In an age where being a startup founder or an investor is considered cool and sexy, we sometimes neglect the value and hardship it takes to live up to these two titles.
We spoke to Sandeep Aneja, founder and director at education-focused private equity fund Kaizen Capital Management. Aneja spent the last 25 years screening startups, offering guidance to founders, and “investing in companies which are designing a better future through education.” In this interview, he shares what it takes to become an investor and reveals some learnings from failed investments.
Oasis (OS): What are the three values that you hold most true, and why?
Sandeep Aneja (SA): Health, family, and embracing changes are the three values I hold close to my heart.
Health is the most important, as it is the only true wealth that lasts until the very last day. This rings true, especially in times of pandemics. Health determines what we can contribute to those around us, what impact we can bring to society, and the happiness we can gain. You need to look after yourself first before you can look after others.
Secondly, family is the foundation for many things an individual ends up achieving or dreaming up in their life. Family defines the belief system that impacts an individual’s capability and life trajectory. The word family might mean different things to different people—it could be your close friends who become family, or it could be your spouse and children. To me, that’s incredibly important because I wouldn’t be where I am today without the support of my family.
Lastly, I always remember to embrace change. I started as a railway mechanical engineer and came a long way before joining a venture capital firm in the San Francisco Bay Area in the US. After that, I set up my private equity firm in India and now in Singapore. I would say that the only constant thing in my life is change, and I love it because it helps me learn, reinvent myself, and grow. Therefore, the underlying philosophy behind this is learning all the time. We need to be able to embrace whatever happens in life and sometimes even make personal changes. Don’t wait for change to occur; make it happen.
OS: People tend to think that the world of venture capital is cool and sexy. What do you think people get wrong about being an investor?
SA: For anything in life, things look really exciting when you don’t do them.
A lot of people imagine that as an investor, you have money and power, and therefore, glamor. I see it differently: when you have money, you have the ability to invest, and therefore, there is a responsibility to listen. Because you have the desire to grow companies, you must have the humility to accept that the person you’re investing in is smarter in their domain than you are. Hence, having the humility, the patience to listen, and the desire to create value when partnering with companies requires a different mindset.
These days, investors are praised as having the Midas touch, but you have to realize that it’s actually tough to select the right company. We usually try to make the best choice, but we have to consider the team, their ability to grow, and our ability to support them. If one believes that investing is all about the glitz and glamour, then there is a high chance of making mistakes in selecting the right company. This is because you will emphasize your own ability to redirect the company’s future, which in reality, is relatively limited.
OS: These days in China, students aren’t aspiring to be scientists. Instead, they are looking to be startup founders or investors. What do you think of the phenomenon? Do you also see this in Singapore or India?
SA: This is very true. Entrepreneurship is now part of the culture of the new generation. Today’s youth want to be independent and try to access a level of wealth earlier in life. Entrepreneurship is seen as the shortest journey to achieving that dream.
Many young people have done a fantastic job. Yet, it usually takes time, effort, experience, and lots of failures and missed opportunities to really understand what it takes to build a company. There are exceptions, but most of the time, the experience will outweigh luck. Not all companies will be billion-dollar companies, but that’s alright. In my opinion, the reason as to why you’ve started a company matters a lot more.
OS: For young entrepreneurs, what qualities do you think matter the most?
SA: The most important qualities are focus and patience. Many people try to do too many things as a hedging mechanism against the possibility of failure, which actually could result in failure.
Storytelling and the ability to inspire are also essential. If you cannot tell your own story and your company’s story, and you cannot inspire others, the talents you will bring to the team will be average, and your company will be average. To bring on and retain great talents, you need to inspire them.
You also need to have the courage to start a company, but the hardest part is making tough decisions. No company’s journey is a straight line. It has multiple ups and downs. What distinguishes ultimate success and winners are the decisions people make when things get tricky.
OS: Could you share an incident of a failed investment you made in your career, and how you managed to overcome it?
SA: One failure I had was a company in India that provided online distance learning for working professionals in areas such as technology and management. Founded by a civil educator, he had the passion and ability to pull this off, and he was one of the early movers in the sector. It happened to be my first investment ever in India.
However, during the third year of the startup’s operations in 2014, the government unexpectedly changed regulations, requiring distance learning to only be provided within the same state. Our revenues fell around 80%, and the founder immediately lost hope in his business.
In the hope of recovering, we took control of the company and merged it with another company. We brought on a new founder, invested, and tried to regrow. However, it didn’t work and was ultimately a significant loss for us.
From there, we learned two lessons. One, just because an area is not regulated does not mean it will always be the same. As investors, we need to be careful of areas that are not regulated because any regulation can come in and disrupt the entire ecosystem. We should have the ability to predict what regulations are most likely, given the various scenarios in the country.
The second lesson we learned is that we need to partner with founders who can withstand shocks and be resilient in tough times.
OS: How can you tell whether a founder will stay tough during challenging times?
SA: That’s an excellent question. There is no easy answer to this, but the way we look at this is that we seek founders who have a bigger purpose. It is not just about making money.
There are many founders who are looking to make the next million dollars. When the going gets tough, they will give up and quit, move on or take a break, and maybe come back a couple of years later to start a new company. This is fine, but some founders will quit too early, in many cases, because they don’t have a purpose.
Seeking people with that purpose takes a lot of time, which is why we spend a lot of time with the founder in the early days. We want to know them over coffee, in family meetings, and in other situations to understand their history, motivations, and fears. It ultimately helps us come to certain conclusions.
OS: If there was something you could say to your 20-year-old self, what would it be?
SA: When I was 27, one of my bosses in the US told me, “you’re doing a great job. That’s brilliant. But you need to slow down to stop and smell the roses too.” That’s the advice I would give to my 20-year-old self.
If I could turn back time, I would learn to live a little more and focus more on work-life balance. These days, younger generations have embraced this advice better than I have.