EP 347 – Some Investors Are Toxic, Can Startups Avoid Them Before It’s Too Late? – Bhavik Vashi – Carta

Read the best-effort transcript below (This technology is still not as good as they say it is…):

Michael Waitze 0:00
Hi. This is Michael Waitze, and welcome back to the Asia Tech Podcast. We are joined today by Bhavik Vashi, a Managing Director for Asia Pacific and the Middle East at Carta. Thank you so much for coming on the show. Let’s give the listeners a little bit of your really impressive background for some context, please.

Bhavik Vashi 0:34
Hey Michael, thank you. Thanks for having me. Super good to be here. Yeah. Sure. Happy to give my background. As you said, I’m the MD for APAC and Middle East at Carta. I’ve been here for a couple years. But prior to Carta, I spent a decade at a software company, a B to B software company called Anaplan, which was a pretty amazing ride. So I got to join that company at Series B and stay there over the course of multiple fundraising rounds eventually, or we had IPO in 2018 and then we got acquired by a private equity company in 22 so kind of got to see the the full life cycle of the startup, the public to private equity there, which was cool. And then, prior to Anaplan, I was actually starting my career at KPMG in in audit and accounting, which was so good way to start, not my gym but but nonetheless a great way to start the career.

Michael Waitze 1:30
Who writes your stuff, by the way, nobody that’s got to be written by somebody. It’s so great look your career, particularly your experience at unemployment, kind of sets you up perfectly, right to work at Carta. Because, you know, carta essentially formed what, back in 2012 it’s just a way to help startup founders manage their cap tables, but to go through the whole process to be fair, to help them get ready for acquisitions at some level, right? So they understood what their valuations are worth, yeah, and all, just how to keep track of it. I think a lot of people think that, like a cap table is an easy thing to do, but the math around it is actually more complex than most people think. Anyway, yeah, I want to ask you this, though, when you’re going through all these processes, right? How can founders, when you think about it based on your own experience and on Carta’s experience, what you see there, how can counters avoid, founders avoid having, like, a toxic cap table, which can be really bad, right?

Bhavik Vashi 2:20
Yeah, yeah, yeah, you’re right. I mean, cap tables, fundamentally, it’s simple math, but it can get complicated really quickly. And I think that answers your question, which is toxic cap table? I don’t think I’ve ever heard it phrased exactly like that, but I think I get what you mean, which is you want to try to keep it as simple as possible, realistically. And so there are a lot of crazy things that you can do, and sometimes maybe at a, you know, desperation or necessity you might have to, but thinking about the different kind of terms and preferences that you give different investors at different points in time and how, you know, in isolation, it may not necessarily feel that complicated to Give a certain investor, a liquidation preference, or a participating right, or something like that. But once those, once you see how those start to compound when you do it multiple times, and then you know basically what we talk about, which is the waterfall, or effectively the math on who gets paid out in what order and how much gets really, really, you know, potentially complicated across 568, fundraising. Rounds. And that’s kind of what we see in the data now, is eventually from incorporation to exit, you’re likely to have at least five to six fundraising events, and so you know that you’re going to go through a few rounds of that, and then, so you want to try to keep that as simple as possible.

Michael Waitze 3:36
Yeah, I mean, in my experience, and I’ve invested in a bunch of startups as well, but I’ve also, I was also a limited partner in a venture capital company, right? So, fair enough, I’ve seen a lot part of the where the toxicity comes from. I just want to go back to this for a second. Is something like these liquidity preferences. But like, how can founders tell the difference between what a great investor is going to be like and what a bad one’s going to be like? Like, what do they need to look out for?

Bhavik Vashi 3:58
Yeah, I my point of view on this is actually, like, relatively simple. I think it’s not that dissimilar to how you how you would approach dating, or how you would approach, you know, making friends like, ultimately, there’s a there’s a judgment call, and the judgment that you’re making is on the character of the investor, obviously, the strategic alignment in terms of their interests, experience, network, and what you’re trying to achieve. And, you know, I guess, the underlying context is, are you operating from a place of abundance or scarcity, like, are, you know, do you have a line of investors that want to get in, or are you kind of, you know, you just got the one, and now you got to make a decision of, do you want their money or not? So I can’t really, can’t really give blanket advice, right? Like Beggars can’t be choosers. But assuming that you know you have a company and you have some interest, yeah, it’s really a judgment call based on kind of what you’re looking for from from an investor. There’s no, there’s no mass to it. I think it’s a. More on the soft and qualitative side, I

Michael Waitze 5:02
could not agree with you more. Did you work in Silicon Valley? You went to school in California, right? Yeah,

Bhavik Vashi 5:07
I went to UC Berkeley. So yeah, very much. Indoctrinated into the world of entrepreneurship and progressive thought, and then I worked in in the Bay Area. So I’m just so

Michael Waitze 5:19
curious, right? Like, I’ve never worked in Silicon Valley. I worked in New York for worked in New York for a long time. Well, not for a long time, but, I mean, I worked on Wall Street for a long time, right? But after living and working in that in in the Bay Area, can you talk about some of the differences between there and Southeast Asia? Look, Singapore always ranks really highly on sort of a global scale, of like, where great startups get built. So, fair enough, and I’ve been to Singapore 1000 times, right? Can you talk about some of the differences, and maybe what we can learn from what happens in Silicon Valley, and what we can actually legitimately import into Singapore?

