297. Meet the Investment Manager at an Family Office Funding Early-Stage Startups w/ Jaysri Thangam | Adeline Arts and Science

0:00Amardeep Parmar:So great to have you here today, Jaysri. Tell us what you invest in. Thank you so much for having me. I'm super excited to be here. What do we invest in? Before that, I'll sort of give a quick intro to myself. I'm Jaysri. I am an engineer by training. Started my career in Microsoft as a manager that was building, engineer that was building instant communication, of watching finder companies. So long back ago, where just saying hi and sending files over chat was a big deal. And from there, I've come a long way. So I realized I don't want to be boxed into this small thing that I'm doing. So pivoted to building FinTech startups in India as a part of the founding team.

0:38The first one was a consumer finance business, really learned a lot. And then BDB payments company, which became a unicorn. So I really understand how difficult it is to be a founder in terms of all the shifting priorities just managing expectations, investors, your customers, your employees. And so one of the board meetings, I usually was extremely skeptical about the investors. One of these guys that's going to come into my office two times in a year, how are they going to add value? But some of these board meetings that have sat in have really, really been instrumental in that company staying alive for the next six months.

1:13So that intrigued me and piqued my interest. So then I pivoted to investing. I've been investing in the early CSTEC ecosystem for the last five and a half years. What do I do now? So I work with a family office called Adeline Arts and Science. They have very diverse interests and investment scope. I'll just talk about the VC as an investment strategy, which I lead. So we are becoming pretty early pre-seed and seed. Average check size is about 150k. But what really interests us is investing in founders that can ship very fast. Yes, that's what every single person says. but we're all engineers and technical people on the team.

1:53So we really want to work with founders that understand what they're doing, that understand product building from a fundamental tech architecture perspective. So we sort of see the software stack as the top end is when an end user interacts with an app and the bottom end is a chip level. So we try to stay away from both of these ends because they're too complicated for their own reasons. So we try to come in or we understand the instrumentation infrastructure tooling are really really well across different sectors so that's what we invest in we invest in founders that are really disrupting how tools work how workflows work across different sectors at a very early stage across europe so yeah that's a very brief way to put it yeah and

2:37Amardeep Parmar:obviously right now is that ai is changing tooling everywhere yeah yeah yeah so it's obviously gonna be really exciting time to be in this space oh my god yes yes uh it's it's just such a watershed such a big change that and it's an exciting time to be an investor because it allows me to reimagine every single thing that I know that I've used so far that I've grown up with. It's so exciting to think about, oh my God, the browser that I know today and how I know how I know to use it is going to change. It's so far everything, the things that we use is built for us, the humans. And now it's everything changing.

3:12It's going to be built for AI and agents. Just thinking about the possibilities, the opportunities of that and how every single thing is going to change really excites me. So I'm excited. Yeah. Yeah.

3:22Amardeep Parmar:What kind of trends are you seeing that maybe the mass market is a bit behind on? Oh, I mean, with an AI, everyone's, everyone's, I think, I think the biggest use case so far that's hit the consumer or the mass is just text, text generation, text as an input. It's always text to image, text to video. But I think with vision learning models, that's going to change. AI is going to be able to take images as an input, not just text and language. That's what the LLMs do. And they have far consequential applications in robotics and how the physical world meets the AI world, how a robot sees things and how it sort of takes an images as an input plus language as an input and is context aware and it's able to help us really well I think maybe that's that's not yet and you know it's not very common yet but I think the VLMs are gonna be huge yeah yeah.

4:21Amardeep Parmar:With so much going on right now as well how do you try and fit through that noise and filter out like what's what's worth paying attention to and what's not? That's really hard that's the million dollar question because to be honest, we don't know, right? Every single thing seems like an opportunity. Every single thing seems to be that's the next big thing. I guess being a VC, that's the tough bit. That's a double-edged sword. Do you sort of wait for consensus to form and leave the board, leave the train? Or do you sort of get on the train and then figure out as it goes? I think that's the fine balance VCs try to strike.

