# VC10X - Stop Competing with Sequoia: Finding Alpha in Secondaries & Emerging Markets

An episode of [VC10X - Investing, Venture Capital, Asset Management, Family Office, Wealth Management](https://invisiblenetwork.ai/podcast/1632806986), 16 Dec 2025, 41 min.

Audio: https://anchor.fm/s/a453ddd4/podcast/play/112661661/https%3A%2F%2Fd3ctxlq1ktw2nl.cloudfront.net%2Fstaging%2F2025-11-15%2F414419092-44100-2-249c08795399c.mp3

In this episode, we sit down with Maxim and Pavel from FinSight Ventures to explore their unique "secondary-first" investment strategy, which allows them to capture equity in giants like Anthropic, SpaceX, Stripe, and Palantir. We dive deep into their newly launched $50M Generative AI Index Fund, a novel product bringing index investing logic to private markets. Maxim and Pavel also break down their distinct approaches for different geographies—operating as a "fund of funds" in India while pursuing "local monopolies" and super-apps in emerging markets like Uzbekistan. Tune in to understand why they believe AI-native startups will beat incumbents and how they find alpha in inefficient markets globally. ⭐ Sponsored by Podcast10x - Podcasting agency for VCs - https://podcast10x.com In this episode, we cover: - Why the "middle" is missing in private market investing. - How to buy secondaries from early employees and liquidity-seeking funds. - The "Fund of Funds" strategy for penetrating the Indian market. - Why AI-native startups have a long-term advantage over incumbents. Companies & Concepts Mentioned: Portfolio Highlights: Zoom, SpaceX, Anthropic, Palantir, Stripe, Razorpay, Medibuddy. Concepts: Secondary Markets, Index Funds, Super Apps, Fund of Funds, DPI (Distributed to Paid-In Capital). Links - FinSight Ventures - https://www.finsightvc.com/ Maxim - https://www.linkedin.com/in/nazarovmaxim/ Pavel - https://www.linkedin.com/in/pavelgurianov/ Website: https://VC10X.com LinkedIn: https://linkedin.com/in/choubeysahab Timestamps: (00:00) - Finsight's unique value proposition in securing competitive deals. (00:23) - Finsight's secondary-first strategy for its growth stage portfolio. (00:41) - Adapting investment strategies to find alpha in different markets. (01:30) - Episode introduction and sponsor message. (03:12) - Finsight's core investment thesis across diverse global markets. (04:46) - The logic behind Finsight's $50 million generative AI index fund. (06:10) - How the growth of secondary markets enables an index fund strategy. (07:28) - Securing allocations in category-defining companies like Anthropic and SpaceX. (09:09) - Who sells in the secondary market: employees vs. VCs. (10:15) - How Finsight sources secondary deals from individual employees. (12:00) - Finsight's specific investment angle and focus in the Indian market. (15:05) - Comparing the US secondary approach vs. the India fund-of-funds model. (16:49) - The philosophy of finding alpha by understanding a fund's strengths and weaknesses. (18:10) - Key trends in enterprise AI adoption and the shift to sustainable revenue. (22:09) - How to judge the stickiness and sustainability of an AI startup's revenue. (24:03) - Using gross margin as an indicator of a product's ROI. (25:17) - The conviction behind investing in Uzum, Uzbekistan's first unicorn. (27:40) - Insights into building a global VC firm with diverse strategies. (30:59) - Evaluating Anthropic in the competitive landscape of large language models. (34:36) - The biggest misconceptions about Finsight's global investment strategy. (38:21) - Start of the Rapid Fire Round. For sponsorship or guest appearance requests, write to prashantchoubey3@gmail.com Subscribe to VC10X on Youtube, Spotify, Apple Podcasts. #VentureCapital #GenerativeAI #SecondaryMarket #Investing #SpaceX #Anthropic #IndiaStartupEcosystem #PrivateEquity #TechInvesting

## Transcript

[0:00] Your portfolio includes some highly sought after companies
[0:03] like Anthropic, Palantir, Stripe and SpaceX, right?
[0:07] While these look fancy on anyone's portfolio, right?
[0:11] But these are notoriously comparative deals, right?
[0:13] It's hard to get into and win those deals, right?
[0:16] What is Finsight's unique value proposition that's allows you to
[0:19] secure allocations in such category defining companies?
[0:23] If you look at the growth stage portfolio, I would say actually
[0:26] it's a reverse of a traditional VC portfolio where you know 10%
[0:30] of the deals who do are actually primary round deals and then 90%
[0:34] of the deals who do are actually secondary deals.
[0:36] It's interesting to see that you are following different strategy
[0:39] of investing for different markets.
[0:41] Every single market is is is unique and it has its own
[0:44] structural distinct features. How do you compete with funds
[0:48] that have much more capital that have very, very deep expertise
[0:52] in the markets and have networks to to access with founders,
[0:56] right. It's it's, I would say quite
[0:58] impossible to to compute them. So you have to be honest again
[1:02] about your strength and weaknesses and figure out which
[1:05] pocket supermarkets actually have alpha where you can find an
[1:09] efficiencies that you can, you know, plug yourself in and and
[1:13] solve this inefficiencies. Give me an insight into what
[1:15] it's like building out that sort of a global firm, right?
