We want to hold every enterprise company coming out of India to global standards: Naren Gupta of Nexus Venture Partners
Naren Gupta, Co-founder and Managing Partner at Nexus Venture Partners
Naren Gupta needs no introduction in the Indian startup ecosystem. Probably one of the earliest VCs in the country, Naren co-founded Nexus Venture Partners in 2006. He has also been mentoring early-stage entrepreneurs and supporting them as an angel investor since 1990.
Nexus Venture Partners has invested in more than 200 companies in India and the US. Some of the notable startups in its portfolio include Postman, Rapido, Unacademy, Zomato, Druva, Delhivery, and Observe.AI, among others.
In the recent episode of 100x Entrepreneur Podcast, a series featuring founders, venture capitalists, and angel investors, Naren spoke to Siddharth Ahluwalia on the journey of Nexus Venture Partners.
Becoming an entrepreneur
Naren, an IIT-Delhi gold medallist, moved to the US in 1969 and did his MS from the California Institute of Technology. Later, he did his PhD from Stanford University.
“I have always been very curious. My goal for coming to the US was to do my master’s and ultimately PhD, where you can really be free to discover new things and get into potentially inventing things,” Naren says.
In 1980, he co-founded Integrated Systems Inc, a software company. In the following two years, Naren says he realised two things. First, people want solutions to their problems. “Nobody is interested in buying technology. What they want is a high-quality product that works all the time, solves their problems, and doesn’t really increase the work they need to do,” he says.
Secondly, Naren says he learnt that even when the product is great, one needs to couple it with good marketing and customer support. “It is necessary to address customer needs and fully support the customer through the journey with your product,” he adds.
Naren believes sale is just a transaction. Customer relationship and how one works with their customers is a process that is almost as important as the transaction.
“I started the company to have it last a lifetime. I had no intention of selling the company or taking it public,” he says. However, Naren took the company public and merged it with Wind River Systems around 1990. Naren says that going public was necessary because of “Access to capital at a reasonable price.” He served as the CEO until 1995.
Naren recalls being one of the earliest Indian entrepreneurs to take a tech company public in the US. This grabbed him a lot of eyeballs and soon people started approaching him with questions.
Naren says his introduction to venture capital or investments was ‘accidental’. He started meeting entrepreneurs and once in a while, Naren would make investments in companies. Between 1990 to 2005, he kept doing this -- meeting hundreds of entrepreneurs and investing in 24 companies. Four out of these companies went public.
One of the product companies that Naren invested in was founded by two IIT Bombay graduates. About five to six years later, the company was acquired.
“I came to realise that if we had real venture funds in India, I would have found a partial exit for these founders so that they could go on and build a big company,” Naren says. “But I didn’t have that luxury. That’s what got me interested in venture capital in India,” he adds.
Between 2005 and 2006, he made a couple of trips to India where he met Sandeep Singhal and Suvir Sujan. In 2006, the trio started Nexus Venture Partners.
“Our view is to hold every enterprise company coming out of India to global standards,” Naren says.
Nexus Venture Partners has three offices at present -- Bengaluru, Mumbai, and Silicon Valley. Naren says, “Running two offices or multiple offices is always hard unless you have a very high level of trust.”
Metrics of success
Speaking on their investment thesis, Naren says Nexus Venture Partners focuses on creating good products that can sell live markets, and on building great teams. “We don’t actually focus on revenue,” he says.
“Venture capitalists need to understand that growth is not going to be a straight line, you need to really fully evaluate. And that rejigging of products might take six months or a year, and the growth might be slower over a period of time.”
He emphasises that getting the product right is more important than selling a product that is not in tune with the times. Unlike other venture capitalists that are financially top-down driven, Nexus Venture Partners is bottoms-up driven.
“We have seen a number of times that growth came to a halt, and then we fixed what needed to be fixed and started growing hundred percent,” Naren adds.
While Nexus Venture Partners does not focus on revenue and growth early on, what it does track early on is the churn. “We are big fans, even in enterprise products, of the net promoter score,” Naren says.
He says that if every customer of a company recommends its products to five other friends or potential customers, the company need not invest in marketing. “That to me is the ultimate source of success,” he adds.
Thus, Naren says that rather than measuring revenue, discussing the net promoter score is what Nexus Venture Partners cares about. He further adds, “I think the biggest mistake venture capitalists make in guiding companies is preparing them for the next round rather than long term success.”
However, questions on the board meetings change as and when a company reaches the growth stage. The first change happens when the company starts generating a steady-state of revenue. At that point, boardroom discussions are around the go-to market and how to build a stronger organisation in sales and marketing, and what are the features one should further develop to help in marketing.
Secondly, boardroom topics drastically change when a company has built a full team. This is because, Naren says, “You are really helping people rather than helping define the product or the sales process.” At this point, the VC helps the founders make more connections with potential customers or recruit people.
Naren says that as a founder, a meaningful life is one where the entrepreneur is building products that customers love. Recalling his personal journey as a founder, Naren says that he wanted to build products that customers loved and products that improved customers’ lives.
Entrepreneurship is a constant quest for finding the golden key, a product that solves a mystery, he says. “That we build a bigger and better India...That is probably my biggest dream right now,” Naren says.