Nitin Bajaj

(0:02) Hey everyone, welcome to The Industry Show. (0:05) I’m your host Nitin Bajaj, and joining me today is Sanjay Reddy. (0:09) Sanjay, welcome on the show.

Sanjay Reddy

(0:11) Thanks for having me.

Nitin Bajaj

(0:13) Pleasure is all ours. (0:14) So let’s start with the big question. (0:16) Who is Sanjay?

Sanjay Reddy

(0:22) Well, I’m somebody who is pretty committed, pretty adaptable. (0:28) I’ve got a broad spectrum of interests, knowledge, network, experiences. (0:34) And that’s a result of the fact that I’m always up for a new challenge and new ideas.

(0:40) In my opinion, life is about experiences, both professionally and personally. (0:46) And so I am less focused on material outcomes, be it, you’ve got to return X, or we’ve got to do Y as a professional accomplishment, or you’ve got to bench press A or run 500 miles. (1:09) It’s more about experiences.

(1:11) And so the focus is really learning and doing and creating new things, as opposed to thinking about a destination. (1:23) The whole point about the journey as opposed to the destination is very much a cliche, which I’ve realized is absolutely the truth. (1:35) It’s a cliche for a reason, right?

(1:36) It’s big data. (1:38) And it is a huge number of people who come to that realization and so am I.

Nitin Bajaj

(1:43) It’s really refreshing to hear that coming from your world, right? (1:48) And we’ll talk about what you do in a sec, but I’m a big believer in the experiences in the journey more than the end game or the outcome. (1:58) So I think it really resonates with what you just said.

(2:02) So tell us more about Unlock, what’s the mission, the vision, but more importantly for me, and as we were discussing the why, why do this?

Sanjay Reddy

(2:13) Sure. (2:14) I’m happy to tell you about Unlock. (2:16) I mean, it’s just something that I, and for all entrepreneurs, whenever you’re talking (2:21) about to investors, it’s usually a good idea outside of doing your homework up front on the (2:27) company, on the partner or whoever you’re speaking to, to actually have them tell you what their (2:35) mission is, what their parameters are, because apart from that being, you know, (2:43) call it Salesmanship 101 or any of those things, it really informs the way you then communicate (2:49) your story. (2:50) But anyway, at Unlock, there are three of us.

(2:53) I’m in LA. (2:54) I have a partner in Seattle and one in the Bay. (2:57) And our goal is really to provide the kind of venture fund where we’re early stage technology venture investors.

(3:06) Our goal is to provide the kind of venture fund we wished we could have worked with when we were starting our enterprises. (3:14) Each of us, the three partners, have started, co-founded and led and exited at least a couple of blank sheet startups. (3:22) And so we’re founders, we’re operators that have invested in the past and done all of these things of being ex-founders, operators, angel investors, corporate executives, spend a ton of time at the early stage.

(3:37) So when you ask why we’re doing this at this time, it’s the right time in our careers. (3:45) We, my partner in Seattle and I, we exited our businesses at the same time roughly and we were in terms of our earnouts. (3:53) And so we didn’t want to do any more startups.

(3:55) We didn’t want to work for large companies, but we really loved the early stage. (4:02) The added benefit is we’d known each other for almost 10 years before we started the fund in various different capacities. (4:10) I had invested in his company.

(4:12) I was on his board. (4:13) We angel invested together. (4:15) So we really knew each other.

(4:17) And the other part of this is, two of the five largest tech markets in the world are Seattle and Los Angeles. (4:26) And especially in the case of Seattle, which is amazing given the outsized tech companies that have been built there, there’s a relative paucity of early stage capital. (4:38) So we felt we had an edge there and we’re very committed to these markets.

(4:41) And so when we started end of 17, beginning of 18, we were always along these two markets. (4:48) That’s why we started the fund. (4:50) And our goal really is to invest in seed stage tech entrepreneurs in those two markets, Seattle and Los Angeles, who are using data and AI to build world changing companies.

(5:02) We want to bring all our experiences and all our ethos, our network, and frankly, a lot of the things that we did wrong to inform and assist entrepreneurs on their journey to build the type of companies that we will all be proud to associate with.

Nitin Bajaj

(5:23) Thanks for sharing that. (5:24) And it can be a really exciting journey, and especially at the startup stages. (5:30) So I can see how you’re attracted to that.

(5:33) And this way, you get to kind of, as they say, have the cake and eat it too. (5:38) That’s awesome.

Sanjay Reddy

(5:40) Hopefully, and hopefully it’s a big cake, so it’s lots for everyone to eat.