Bhavik Vashi 5:47
Yeah. I mean, probably the most obvious difference is everybody there is in a Patagonia vest, and that doesn’t make a ton of sense here in Singapore, albeit I’m in a sweater at the moment. So the jokes aside, you know, it’s an interesting question. Obviously, a few things. One is, again, as simple as it may sound, there’s a culture in the silicon in Silicon Valley, and it that culture doesn’t quite exist yet in Singapore. I mean, I think it does in pockets, and it certainly progressed a lot in the last decade that I’ve been seeing it. But in Silicon Valley, it’s a way of life, entrepreneurship, innovation, startups, it’s a way of life, and it’s it’s what some of the brightest minds, I think it really starts here, is the brightest minds that are entering the workforce from universities have kind of grown up in that world of research and innovation, and then how do you privatize and capitalize on that innovation, whether you’re from Stanford, Berkeley, or any of the other kind of schools in the area, whereas in Singapore, traditionally, you’re still kind of looking at, like major companies getting a kind of a good, secure job there, or maybe you’re looking at like an MNC tech company, obviously Facebook’s and Amazon’s or big employers and Singapore, Google, right? And so startup that you don’t normally see like number one, number two, number three, number four, students necessarily saying, My dream is to either join a startup or to create a startup. And again, I’m not saying that those kids are even necessarily the best suited to be a startup founder. I think there’s actually a lot to be said about the grittiness and resilience and some of those other characteristics that are really core and necessary, which I think people who have failed a little bit more in life up to that point tend to have, again, just as a trend, but that would be the main, main difference, and then as a kind of a downstream impact of that, there’s a bunch of other differences, which is maturity of the ecosystm, in terms of just the venture capital ecosystm, the depths of VC and private equity money available, which then makes it easier to obviously try your hand at entrepreneurship, the increased, you know, likelihood of exits, which motivates people to kind of go on that journey, both ultimate exits, but also like substage exits, and then, and then, kind of just the the environment, in terms of the network as well. They’re all like, kind of self fulfilling prophecies of the network of people that you end up operating within, and the networks you end up creating. They’ll just almost always find a way to lead you back into the startup world or the VC world, if you’re in the Silicon Valley. Yeah,

Michael Waitze 8:35
I’m interesting. Interestingly, I’ve seen a lot of really great founders from here actually go to Silicon Valley and try to just like, suck up the culture. And it’s weird, right? Because you can, and I love Singapore. I do a ton of business there. It’s nothing against it, right? But when you’re walking around or sitting in a coffee shop, finding the other guy or gal that’s building something from scratch is not really straightforward. But I feel like in Silicon Valley, you could literally, like, wake up, go downstairs and grab a cup of coffee and run into 16 other founders.

Bhavik Vashi 8:59
Yeah, yeah, that’s right. I mean, you know, you walk into a Phil’s coffee right in San Francisco, you’re going to see at least 15 people operating on MacBooks and just deep in the zone, which is always funny to me, because I could never work at a coffee shop personally, but they do it and it works, and you can see them ideating and really getting into it. And then that’s, you know, you touched on an element of the culture there. There’s a profound, I think, openness in Silicon Valley, especially the, you know, early stage where sharing of ideas, sharing of what we call IP, is pretty free, like they believe in open sourcing. They created that concept of open sourcing, right? And so that’s also a little bit different, although, again, like I said, I can see a lot of attempts being made to create and foster that culture here in Singapore.

Michael Waitze 9:48
So you bring up a really interesting topic for me, what’s your view on having a stealth startup? Because you said there’s a culture of openness and sharing, right? Yeah, and look, I’ll tell you. My philosophy. So you don’t, you don’t have to think it. You don’t have to worry about, like, what I think about this. I think it’s ridiculous. Like, if you’re a great founder, you’re gonna tell everybody exactly what you’re doing, because you’re not afraid to

Bhavik Vashi 10:09
be out executed. Is that fair? Yeah, yeah. I broadly Yes. As ever, there’s always, like, there’s always a case to be made. There’s a reason. You know, if you’re going into an industry that has some pretty established incumbents, and you know the competitive landscape super well. And maybe your idea came from consulting in that industry for 1015, years and all blah, blah, blah. Okay, fine, I get it. You want to go stealth because you exactly who you eventually want to either fundraise from or sell to, or all of that. But broadly, I would agree with you. I think that there is a lot of validation and a lot of iteration that needs to happen very, very early in a startup’s journey. And you can’t do that if you don’t tell anyone else what you’re thinking about working on, right? So I think people Yeah, people over index on like, yeah, that secrecy and thinking that that’s going to be the competitive advantage, that’s not the competitive advantage. It’s what you said. It’s execution is everything, and product market fit. So really a product market fit and then execution, and you’ve got two things to worry about,

Michael Waitze 11:13
yeah, look, I think hopefully, hopefully you understand this reference. I went to summer camp when I was a kid. Yeah? And you always get these kids go home from summer camp and they would say, like, oh, I had this. Like, oh, I had this killer girlfriend when I was there. She was amazing. Like, when do we get to meet her? And the answer was always, she’s in Canada. And I feel like the stealth startup is the same answer. I’m building this amazing company. Where is it? She’s in Canada. That’s just what it feels like to me. Anyway, yeah, yeah. So what brought you to Asia? Where are you originally from, by the way,