5:00But what do I do? What do we do? So that's why having a very diverse team is so important. Diverse racially, backgrounds, how we think, gender. I think that's what helps us keep us grounded and keeps us close to reality. One of the team members that we have, so she's not from the tech background at all. So she is from comms and storytelling. And so she's a storyteller. so she thinks about places and names and and and words and stuff like that and and she has extremely diverse background toward me and and the and the founder of family officer so she sort of asks this question that we don't even haven't even thought of right so she she keeps us grounded so I think that's the only way that that we can sort of remove the signal and the noise or separate the signal from the noise is is asking the most relevant questions or think about oh I'm seeing this but these are my white spots i i don't see all of this that's the only that's the only way i think we can we can be um relevant yeah yeah and you mentioned the team as well is like different

6:02Amardeep Parmar:to some other firms been at before yeah and being under a family office as opposed to like a kind of external lps how does that change the way you invest as well so when we think about when working working for a family office is quite interesting because it helps me understand wealth generation differently. It helps me understand portfolio allocation differently. So yes, within the typical LPGP structure, within the VC, we do think about portfolio allocation, but that sticks within, okay, VC as an asset class. Within that, this is going to be this sector, this geography. I'm going to separate that mean seed and pre-seed funds and follow-ons and stuff like that.

6:43So it's sort of within that box. But within the family office, I'm able to sort of see a ticker, much larger view on the risk of a particular asset class, VC as an asset class, commercial real estate, real estate, art, movies. So then that gives me a holistic picture. So personally, I'm learning a lot more. In terms of investing, how is that different? I feel being in the family office is much more powerful. Also depends on which family office and how do they think about tech and what is their risk appetite. The family office that I work with is super techno-optimist. They are highly, very high risk appetite, which gives me a huge, you know, play field.

7:24And how is it different is that I'm constantly not thinking about how does this, how does this investment look from a VC point of view, or sorry, from an LP point of view. I'm not thinking about, oh, what are my LPA restrictions? How should I sort of handle this? Should I carve out something as a side letter and stuff like that? So if you think it disrupts the future in a certain way, we take a bet on that. So I think that's been the biggest relief, working for a family office. And decisions are much faster. So I think that's been one of the massive and biggest differences. And the other thing, Amar, is there's something called a principal agent problem.

8:06and I think within a family office, that principal agent problem is massive. I'm constantly thinking about, oh my God, this is someone's hard-earned money. This is their family's wealth and this is the money that they leave for the family and their children. So I'm very, very thoughtful about which investments do I make? What are the opportunities? What does it bring to the table? And what are the downsides? Let's talk about the downsides and how do we mitigate that in case of a downside? So I think just the thinking has changed a lot more. Yeah, these are a few changes.

8:42Amardeep Parmar:And with founders, right, so if they're approaching you, I've said you can make the decision faster because you need to think about how does this fit into the fund structure? Am I going against what I told the LPs and things like that? How that works? So let's say a founder pitches you or a founder's, yeah, to work through that process for a founder's perspective. Sure. So because we're a single family office and we're a very small team, they don't lead deals. So our advantage is speed, right? And how we understand the founder's journey. So in the investment team, all of us have either built, scaled, exited businesses.

9:19So we understand the grind that comes with it. So the process. So we usually run a three to four week process. We give them a yes or no, a definitive no within a week's time because we don't want to waste their time. If it's a yes, then we go through three more steps. So the second call is a call with a partner where we do an extremely thorough deep dive into the tech and the product. And then the third call or the meeting, we'd love to have all the team in person. If they're abroad, then do it on Zoom. It's almost like a culture fit exercise that we do because we think of this as a partnership.

9:56We take a very long-term view when we invest in certain assets and startups. So we think about, it's also an opportunity for the founders to understand us and what are our values? Would they like to work with us? So we really want to give them that opportunity and for us to sort of meet the team and understand how they work, what's the chemistry. So that's it. That's the three-stage process. And between these two steps, the due diligence happens. And then that's it. By the end of the third meeting, we already know whether we're going in or not. And then it's just a matter of, you know, the terms and stuff.