Nitin Bajaj

(5:46) Tell us, you know, I’m always curious to get a sense for, in one way, the size and scale, but more importantly, the impact that you’re able to make through the work you do. (6:00) So I’d love to hear a little bit about that.

Sanjay Reddy

(6:03) Well, size and scale, a presumption as you talk about the size of the fund, I mean, we’ve got about 100 million AUM across two funds, where we’re investing out of the second fund right now. (6:16) I think impact’s an interesting thing, because, and this is one part of why we really do like working at the early stage, we believe that we can have a disproportionate impact in terms of the outcomes. (6:32) There’s a lot of volatility, high beta that can be addressed early on.

(6:38) And so we think that this is, and when we say impact, there are many different things, right? (6:44) For instance, telling you what not to do is incredibly important, because we’ve lived these experiences, we understand, and again, obviously not every, this is the strength of an entrepreneur. (6:58) I can tell you based on my experience, but the reason we invested in you is because we believe you are the best person to run your business in and see that your idea to fruition.

(7:09) But that said, there are a lot of things that, you know, maybe outside of experience set or things that we believe we can add value with, which go beyond capital. (7:20) I always tell entrepreneurs, once I write the check, and we say it to fellow investors, etc. (7:26) Once we write the check, we’re nothing more than glorified BD executives, right?

(7:31) Our jobs, there are two real functions we have at the early stage. (7:37) It’s to help you get your first or next commercial deal, to validate your GTM or to accelerate your revenue profile. (7:47) And the second is, it kind of goes sort of lockstep with that is to help you get the next round of funding.

(7:56) Let’s be very clear, there are other things you can help with. (7:59) But if we had to put, you know, the two things at the top of the pyramid, that would be it. (8:05) And so when we focus on impact, ultimately, that is what we will be judged by outside of all those other things that go into helping an entrepreneur be successful.

(8:19) So we feel we’re pretty good at that. (8:22) And we feel we have a lot of experience. (8:23) I mean, we had invested about 130 angel deals between the three of us before we started the fund.

(8:29) And so outside of our own startup experience, we felt that, you know, we understand a little bit of pattern matching, pattern recognition, as well as some of the do’s and don’ts at the early stage.

Nitin Bajaj

(8:43) That makes a lot of sense. (8:45) And, you know, with numbers with experience with practice, you kind of just keep refining that toolset. (8:51) And yeah, I completely agree with you.

(8:55) It’s how do you avoid doing the same mistakes can make the difference between whether you exist as a business or not, in a year or two. (9:04) So it’s extremely important. (9:07) Now, I’m really curious to hear as a fund owner, as a fund manager, what’s the biggest challenge you’re facing?

Sanjay Reddy

(9:16) Well, I mean, it’s no secret. (9:20) This is something all of us are observing. (9:23) And even in our daily lives, we face it.

(9:27) Milk doesn’t cost the same. (9:29) You know, there’s everything costs is changing in terms of cost. (9:34) We have all of this geopolitical risk that’s built into our everyday life.

(9:38) And in a very dispassionate, you know, way, you say, how does this impact outcomes? (9:46) And how does this impact returns? (9:47) How does impact the financial world we live in?

(9:50) And the answer is, you know, the capital markets and the turbulence therein is the biggest challenge we face. (9:58) We’ve gone from a period where some of us, unfortunately, or unfortunately, however you want to put it, old enough to have been operators or professionals at a time when cost of capital is not de minimis. (10:13) Capital has a real cost.

(10:15) And I think people have, if you go through a 20-year period, effectively, where it is always interest rates going down into the right, one tends to sort of discount that as a very real variable that one has to deal with. (10:30) So the turbulence in the capital markets has disrupted the sequence of financing. (10:35) When the public markets, you know, A, you can’t price things appropriately because the multiples are all over the place, new offerings, IPOs closed.

(10:44) So that affects every single stage of financing. (10:48) When you look at the pre-IPO series E all the way down through A, that impacts us. (10:54) And so that along, you know, and then the ripple effect is we’ve split the focus is switched from pure growth to what I’ll call normalized growth.

(11:05) That has a different set of challenges when it comes to the entrepreneur mindset, the construction of your P&L and how you have to now reorient your mindset as well as your focus. (11:25) All of those are challenges because you have to do it on the fly. (11:29) You got to help folks who might not have gone through this before, help them address that.

(11:35) You’ve got to think about what kind of capital you can reserve and put to work to support some of these companies. (11:42) And then unfortunately, some of the difficult, the most difficult things is when you have to say, look, this is not working and I cannot deploy more capital here. (11:51) So that boils down to the capital markets and what’s going on there, which everyone knows about is the biggest challenge we face.