[1:19] Because most VCs, even if they're growth stage or early
[1:23] stage, they're focused on one market.
[1:26] Right, Yes, I I think one of the most important things is.
[1:30] How do you get on the cap table of giants like Stripes, SpaceX,
[1:34] Anthropic, and Palantir without competing in a bidding war?
[1:38] In this episode, we sit down with Maxim and Bavail from
[1:41] Finsight Ventures to uncover the unique secondary First
[1:45] investment strategy which makes up 90% of the US portfolio.
[1:49] We also dive into their bold new $50 million generative AI index
[1:53] fund, their fund of funds approach to the Indian market
[1:56] and why they are betting that AI native startups will ultimately
[1:59] beat the incumbents. TuneIn for a master class and
[2:02] finding alpha across diverse global market.
[2:05] This episode is sponsored by my own podcasting agency called
[2:08] Podcast NX, where I help venture capitalists, asset managers,
[2:12] allocators and family offices and starting their own podcast
[2:16] and building a strong brand. Podcast NX is designed in a way
[2:19] to work well with the busy schedule of investors where we
[2:23] handle every aspect of podcast production so you can focus on
[2:26] investing. If you're looking to build a
[2:29] strong investor brand, starting a podcast should be right up
[2:33] your priority list. It's the only form of marketing
[2:36] where you can showcase your strong network.
[2:38] In other words, access to limited partners and founders
[2:42] and grow that network further. And contrary to what most people
[2:45] hear, it's still very early to start a podcast.
[2:48] There are at least 10X more newsletters and thousand X more
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[2:55] You can learn more about our podcasting services at Podcast
[2:58] ten-x.com. I'll make sure to add the link
[3:01] in the description below. Enjoy this episode.
[3:04] Hey Maxim and Pavel, so good to have you on the VC10X podcast.
[3:07] How you doing? Good.
[3:09] Thank you. It's nice to meet you as well.
[3:11] Happy to be here. Yeah, awesome.
[3:13] Great having you both here. And to start things off, I'd
[3:15] like to ask Fin side has a fascinating global footprint
[3:19] right from back in Uzbekistan's first Unicorn Zoom to investing
[3:23] in US giants like SpaceX, right? And then throw back now, of
[3:27] course, could you both share the core investment thesis that
[3:30] connects these diverse markets and opportunities?
[3:33] Yeah, Yeah, of course. First, I mean, we've been
[3:36] investing as a fund for about 13 years.
[3:38] And what we found is that innovation is not only confined
[3:43] to the United States. Obviously, there's a lot of
[3:46] innovative companies that are popping up in different regions
[3:49] with Latin America, India, China or even smaller countries such
[3:53] as such as Uzbekistan. But you know, some of the things
[3:56] that we've seen is that if you look at global talent pooled it,
[4:01] it has in our opinion has increased significantly.
[4:05] A lot of people are people are much more connected today and
[4:08] information travels much more broadly.
[4:11] That's that's number one. Number two, a lot of a lot of
[4:14] people have spent time in San Francisco and Silicon Valley
[4:17] working at some of a great tech companies and they have a skill
[4:20] set of operational skills of building large businesses.
[4:25] And some of those people are coming back home and using the
[4:27] skills and that knowledge to to build companies internally in,
[4:31] in, in their respective domestic markets.
[4:34] And thirdly, those markets represent large opportunities
[4:37] for themselves. So we think it's a combination
[4:40] of two things, talent and opportunity that those markets
[4:44] present themselves. Absolutely.
[4:47] Very interesting. And Finsat has recently launched
[4:49] a $50 million generative AI index fund, right, which is a
[4:53] novel approach for private markets, right?
[4:55] Can you explain the logic behind applying an index investing
[4:58] strategy to late stage AI and how you selected the 12
[5:01] companies for the fund? So you're familiar with the
[5:04] small case, right? In India, the company.
[5:09] Absolutely. Yeah, yeah.
[5:10] So we, I was looking at small case at some point of time and
[5:14] realized that in public markets there are two, two basically
[5:19] extremes here, either pick particular stock or invest in
[5:24] the hedge fund. But then there is something in
[5:26] between which is ETF or index. And when it comes to private
[5:31] market, there is no such a middle.
[5:33] There is either you invest in the VC and then you for the next
[5:37] 10 years you believe they invest in a good companies and try to
[5:40] avoid bad companies or you invest in different SPVS through
[5:44] Angel list and other basically SPV managers.
[5:47] But the middle is missing. The middle which is existing in
[5:50] the public market in private market absolutely is absolutely
[5:54] missing. So we wanted to create something
[5:56] which mimic the the philosophy of index if index fund investing
[6:02] in the public market. And this is how we came to an
[6:05] idea to organizing this index fund for AI.
[6:10] Yes, I, I think there's a couple of things that are worth
[6:12] pointing out. I think structurally this
[6:14] product is, is, is possible today because you know, the
[6:19] secondary markets have grown quite a bit as as I'm sure you,
[6:22] you know, and you can get access to someone whose companies fear
[6:27] a secondary market. We, we have fintech as I've
[6:30] mentioned, they've been around for about 13 years and we
[6:33] started investing in fintech. And the one we think one of the,
[6:36] one of the mistakes we made early in the fund would
[6:39] overthink valuation and prices around early leaders in fintech
[6:44] and we would not invest in them. And we would spend a lot of time
[6:49] talking to a lot of companies where in reality we should have
[6:52] just try to get on a cup table or, or the littering space.
