An insider's view from the growth fund within Google's parent company

CapitalG's Sumi Das on being a growth-stage investor focused on healthcare tech and fintech

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Sumi Das joined CapitalG, the growth fund of Google parent company Alphabet, in 2015. However, he got into the finance sector in 2010, at a time people believed venture capital was dead due to the financial crisis. According to Sumi, the financial crisis in 2008 brought forth a new era. The times were changing as the ‘Mobile’ was growing in prominence, Apple had launched its iPhone in 2007, and ‘Cloud’ technology had just been invented. Since its founding in 2013, CapitalG has been investing throughout all the geographies in the World, including the U.S., China, India, Europe, etc. When the pandemic struck the World in 2020, many people became restricted to working from their homes. Sumi believes that the pandemic-induced near-overnight shift to working from home has accelerated the future by about 6 years, with new technologies advancing by leaps and bounds. Sumi believes that Healthcare tech, Education tech, and Fintech are areas with massive potential.

CapitalG
Sumi Das, Partner, CapitalG

Sumi on the pros and cons of working on Zoom says, “Positives are how it has flattened the world and all the frictions that used to occur. These are in many ways reduced because we are getting comfortable in a world where we are doing investments over video calls. It has been great because we are meeting a lot of Entrepreneurs, meeting them earlier in their life cycles, and we are having conversations at scale in a way that we weren’t able to before. That has been great because now we can meet Entrepreneurs across the globe at an increased velocity. One of CapitalG’s most successful investments, UiPath, which went public in April at a market cap of USD $38 billion, was founded in Romania. We really think that the best companies will be all over the World. The cons of it are obviously that we don’t get to spend one-on-one time with Entrepreneurs getting to know them as much. The other con is that we don’t get to be in the environment of the company. A huge part of what we used to do prior to the pandemic was to visit offices and get a feel for the culture of the company. To compensate for that, we did two things differently during the height of the pandemic. One is that we started to engage founders much earlier in their life cycles before they needed to raise growth capital. This way we got to spend some time with them, even though it was virtual, getting to know their businesses. Before they even start fundraising, we find ways to be helpful to them in their thinking and execution. It is a rewarding way to build a relationship.” Also, now that vaccines are available in the US and many other parts of the World, travel is finally resuming.

CapitalG is an independent growth fund that is funded by Alphabet. It invests in growth-stage companies that have found product-market fit and are starting to acquire customers. CapitalG goes for Series B, Series C, or Series D funding, as the goal is to invest in a company that has found its product-market fit and to support it through its life cycle till the company goes public and sometimes beyond. The ‘sweet spot’ for CapitalG remains Series C and Series D. However, with the pandemic changing the usual scenarios of the world, CapitalG is getting involved in more Series B rounds, as they selectively choose Entrepreneurs who they want to invest in after the Entrepreneur’s successful Series A. CapitalG led Stripe’s Series D funding in 2016. Stripe has proven to be a strong bet with a USD $95 Billion valuations, making it the most valuable startup in the U.S. Albert has been one of the newer companies that CapitalG has funded. Albert received Series B funding as it aspires to create a full-scale financial services advisor and bank for mid-range income consumers. CapitalG has made several investments in India as well like Practo, CarDekho, Freshworks, Cuemath, etc.

Sumi Das on being a founder and the difference between Indian and U.S. Markets mentions, “ I’ve seen different founders do well in different environments, but the founders I’ve worked with have a very different vision of the future which is very hard to imagine for other people working in that industry. I focus on Fintech and Healthcare tech, which are very regulated and slow to move. Founders need to have a very defined vision of how they are going to build something different. The second is the ability to inspire and tell a story to the people you are going to need along the way--the first couple of employees who join you from their cushy jobs in a big company and take a risk to go work towards a vision. Then there are investors who give you early funding to achieve your vision, and there are customers and partners to convince you that it is worth getting on the ride. So it really comes down to the ability to inspire. All these companies are a series of zig-zags. It isn’t a straightforward journey. It is a series of decisions one makes. Some go well, some don’t, but you adjust to them. The fortitude to continue and adjust is a common attribute among successful founders in India, the U.S., and other markets. One thing that I do think is unique about Indian founders is that the number of employees grows faster in comparison to the U.S. One of the skills Indian founders need to have is to learn to manage a large organization and to learn to make it work for an operational business. That is a unique challenge that Indian founders tend to be very good at. Several of our companies have 100s of employees. Another challenge for Indian founders is that the capital markets in India aren’t as predictable as in the U.S.” The pandemic has ushered us into a whole new era. An era where remote work is possible but with many offices still shut down, it has created a whole set of problems for Entrepreneurs. Sumi Das shares that when the pandemic first struck there was a lot of fear for what it meant for the economy, the World, the capital markets, and the businesses that needed some cash to get through it. At that time CapitalG helped Entrepreneurs think about what they needed and how they could get through it. Sumi notices it has been very hard to keep company cultures and levels of morale high during such an uncertain and extended period of remote work. People build startups together, and in the remote world, it’s harder to do well.

Sumi Das on the lessons he has learned shares, “The biggest lesson I’ve learned by far is that in entrepreneurship you really have to keep an open mind, and this is the biggest risk I see. As an investor, you learn over time, and you do pattern recognition, but every great company has a unique story of its own. I think the best investors are the ones who are able to think about the company in a very open-minded way and think about the unique strength and weaknesses of the business. That is the number one lesson I’ve learned over the last 10 years. I think it is a very good life lesson to keep that mentality. I always had very high respect for Entrepreneurship even before I was an investor, but now living with these folks for a decade, that respect level has gone up quite a lot more. At a societal level, we should be thinking about how to encourage more Entrepreneurs because it really is a noble act. You start out with very little and put it all on the line. I’m very proud to be in a profession that does its part to support Entrepreneurs. Many of these companies are creating better versions of the World. The emotional weight of starting these companies, building them, and scaling them is significant. I really see that my role as an investor is to be a mirror to these Entrepreneurs. In both the good moments and in the bad moments, I help them move forward in our shared journey.”

BY THE NUMBERS:

11 IPOs + 9 M&A exits;

45 portfolio companies;

$3 billion under management; over 2500 Googlers/Alphabet employees have engaged with the portfolio companies