Nitin Bajaj

(12:00) Makes sense. (12:01) And I think when it comes to the stakeholders, it’s that mindset, it’s that perception that becomes a pretty big bottleneck because you’re not looking at the real or the reality of the real terms. (12:16) You’re kind of working with those mindset challenges.

(12:20) Now on the flip side of challenges come opportunities. (12:24) I’d love to hear what’s the most exciting one you’re targeting.

Sanjay Reddy

(12:29) Well, against the backdrop, historically it’s been proven great companies have come out of challenging times. (12:38) Some part of it is it’s natural selection because the best entrepreneurs try to solve problems. (12:47) It’s natural selection.

(12:49) You’ll have folks who are going to be grittier to survive this period. (12:54) I think the other part of this is, I think it’s relatively straightforward. (13:01) The big companies, the large strategics focus on the core product and their P&L.

(13:09) The companies that are coming up, the new startups, they have a harder time getting funded. (13:13) So those who are funded, who sit in this gap between the two, they have the time to execute, get their product market fit right, get that early scale without having to worry about the incumbents or new entrants. (13:31) So I think the two of those things result in great outcomes.

(13:35) But I think right now, again, not going to say anything revolutionary. (13:40) Obviously, the open AI release has unleashed an awareness, not as unleashed AI. (13:47) Machine learning and NLP and CV has been around for a while.

(13:53) As have LLMs. However, I think obviously the advance in the output for LLMs has been incredible. (14:02) And especially I think what’s incredible is the fact that it’s almost like a Google moment. (14:08) It’s so accessible to the average person.

(14:12) And so I think it’s incredibly exciting. (14:17) I won’t say exciting in terms of, oh, my God, it is exciting to say, oh, my God, look at all these videos you can create. (14:25) They’re amazing use cases.

(14:27) But I think what’s exciting for us is seeing firsthand the actual tangible benefits from an operating efficiency perspective from our companies, small startups to folks who are further ahead in their life cycle, where we have one company that saw the time to process output for these massive data sets reduced from months to literally hours. (15:06) I mean, if you have to think, I mean, it’s just mind-blowing. (15:09) And this is not even while being experts or have figured out the most efficient way to utilize these LLMs. And it’s not just OpenAI’s solution. (15:23) It’s across the board. (15:24) There are so many things that have come out. (15:26) OpenAI releasing that forced a lot of the strategists to release their solutions ahead of when they were, quote unquote, ready for primetime in their estimation.

(15:37) And so it’s a massive, massive opportunity for all of us to a certain extent. (15:44) I’d say it’s even bigger than when the internet was released. (15:50) And so I think within that subset, I think we’re very interested in how close proprietary data sets will function for smaller companies in terms of generating value and being an actual real asset on the balance sheet, because ultimately LLMs have to be trained on something.

(16:09) And I love to wind up with, yeah, till you wind up with great synthetic data sets or whatever, but still even generating those synthetic data sets in and of themselves have value. (16:21) So yeah, that’s what’s really exciting today. (16:23) I will toss out one, which is specifically for LA.

(16:28) I would say while generative, obviously given the content space and the creative space that LA has always been a leader in, I think space tech is really interesting.

Nitin Bajaj

(16:39) I’ll keep my eyes and ears open and I’ll pick your brain on that one. (16:43) Now, as we talk about what’s coming next, I want to take a moment and reflect in the rear view mirror and ask you for two experiences, one in which things worked out beyond your expectations and became a success more than you had imagined it to be. (17:04) And on the other end things, when something did not work out as you had expected and became a failure or a lesson.

Sanjay Reddy

(17:19) I don’t know about wildest imaginations. (17:21) I’ve got a pretty wild imagination. (17:23) So I don’t think anything’s outperformed that.

(17:28) I think, again, I tend not to think in terms of the extreme. (17:36) I just think, and we’re going to cover a couple of other things, but I think believing in oneself is an incredibly important thing because again, these are all cliches, but they’re so true. (17:52) If you don’t believe in yourself, other people might, but if you really don’t believe in yourself, it’s really hard to get those outcomes.

(18:06) Everyone has moments of self-doubt, but you have to believe in yourself. (18:10) And so the one story which I do like, and it talks about my belief in myself. (18:16) I had come off a startup in between college and business school.