[6:56] So I think, you know, it's, it's, it's a learning from our
[6:59] mistakes and, and, and realizing that, you know, sometimes it's
[7:04] OK to overpay if you're investing in the littering
[7:06] space. That's number one.
[7:07] And #2 again, structurally the markets are, are in the
[7:12] secondary markets have evolved quite a bit.
[7:14] So you can get access to some of US names.
[7:18] We have a secondary market. And and then thirdly, we believe
[7:20] that it's worth investing in, in those companies.
[7:25] We are secondary, not to your primary.
[7:28] Absolutely. That's quite interesting.
[7:30] And your portfolio includes some highly sought after companies
[7:33] like Anthropic, Valentir, Stripe and SpaceX, right?
[7:37] While these look fancy on anyone's portfolio, right?
[7:41] But these are notoriously comparative deals, right?
[7:44] It's hard to get into and Windows deals, right?
[7:46] What is Finsight's unique value proposition that's allows you to
[7:50] secure allocations in such category defining companies?
[7:53] As I said, we we have done in some of those names, we have
[7:59] invested very secondary market. I would say if you look at our
[8:02] growth stage portfolio, I would say actually it's a reverse of a
[8:06] traditional VC portfolio where, you know, 10% of the deals we do
[8:10] are actually primary round deals and then 90% of the deals we do
[8:14] are actually secondary deals. And our view is that, I mean,
[8:18] first of all, our structure as a fund allows us to do that.
[8:22] But more importantly, our view is that again, you know, like
[8:26] some of those names, if you have a strong thesis around the name
[8:31] and if there's a strong trend behind those names, you should
[8:35] absolutely try to to get on their on, on their cap table.
[8:38] And then it doesn't really matter if you try to get to your
[8:41] primary or secondary round. Some of those names like you
[8:45] mentioned Palantir, actually surprisingly enough, you know,
[8:48] like when we invested in them, we have a secondary market.
[8:51] Not a lot of people were actually buying up secondaries
[8:52] in this company. So there, there there was quite
[8:56] a lot of quite a lot of supply. And, you know, I think people
[9:01] had a different investment thesis and, and, and we were
[9:04] just, you know, we were able to build our own thesis that worked
[9:09] for us. Absolutely.
[9:10] That's quite interesting. So when you're buying
[9:13] secondaries, who is it that you're buying from?
[9:16] Is it the VCs who invested earlier in the primary downs?
[9:18] Or is it employees? Or maybe the founders or
[9:21] founding team executive team who who is the seller for you that
[9:27] you're buying from? Yes, I, I think the market is
[9:30] evolving in terms of sellers that we see.
[9:33] I would say a majority of, of stock to buy is from employees.
[9:39] We're seeing more funds in the market.
[9:42] Obviously, you know, some of the funds that were started in, in
[9:45] 20/20/21 are they, they need to show DPI and they need to show
[9:51] liquidity to their early LP's in order to be able to raise their
[9:54] second funds 2nd or 4th or or basically next fund.
[9:58] So we're seeing some VCs also come to, to the market and then
[10:04] and, and start selling some of its positions.
[10:06] So it's a combination of I would say mostly, you know, like early
[10:11] employees with some mixture of funds as well.
[10:15] Absolutely, quite interesting. So we we see selling at the end
[10:19] of the fund cycle and that completely makes sense.
[10:21] And even employee selling also makes sense.
[10:24] You know, they want some liquidity, but how are you
[10:27] finding those employees that have those, you know, stock
[10:31] options with them that are matured and ready to sell or are
[10:34] they finding you? How does that happen?
[10:37] Because that's what individualistic, right?
[10:39] These are individuals versus organizations that are selling
[10:43] their stocks. It, it, it really depends.
[10:46] It's it's a very unstructured market even bow it's shifting in
[10:52] the volume very quickly. I mean, obviously there are a
[10:55] handful of brokers that operate on those markets successfully.
[10:59] They have their own business model where they, they source
[11:02] with sellers via different channels.
[11:06] But you know, for, for us, I guess it's a mixture of three
[11:10] things, just building relationship and, and building
[11:14] the network to get to get direct access to the sellers #1 #2 you
[11:19] know, working with, with brokers.
[11:21] And actually this would be the two, the, the two primary
[11:27] channels for us. Yeah.
[11:30] And I think the opportunity, at least for us, is that, you know,
[11:34] it's, it's still somewhat unstructured market.
[11:37] So you can, you can find some, some alpha in that market.
[11:41] Whether it will be so in the next 5 or 10 years, we don't
[11:43] know. Obviously, there's a lot of
[11:45] players such as that private markets and then other players
[11:49] that that are playing in that, in that in that space.
[11:52] But for now at least, we're still seeing some opportunity to
[11:56] to get direct access, get good pricing and then on the right
[11:59] results. Absolutely.
[12:01] Quite interesting. And turning to the Indian
[12:03] market, it's one of the most dynamic and comparative venture
[12:06] landscapes in the world and one of the promising emerging
[12:10] markets, if you'll say that right.
[12:11] What is inside specific angle or focus in India?
[12:15] And could you share an example of an investment that you
[12:18] believe uniquely captures the opportunity that is here?