Bhavik Vashi 11:42
I’m an American. I hold a US passport. Where am I from? Is always a complicated question for me, because

Michael Waitze 11:49
it’s a bad question, because the same thing for me. I get it. I hear when people ask me this. Let me rephrase,

Bhavik Vashi 11:53
yeah, yeah. I’m of Indian origin, born and raised in the US holding a US passport, living in Singapore for eight and a half years now, I grew up across the US, a real answer. So I lived in eight different states, between the between being born and middle school, basically, oh, god, yeah. So yeah, a lot of fun. Didn’t know any different right at that age. So to me, that was just normal. I only realized that was not normal later. And so that was fun. So both the kind of the southeast of the US, the Midwest. And then ultimately I found myself in California, Southern California, which was which is a great place. So middle school and high school in Southern California, Orange County, and then college at UC Berkeley. And then started my career in Silicon Valley, as you mentioned, and then Singapore.

Michael Waitze 12:42
So listen to this California, Massachusetts, Connecticut, New Jersey, Pennsylvania. That’s all before. That’s all before I graduated from high school. The longest I’ve ever lived in my whole life is Tokyo. And I’m, for sure, not Japanese. Strange. It’s just a strange thing, right? So when people ask me where I’m from, I’m just like, I don’t know what’s your favorite team, because I probably live there.

Bhavik Vashi 13:05
Yeah, yeah, it’s a truly global citizen. And I don’t know where I’m going to be either, right? My family’s all over the place as well. We’ve got family in all parts of the US and India and Europe and stuff. So, yeah, it is a it is always a tricky one for me. So what

Michael Waitze 13:19
made you come to Singapore, what made you want to be an APAC?

Bhavik Vashi 13:23
So I’ll be honest, I had no I had no desires as such, to end up in Asia Pacific. This was very random. Yeah, it was. I was minding my own business, you know, being reasonably successful at a growing startup called Anaplan. I think I was in year three of my employment there, and in that time, we’d already done a couple rounds, and team had like, tripled or something crazy, like, we were going through that really fun stage of growth, and I was building out a team in the Bay area and across the west coast, where all our large customers are. In short, one of our founders actually just kind of came to me with this crazy idea, which was, why don’t you move to Singapore and kind of help us build our Asia Pacific Business? There were a lot of reasons, specific reasons, why he wanted to do that, in terms of the timing of it, the opportunity, but at a high level, it was just like, hey, this ship is sailing. This thing is going to keep working, whether you’re here or not in the US. But we think you’re great, and I think you’ll make a big difference if you go to AsiaPac. Because AsiaPac, I don’t know if it’s going to work or not, but I feel better that it’ll work if I send you out there, I think you can have a bigger impact there. And that usually is a good sales pitch to me. If you’re kind of convincing me I can be important somewhere or have impact somewhere, I’ll probably, I’ll probably lean towards saying yes. So I did, yeah,

Michael Waitze 14:51
my um, my boss came over to me on a Tuesday afternoon. Okay? And when I was at Goldman Sachs, we had a small business in Hong Kong that he wanted to make bigger. I was like. Him in Tokyo. He literally tapped me on the shoulder and said, Would you consider going to Hong Kong? Yeah, sure, because he needed it was kind of the same. He said, We need somebody to go there and fix that business a mess. And I was like, I’m already packed. That’s nice.

Bhavik Vashi 15:12
That’s exactly what I said.

Michael Waitze 15:13
I said, I’m already packed. So I think I had your writer actually working for me at the time. It’s amazing.

Bhavik Vashi 15:18
Yeah, mine was, mine was really funny. Mine was a I was I had a rambling voicemail from one of my founders, which had never happened before. I don’t think I had a single voicemail from him prior to that voicemail. And so I got it on a Sunday. I’m like, Huh? This is weird, like he never calls on a Sunday, never leaves a voicemail. And we ended up going to dinner that Wednesday, I believe, just the two of us. And he kind of walked me through the whole the whole thought, and then I think it was that following Sunday, we were flying to Singapore, and I had never even been to Singapore. I had literally never been in this country before, and I had kind of in principle, agreed to relocate here already. So that’s why

Michael Waitze 15:56
I told you this story. He came over on Tuesday, and I said, I’m already packed. He literally came to me on Thursday and said, You’re leaving tomorrow. Wow, he didn’t come with me, by the way. Oh

Bhavik Vashi 16:05
yeah, wow, that’s yeah. No, my founder came with me. He was very nice. We did it together.