(18:20) I was a fully employed MBA at UCLA Anderson. (18:24) And I remember, and it’s okay, I’ll give the name because it doesn’t cast the career center in a great light, but I remember trying to do a pivot and going, I was in the entertainment industry and startup pivoting to go into, I wanted to be an M&A, I wanted to be a banker, investment banker on Wall Street. (18:41) And they said, the career center, I remember said, ask them, no one has ever done that from the fully employed program who hadn’t been a banker before and had never done an internship, summer internship.

(18:57) No, you can’t do that when you’re working somewhere. (19:01) It’s not the best sort of way to start the process when you get the job, but I just felt, look, I studied accounting when I was a freshman and a sophomore in high school. (19:18) Finance and accounting are not that difficult for me.

(19:21) And so hard work is not that difficult. (19:24) I knew a startup is a lot, it’s incredibly hard. (19:29) And so I just had faith in myself and it was not just the one job that I did.

(19:34) I actually got pretty far with a lot of folks, including convincing a vice chairman of one of the top banks that even though I had a different background, I just met him at an event that I was worthy of having a conversation with. (19:52) Ultimately, I did wind up getting that job. (19:56) And the funny thing is after that, the career center come to me and said, hey, would you come and talk to our students about it?

(20:04) And some part of me was less than enthused about it. (20:13) But I think the other part of that is I was always happy to do so because I could help other students and I did. (20:21) I know a couple of other families wound up working in the same bank as I did as a result of what I had done.

(20:28) So I always feel that you should believe in yourself. (20:32) And the key thing to remember is all of us, no matter where, and especially entrepreneurs who are going to be watching this or whatever, all of us have already come through a bunch of filters. (20:43) Sometimes you tend to forget that you in general are pretty privileged lot and you’ve already gone through those filters.

(20:51) So it’s not like you haven’t crossed over the hurdles. (20:56) It’s just you haven’t crossed over the hurdles that are yet to come. (20:59) But if you look back, you should realize that you didn’t get all the way here by accident.

(21:05) And so have faith in yourself.

Nitin Bajaj

(21:08) That is so important. (21:10) And again, we can still have our moments of self-doubt, but the fact that we’ve got to where we’ve got to, what we have gone through, it builds on our character, builds us, it builds how we tackle the next set of situations that come to us. (21:27) And, you know, I’ve, I’ve personally experienced so many of these things where it may not be the same exact thing, but I can gather all my previous experiences and I have that sense of confidence that, yeah, I’ll, I’ll figure this one out.

Sanjay Reddy

(21:45) Yeah, no, I can tell you one of my startups, I remember when this stuff melted down, like, you know, the meltdown was happening, financial meltdown and all this stuff for the last 12 months. (21:56) I remember talking to the founder and saying, hey, are you okay? (22:02) You know, how are you thinking about this?

(22:04) And as we as a business had so many existential outcomes, you know, existentially challenging outcomes in the past, he goes, well, I have millions of dollars in the bank. (22:19) I’ve got more than enough levers to deal with this. (22:22) This is, this is hardly any kind of challenge.

(22:26) It is a challenge, hardly the same sort of type of challenge that I’ve already gone through multiple times. (22:32) So being able to look back and draw strength from that is good perspective to have. (22:37) And I, that’s why I say experience, you know, good, any experience is good.

Nitin Bajaj

(22:43) Yes. (22:45) I agree.

Sanjay Reddy

(22:46) Yeah. (22:46) As far as, you know, bad stuff, you know, so many bad things, but why, why go into, I will tell you though, the one thing that is of all the things that, you know, I’ll challenge you when I say it, I’m sure it would be nowhere near what you would think I would say, but literally the biggest failure that always sticks in my craw. (23:10) And I have a lesson learned from it was this goes back to the sixth grade and it goes back to a football match, soccer, but football match.

(23:21) And we were playing the finals. (23:23) It was one of those, this big thing, right? (23:25) We’re going to play the finals in school.

(23:28) I was a decent player and all that, but what happened was it’s so funny. (23:34) I can remember it clear as day. (23:35) I can even remember the goalie.

(23:36) I won’t say his name, but I blew three one-on-ones and normally, you know, three long ones. (23:42) And normally, you know, I was close enough that if I put my foot through the ball outside of it, hitting the goalie’s face and not going in, it was going in. (23:51) And I don’t know why it was the first time you kind of hit it softly, save it.

(23:57) Second one, even, I mean, even though I almost rolled it, I almost scored the third one. (24:02) That’s how close I was, but literally didn’t score any of those. (24:06) And we lost.

(24:08) And I felt terrible. (24:12) And the thing that I realized later was that I felt terrible because I was literally scared. (24:20) I mean, this stuff I’ve done like thousands of times leading up to it, right?

