Well, it is my absolute privilege and pleasure to speak with a man that I've had the opportunity to speak with a few times in the past. Mr. Tata, it's always a pleasure. Many thanks for joining us here at TYON. You know, you've been called many things by the media. But here's an interesting one. There's a piece that has labeled you India's accidental startup investor. How do you respond to that?
Well, you know, you look at the entrepreneurship in India as such. First, you look at what has happened in the US. It's been an exciting time for startups. People have had ideas that they've been able to convert into, in some cases, multi-million, multi-billion activities that you never thought would see the light of day. And in India, the entrepreneurial spirit has always appealed to me, but more often than not, there is a feeling that I've had that whatever I want to do would be in some form or other in conflict with the Tata group. So all the time that I've been in Tatas, I have felt that I would be having a conflict of interest or some kind of self-interest which has kept me away from the excitement of entrepreneurship. So you come to a phase in your life where you're no longer with Tatas and you are on your own. What you do does not have an impact on Tata Steel or X or Y or Z. And I thought this would be the time to look at doing something with startups.
Hey, now of course a change of—
No, now the game is a different one. I only have my pocket money to play with. It sounds very awful to hear me say that, to play with, as though I was playing with Tata Steel or TCS, but the truth is that you're looking at an entrepreneur who wants to do something, is willing to talk to you hoping to get your views for whatever they're worth. And then you're suddenly in the shoes of the small entrepreneur with an added responsibility that it's something you're doing rather exposed. You could make a mess of things and gain that kind of image or an image where you add value.
Well, Mr. Tata, I think many of us would like to have the kind of pocket money that you have at this point in time and make the bets that you're making. But just on the kind of bets that you're making, as well as the fact that you've learned perhaps things very differently today being in the shoes of a small entrepreneur as you put it. What's been the biggest learning as an investor working with over 20 plus startups and what kind of risks, what kind of bets are you now willing to make with this changed landscape of a post-COVID world?
Well, when I was initially interested in entrepreneurship, it was always the same kind of excitement. If somebody said they could do something which otherwise was not possible, I was the one in Tatas usually that was urging that we do this. So while in Tatas, I was involved in the Bay Area and in some of the early computer startups, some of the software startups, and those were exciting companies for me. I was in Tata, so I was not doing anything myself. I was doing it in the name of Tata. Now I have, if you might, another kind of responsibility to be advising people. And what I have found was that what mattered the most was how you interacted with the founders. A founder that you spoke to and you heard about who was looking at selling out to a large manufacturer, a large company, was probably not the person that you wanted to associate with because he was going to cash out whenever he could. And it may help him but it may not be the right thing for the investors that invested in his company. But there is also the other thing: you would look at companies, you look at the founders of the company, and you'd find in some cases a genuine urge to make this the market leader or the entrepreneur that was making one proud, against someone who was just looking at cashing out. And there were, we won't mention names, but there were companies that I thought would crash instantly and nobody would put their money behind it, and that small entrepreneur worked wonders with his company and had great success, and there were others that failed. So to me, the relationship you established with the founder, the truth and faith that you put on the table or he puts on the table, would be the difference between a flashy entrepreneur who is either trying to copy another company that's been successful or that has a dream that doesn't come true. That's the difference.
Yes. And you know, you're right in pointing out that it is often the equation that you build with a founder that could determine whether you write out a check or not. And you've previously also spoken about how you've been intuitive in your investment decisions. But Mr. Tata, you raised a couple of interesting issues there in your comments. One is the risk-taking ability of people like yourselves, people who have run conglomerates who are today at a point in their lives where they can encourage and nurture the startup ecosystem. And there's been a lot of emphasis on trying to unlock domestic pools of capital, but it's been a slow start and it continues to, while it's gathering momentum, not at the pace that's required. What do you think it will need to ensure that that actually becomes a reality? And secondly, what's the role that you see for the government to play in order for us to be able to push the innovation agenda further?