[12:22] Yes. So first of all, I would say
[12:24] that we spent spent a lot of time looking at other emerging
[12:28] markets and then came up to an idea that India is actually the
[12:36] only market apart from US and and China where you have
[12:39] liquidity. Liquidity is the number one, I
[12:42] would say hygiene factor that any investor should take into
[12:46] into account. So This is why we decided India
[12:49] would be our second home market. But obviously as you mentioned
[12:54] in this very, very competitive, there are so many global brands
[12:59] separating here and we try not to compete rather than we trying
[13:03] to to find our unique approach to the market.
[13:07] So first of all, we are very active in to fund investing in
[13:11] India. We investors and we are OPS and
[13:14] for funds and we understand that we as foreigners cannot be as
[13:17] deep as as they are. So we prefer to outsource early
[13:22] stage to other seed funds operating in India and then we
[13:26] pick up those those gradients from their portfolios and invest
[13:30] in the growth stage. But in terms of our unique
[13:35] approach, so I wouldn't say it's a it's a unique as an outsider,
[13:39] we we employ rather very macro level approach to the market.
[13:45] So we tend not to invest in business models which are very
[13:49] unique to India because basically we outsiders and we
[13:52] would never understand them to the same extent that locals
[13:55] understand. So we prefer to to invest in
[13:58] something we seen seen in other markets.
[14:02] And this is how we put money in companies like Razor Play, which
[14:07] is you know, the largest acquirer in the country or MIDI
[14:11] Body, which is the largest telehealth in the country, our
[14:15] car Deco, which is the largest, let's say new car marketplace.
[14:20] So very, I would say high level, but after spending maybe four
[14:25] years, 4/4 to five years in the country, we realized that one
[14:32] particular sector is actually missing attention from many VCs.
[14:37] And if you look at India, which is to be the third largest
[14:40] economy in the in, in the world, it is very much dependent on the
[14:44] on other countries in terms of critical tech, let's say
[14:48] aerospace, clouds, security, etcetera.
[14:52] So I think these are sectors which are in line with the
[14:56] national interest are very much attractive from investment
[14:59] standpoint, yet they are, you know, missing, missing attention
[15:03] from global BCS today. Absolutely.
[15:06] I completely agree to that. And it's interesting to see that
[15:09] you are following different strategy of investing for
[15:12] different markets, right. For the US, what I'm seeing is
[15:14] you're following more of a secondary approach and in the
[15:17] Indian market, you're falling more of a fund of funds model
[15:20] investing into VC funds. And because probably they have
[15:24] better access than you can, they are locals and people who
[15:27] already have great backgrounds, they have created access to that
[15:31] completely makes sense. So how does that work at a firm
[15:34] level? Is it like you're having
[15:35] different funds for US that are that is separate and has a
[15:39] different strategy of investing and separate fund for India, but
[15:43] again a different strategy of investing?
[15:45] How does that work? Look, it's very it's very
[15:50] flexible in terms of in terms of strategies.
[15:53] So we understand that India cannot be, you know, cannot have
[15:58] the same approach as as, as US. First of all, the secondary
[16:02] market is not that liquid as in the US.
[16:05] So we're not cannot fully rely on on on secondaries.
[16:09] This is why we tend to on the right only those companies which
[16:12] are have a larger opportunity to become largest, you know stand
[16:17] alone companies and then eventually list on NSC.
[16:23] How do we get on the cap table of those if the secondary market
[16:26] is not that liquid? This is why we should invest in
[16:31] smaller VCs which can get us warm intro in US.
[16:35] You can actually leapfrog that and invest in secondaries
[16:38] directly in India. I mean you can technically but
[16:43] finding the supply of shares unless it's a pre APO stock can
[16:46] be much harder. Yes.
[16:48] I think, I think first of all, foremost it, it, it begins with
[16:52] being honest with ourselves and being honest around our
[16:56] strengths and weaknesses. Every single market is, is, is
[16:59] unique and it has its own very, it, it has its own structural
[17:05] distinct features, right? If you look, for example, in the
[17:10] US, there they have very, very deep capital markets.
[17:14] And for example, you know, like Series A and series B Series A
[17:18] and series B stages are quite efficient.
[17:20] And what I mean by that great founders can be found by leading
[17:26] firms such as Sequoia, Excel and, and Bessemer.
[17:28] And you know, like how do you compete with funds that have
[17:32] much more capital that have very, very deep expertise in the
[17:36] markets and have networks to, to access with founders, right?
[17:40] It's it's, I would say quite impossible to to compute them.
[17:43] So you have to be honest again, look about your strength and
[17:46] weaknesses and figure out which pocket supermarkets actually
[17:51] have alpha where you can find an efficiencies that you can, you
[17:55] know, plug yourself in and and solve this inefficiencies.
[17:58] Absolutely. That's that completely makes
[18:00] sense. That's an amazing approach where
[18:01] you are thinking very deeply about what's the investment
[18:04] strategy where you we can actually position ourselves to
[18:07] win and there's a gap there and you're feeling that, which is
[18:11] amazing instead of just going blindly and competing, which is
[18:14] what most VCs are doing. That's why the VC landscape has
[18:16] become so competitive and hard to win these days.
[18:19] But your approach is perfectly sound there, so makes sense.
[18:23] Great. So then Jenny I fund focuses on
[18:25] companies already generating significant revenue, right?
