Why My Startup Failed
It’s been nearly a year since we shut down
@Upside_AI
. Given that I’ve had enough time and space from it, the end of the year seems like a good time for reflection and closure. Its a long thread, bear with me :) (1/n)
The best kind of market guru, is an honest one.
Vijay Kedia's portfolio made 0% return in the past year. It happens. His portfolio is heavily small and mid cap tilted. A one year horizon means little to him.
When asked about holidays, he said he's bought a few resorts. :)
In 1971, Pakistan was 70% richer than Bangladesh; today, Bangladesh is 45% richer than Pakistan.
India — eternally confident about being the only South Asian economy that matters — now must grapple with the fact that it, too, is poorer than Bangladesh in per capita terms.
I have to write a 700 word article this weekend on how fintech will help us get to a $5tn economy.
Tech just makes finance more efficient.
Now what to do with the remaining 694 words?
I’ve joined
@IndiaQuotient
as Partner recently! While our journey at
@Upside_AI
didn’t work out, endings also mark exciting new beginnings. At IQ, we like investing in big, India-first businesses early. If you’re building something cool, I’d love to chat!
My advice at 60,000 (today) is the same at 40,000 (Oct 2020):
Jump in and ride the wave.
Timing the market isn’t possible. You’ll lose more in trying to protect your downside than you’ll make on the upside.
Guys who crack distribution first have a much better right to win than the folks who have a great product. This is true across industries and extra true for financial services. Therefore, in my view, an AMC by Zerodha and Groww have a much higher chance of success than a new AMC.
But this was not true for other fund houses – investors did not leave other guys with bad performance. They stayed because they trusted the brand. Therefore, second realization was that this is a brand trust business. Investing brands are built across vectors of time and capital.
Therefore, our first realization was that our thesis on why most investors were onboarding was wrong. It was not the tech, but the great returns. Seems so obvious now.
I am taking all of these hard-won skills to
@IndiaQuotient
. I was an early-stage investor before I Upside. But the big difference in how I now evaluate companies is the deep empathy with which I can relate to a founder’s very tough journey. Hopefully makes me a better investor.
We started Upside with the vision to build the next HDFC AMC. The next generation of mutual funds that will deliver returns using machine learning instead of humans. The inputs to pick good stocks was the same – company fundamentals and macro data.
We tried to “borrow trust” over the years. Raising venture money, onboarding marquee distributors was one way we tried to move up in the circles of trust till investors could trust us directly. But brand trust does not flow as easily, and rightly so. It should not.
"a Chinese billionaire dies every 40 days...unnatural deaths have taken the lives of 72 mainland billionaires over the past 8 years...15 were murdered, 17 committed suicide, 7 died from accidents and 19 from illness. 14 were executed. (Welcome to China.)"
via
@tylercowen
The other way to approach building a business in this space is distribution first. Build the pipes and then different products to push through this. When we started, we debated this a lot – should we first be manufacturers or distributors.
"If an elderly but distinguished scientist says that something is possible, he is almost certainly right; but if he says that it is impossible, he is very probably wrong."
Arthur C. Clarke
We weren’t trying to build a trading shop but an investing firm without the biases of human investors. The thesis came from how investing in the US had evolved into more rules-based, quant driven products.
I've never understood how a company "misses" street estimates. Street got it wrong na?
Its like parents expected 90% from the child, and child "missed estimates"😅
Having said that above, we are very proud of all that we achieved. The three of us founders succeeded and failed together and had an awesome team that stuck with us through it all. We still believe there will be an Upside AI that will exist in the Indian markets in 5-10 years.
For the first couple of years, it was just the 3 of us building the product, testing it in live markets to build track record and selling. As markets took off in mid 2020, so did we. Our products were consistent top quartile performers and AUM follows returns.
We grew 10x in two quarters and very profitable. We were organically adding customers who would find us and invest. Therefore, we did very well in building an awesome, unique product that was our wedge into the market. We also did a good job building brand through PR and content.
I’ve been thinking a lot about market size lately.
Most founders confuse TAM with just $ GMV/ revenue. Market size of profit pools is much more critical.
It's not just about $100m rev targets- can you ever get to $50m PAT?
Large flows+insufficient value add= Small profit TAM
However, we started hitting a ceiling on AUM growth as markets turned mid 2022. We troubleshooted plenty – offline sales team, digital marketing, more PR/ brand building, growing through distributors, etc. But none of these seemed enough to fight bad markets.
What we saw was that as soon as we had a few poor quarters of performance, AUM started leaving the platform. The products were high beta, but the AUM was even higher beta.
In hindsight, I think we realized these things too late. We were growing so quickly that we didn’t see that there is a ceiling on where our product/ efforts would take us. We could have launched/ improved products faster, tried more distribution experiments and maybe even pivoted
Another axis on which you can build an AMC business is solving the cold start AUM problem. If you start with an AUM of Rs 500-1,000 cr, money begets money. This was never an option for us or likely for any other middle-class kids that decide to build in this space.
Super happy to share the first report in our series on how India consumes. First one focuses on how India eats. In true
@IndiaQuotient
style, it is light on industry gyaan and heavy on insights.
