at this scaling stage? Any pitfalls to avoid for the management team and CEOs?
I think it’s sort of the same thing. But I would say something that I alluded to earlier. I think the business supports certain organic, linear motions.
There is no shortcut in terms of time, people, and process. So if you are trying to shortcut it in some ways and trying to fast forward things, that always creates holes within the organization. And the product and the go-to-market will eventually come back to bite you.
Often, you feel like you’ve arrived, and you’re already thinking about the next thing and trying to accelerate the process. And we’ve gone through the last two or three years where the speed with which we are doing rounds has led to what I would say no meaningful internal processes getting built or risks taken off the table in between rounds.
So I’d say don’t over-index on that and focus on the organic next steps while knowing what that end goal is and watching out for these big inflection points where your customer base changes and look at what that means as opposed to trying to fix a sales problem or something like that.
And could you share any examples of a shortcut that burnt you?
I think this usually ends up in product in many cases, at least in my experience, and it’s the organic versus inorganic question. We’re talking about unicorns at scale. I’m not talking about the companies that are probably getting there.
When you reach that stage, you feel like you have the equity value to do that. And in a lot of cases, that comes with so much downside. And whether it’s people processes, product integration, go to market, and I’d say a common error in many cases is like: “Hey, this is something that we should have the equity to go buy. And we should do these 1234 things to get to that next milestone quicker.
And I’m talking about a funding milestone, in this case, so I feel like the decision to do so has to be organic.
I feel like that is more common than you would imagine. So the quicker shortcut I say is to really [get that] organic was inorganic, and it always stems from the product.
Got it. So the mistake would be to make any aggressive acquisitions to beef up the product somehow, thinking that that will offer some inorganic growth acceleration. And more often than not, these types of purchases at this stage of the company don’t tend to move the needle positively.
What’s the most common piece of advice that you see Sandesh offering the boards of these companies at this stage?
I’d say culture. Culture is very, very important at this stage. You have to be very cognizant of pockets that may develop within the company. Maybe there’s this macro team like: “Hey, we’re doing this, and we’re this A-team, and we’re going to do that” And they do certain things that are different from the culture you are trying to build, and maybe they have success. And the hard thing to do is to understand that success comes at a cost.
And recognizing that and fixing it early because it eventually always comes home to roost you, and you don’t want the headaches. And culture stands on its own.
I think the type of people you bring into the organization, the learning aspects of it, matter a lot, and I think, for the ones that are sustainable and can build massive businesses, spend a lot of time thinking about that.
Yeah, thanks, Sandesh. We also have Kat from my Chief of Staff team here. So I’m going to invite Kat to ask you any questions about the state of company building.
Thanks, Jonathan. It’s great to meet you, Sandesh. So my question for you is, what traits or skills do you think are most important to develop for future founders who want to build successful startups?
Gosh, I think that question should be addressed to Jonathan. I would say it’s incredibly lonely. But, the most crucial trait is resilience and being able to understand your vision truly and stick by it. And, in the face of many things in the market telling you otherwise, to be able to power through it.
With some founders, we see that they’re willing to take on the challenge. And, for us, we’re looking at companies that can thrive in the public markets, not as a liquidity event, but mainly as a sense of quality and size of opportunity they’re pursuing. And we spent a lot of time listening to these great business leaders in the public markets that are creating tremendous value.
There are many subtle points, for example, how they talk about their business, the vision they portray, the delivery of that business model, and how they communicate that vision. So those are critical aspects. And the idea is to create that dot plot and potentially identify people who have that similar capability.
Everybody has a nuance, right? So, that is how we would think about it. I believe resilience in those cases is a key attribute in my mind.
Thank you, Kat and Sandesh. So, could you tell us a little bit about Premji Invest? What types of companies do you look for, and what kinds of founders should come and speak with you? And what’s unique about Premji Invest, and what makes the firm a good partner for companies at this stage?
The first thing is, as a firm, we are pretty mission-oriented, and we run a fund in the typical context of a broader crossover fund. We directly invest on behalf of an endowment or a foundation. The foundation focuses on enhancing primary education in developing countries, seeded initially by Azim Premji, the founder, and chairman of Wipro.
And since then, our goal has been to create a corpus, an endowment of a size that can continue that vision of the foundation’s aspirations in perpetuity. So at a high level, it will have a mission orientation to it.
That means that we want to partner with companies that have enduring value. So mission accomplished for Premji Invest, the fund that supports the endowment, is if we can hand back to the endowment, say 20 or 30 companies each worth many billion dollars each.
What that means, then, is that we want to invest in companies that can create a significant market cap and thrive in the public markets for an extended period. And so, we run a crossover fund for public markets and private markets in some ways. So we understand what a company that thrives in the public market looks like. And the idea is to create the dot plot and identify companies with similar aspirations and business models, the whole bit in the earliest stages, and partner with them through the entire journey.
So that’s where we are focused on. If, through our diligence process, we conclude that this is more like an M&A event, it’s unlikely that we will invest in these companies. And so, largely, I’d say that is the broader vision of the firm.
Thematically, we do everything tech, consumer healthcare, and fintech. And typically, I think the right stage for us is for companies that have achieved product-market fit and are going through that scaling journey that we just described. So the scaling journey is where we can be helpful, and the one distinguishing factor for us is we’re a very product-oriented firm.
So early-stage venture has many people that have that orientation, data stages. You have people that think about public markets and models and valuations. We do that as well, just as well as anybody else. But we have a strong product orientation. And the idea is to think of the product at scale.
What product gets you the first 100 million gets you the next 500 million? We’re thinking about that at scale. We’ve seen that journey now with a bunch of our companies. I believe that we’re singularly focused on that aspect, which is a differentiator for us.
Thank you, Sandesh, and if people want to learn more, how do they reach you or Premji Invest?
By design, we are largely invisible, but I think, you know, anybody can drop me an email at email@example.com.
Yeah, that sounds great, Sandesh. It’s been great having you. Thank you for sharing your lessons on scaling unicorns.
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