[18:28] From your vantage point, what are the key trends in enterprise
[18:32] AI adoption and how are companies moving from the hype
[18:35] cycle to generating real sustainable revenue?
[18:39] I think look. If if you look at the market
[18:41] today, I think there's, there's a big questions.
[18:44] And I think this is one of the maybe things you're alluding to
[18:46] is that there's quite a few companies that have generated
[18:51] significant revenues, 102 hundred 300 million plus.
[18:54] But the question that everybody's asking if it's
[18:57] stickier, right? We believe for majority of our
[19:02] companies, call it, you know, 60% plus, this revenue will be
[19:06] stickier. And the reason why is look,
[19:10] another question that everybody's asking, who's going
[19:12] to win the market, right? Is it going to be incumbents or
[19:15] is it going to be AI native startups?
[19:17] And we at, at Finsight, we believe that in AI native
[19:22] startups are very well positioned to, to win in a lot
[19:26] of our markets. If you look at it right, in the
[19:30] short period of time, it's it's really hard to kind of like
[19:35] assess the market. But over a longer period of
[19:37] times as AI companies scale, they build expertise around
[19:45] building product. They have different sales
[19:47] approaches, they have different operational approaches and that
[19:51] just adds up and accumulates over time over the courses of
[19:54] next, you know, like 2-3, four years.
[19:56] And and then the, the gap just becomes too large for incumbents
[19:59] to, to catch up. So we, we, we're big believers
[20:03] in, in AI native companies winning the market.
[20:09] We think obviously, you know, some of the companies in, in, in
[20:13] the zeal markets, they have revenue that is not sticking.
[20:15] It will go away and we're going to see some, some, some
[20:18] companies. You know, basically full
[20:22] operator in the next couple of years that's, that's, that's
[20:24] inevitable. But we do believe a lot of
[20:27] existing companies will be able to convert, convert their
[20:33] revenue into, you know, like real, real sustainable revenue.
[20:37] I think, you know, in terms of enterprises, when you speak to
[20:39] CTOSI think obviously the conversation today is quite
[20:42] different from where it was a year ago or, or even 2 years
[20:45] ago, right? Everybody is going away from
[20:48] experimentation budgets to real budgets.
[20:50] And when it happens, everybody's asking if the question that
[20:54] everybody is asking, what is the ROI on the technology that we're
[20:57] buying, right? And, and we're seeing some of it
[21:01] ROI very clearly in, in coding, in customer support companies in
[21:06] good spaces, they, they, you know, can very clearly showcases
[21:11] showcase ROI on, on, on, on their solutions.
[21:15] So we think there's going to be more of that in the next, in the
[21:19] next, in the next in the next couple of years, right across
[21:22] the entire kind of like stack over EA solutions that
[21:26] enterprises are buying. And a a companies will have to,
[21:30] you know, adopters the sales approaches and they have to be
[21:35] much more ROI driven rather than experiment driven.
[21:39] But we, we, we see, I mean, we definitely see some, some, some
[21:44] CTOS and some enterprises cutting experimental budgets
[21:48] and, and you know, not using solutions any longer.
[21:54] But at the same time, you know, on the other end, when companies
[21:59] demonstrate clear ROI, companies are signing longer dated
[22:01] contracts. So, you know, we, we, we see
[22:03] just, we, we kind of see both ends of, of it.
[22:07] Asia, absolutely. And when you as an investor,
[22:11] when you're judging companies, you know, these days, AI
[22:14] companies are, are like they can suddenly blow up and generate
[22:18] millions in the venue and be ready for the growth arms as
[22:21] well. But the important thing to
[22:23] notice that stickiness in that revenue that, that that you
[22:26] mentioned, right? How do you judge for that as an
[22:29] investor that, OK, the revenue is growing and it seems like a
[22:32] breakout start up, the revenue is going up and do the right,
[22:37] but is this revenue going to stay around, right?
[22:40] And one of the factors that help you determine that, OK, is this
[22:44] sustainable revenue or is over time is this going to fade away?
[22:49] I. I, I think we're still trying to
[22:51] figure out our framework to be, to be quite honest, I, I think
[22:53] the market is evolving and you know, our, our framework for
[22:57] assessing those companies is evolving as well.
[22:59] But I think it starts at the most fundamental level, right?
[23:02] Is the solution that the company is selling, is it actually
[23:07] needed on the market? And is there a clear business
[23:10] ROI, right? I think that's, this is where it
[23:12] all starts. If a company can demonstrate
[23:15] that their product is useful and it has a clear ROI for
[23:19] businesses, that's, you know, that's, that's, that's the first
[23:21] step. And then the second step is,
[23:26] will open AI or any other company eat, eat their lunch,
[23:29] right? And, and that's their, you know,
[23:31] like it's, it's, it's, it's a little bit more challenging to
[23:34] model it out going into the future.
[23:36] But again, like if a company has excellent, excellent founders
[23:41] that have great understanding of market and they have their own
[23:45] vision for the future and they have your proprietary data or,
[23:50] or, or, or a team that, that possesses unique insight into
[23:53] the market, you know, we're willing to take a bet.
[23:57] So we're basically look at those, those two different
[23:59] things. I don't know if you want to add
[24:01] something. Yeah, I just wanted to add.