10:28That's pretty much it. So founders can reach out to us, either LinkedIn, we have a pitch email on our website so reach out to us and then yeah so we try to be very quick that's it that's the process very vanilla

10:41Amardeep Parmar:You know your background is also obviously you come from a tech background yourself you've been able to build things how the engineering side works what are you looking for when you're assessing people to whether or not is a product that really has that ability to potentially scale Very good question but I am investing at a stage where sometimes there's no product So I am essentially underwriting the founder's grit, their speed to market. So they should be able to demonstrate that it doesn't really have to be, oh, I build this beautiful looking product. It could be one simple feature that really throws me and I'm blown, right, blown away.

11:21I'm looking at, OK, there's magic in this. Now, if I give them the money, it's just going to multiply. so they just have to show me that magic either in terms of hey I've done so many customer interviews and this is that earned insight that I found and this is my record of what I've done so far so I'm able to do this this this and this and more than that sometimes we also think about are they able to bring in very high caliber people on board without any money so at a very very early stage at the pre-seed stage there's really no money so when people join pre-seed companies usually on the vision and are they able to imagine a better future working on that vision?

11:57So that's a very good signal for us. And somebody that can show me they can ship faster and they can, when I say ship faster, it doesn't mean get product to the world. It can also be, hey, I've done this, but this is what I learned. And this is a mistake. I'm redoing that again, redoing that again. So iteration, the speed of iteration is very, very important. Equally important is thinking about distribution in a very differentiated way. In the age of AI, anybody can whip up an app in half a with Lovable or Replint. So we think about what gives them the right to stay in the market for at least six months.

12:28And by then they figure out something and they can sort of hook onto that and then move more. So if they have both product differentiation and the magic and the distribution differentiation, fantastic. At least one of them is mandatory. So that's how we assess early stage startups. Yeah.

12:47Amardeep Parmar:And you're in Chirizwa has a partnership, right? Where you're missing the long term. What are you doing once you've invested in these companies? How are you trying to make sure that you're adding value and you have your side of the partnership too? Absolutely. I always tell this to the founders that I speak with. I don't want to invest in founders who think I'm going to help them build their business. I want to invest in founders that know what they do, right? And I also don't want to fool myself in thinking I'm going to do a better job at building their business. The founders are doing that 24-7.

13:19What am I doing? I'm looking at 100 different startups. My mind space is limited to that board meeting when an interesting thing comes up. So my value add or the funds or the family office's value add is on ad hoc. It's wherever we can really plug in meaningfully. So right now that comes in a few formats that's obviously helping them fundraise. We have developed and built an extensive network of investors across Europe and US. So in case they want to enter a new geography, let's say my background is India and Des, the partner, he has his ties in Singapore and Asia. So if anyone wants to get into those sort of geographies, we are more than happy to sort of open our phone books for that and give more mentors there.

14:07And we, for example, I've been a chief of staff. I've been an founding team members. So if they want to sort of bounce off certain ideas, how do I do this? How do the story is not coming through? So I'm more than happy to sort of brainstorm with them or point them in the right direction of, hey, look at this, this, and this, and this. Or tell them, okay, I've looked at 10 other companies. This is where they failed, so don't do that mistake. So that, I think, is very, very valuable. And we also have a platform function where the VP, so her storytelling, brand-building perspective really comes in, especially when they raise that little bit of capital.