(24:25) And it was like, I could close my eyes and do that stuff. (24:28) And it was really the fear of failure. (24:29) The first time, you know, you kind of chicken, then the second time it became a bigger thing and then it became this mental block.

(24:37) And so I think it is, again, it comes back. (24:40) You got to trust in your abilities and the work you put in. (24:42) You can’t worry about it not working out because if that’s what it is, you’re going to, you’re usually not going to wind up in a good place.

(24:50) And the worst thing is going to happen is that you wind up feeling like, oh man, I left something out there. (24:56) And, you know, it’s literally fear of failure that that caused me not to do what I know I could have done. (25:03) So that, I can’t say that I always will operate by that.

(25:09) Like I said, you know, some, some, something slipped, but that is the one thing that I still do. (25:15) And we went on many other finals and all that after, but that one specifically, because it was a hundred percent on me and it was no reason to have that happen. (25:27) Without a one or not is irrelevant.

(25:29) You don’t remember all those things, but I think failure sticks, certain types of failure sticks with you much more than any of the victories. (25:36) That’s why it comes back to the journey and not the outcome is super important.

Nitin Bajaj

(25:41) Extremely well said. (25:42) And I agree a hundred percent. (25:43) You know, there have been some moments from back when I was like six, seven, 10 years old.

(25:49) And those moments really change you and make you reflect and, and take actions and make choices because you kind of go back and, you know, same thing I relate to. (26:01) And you said, you know, like it happened yesterday, because those memories stick and it just helps you build and, and draw from that strength. (26:12) So thanks for sharing that, you know, it’s extremely important because it’s these moments that define us, that make us.

(26:21) And before I go there, I, I do want to kind of put a break in between and, and ask you, what do you do for fun?

Sanjay Reddy

(26:32) I’m a big sports fan. (26:35) I love basketball. (26:36) I love soccer and football.

(26:39) Love traveling, be it for work or, or, or for pleasure. (26:44) I’m hanging out with my family. (26:46) I’m traveling with the family is one of the highlights of of my year.

(26:53) And then, you know, I love to read. (26:55) I don’t do as much reading just for reading sake as I would like to, or as I used to, but love to read history, geopolitics, that type of stuff is, is incredibly fascinating to me. (27:11) But, you know, I think what I do for fun, what I do every day is kind of fun too, you know, talking to, to entrepreneurs are going to change the world and have, you know, pitch me on these crazy ideas.

(27:26) And especially since we’re generalists, I mean, it’s awesome. (27:31) I mean, it’s awesome. (27:33) Yeah.

(27:34) I hear about gene editing and I, then I hear about, you know, rocket launches and I hear about, you know, putting dog whispers on cat ears and, you know, you can hear just the incredibly broad spectrum of, of, of ideas and, and meet so many founders, which like you said, you know, when you interact with these people, I think it’s, it’s a pretty cool job.

Nitin Bajaj

(28:03) It is. (28:04) It sounds like a lot of fun and a lot of adventure. (28:07) Obviously, when you venture on a journey with them and get to kind of see the, from the front row seats, other journeys evolving.

(28:19) Yeah. (28:20) Thanks for sharing that. (28:21) So this brings us to my favorite part of the show, which we call the one line life lessons.

(28:27) So I would love for you to share your one line life lessons with us.

Sanjay Reddy

(28:30) Sure. (28:32) So my favorite one is never over good or bad. (28:36) It’s never over till it’s over.

(28:40) As second one, this is, goes back to when I was in, you know, you know, how Indians are a lot of what we learned in middle school and stuff stays with us. (28:51) So intelligence is secondary to diligence. (28:55) You know, if it was easy, everyone could do it, would do it.

(29:03) No experience is wasted. (29:04) I think I touched on that. (29:06) And then the last one is why not me?

(29:11) Those are my life lessons.

Nitin Bajaj

(29:14) Those are awesome. (29:16) Amazing. (29:17) I relate to all of them and especially the one about diligence and, you know, I kind of extend that out and add discipline to it as well.

(29:27) And Sanjay, thank you so much for sharing these one line life lessons, but also your journey and your story and what you do. (29:35) It’s so fun. (29:36) So exciting.

(29:37) You’re helping entrepreneurs. (29:39) You’re helping us move forward as a race and really appreciate it. (29:46) And would love to bring you back on here in a few months and see what are the stories and what are the journeys you’re adding to that pack of experience.

Sanjay Reddy

(29:56) Sure. (29:57) Happy to do it. (29:57) Thanks for having me on.

(29:58) It was fun.