[24:03] That probably gross margin is one of the ultimate, you know,
[24:08] indicators. You can think of gross margin as
[24:12] a as a derivative from ROI because it is an indicator of
[24:18] clients willingness to pay for your value at.
[24:21] If there is no ROI, your gross margin tends to be in the, you
[24:25] know, single digit or even negative range you can compare.
[24:31] I don't want to. Talk about specific.
[24:32] Companies, but for example, you can take summarization, not
[24:36] summarization software for different industries.
[24:39] There are general ones which cost you around 2015 bucks a
[24:43] month. And then there is let's say
[24:45] healthcare where people are ready to pay 300, five, 100
[24:49] bucks per seat. It's only because there is much
[24:53] larger ROI realized in in a in a specific industry with the
[24:58] application of specific expertise rather than a general
[25:01] one. And the gross margin here is 10X
[25:04] of that of the general one. And this is how you realize that
[25:07] probably this solution have bigger ROI for specific clients
[25:11] rather than another one and then this becomes a a sustainable
[25:15] source of revenue. Absolutely.
[25:17] Quite insightful and Finsight was the lead lead investor in
[25:21] Uzum right? Uzbekistan's first Unicorn?
[25:24] What were the key factors that gave you conviction in that
[25:27] market? And what lessons from investing
[25:29] in Central Asia and Saudi Arabia can be applied to other emerging
[25:32] tech ecosystems? Well, first of all.
[25:36] I think the the number one reason why we decided to place
[25:40] bet on on the market such as Uzbekistan is a change in
[25:46] political change. In 2016, the new president came
[25:51] and he liberalized a lot of parts of the economy.
[25:56] Before that it was one of the closest country in the region.
[26:00] Now it welcomes a lot of a lot of other funds companies like
[26:05] Franklin Templeton recently opened offices there.
[26:07] So there was number one reason and we saw that the new regime
[26:11] want, want, wants to bring and welcome foreign investors.
[26:17] Second, Uzbekistan, unlike other post Soviet countries, actually
[26:24] growing in terms of population and it acts like a South East
[26:28] Asian country rather than a post Soviet one.
[26:31] And we saw that in in, in, in such countries.
[26:35] You can take India for example, we have a very young population,
[26:39] very tech savvy. You can leapfrog a lot of a lot
[26:43] of stuff and, and, and build digital first businesses from
[26:46] day one. And 3rd.
[26:48] We have a specific thesis on super apps, especially in
[26:54] relatively small markets like Uzbekistan is such markets are
[26:59] usually not that attractive for global conglomerates because you
[27:04] still have to localize a lot of your app in order to enter the
[27:08] market. And the market is not big enough
[27:10] for you to, to build a sustainable, you know, business
[27:13] case. So This is why in such markets
[27:17] there are opportunity to create local, you know, ecosystems that
[27:21] tend to become almost monopolies.
[27:23] You can think of Rap in Colombia or Caspian, Kazakhstan, or Uzum
[27:29] in Uzbekistan in this case. So we think this is an ideal
[27:32] market which has the combination of different, you know,
[27:36] prerequisites to build a monopoly here.
[27:39] Yeah, absolutely. I.
[27:39] Love the global perspective you have on investing and you're
[27:43] always tracking markets, even the ones where you're not
[27:47] presently active to see if there's an opportunity to go in
[27:50] and you know, capture that opportunity.
[27:52] Quite interesting. You know, give me an insight
[27:55] into what it's like building out that sort of a global firm,
[27:59] right? Because most VCs even if they're
[28:02] growth stay early stage, they're focused on one market, right?
[28:07] And even in that it's like hard for them to operate because they
[28:11] have to fundraise from LP's. LP's a lot of times preferred
[28:15] that you have a focus in a specific geography.
[28:19] They don't like you all over the place that, OK, I'm going to
[28:21] invest in this new market now or I see an opportunity in India or
[28:25] Uzbekistan now. So how do you do it internally?
[28:29] Give us an insight into that, that OK, are you raising
[28:32] separate funds for separate geographies or and separate
[28:36] funds for separate strategies as well?
[28:38] Maybe that you think at a particular point of time there
[28:41] there's an opportunity in the secondary market you want to tap
[28:43] into that, you go to LP's and say that, OK, I see a secondary
[28:46] opportunity in the US and we should do a fund there and then
[28:51] LP's come in and support you with that.
[28:54] How does that work internally to build that global sort of firm
[28:57] and mindset? Yes, I I think.
[29:00] One of the most important things is is actually underwriting and
[29:03] going to local markets and spending significant time on the
[29:06] ground trying to trying to spend time with spending time with the
[29:10] management and trying to understand local markets.
[29:13] So physically going to source, physically doing purchases,
[29:17] physically going to warehouse, all of that.
[29:19] I think in terms of, you know, finding those opportunities,
[29:22] there's a lot more data available today, not only for
[29:25] us, for, for, for all the, you know, this is trying to operate
[29:30] globally. So you can find a Series A and
[29:32] Series B company that has raised money and you can find your
[29:34] attraction online. But I think it then comes down
[29:37] to actually taking that, that step of flying into the country,
[29:42] meeting the management and, and spending time with the
[29:44] management to build a relationship to secure access to
[29:47] the next round. That's, that's number one.
