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With an intent of investing in deep technology ideas and super early-stage companies, Arjun Rao and Vishesh Rajaram got together to form Speciale Invest fund. Founded in 2016, the firm focuses on investing in ideas and concepts, thereby investing in many pre-product companies.
In an exclusive interview with Analytics India Magazine, Arjun Rao talks about the investment philosophy of the firm, its favourite segments in the technology industry, and shares his views about the tech startup ecosystem of India.
“We have to remember that 2021 and the second half of 2020 were very unusual years. We saw a lot of liquidity in the market and funds were pumping in capital into startups,” said Rao, talking about the current stage of funding globally and the onset of the so-called “funding winter”. The firm believes that though there are corrections in the valuations of startups and VCs are getting careful, as early stage investors focussed on technology, that is going to benefit us in the coming years and decades – the long term view is still very positive. “Founders do not need to worry about the current downturn and keep a long-term mindset.”
Speciale Invest divides deep technology into two major categories —
- Enterprise, software, and SaaS with differentiated tech at the heart of the product like core AI and ML companies with complex and sophisticated softwares like NLP, computer vision, cloud and data infrastructure for the global market built from India.
- Frontier Tech, which means companies that are the intersection of hardware, engineering, sciences, and software with disrupting industries like space tech, robotics, EV, climate tech, and quantum cryptography, among many others.
With a very small and young team that believes in the principles-first thinking and a bottom up approach, Speciale Invest does not rely on their network or industry or domain experts to guide them about their investments all the time, but build their own convictions on technology trends and invest in the disruptive technologies. “We learn from our entrepreneurs as they are the actual domain experts,” added Rao.
Through their first fund of INR 60 crore, Speciale Invest backed 18 startups with an average of half-a-million dollars per company, and successfully exited from four of them. On April 6, 2022 the team started their second fund of INR 300 crore and plans to invest in around 20 more early-stage companies through pre-seed and seed rounds with a ticket size between $100,000 and 1 million.
Among the 27 startups, the company has invested in eight AI startups — Wingman, TrueLark Materiall, StreamAlive, LoopPanel, CynLr, Kawa, and Galaxeye. Some of the notable portfolio companies are Agnikul Cosmos, which is building 3D printed rockets for microsatellites, The ePlane Company, flying taxi company, QNu Labs, a quantum cryptography startup, Trainn, a video-first product adoption platform, among others.
Their latest lead investment was Uravu Labs that raised $2 million in August. Uravu Labs developed renewable water technology with inexhaustible atmospheric moisture and renewable energy to produce drinking water and was founded by Govinda Balaji, Pardeep Garg, Swapnil Shrivastav, and Venkatesh RY.
“If you look at our portfolio, you will know that we are genuinely looking at the future of technology and innovation in India,” said Rao, about what sets them apart from other tech investors in India. The firm has a broad portfolio with every single segment of AI/ML. “If entrepreneurs are genuinely disrupting areas of technology and industry, then they should know that we are ready to take risks even at the early stages.”
In return, the firm wants the team of the company they are investing in to come from a strong background with certain knowledge about the industry they are diving into. “You cannot wake up one day and build a cutting edge AI solution. It matters what you were doing the past few years and what brought you to the specific problem statement that you are into,” explains Rao.
‘AI is not a blackbox anymore’
“In the past two years, AI has really broken some key barriers in technology with GPT-3, DALL-E, and similar other breakthroughs,” said Rao. The firm believes that generative AI will continue to be the biggest disruptive technology in the coming years with increasing cases in enterprise and consumer markets.
“Machine learning stack is evolving very fast and we cannot say that AI is a black box anymore”, added Rao. “In the coming years, we will definitely see enhancements in the infrastructure of AI with more, better, and efficient models solving different problems. As AI becomes more and more omnipresent, observability in AI will increase in the next 2-3 years,” said Rao. He also expressed interest in real-time streaming machine learning platforms, autonomous vehicles, fraud detection, and explainable AI.
“Don’t do it because it’s cool. Do it if you want to do it for the coming 5 to 10 years and if you genuinely believe that you can solve the problem in your mind.”
The firm invests in a lot of first-time entrepreneurs and therefore expects that there would be mistakes. “A learning mindset is what we definitely expect and want in our founders,” said Rao. “Just because the founders are technically good, does not mean that all the other problems will get solved by themselves,” said Rao, explaining that though the companies aren’t expected to be ready with orders and customers but should have spoken to people that could be prospective customers.
It is important for founders to keep the jargon aside and simplify even the most complex AI concepts. Adding value to the customers is as important as building algorithms. “Why is this technology better? What is the background of this technology? What is the genesis of this algorithm? These are the questions that need to be answered before going to the market,” said Rao.
“Don’t be prescriptive, but be supportive,” Rao believes that being patient with founders is the key for growing businesses. “We don’t want to exit quickly, we are here for the long haul.”