Michael Waitze 16:09
I love it. I love it. I love it. I mean, obviously it’s been good for you, right? It’s been

Bhavik Vashi 16:13
great. It’s It’s honestly been life changing in the genuine definition of that term, like for me to completely redirected the course of my life. I mean, I’m still living here. I’m still living here. I’m a permanent resident here. I met my wife here. I had my kids here. Just totally changed everything. So what

Michael Waitze 16:29
made you switch companies like, why’d you decide to join carta Yeah, I mean,

Bhavik Vashi 16:33
I think the I was very happy at Anaplan. It was such an amazing company, and pretty much ran it, not to its end. It’s obviously still operating as a private company now, a private equity owned. Private Equity owned company. But yeah, when we came to I was coming into kind of year 10 at the company, naturally, I had done well and kind of risen the ranks and all of that. So there was a kind of a bit of a ceiling, right in terms of where I could grow within the company, company and just gotten much larger. Now we had new PE owners, and so there was that reality of kind of knowing that I might have been, I might be tapping on the ceiling of my my potential there. And then the second is the acquisition. Frankly, it just, it was an all cash acquisition, and they accelerated some of our vesting as well. So for the first time in basically 10 years, I had no financial carrot tangled over me to continue to stay. And so it really forced me to think about and so, like, I need to have, like a first principles exercise here, of, do I stay, or do I go pros and cons? And as many of you who’ve kind of been through like a career switch, like once you start thinking about that, and then you start having conversations, and then you start seeing what’s out there. And I spoke to like, some 30 companies before I settled on Carta. And yeah, then then you’re kind of in it. And luckily for me, there were lots of interesting, great opportunities. Carta was one of those, the one that I thought was best. And so, yeah, I made the leap.

Michael Waitze 17:55
Yeah. I mean, look, you started this whole conversation with a dating analogy. So I’m going to say the same thing. Once you’ve once you consider breaking up with somebody, you’ve already broken up with

Bhavik Vashi 18:03
them. Yeah, it’s tough. It’s tough, although I will say contra like, there were at least three, probably real times where I thought about breaking up with Anna plan and I didn’t, yeah, and each time, you know, the the decision to stay was definitely the best decision. In retrospect, if I evaluate the alternatives or kind of project, what those might have looked like for me. So yeah, definitely had been through an exercise like that before this time, it just made a lot of sense to leave. And part of that was the pull factor from Carta. As you said, I got recruited by the CEO and founder, Henry Ward. I work for him directly. That’s a that’s a large part of it. I think he’s an incredibly charismatic and super dynamic individual. And then, yeah, just the opportunity, the stage, the company, the ethos of it, which, as you said, kind of resonated super loudly with me. So yeah, was

Michael Waitze 18:55
there a mind? I really want to talk about this acquisition, because I’ve never been through one, right, you know? And if you’re at a senior level, whether you’re at the home office or whether you’re in Singapore, right? Is there a mindset change among the people that have an equity stake in the company when you realize that there’s going to be an all cash acquisition? It’s because it’s meaningful to your life, right? For everybody that’s involved, yeah, what is totally what is that feeling like? What’s that experience like?

Bhavik Vashi 19:21
Yeah, it’s a complicated, emotional experience, I will say so, for example, I mean, I’ll just share about mine, and maybe I can talk at like, what I think other people went through, because we all talked about it naturally. But for me, you know, like I said, Anna plan felt like, like my family. I mean, it was there for 10 years. Grew up there and there was, I don’t still to this day, I don’t think I have a professional accomplishment that I feel more proud about than standing on the floor of the New York Stock Exchange on, I think it was October 12, 2018 and waiting for the first trade of our our stock. PLA and plan to execute. Uh, and just ringing the bell when it did, and being there with our founders and a group of maybe 50 of us that were invited. And it was, it was truly special and unforgettable. And so having, you know, we had been seen the high of that, I would say, and then we’d, you know, I operated the company as a public company for about four years. And so you really, you think the sky is the limit, right? You think you’re, you know, you can go compete with Salesforce now, like you can go compete with the work days of the world. At least those are some of the bigger B to B names that we were going for. And then you get this news. Even in your senior leadership, you generally aren’t read into the fact that you’re going to get acquired. That’s very tight. And so you get the news, just like everybody else does, pretty much, which is, maybe you get a couple hours or a day before, which is, hey, we’ve entered into a definitive agreement to be acquired by this firm for this price. And it’s kind of shock, because you in, on one hand, it feels like, Oh no, somebody is taking us over our company as we know it ceases to exist, right? Like, there is a feeling of that. And then on the flip side, you’re like, oh my god, this is financially amazing. Like, this is this is crazy. This is putting more money in my pocket than I would have ever dreamed of. And it’s happening all at once, right, right? Versus as a public company, every quarter, you’re like, All right, what’s going to happen on the stock? Am I going to sell? Am I going to sell? Am I going to hold you? It’s like an investment that you’re constantly monitoring versus this is like, you don’t have a choice. We’re just paying we’re buying everything off of you at this price. It’s all yours. It’s in your bank account, yeah, particularly from a private equity

Michael Waitze 21:32
company, right? They’re not leaving other stock out there. They want to own the whole thing because they think it’s wildly undervalued. They think they can create more value for it, and then at some point sell it back out to the market. Who knows double or triple the price? Right?

