Last month, thousands of industry leaders and creatives descended on London for the first European edition of South By Southwest (SXSW), of the legendary media conference held in Austin, Texas.
As the event got underway, Sifted sat down for a live Q&A with Sumer Juneja, a managing partner at Japanese tech giant SoftBank, where he’s spent most of the past seven years overseeing the firm’s investments across India and Europe.
We asked Juneja about VC investing in India versus Europe, the pitfalls of hype cycles and the future potential of AI agents. The conversation has been edited for clarity and length.
Just to start off with, I wonder if you could walk us through your journey into venture capital and how you ended up at SoftBank?
So I finished here at the LSE, joined Goldman Sachs, where I did two or three years of banking, then joined their private equity group.
My venture career started by joining Norwest Venture Partners in 2010, based out of Palo Alto. We raise about two and a half billion every couple of years, they’re very big in enterprise. I joined the Mumbai office in 2010 and started doing a lot of venture there.
In 2018 I was asked to open the SoftBank office in India. And I think we can go through some detail on what we’d changed there, what we thought about India. And then in 2022 I was asked to move to London and look after Europe and India.
So I’m back and forth in a lot of learnings from both the markets. There are some similarities, but there’s lots of differences as well.
What was SoftBank’s presence in India when you joined in 2018, if any, and what were some of the challenges that you faced setting up there?
Yeah, so we didn’t have an office in India. We had invested in two or three companies; we had about three odd billion dollars deployed, but it was being done from the London office. In investing, especially in VC, I do think you need boots on the ground. And I think SoftBank soon realised that, so we put up an office.
There are some material differences in the way you view India outside-in versus when you are there on the ground. Macro in India always looks very strong — big population, growing economy, cheap data — but the nuance is in the micro.
In my final interview, actually, I told my boss that SoftBank always wanted to put at least a billion dollars to work in companies at about 5bn post[-money valuation] and outcomes of about $10bn. In India at that time, there were only 40 or 50 companies with above a $10bn market cap on the stock market. Now that’s gone to 125.
So one of the things which is very clear is that we need to come in a bit earlier, maybe at a billion odd post, a $3bn outcome, because that’s what a $2,000 GDP per capita economy can sustain.
So those were the changes we made: Come in earlier, smaller ownership and diversify the portfolio.
Because from outside in, everyone is super excited about the India consumer story. You’ve got to go a bit wider. There’s a lot of SaaS, there’s a lot of IT services and there’s a lot of B2B, which you need to get involved in.
When you put it like that, it all sounds very obvious. Was there much resistance when you were pitching these ideas? And how did you convince them it was the way to go?
The resistance was […] you know, at the time, our [Vision] Fund 1 was $100bn fund, and they said, ‘Look, how are you going to deploy 250m versus a billion? What’s going to be the ROI on time? You have a six-to-seven member team, which you will build out, and how will you have an impact on the fund?’
My view was different. My view is: If you take a billion and you make it 2x or you take 250m and you make it 4x or 5x, ballpark, you’re going to start getting similar outcomes. Obviously, India has had a lot of tailwinds and that’s worked out.
And I think you’ve got to back yourself a little bit, like entrepreneurs do. And I said, once you get some initial success, then I think the strategy plays out.
Is there anything you’ve learned since setting up SoftBank’s India office you wish you’d known earlier?
Well, by 2018 I had been investing for around 10 or 12 years so, you know, you think you’ve learned it all and you’re very mature and you can stay out of any bubbles.
But to me, every deal is an internship and the lesson is the same: Why did I get carried away in 2021? I could have done four deals less — it was a bubble — and should have been a little more disciplined.
And that’s going to happen again and again and again, that’s not going to change, but you want to learn from that.
What is it that those investors, who are on the outside looking in, really get wrong about India?
So I think the first unicorn in India was Flipkart, which got created around 2010 or 2011, so we’re only 15 years into this journey. And if you take the couple of analogies that people get wrong, one is obviously you see a large population.
You have to divide that population into the top 1%, which is as rich as Europe and the United States. And then you’ve got a bulk in the middle, which could be China or Brazil. And then you have, you know, the bottom end, which is at $1,000 GDP [per capita]. So where do you want to play? How do you want to play it, and how big can the outcome be? [This] is going to be very, very different.
And the second bit is: if you come from outside-in — for tech, for e-commerce, for AI — for any of that to work, you need a basic level of infrastructure. You need connectivity, you need the internet, you need data, you need compute.
A lot of that in India is being built in parallel with the tech ecosystem, right? So we’ve never gone from cash to credit card to digital payments. We went from cash to digital payments. We’ve never gone from shopping, you know, in the informal sector, to malls or high street and then to e-commerce. We went straight to e-commerce. We never had 7-Eleven or corner stop distribution.
We went straight to the mobile phone because that’s where you’ve got 600m people with very cheap data. So if you don’t understand how those nuances work, I think you can get the micro quite wrong.