14:38Now they can open the marketing tab. So that comes in handy. So that's how we think we can really add value. Obviously, when they want to hire, they want access to some really good engineering or PhD talent, we can tap into a university network. But by the end of the day, it's a people game. Are we showing up for them when they really need us the most? We don't have all the answers, but can we at least point them in the right direction? I think that's where the biggest value add is, especially as a small investor. yeah I really don't like selling myself as oh my god I am going to help you think better I'm going to help you build the best version of yourself no I don't think that's my job and founders are doing it every day so hats off to them yeah but that's that's where I sort of draw the line yeah and what part of your job do you enjoy the most that's a tough question because I I adore all aspects of it but I really like it there are a few elements that I really like I really like connecting people even even if it's a if it's a startup that i'm rejecting it's always a no and can i do something else um even when i'm speaking to someone and i'm immediately thinking hey i think you should speak with this this and that person have you already spoken to them um can i'm more than happy to give you an intro so i think that gives me a little of a high first of all the fact that i know so many relevant people the second thing is hey if i if i call them they're going to respond to me.

16:01So I really like that bit. And even though I'm an engineer, even though I really like the numbers and the quant side of it, I'm a big vision, big picture person. I really like to be... This is the most exciting bit, right? So when the founder is narrating their vision, their product, and this is the problem they're solving, blah, blah, blah. And I'm imagining a new world when they're pitching to me. So there's almost like a new story or a movie that's going in my head and I think that's what makes this job so exciting and interesting for me even though it's it's it's such a tough job and I'm saying no to 99 % of the pictures that I see but that 20 minutes of story that I live in my head I think that's amazing so I think these are the best parts of being a VC yeah yeah I think it's interesting as well because

16:48Amardeep Parmar:to me so many young people want to be VCs and so you could do realize your job is 99 % of the time I'm just saying no to people where that breaking people is hurt, right? But is it the 1 % that you can help? You can do so much. And that 150K you put in, could that now help catalyze the technology and change the world, right? Absolutely. Yeah, yeah. Oh, and the other thing, just going back to the initial question of how is this different from a, how is working for family office different from a LPGP VC fund, is that we can act like an evergreen fund. So we don't have the regular hurdles or challenges that a VC fund has.

17:24There's no four-year, four-year, and two-year period. There's no, okay, these are the restrictive terms in an LPA. None of that applies. If there's interest, if there's opportunity, we can go in and keep following on in the successive rounds as much as there's opportunity and as much as we have capital to sort of deploy. So I think that's a very, very interesting angle, which also helps us get on the cap table for some of these very, very hot deals saying, hey, these guys are really, really patient and really long term. And they mean that when they say that. I think that's very helpful and different.

17:56Amardeep Parmar:I think there's some founders, family offices are kind of a weird black box. They don't understand. Yeah. And if someone's coming to you versus a VC in an LP structure, how would they tailor their pitch differently? Was there anything that you'd be looking for? maybe that other VCs wouldn't be looking for from traditional funds? Yes, there is a little bit of mysticism around family offices. I think that is because of most of these really rich people, they want to stay low. Or the source of their income, the source of their capital, there could be varied interests and diversified assets. We don't really know where that comes from.

18:34I think that's the mysticism and the opaqueness around that. But from a founder perspective, I don't think they should have a different narrative for a family office versus VC fund for a micro GP or an angel. The only thing they need to keep in mind is, for example, let's say a family office made their wealth of selling fertilizer or agri-tech machinery. Does this really fit into their investment thesis? So they need to think about, is it a strategic investment for the family office if they're still running a current huge business? Or is it a pure financial play for them? I think then if they sort of know, then it's just like pitching to a corporate venture capital arm.

19:12What's the angle? And then pitch differently. But other than that, first of all, fundraising is hard. And I know they're building hundreds of versions of DEC from V1 to VF, and that's the 150th version, and it keeps evolving. I think asking a founder to pitch differently to a different kind of investor, if they're all operating the same stage, you're an early stage investor. Asking them to pitch differently is just such a selfish ask. They're already doing too much. But that's my advice. I mean, understand the interest. That's the only thing that's going to change. But then do your thing. It's the product and you that they're investing by the end of the day.

19:51Yeah.