[29:49] And #2 again, spending significant time on the ground
[29:52] to, to, to try to understand all the different aspects of, of, of
[29:56] the market. Every market has its own
[29:59] peculiarity, peculiarities from operational perspective, laws,
[30:03] regulation, taxes. And that requires quite a lot
[30:07] of, quite a lot of work actually.
[30:09] And we, we've been doing that work.
[30:13] And I think that that work is necessary if you want, if
[30:16] someone wants to, to be successful and lose different
[30:18] markets. That's from, from dual sourcing
[30:23] and, and dual execution perspective.
[30:25] From a fund perspective, we, we have, you know, sort of like a
[30:28] global, one global fund that invests into, into, into global
[30:33] opportunities. And a lot of LPC have been very
[30:36] open to the thesis of digital local ecosystem and investing in
[30:41] those local ecosystems. So they they're fine investing
[30:43] in, in one fund that that has exposure to different regions
[30:49] and it could also work as a diversification strategy in a
[30:52] way from from local markets perspective for geopolitical
[30:56] perspective. Absolutely.
[30:58] Quite interesting. And let's go deeper on one of
[31:01] your investments. Anthropic, like a big name these
[31:04] days, you invested in a major player in the foundation model
[31:08] space, right? How do you evaluate the
[31:11] comparative landscape of large language models and what made
[31:14] Anthropic stand out as a winner into the capital intensive race?
[31:18] I I I think. So, so we made an, we made an
[31:22] investment about a year and a whole a year and a half ago,
[31:25] just over a year and a half ago. And I think it's important to
[31:29] point out that, you know, our thinking on, on the topic
[31:32] changes every every three months, If, if, if not every
[31:35] month. Again, like, I think it's a very
[31:38] dynamic landscape. And we certainly, you know,
[31:43] don't claim that we have a full understanding of market of who's
[31:47] going to win. But at the time, at the time
[31:52] that, that, that made sense for us from a multiple perspective.
[31:56] From a multiple perspective, we, we believe that at the, at the
[32:03] time, there were, there were multiple players, but to the
[32:05] biggest one was obviously open AI and entropic.
[32:09] So in, in comparison to open to open AI, open AI was much
[32:12] larger. And they also had some issues
[32:14] with their structure as a, as an organization that prevented us
[32:19] from investing in, in it. So that's kind of like from, you
[32:23] know, selecting between the two. But, but more importantly, we,
[32:28] we believed in, in, in the team and, and what Dario Dario was
[32:33] saying about his vision of a market.
[32:36] And, and we believe that there's going to be some value accrued
[32:41] to his players at least in the medium term, right.
[32:45] I don't know if it will stay very in, in the long term, but
[32:48] in the medium term, in, in the medium term, we believe that
[32:53] whose foundational layers are essential for the entire AI
[32:57] ecosystem and for, for applications.
[32:59] So they're being built on top of them.
[33:02] They, they build a skill set in terms of, you know, assembling
[33:06] great engineering teams that were able to solve very complex
[33:09] engineering engineering challenges, but also we were
[33:11] able to solve the challenge of, of, of raising capital, enough
[33:14] capital to, to fund, fund basically model, model model
[33:20] training. So again, you know, we, we
[33:25] believe those layers are essential for for, for the next
[33:29] couple of years. Longer term, we don't have a
[33:31] thesis quite yet, but in, in the short term, you know, we, we
[33:36] kind of saw that Entropic emerges a strong number two
[33:40] player and they had their own different angles around coding
[33:43] and how they were thinking about the market, focusing on the
[33:45] enterprise and security that that gave us a lot of in comfort
[33:49] to, to, to, to backup player. And just to add, I think.
[33:52] It all comes down to strategy companies, particular companies
[33:56] focusing on and then execution on of that strategy.
[34:00] And when it comes to Anthropic, unlike other major foundational
[34:04] model developers, they are pretty much focused on
[34:07] enterprise use cases and they are, they have the, the largest
[34:11] market share in enterprise. Whereas the other like open EI
[34:15] Gemini, you know Lama from Meta Platforms, they're they, they,
[34:20] they do both, they do open source.
[34:24] In case of Lama, they do B to C, they do B to B Person Tropic is
[34:29] the number one in terms of enterprise use cases.
[34:33] So I think focus really matters. Yes, I completely.
[34:36] Agree. I completely see that Entropic
[34:38] is really focused on the enterprise piece and is actually
[34:42] somewhat winning in that space and that's actually a big piece
[34:45] to win, right. So quite interesting to see how
[34:49] that plays out. As a final thought before we try
[34:51] to close this out, Finsight operates at the intersection of
[34:55] late stage growth, generative AI and cross-border investing.
[34:59] What is the single biggest misconception that founders or
[35:03] LP's have about your strategy and what do you wish more people
[35:06] understood about building a global venture portfolio today?
[35:10] I think it's. I mean, that's a great question.
[35:12] It, it acquires quite a lot of quite a lot of food to be quite
[35:16] honest. But I think.
[35:21] You know. Again, we'll also do some early
[35:24] stage investments and at early stages, I think the most
[35:27] important thing is adding value to your founders and, and
[35:30] supporting your portfolio companies.
[35:32] At a later stages, when you're investing maybe a 10 or 15 or
[35:36] $20 million check, you're not, you're not maybe joining the
[35:40] board, right? And, and, and you're not really
[35:45] engaging because of management in a way that could be
[35:48] beneficial to, to, to, to the management.