That's a great question. First of all, in days gone by, entrepreneurship had no place in the Indian economy because you either had a bankable product project or you didn't, and there was not that middle ground of risk capital by entrepreneurs which we now have, relatively small, but we still have it, and that's a great change and that's what you've seen. But we need to recognize that what we're looking at is foreign money. We're looking at investors overseas who are looking at our entrepreneurship, the entrepreneurs, the founders, and put their money behind those small companies with a magnitude that you can't find somebody playing in India, which is unfortunate because we're really putting our money behind foreign-owned projects, which in a way I'm glad we have because we have entrepreneurship and startups because of this. But if we had a bigger play, and if large enterprises were to put large amounts of their money into projects, we would get an interesting play in terms of what to do. That's also, as you can see, starting to happen. You can see players looking at this, others following. You asked an important question: what role should government play? The government can play a very important role in furthering technology which as yet the private sector cannot do because it's big money, it's high risk. But if you look at some of the most interesting startup companies or startup activities, they've been from people who have used government money to institute an activity. That investment would never have happened without that government input. Let me expand that. I'd like to take an organization like DARPA, which is the US government's development agency. DARPA has put billions of dollars into integrated circuits, medical electronics, life sciences that no one would, not no one but very few people would put their money into because it would be a long drawn out thing and it may not work. But if you look back on it, there are enormously impressive areas which have been funded by DARPA with seemingly no future. But because of DARPA's investment, those companies have had the funds and DARPA has had the insight to enable those industries to take form. So without the entrepreneurs that we have, it's funded on outside money, and without government companies like DARPA, the scene would have been quite different.
Yes, that is a valid example, but the government has got the Startup India fund and so on and so forth. But I want to steer the conversation away from the government to the role of the private sector in nurturing the Indian startup ecosystem. What role do you believe large conglomerates like the Tatas, like the Reliance Group, etc., can play? Because one of the aspects that you just brought up was that startups are much more agile, much more nimble, perhaps in many ways more disruptive than legacy businesses. So we are now starting to see conglomerates acquire startups. We're starting to see partnerships and collaboration. How do you see that playing out?
Well, I think the plays are the same. Who looks at it as a question of what kind of vision one has. But there could be two kinds of roles that we're talking about. One is an area where I am now putting myself back into the industrial entity that I was. I've got disposable funds. I'm going to start investing in startups which I will control and I will own and I will provide myself with activities which I would otherwise not get into. And I could do this by setting up family offices, by creating small venture capital based companies where you can argue that I'm using my shareholders' money but I'm providing them the opportunity of being in this activity. That's different from what you've seen in the Bay Area time and time again. I put all my money into this. I borrowed money from investors and friends. I have a responsibility to see this become a reality, and I'm going to give it all my best to make this happen. That segment of the enterprise has been the one that I've been most impressed by. Usually, a bunch of ex-students who have had a common view of something that could happen. A company like Google that's been established where two colleagues in college could decide that they're going to start a search engine. Then you look behind the vision and the entrepreneurial spirit that there is, and you have to say wow, that's something that is very impressive to look at for someone to put their money into, to become a part of their life. But look what it's done. So it's so exciting an area that I find it difficult to put words behind it. But when you look at a deck of investable options and you look at some of the propositions that are made, a lot of them are copies of successful startups, and those, unless there's a jewel somewhere, are probably not going to be successful. Maybe they would become me-too companies and that would be all. But the one which has the greatest vision and a spark that explains how he's going to get to that goal, you don't find that with everyone. Those are the jewels that one looks for that create the enterprises that you and I are referring to just now.
You know, you talked about how Google had the wow factor. You're probably looking at a bunch of decks and investable opportunities on a daily basis, Mr. Tata. What has wowed you or what wows you today as you look at opportunities? Which are the sectors that you feel that you must back? Because you also said that this is an opportunity that people must capitalize on and you can stretch the envelope to as much as you want. So where do you believe the constraints lie? What is wowing you today? How are you looking at the investment landscape?
Well, I think first of all, you have to accept that you're going to have a choice of, let's say, 10 companies of which eight are going to fail. They may fail for lack of investment. They may fail for a mistaken element, but they're not going to be highly successful. And that's not going to turn you away from looking at enterprises. You're going to continue the quest to do so because two or three out of 10 are going to succeed, or you hope that your vision enables them to succeed. There is no pro forma that tells you that you go down this checklist and you're going to be backing a winning company. One may be in healthcare, one may be in life science, you may have four or five in electronics. You can have unbelievable connections between, let's say, electronics and life sciences or nanotechnology. These are actually areas of enterprise that have come from these new areas of business and are going to continue to be exciting areas. And some of them, unfortunately, you get terribly excited about as something that can happen, let's say almost like science fiction movies. You can see that this really could be. So you could have a telephone conversation with another person in another language and speak as though it's the same language that you're talking, interacting with a person in real time in a very different way. And it may seem again that this would be terrific, but it doesn't work or it doesn't work with these founders. It's all a question of the people behind the brains behind the enterprise you're looking at. And in my view, the link that you have to the investor is: do you give that investor the chance to play out that role model that he wants to, or are you going to constrain and try to second-guess him as you go along? Both have their pluses and both have their minuses. But the entrepreneur who enjoys the trust and the confidence and the excitement in a new venture is going to be more successful, or should be more successful, than the other one who's trying to use his vast knowledge and his risk awareness also to control the enterprise.