This should make for a good lunch read - foodtech + food 😅
We are excited to share the launch of our report, ‘20 Things About How India Eats’! Discover current food trends in India, emerging opportunities in India’s food tech market, VC activity in this space, and much more:
The level of glee from “fundamental investors” at the crypto correction is hilarious 😂
Theek hai yaar, corrections happen in all asset classes - including yours. 🙂
Looking back on last year with
@smallcaseHQ
. Our latest blog just dropped!
"We grew our AUM nearly 10x. We delivered 52% returns in the year ended Feb-21. We are in the top 10% of PMS in the country today based on these returns."
I don’t know who needs to hear this but your non-work time can just be to chill. Without doing anything productive, or improving yourself in anyway whatsoever.
I own
#Berkshire
stock AND I own
#BTC
. There is no us vs them, crypto-peeps! You can happily exist in a world where you take the best ideas from everywhere and run with it
#BerkshireAnnualMeeting
We’re releasing new updates to make smallcases more transparent for everyone:
- Live performance chart ⚡️
- Adopting ‘Volatility’ in place of ‘Risk’ 🔗
- Improved CAGR calculation method ✅
More details here:
Inflation, interest rates, war, and COVID. How do you beat the NIFTY in these volatile times?
@aagarrw
and Nikhil, Co-Founders of
@Upside_AI
discuss in webinar on Friday at 4.30 pm.
Register here:
& Join us on📅 17th June at🕟4:30 PM
@VijayKedia1
This is the key demographic that invests in markets. They’ll be the buyers and sellers. People will draw any correlation 😅🙄
It’s like 3 out of 7 times it rains on Mon, Wed or Fri
The way I look at it, there are only two ways you should invest in crypto - (1) super long term; or (2) punting short term where you are ok with your money going to zero
Anyone who claims to be an investor or trader with "target prices" is smoking something fun.
#dogetothemoon
I have to write a 700 word article this weekend on how fintech will help us get to a $5tn economy.
Tech just makes finance more efficient.
Now what to do with the remaining 694 words?
As much as we meme about it, has there been better, quicker investor education than
“Buy the dip”
Only “MF sahi hai” comes close, and that took years of education.
1/n
@banglani
I would like to womansplain this: there is a window between somber and scruffy that all men should live within, always.
Thanks for highlighting this. Not enough is written about the vectors of hair and time 😅
Smallcap 100 index down 20% in 1 MONTH! We are back to 2018 levels. If you were looking for a new opening to enter the market, here it is. Key words: S-I-P
"In school, they tell you your paper must be a minimum of five pages long. In the real world, you have five seconds to catch someone’s attention before they’re bored and move on. Today your phone offers an Olympic competition for your dopamine." -
@morgunhousel
“We had a net DPI of 5.9x from fund one. We’re hoping to achieve similar numbers from fund two.”
Catch
@kanika_agarrwal
’s (IndiaQuotient) full feature in
@livemint
below ⬇️
The overlap of fund managers and test cricket lovers on my Twitter feed is too damn high.
Next 5 days, market tweets bhool jao. It’s only pitch, batting order, blah blah 😅🤷♀️
When we look back on this market cycle, the biggest takeaway will not be covid and what it did to markets. Every black swan is “different.”
It will be how retail investors have disrupted equity investing and broad based the markets. THAT is the unprecedented part.
Our next pod is on the evolution of food tech in India. There is a lot of nuance in this conversation that only folks like
@ankitnagori27
and
@anandlunia
who’ve watched and built from day 1 get, and have generously shared.
Very highly recommend. Tell us what you think.
New High IQ podcast ep. with
@ankitnagori27
, founder of Curefoods, is out now! We delve into all things cloud kitchens, from its unit economics & product market fit checklist to its scope in Tier 2 & Tier 3 cities in India, & much more! Tune in now:
Since everyone is on Twitter, I would like to take this opportunity to shamelessly shill
@Upside_AI
We are teaching machines how fundamentals work in the Indian markets - and we are doing a great job! To invest with us, write to invest
@upsideai
.com
#WhatsApp
#WhatsAppDown
When you see “flavour of the season” fund managers fall from grace every year, you realise how crazy it is that guys like Buffett, Marks, Lynch have been around for decades and still remain credible.
It’s insanely difficult to build a lasting franchise in invt mgmt.
Yaar, why does the market “owe” us a fall? What’s going on with the virtue signalling on Twitter today? No one was complaining all through last years bull market. 🤷♀️
If you buy say a 100 stocks (very diversified), you will do ~benchmark returns long term. Short term you may under/ over perform.
If you toss a coin to choose your 100 stocks, you will do the above returns still.
This article is a dramatic way to make the point
China’s ability to trigger deep structural reforms at the risk of extreme short term pain is amazing.
This is obviously something the West is no longer brave enough to pull off.
It’s almost startup culture, at the scale of countries. (1/n)
Just walking down memory lane and thought I'd share how we started
@Upside_AI
:
After working at
@MayfieldFund
, I realized that there is enough alpha in public markets with a major plus point
- you don't need to worry about liquidity. (1/n)
We are doing a webinar this Saturday at 4 pm in partnership with
@smallcaseHQ
to talk about tech in investing. Sign up with the link below if interested!
Had a terrific time today at PMS & AIF 5.0 discussing masters' and rising stars' points of view on all things PMS with
@Raamdeo
, Bharat Shah,
@Amit_Jeswani1
&
@jigarmist
.
Here I am discussing how
@Upside_AI
AI takes an innovative approach to investing.
@PmsBazaar