Bhavik Vashi 21:42
Exactly. And that’s the next thing that comes in. So it’s like the shock of like, oh my gosh, my company’s being bought over. And how do I feel about this? And generally, pe has a has a bad reputation from an employee perspective, because you’re like, Oh, they’re going to cut costs, they’re going to change the culture. These are the general fears that employees have, and I wouldn’t say they’re completely invalid. Then it’s the oh my gosh, this is amazing payday step two. And then step three is like, what does this mean for me? Right, right? And, and part of what it means for you, usually, is like, how do I do I fit in to the PE firms thesis about the company? Like, why did they buy this? Yeah, right, exactly. And they paid a premium to your public price. Why? Why do they think they can flip it in five six years for a gain? Like, what does that underwriting like? What does that underwriting process look like for them? And then, how does that jive with what you want to be doing for the next five to six years? Because that’s their time horizon, right? And so you know that you kind of are looking at another extension of the five six years if you really want to see it all the way through, because, anyways, I mean, not to get too much into it. No, that’s basically what they’re doing. They’re accelerating your vesting so that they’re telling you, like, if you want to go now is the time, yeah, because we’re going to flip all your equity holdings into these profit interest units and these other ownership structures. But those are going to tie you in for another five to six years, the same time horizon that they look at the company if you’re in leadership. So,

Michael Waitze 23:03
yeah, I’m gonna lose some agency as well, right? Because when it’s when it’s your company, you have the agency, but when, once they take it over and switch the structure of your equity holdings, yeah, you don’t lose a lot of agency. So the decision kind of gets made for you at some level, yeah,

Bhavik Vashi 23:16
yeah, that, I mean, that’s right, you, you, you have to be in the boat. Like, that’s your that’s your decision point of like, Am I in the boat? Do I think their investment thesis makes sense? Do I think that they can return capital on their investment and do I want to participate as a hardcore operator and executor of their strategy over the next five to six years because I either agree with it, or I think it will work. And I want to, you know, participate in the gains as well, or simply something else. Like, maybe, you know, things are good in life, and you’re looking to, you know, maybe not, you know, take the foot off the gas or something like that, and focus on other things. Like, there are a number of reasons why people I know have stayed but for me, that math and equation didn’t make sense.

Michael Waitze 24:03
Yeah. I mean, look, I don’t know you well enough to say this, but everybody has their own sort of idiosyncratic personality. It doesn’t seem to me like you’re the kind of guy that wants to work at that company. Again, nothing against Anaplan or private equity. It’s just that you seem like somebody wants to have a ton of agency. And that’s a compliment coming from me. So, fair enough. So now that you’re a Carta, now that you’re staying in Singapore, you’ve built a family and stuff like that, like, How’s How’s growth going? Right? What? Yeah, what’s the goal? Right? Because clearly, in the United States, they dominate this space, right? What’s the goal out here? How’s it going?

Bhavik Vashi 24:34
Yeah, no, it’s so short answer is, it’s going really well, which is exciting, because, yeah, I mean, after spending 10 years at a company like you, you always have that moment of doubt of an A am I going to find another company that I like as much, that I can thrive in as much and be like, am I going to be good at this? Like, am I good at this? Or was that a one hit wonder type of thing? There’s always a moment of self doubt for anyone they’re lying if they say they don’t have that. Two years in, I’d like to think. Think there’s an extreme level of validation for what we’re doing here. And I think mainly the exciting thing is that we’re kind of transforming the business. Like you said, most people know carta as this cap table and ESOP management company, we’re actually becoming like an operating system for private financial markets. And what I mean by that is, if you think about the cap table, we’re solving a problem for the founder, fundamentally, which is the ownership structure of his company or her company. But one of the main, biggest beneficiaries of our products are investors. Right? Because the investors now log into a single platform, Carta, and they can see 20 rows of 20 different companies they’ve invested in, and they can basically just click into each of those rows to see the underlying holdings in that company, the digital stock certificates, and what percentage of the company they own and what it’s worth today, before they’d be getting 20 different paper stock certificates, 20 different emails from different founders, and stitching it together in some Excel, something exactly and So investors love Carta, and they would start recommending companies to use carta for their own benefit. And what we realize is actually investors have the exact same problem set at a very high level that founders have, which is they raise money from investors as well, called LPs, and they then have to allocate that money to underlying assets, which are the companies on cap tables from Carta, and they get and then they’ve got to do the same, the same thing, exactly. And so there’s a lot of Excel, a lot of email, a lot of PDFs, a lot of math, but math that is kind of simple, but gets really complex once you do complex legal structuring and side letters, until it’s not basically exactly. It’s a very, very similar concept, where the truth lies in legal documents, and then you have to kind of translate that into a ledger of some sort. So we were like, We can do that standardized.

Michael Waitze 26:52
Because here’s the thing, yeah, every company that uses carta right as a startup company gets the same look and feel. Essentially, that’s right. Cap table, that’s right yet. On the flip side, every venture capital company probably just has an intern from Berkeley, to be fair, writer from Harvard, creating a bespoke spreadsheet. I’m sure it’s, it’s an Excel spreadsheet or some Google Sheet, right? And they’re all different. So when you compare them to each other, they have, there’s no way to really compare them. Yeah. So on the flip side, if they all log into carta again, now they’re getting a different view on the same data because their shareholdings don’t match any other VC shareholdings. But it’s now easier for everyone to see it. You can see it in Singapore, you can see it in Tokyo. You can see it in on Mars, if you have an internet connection, and it always looks the same everywhere in the world to all of the people that are involved in your company. And then, to be fair, like, if you’re an intern or a low level person at like Anderson Horowitz, and you move over to like benchmark, you’re just looking at a complete different system, unless they’re on Carta, and then it’s gonna look exactly the same to them. So it just makes everyone’s life easier. No,

