How Avnish Bajaj Carried His Legacy of Entrepreneurship into Venture Funding An entrepreneur turned investor by definition is able to empathize with the founders because they have been there before.

When an investor has walked the path as an entrepreneur, he is bound to understand and empathize with the founders. Avnish Bajaj co–founded Matrix India in 2006. But, prior to that Avnish also co–founded online marketplace, Baazee, in 2000 and sold it four years later to eBay for $55 million. Hence, he is aware of the exact pain points of an entrepreneur's journey. In an interview with Entrepreneur, Avnish spoke about his journey from being an entrepreneur to an investor and Matrix's perspective on the fintech sector.

Does a legacy in entrepreneurship help an investor?
It depends on how one uses his experience. Venture capital is about working closely with the entrepreneurs. An
entrepreneur turned investor by definition is able to empathize with the founders because they have been there
before. Yet, it also comes with its own pitfalls of potentially getting too closely involved in the business and getting in the way of the founder.

Matrix was very bullish about fintech very early on, what gave you the hint?
Our approach is founders first, yet thesis backed. We build thesis around key areas of interest – essentially a "prepared mind' on markets and trends. So, if we were to look back in the last 3–4 years, the thesis that we built
around fintech was around a few key drivers. To start out, it is well known that India is underserved when it comes to financial services. Yet, the underlying drivers why it has been underserved have been changing in the recent past. Firstly, alternate sources of credit information have now become available e.g. e-commerce transaction history, online banking history etc. Secondly, universal identification has come in with Aadhaar and has been adopted widely.

Thirdly, credit bureau information has improved to a level which coupled with Aadhaar is providing better risk underwriting capability. And finally, the proliferation of the mobile in every hand provides the transacting instrument and data in the hands of the end user.We have also been investing in financial services firms since our inception and also invested early in Mswipe, mobile POS company. So as we combined the above trends with our experience in financial services, the opportunity was staring us in the face as pointed out by my
colleague, Vikram, who leads this sector and has been the keydriver of our franchise in it!

Has your investment thesis changed post things like UPI, demonetization, and other financial reforms?
No big change, as we don't invest in short–term disruptive events but rather behind long–term trends. However,
the short–term events are a catalyst if one has called the trend right. Obviously, businesses, like Mswipe, have exploded in traction and the key question is whether this is temporary or permanent.

My view is that this event and associated thrust of UPI, India QR etc. are all big positives for the digital economy in general as too much cost and effort has so far had to be put into structure around the "cash economy" (e.g. COD, cash acceptance points etc.) which will change over a period of time going forward with its significant push from the government. No amount of marketing money could have generated the kind of quality trial for the digital cash modes like this single move from the government has done!

Will there be an occurrence of a bubble in the fintech sector?
There was one (globally) and it burst already earlier this year! Today fintech is not a buzz word frankly. In fact, the
sector globally has been in a downturn. In India, it never really went into a bubble (though company creation did go into high-velocity last year) so there isn't much to burst! The only segment where spends have gone crazy is
wallets and the sustainability of that can be debated in the face of government moves like India QR – but one can also argue that it is a once in a lifetime opportunity for these companies. The other element of a bubble is high
and unsustainable valuations and there have not been any new financing rounds in the recent past so that element is TBD. Right now, it's about adoption and these companies are spending a lot of money on driving the adoption. Whether they have overspent during thisperiod that only time will tell.

Do you have a defined structure to select entrepreneurs?
In this business, if one structures it too much, then one will miss the best opportunities – as the best investment opportunities are not obvious and deterministic (e.g. Facebook; Google; Twitter etc.) So one has to be opportunistic within a broad strategic framework. Yes, one can follow certain frameworks but ultimately it's a judgement call. As far as our philosophy goes, we are "founder backers'. We back founders over markets, even to the extent that if we like a founder and don't like the market, we will still back the founder. For a founderdriven model like ours, it is essentially a people evaluation process which by definition is a judgement call in separating the excellent from the rest. As a team, we often disagree on such calls, but we also learn a lot from each other's perspectives on the founders.

Some of Matrix's investments include Ola, Practo, Quikr, Razorpay, Finomena, Mswipe, Dailyhunt, Limeroad, Treebo, OfBusiness, Myra and Belong.

(The article was first published in the January 2017 issue of Entrepreneur Magazine)