[35:50] So in, in, in growth stages, I feel like it's important from
[35:55] that perspective to think about LP's and, and, and, and, and,
[35:58] and their perspective, right? And I, I think you know.
[36:04] When you look at that. Some of those companies you know
[36:06] like on Tropic ongoing from 15 to 60 billion to 170 billion,
[36:10] right. You, you can, you can generate
[36:14] great returns just playing in a secondary market.
[36:21] So I, I, I think it's, it's, you know.
[36:27] I I think you know. A couple years from from now,
[36:29] we'll sit down and you know, there's going to be more
[36:32] definitions on how to think about those different models and
[36:34] frameworks. But today I, I think it makes,
[36:39] you know, like absolute sense to, to play in the secondary
[36:43] market on, on a global stage and I, I think.
[36:50] Maybe in a way? It makes sense to to rethink
[36:52] with VVC model. Obviously, I mean Sequo and
[36:55] Andreessen's are, are already doing it and they have much
[36:57] larger funds that play across different aspects of the
[36:59] ecosystem. But if yeah, I maybe it's, it's
[37:05] not a direct answer. It's it's something that we
[37:07] actually have to think about again, like we've been following
[37:10] the the two North stars for us is, is, you know, helping
[37:12] portfolio companies and helping founders succeed and, and
[37:17] obviously driving returns for all peace.
[37:19] So in, in, in the market that is very competitive, that is
[37:23] changing where you, you see, you know, profile of a founders
[37:30] changing profile of a companies changing.
[37:31] I I think you just have to stick towards North Stars and try to
[37:35] play where you can play. That's that that's kind of how
[37:38] we think about it. I, I don't have an exact kind of
[37:41] like definitional framework for you quite yet.
[37:43] Maybe, maybe we'll think about it some more and we'll have it
[37:45] for you on the next show. But but for now, you know, we
[37:48] just stick to the North Stars and we'll do our work.
[37:51] Both OPSO. PS And founders, they, they
[37:54] think about we see firms as win money or LPGP structures was, I
[37:58] don't know like 5 year investment horizon, 10 year
[38:01] term. But as so many creative
[38:04] instruments and strategies around which you can build
[38:07] different products with shorter liquidity, longer liquidity and
[38:12] so on. There are so many, so many
[38:15] creative products you can create as AVC firm rather than a plane
[38:18] when you are, you know, PGP absolutely.
[38:21] I so agree with that. I, I think that should be 1 big
[38:24] take away that you don't have to do what everyone else is doing.
[38:28] You can't be innovative. And there, there are many
[38:30] different strategies you can employ and build a successful VC
[38:34] firm simply by filling a gap that already exists.
[38:36] You just have to identify those gaps and be good at filling
[38:39] those, right? That's, that's all you have to
[38:41] do. And you just have to be open to
[38:43] learn, open to new strategies, and you can build a good
[38:45] business here, right, in investing space.
[38:48] Now we move to the rapid fire around wherein I'll ask you 6
[38:51] quick questions about the investing you're doing.
[38:53] We can answer in general for all the markets that you're
[38:56] investing in. Or if you want to answer for
[38:59] specific markets, you can also answer that.
[39:01] So in that the first one is one of the sectors and regions you
[39:04] invest in in terms. Of in terms of regions, it's, I
[39:08] would say 80% of the capital in, in the US, 15% India and 5% the
[39:13] rest of the world. It's Latam and, and, and some of
[39:16] our emerging markets and sectors, obviously AI and local
[39:21] super apps. Got it.
[39:24] What's the? Typical stage of investment.
[39:27] I would say 80%. Of our capital goes towards
[39:30] growth stages and then 20 towards early stages, which
[39:33] includes seed after Series B. Got it.
[39:37] Do you lead rounds? We lead about 20% of earlier
[39:42] stage rounds. We, we would about 20% of our
[39:45] own participate in, but it tends to be at the early stages of our
[39:48] companies, OK. What's the typical check size
[39:51] you put in? I would say an average check
[39:54] size right now for us is about 10 million, but it varies quite
[39:58] a bit. For example with Zoom was 40 and
[40:02] we have some we even have check sizes as small as as small as
[40:05] 100 to build relations with the founder but it I would say an
[40:08] average is 10. Got it.
[40:11] Where? Can founders get in touch in
[40:12] case there's a direct way? You you can find you.
[40:17] Can personally can find me on LinkedIn and there's my e-mail
[40:19] list on LinkedIn. Awesome.
[40:21] And I'll also. Put the links for Prevail in the
[40:24] show notes so you can find both of them there.
[40:27] The last one, where can our listeners follow you and your
[40:30] journey? Yeah, yeah.
[40:33] For for me again, it's, it's, it's LinkedIn, that's where our
[40:37] portfolio companies operate and we try to support them there by
[40:40] spreading good news from them. Awesome.
[40:43] And Pavel? Same for you.
[40:46] Just the same, yeah. Got it.
[40:48] I'll make sure to. Put those links in the show
[40:50] notes below. Thanks so much for doing this
[40:52] with me, Pavel and Maxim. It's been a pleasure having you
[40:55] on the podcast and I wish you happy investing.
[40:57] Thank you, it's nice. Thank you.

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