Bhavik Vashi 28:02
that’s right, there’s a, there’s a tremendous opportunity for standardization, and there’s also it plays really well with globalization of capital, because when you move upstream, there’s, there are very few large asset allocators who are concentrated in a single country or a single stage of growth. They’re, you know, they’re spreading their bets across the private markets. And so, yeah, it makes sense to see things in a more standard light. And the other big thing that we have going for us, which is accounting, right? Like the core of a fund, is fund accounting was, it’s your nav, it’s your IR. It actually should not be done 10 different ways. It actually should be done the same way, whether it’s us, GAAP or IFRS, and so by standardizing the core accounting, which therefore means it can be automated with software, and then giving you the configurability of presenting your reports in a different way, perhaps, or branding your LP relations in a different way, those kinds of things, but the core accounting and also the core workflows, whether it’s a capital, call an investment, a distribution, those should all more or less function the same. And so yeah, we’re really solving that problem. We call it kind of carta fund financials, or fund administration for private market funds like VCPE, private credit, etc. So that’s the that’s kind of the new opportunity, are kind of the next wave of opportunity for us as we expand our nodes. And that’s what I’m spending a lot of my time building in AsiaPac, like we have the startup product, a lot of startups use us, like you said, it’s kind of table stakes, but where we’re actively thinking about is, how do I solve for this huge private capital ecosystm, emerging in Singapore, emerging in Middle East as well, which is why it’s part of my remit, like these. These two markets are super, super interesting right now,

Michael Waitze 29:47
so 10 years ago, and even maybe up to five years ago, I would say once a week or twice a month, you see, like a new VC fund pop up. Yeah, I just would like, it was just all the time. Sometimes I used to work at some other company. Was like, I can do this on. My own. And my father knows this lady who has a billion dollars, and she’ll give me 10 million bucks right there popping up all over the place. Yeah, you don’t see it that often anymore. Actually, out here, right there aren’t a lot of new funds being formed. And to be fair, a lot of the smaller funds, because they’re smaller funds. And frankly, there’s no way to pay yourself if you just have a ten million fund like you have to eat, and it’s just no money left for food there. Yeah, but family offices are a growing influence, not just in this region, but all over the world and definitely in the Middle East. Are you seeing that as a potential car to clients as well?

Bhavik Vashi 30:29
Short answer is yes. I think of family offices primarily as LPs, although I understand that in a way, they’re they consider them a fund in their own right. But I think the way that most of the family offices we engage with, because there’s a need to diversify on behalf of the family, usually they operate a little bit more like an like an LP, an endowment, a pension, etc. We’re more there. They’ve kind of got those wealth management principles. And if you think about the LPs, they are very similar to the investors looking at carta cap tables five years ago, right? So that relationship between GP and LP is very similar to founder and investor. And so right now, if you think about and I’m just going to spend a second on this, the person who pays carta money is the GP or the fund manager, the beneficiary, you could argue one of the biggest beneficiaries of the product is the LP. And so in that light, family offices are actually one of the biggest beneficiaries of Carta, becoming a preeminent fund administrator in this part of the world, because now they get a consistency, B, transparency and C, visibility. And that’s, I think, really, really powerful for them. And so we’re thinking about, we recently put out, for example, a fund, a VC, fund benchmarking report, right? That’s the kind of stuff that family offices and LPS had a lot of trouble getting to, and so, but just as a result of our market penetration, we have almost 2000 what we call emerging fund managers. A lot of those first time fund managers that use carta because it makes sense for them, and now we understand what the median IRR should be looks like. What does 75th percentile look like? What does 25th percentile look like? So on and so forth. Yeah, exactly. And family offices, MLPs at large, love that, because then that helps them make better investment decisions on behalf of their families. And so that’s where we’re starting to engage that community a lot

Michael Waitze 32:25
more. Yeah, I was thinking more to more, to the extent of you know, if they give more, if they give money to more than one fund manager, they’re going to want to do the same sort of financial fund management that the totally that the GPs are doing, but just again, from a different lens, because their holdings, per se, are just a group of other funds, whereas the whereas the funds, their group of holdings, are companies, and the company’s holdings are just the shares, right? So it all kind of melds together. That’s what I was thinking about,

Bhavik Vashi 32:53
precisely. And that’s why, like, I think the the benchmarking, the data, the insights, is kind of our first step in engaging or warming up that audience the second or third step, just like we did for investors, eventually, we built them a product that we sold to them directly. Yeah, I think it’s not, it’s not super provocative to say we will build a product for LPs and sell it to them at some point.

Michael Waitze 33:15
I’ve got another question kind of related, right? How do you why do you think investors develop specific theses? Right? Because you must see this across the board, right? They’re like, I know that everybody looks at the world in a completely different way, right? I have this conversation with my friends all the time. That guy walking down the street, he may bump into you because he literally didn’t see you, right? Yeah. So I get the fact that people look at the world in different ways, but how do you think they develop these, these to so specific?