19:52Amardeep Parmar:Hello, hello. I hope you've enjoyed the show so far. I'm Amadeek Palma, co-founder of BayHQ and the host of this show. For those of you who don't know, BayHQ is the community for high growth, Asian heritage founders and investors in the UK. Over 7 ,500 people have attended our events. 200 people have been for our impact programs. And obviously there's been over 250 episodes of this podcast. If you want to join us and take part in the programs and come to the events, go to vahihq.com forward slash join. We also just released our first ever book called Startups for Outsiders, which you can get on Amazon now and the link is in the bio.

20:33Amardeep Parmar:Hope to see you soon at our event. Hope you enjoy the rest of the episode. And you said you're hearing some really interesting stories and it's one of the founders that you've talked to. Yeah. Is there any investments you made recently that you'd love to share about how excited you and why you invested in them? Is there something that I can talk about? I can talk about a few investments without naming them. So there's a self-mode startup that we invested in based in the Netherlands. So this is a second-time founder. came in through another very close colleague of mine and said, okay, this person is super interesting, immigrant, very, very tenacious, has built a startup, has scaled it, now is onto a second journey because he is a zero to one person, not the one to a hundred person.

21:18And the idea that he had in mind is super exciting, right? So you must have heard of AI native ERPs. And in the US, there are a couple of companies that have raised 100 million plus. But then this guy has found out a new way to create ANA to VRPs for brick and mortar businesses because he said, hey, SaaS, anybody can do, but have you ever been to, let's say, a beautician business or a veterinary practice or a dental clinic? How they operate is so different. And the current SaaS tools that the Oracles and SAP, you know, that they've built just doesn't fit the bill. And we spoke to so many of customers and then we looked at their tech stack, they've stitched together 15 different apps to create a CRM, ERP system.

22:07It's just so expensive and doesn't work, doesn't scale. And nobody has tried to solve this problem and this person is trying to solve it. And we're like, okay, this is super exciting. And why was that exciting? Is that this person, he's very, very new. It's a solo person team. He has brought together a few people that he trusts and has worked with before. and they still had their previous jobs, but they've sold on the vision. They said, okay, once a day is a fund, we're going to quit our jobs and join your team. And it's impressive, right? So why would anyone that's got a stable income, has got a job, is on a growth trajectory, why would they quit their job to join this not funded, you know, single person?

22:45It's just so impressive to see someone who's able to sell that vision and bring some very impressive people on board and wants to take on a huge, massive challenge and go against the Microsofts and the Oracles of the world, I think that's an exciting startup and investment.

23:03Amardeep Parmar:So with the fund itself, so you're investing across, what's the geographical location as well? It's all across Europe. The UK first, we're based here. Europe, and then if there's an opportunistic bet that comes from, let's say, US, we're ready to sort of take a look at that. But I would say Europe first, yeah. And obviously there's a fairly new family office VC model as well. how you're getting the deal flow and how you're trying to work out things in all these buyers. Obviously, you've got a background already. Is it kind of using your existing networks? You happen to build new ones? Yes. So it's a very interesting challenge when you're a startup fund where you're the new kid in the market and then as much as how founders are pitching you, you're pitching your fund and your value add, what do you bring to the table to them as well?

23:50I think how we source deals, obviously through network, but we're trying to use AI ourselves. I'm sure every other VCO in the world is trying to be data-driven and using AI, but I think now it's not a good to have, it's a necessity. Everyone wants to run a lean process. Everyone wants to sort of, you know, be the most tech-savvy person in the room. So we're trying to do a few of that. We've invested in tools. We've invested in analytics platforms. We've sort of, we're building our own custom integrations and tools that sort of, and gives us a notification when there's a new founder on the block.

24:26So I think that's it. So it's a little bit of maintaining a warm relationship with a lot of other founders in the portfolio, network of investors, and building partnerships with universities, building partnerships with incubator networks and communities. And I think that's the best way to source. And I think, yes, getting warm intros from other VC fund, VC investors is great. But I think the best of the best deals comes when your portfolio companies who know other founders say you have to work with that VC. I think that's almost the, it's a pinnacle of you've done a good job with that particular founder that they're referring you to other founders.