Bhavik Vashi 33:41
Yeah, it’s, I’ve seen broadly, two categories, and then you could break one into more categories. First category, simple, one based on their experience. Yeah, it’s very straightforward, but they’ve their life, chemical

Michael Waitze 33:55
company. I’m into biochemistry. I got it. I’m going to be a biochemistry, you know, totally

Bhavik Vashi 34:00
investor, totally, totally, and then then you’re, you know, you’re doing something unique and niche that’s interesting to investors who want exposure in that area, they trust you to know it better than anyone else. And so you’re differentiated from every other early stage FinTech fund, just to use an example, right? The second category is actually, it’s almost reverse. It’s not so much that they have conviction about a specific theses or category, but they are seen as usually experienced asset allocators and kind of custodians of capital, and then they actually get approached, or they have a relationship with a specific LP, right, who wants them to do, to go do something specific in healthcare in a specific country, or, you know, deep tech, cyber and, you know, like they have a reason. And sometimes those reasons from our. Because they’re coming from a NASA allocator, are strategic in nature. Sometimes they’re, you know, mission driven and philanthropic in nature. And, you know, ultimately, as a GP, it’s like, okay, this is, this is an intellectual exercise for me. It’s like someone told me, I have to go deploy 50 million in capital doing consumer healthcare in India that’s interesting, like, how now let me go work on that problem for the next 10, you know, three years of deployment, and then I’ll harvest it. So broadly, I see these two categories, yeah, which

Michael Waitze 35:30
is thinking the same thing I was looking up like, so if the bunsel brothers came to you and said, We’ll give you $100 million to invest in pharma tech in India, you’re just gonna have a fund that invest

Bhavik Vashi 35:38
in pharma tech in India. Yeah, exactly. And they just, they don’t have the time, they’ll pay you to do it, they think you’re really smart. They think you’ll figure it out. Well,

Michael Waitze 35:45
they’re in the middle, they’re in the midst of the market, and they see all their friends investing and inventing all this great stuff, and they’re like, just do this for us. We’ll pay you the fees. It doesn’t matter, because we think it’s gonna go from $100 million to ten billion do you see different like usage or product needs in different regions? Do you know what I mean? So you’re in Southeast Asia, let’s say Southeast Asia, let’s say, and then the team in Silicon Valley. And does that change the product development in Carta? Right? Because it’s not a fixed product, right? That’s

Bhavik Vashi 36:09
right. Yeah, totally. And I think specifically for both of our if I oversimplify, let’s say we have two products lines, one that serves founders, one that serves investors. For both, the work that we do is really either adjacent or absolutely integrated with regulation, so law and tax, right? And because of that, it’s different in every single country and so by definition. And so, yes, that you know, that’s the main area of divergence, I would say, if you had to find one, is like, accounting is pretty standard and gap and IFRS are not that different. And so you can actually build a platform that does, you know, the core accounting stuff right, reporting needs are different, but you can usually build a capability of reporting capability that gives enough configuration back in the hands of the user, the power user, to let them kind of report the way they need to right. Other concepts, like portfolio monitoring are, again, pretty, pretty similar. Like I need data on my underlying investments, business metrics, etc. I’ve got to collect them, analyze them, and then model the fund based on it. The things that are really different are tax and all the different incentive programs and things that you know exist in different countries around tax benefits that most investors need to avail. So you’ve got different like legal jurisdictions, different tax incentives, etc. And then you know, obviously the the law itself in various different jurisdictions, which you know you need to basically encode into the documentation that drives the the rules or definitions of your fund. And those are the two areas that we customize, or kind of the most in regionally. Like each of our Regional MDS has engineering and product dedicated to us to make sure we’re solving our key markets, your

Michael Waitze 38:00
local your local problems. Look, I’m so attuned to trading and changing valuations with real time data, because I did that as a job for years, right? I mean, I sat on a portfolio trading desk so many stocks across multiple markets, and that’s just kind of the way I think about things. Private Companies don’t work that way, but I do get the sense that a lot of the founders are providing, I don’t know, maybe monthly or quarterly reports to their LPs, right? Absolutely. Yeah. So they’re totally right to their um, to their investors, and I know that, like, or at least I believe right, that private companies don’t change their valuation for the most part, unless something trades, right, yeah. So unless some stock trade changes hands, you don’t really know, but the reports that they get are good indication. Is there any way to build a product so founders can get a sense, but also so the investors can get a sense of where that thing should be trading based on either the growth or the falling growth of that company, if you know what I mean. And since they’re publishing them anyway, could they, is there any way they could submit them to you? You collate that data for that particular company, you track it, you build that kind of type of stuff, and you go, you know, it was a billion before, but now it’s probably 1.25 kind of thing, just

Bhavik Vashi 39:12
based on growth. Short answer, again, yes, lot of people don’t realize this, because it’s kind of grouped in with our other stuff. Carta is the largest valuations provider for startup companies globally, because, like you said, we have the data, and so it’s kind of a chicken and egg. The more valuations that do, the better we are at them. So we can start giving you comps. If you’re cyber in this country, we know what the comps look like, not just the public comps, which everybody has access to, and you can, you can do, but the private comps as well, right? And then, similarly, we are now slowly becoming the leading valuations provider for funds as well. So in the US, it’s, it’s governed by a different, different ASC, 718, I think. And. Um, in the international markets. Fundamentally, both companies and funds are valued under IFRS 13. But as you know, fund managers will take the most aggressive, generally speaking, valuation on their portfolio company, and the portfolio company wants to take the most conservative. And so you’ve got a you’ve got a range on both of those? Yeah, and so we provide valuation services to both exactly for the reason that you mentioned, because I think we’re in the best position to answer that question. So

Michael Waitze 40:29
again, just a random idea for me, but is there a way? Again, because you have all this data, they must trust you with this data. I’m sure it’s, you know, behind some kind of massive firewall with a bunch of guys with guns and stuff.

Bhavik Vashi 40:39
But that’s exactly what our security strategy is, by the way,

Michael Waitze 40:43
it should be, particularly in the United States, but, but because you have all this data, and you’re intimately aware of the company’s growth trajectory and all this other stuff, but from a very early stage, right? Yeah. So you’re working closely with the founders, you’re working closely with the investors. I mean, I know it’s kind of, it’s kind of crazy. But, like, shouldn’t you have an IPO team? You know, hire like four guys from Morgan Stanley, hire three guys from Goldman Sachs, hire two guys from whatever else still exists, and just go your job now, because you know how to do this, is to take these companies public as a service. Do you know what I mean?

Bhavik Vashi 41:14
Yeah, yeah. I do know what you mean, and I will share with you that at one point in our history, we had a pretty large bu as we call it, business unit focused on public, exactly to your point like, how do we take companies public? How do we continue to go public? How do we prep them to go public? How do we road show them? How do we obviously act as their brokerage firm once they are public? How do we then get into the wealth management aspect of the brokerage accounts we get through employees? It’s the classic playbook from, you know, Morgan Stanley and Goldman and others. JP, so we have that short summary. It’s super hard. That’s

Michael Waitze 41:58
That’s why they get paid the big bucks.

Bhavik Vashi 41:59
I mean, yeah, it’s super, super hard. And you know, our core competency that we’ve kind of concluded is like building B to B software, not becoming like a full fledged financial services player, although that was, like I said, definitely a fork in the road for the company. And at one point we could have gone down the hardcore kind of FinTech FinServ route. We’ve decided, probably what’s most strategically relevant or valuable to our shareholders and us as a company where we think we’re most differentiated, is continuing to build out as a B to B, SaaS player for a very lucrative and underserved niche vertical market, which is private capital, because most, most software companies build for big companies. Basically, yeah, any if you’re a, b to b software founder today, most of your VCs will tell you, like, yeah, find product market fit with some SMB companies. But then you have to go mid market. Then you have to go enterprise, like, go sell your software to Walmart, go sell your software to Coca Cola. If you do that, we love you. We think you’re amazing, right? So what we’re doing is pretty counterintuitive, which is like, Hey, we’re selling software to startups who are super, what investors call, low quality revenue streams. And then we’re selling software to fund managers who have very small operating budgets, generally speaking, and budgets. And then potentially, we’ll be selling software to LPs, who, you know, definitely have deep pockets, but, like, almost non existent in terms of headcount. So it’s a contrarian view, but yeah, we’re, we have a lot of conviction around it.

Michael Waitze 43:33
Yeah, look, I would say this, even if your budget’s not that big, everybody needs a desk to say that in a computer to work on. They’re still paying for that stuff, too. And if you, if you want to run your business either as a founder or as a as a VC fund, without knowing, like, what the valuations are of the companies in which you’re investing, go for it. One last thing before I let you, I want to say this first though I feel like we’ve left a lot of stuff on the table. Yeah, anyway, we can discuss whether you come back or not. That’s that’ll be up to you. But I’d love to you, but I’d love to have you back, because there’s so many other things I’m sure that you’ve learned over time. But before I let you go, what kind of advice would you give to to founders, growing founders?

Bhavik Vashi 44:10
Yeah, I get, I get asked this question a lot, and I have a ton of respect for founders. In fact, I’m, I would say I’m, you know, borderline, like, envious of them, not because I think their quality of life is great, it’s not. It’s more the the risk appetite that they have is truly impressive, and then also the resilience there’s like, there’s a reason I’m not a founder. For example, I love operating companies, zero to one, one to 1010, to 100 but, yeah, being a founder is a whole different thing. It is all that being said, my advice to founders is make sure that you surround yourself with people you trust. I know this is like. This has nothing to do with business, but I think it has everything to do with business. Yeah, it does the number one area where I see founders struggling. Uh. Um, is, is kind of not having the right support system and professional network around them to help them to be successful, because it always takes, it always takes a village, right? And the founder, your job is to, like, have a lot of conviction and to lead with a vision and a mission and a vision, and have clarity on kind of where you want to take things, but you need to surround yourself with people that are going to help you execute against that. I think it’s really, really hard to try to do kind of everything, and then finding those right first, finding the first you know your co founders and your founding team, finding your first 10 employees, finding the right first couple investors, I really feel like that’s make or break. Startups pivot all the time, like I invested in companies and I thought I was investing in one thing, and two years later, they’re doing completely something else, and that’s just the nature of it. So it’s almost like the idea and product, market fit and strategy and all this stuff doesn’t matter that much. What matters most is the people involved, and that’s you yourself as a founder. But I’m not gonna give advice to a founder. Be like, go check yourself. So my next advice is surround yourself with the right people, basically, and those people look different based on who you are, right? So the people I surround myself will be different than the people Michael you surround yourself with, and that has a lot to do with, as you said, the idiosyncratic nature of us and so, yeah, can’t get more specific, but just have a good idea of who you are and what works for you, and then surround yourself with people that bring out the best in you.

Michael Waitze 46:36
Perfect. Bhavik Vashi, a Managing Director for Asia Pacific and the Middle East at Carta. This was awesome. I hope you enjoyed this as much as I did. Thank you so much for doing this.

Bhavik Vashi 46:45
Yeah, it was super fun. Thanks for having me.