Which brings us nicely to the big question: How does investing in India differ from investing in Europe?
India is a big consumer market, 70% of the economy is domestic. Unlike China, we’re not an export-led economy. So the opportunities have big outcomes. We’ve had about 10 or 15 big tech IPOs in India. Zomato, which is a food delivery company, is the largest. [It has reached a valuation of] $24bn. [In India] they’ve pretty much been consumer companies.
In Europe, it’s a bit different. And the learning for me in Europe was, you know, it’s a $20tn economy, if you put it all together. As big as the States. So why aren’t there very big consumer tech outcomes in Europe? There should be and there aren’t.
And the reason was — if you look at it, in my view — is that it’s not really a $20tn economy. It’s many $3tn-4tn economies. So you can have one DoorDash or Uber Eats in the US, which could be worth $30bn, $40bn or $50bn. Or you could have one Zomato in India, which could be $20bn.
But in Europe, you have Delivery Hero, you have Glovo, you have Deliveroo over in the UK. And basically the market gets fragmented, so you’re not really getting the benefit of the pan-European population’s per capita income.
That being said, on B2B you can have much larger outcomes. So you have Adyen, you have Snowflake, you have UiPath, because there you can completely go pan-European at the first stage. And it’s a lot easier for European companies to go and conquer the US, or do well in the US, which is obviously the largest market, compared to Indian entrepreneurs. So there’s a big difference between B2B and B2C.
Having said that when you deal with entrepreneurs […] entrepreneurs are a particular type of people. I can tell you. The mindset, the aggression, is the same, right?
I wanted to ask you about that. There’s been a debate kicking off on Linkedin about ‘996’, this idea that startup employees should work from 9am to 9pm every day, six days a week.
And on top of that, this kind of suggestion that entrepreneurs in the West are hesitant to commit to those kinds of working hours because they’re lazy. What’s your take on that?
Look, my view is: If you’re going to excel in any field — whether it be tech, whether you’re an entrepreneur, whether you’re in your field or my field — I don’t think anyone looks at how many hours a day you’re working. Either you have the incentive and the drive or you don’t.
Entrepreneurs tend to have more incentive, drive, commitment than if you’re in a corporate job. So actually, the entrepreneurs that I’ve seen in Europe and the ones who want to make it large — and there’s now a big wave of AI application layers coming. Go meet Mistral. I don’t think they are lazy or not as committed. Look at Bolt in Eastern Europe. Any of them you meet, they are super charged up and on it.
So is it just a numbers game then? You have a country like India where you can easily access the entire market because the rules are the same, whereas in Europe you have all these fragmented markets with different regulations. Is that what it comes down to?
That makes it tricky, and I think one of the reasons why you don’t see as many large outcomes in Europe is because you’re basically going through different labour laws, different tax laws, different cultures and habits, right?
So if you start an online grocery company — and we had one in the Nordics that wanted to expand to Germany — it is not easy.
What people buy in the Nordics, the eating habits, are not the same as when you’re in Germany. Whereas if you’re in the States or you’re in India […] of course India is also divided, but generally you can have a pan-India outcome.
So what’s the most compelling area for investment in Europe right now? I’m assuming AI agents are on your radar, like everyone else?
No, no, it’s not AI actually.
There’s a lot of noise about, ‘Oh we’re not as big as the US, why aren’t we having the bigger outcomes?’ Et cetera.
But if you take a step back: What are the ingredients you need to have a big outcome? You need capital. I think Europe has enough capital. If there’s any good deal in Europe, you have VCs flying in from California, New York, you’ve got American funds happy to deploy in Europe.
Do you have the talent pool? I think the European talent pool is A+.
And if you go back — whether it be mechanical engineering in Germany, whether it be in France, whether it be in Eastern Europe, or with fintech here in the UK — you do have the education system which is very technical, mathematical engineering, tech based.
And finally, you need catalysts to create entrepreneurs. So when you create a Revolut, you’ll have 15 people coming out of Revolut who are then going to be the next wave of entrepreneurs. Or you have the UiPath in Eastern Europe, or you have Adyen in Holland, so you have all the ingredients.
You don’t have the Magnificent Seven but the application layer, which is going to be nuanced and focused on local preferences […] that’s where Europe is very well-placed.
There’s obviously been a huge amount of hype around generative AI over the past few years. How do you think about hype cycles and how do you avoid rushing into an investment when other VCs are all piling into a given company or sector?
It’s tough. When I meet entrepreneurs, they will say it’s a bit of a herd mentality. You can try and be ahead of the curve. I think some are, and I don’t know how much of that is art versus science, but sometimes you get lucky.
When you’re in this bubble, the top 10% will always do well while the other 90% don’t. You will get many, many multi billion dollar outcomes. This is where I come back to risk appetite. If I do 10 deals, six or seven could probably go wrong. They might not collapse but you might not make money, while the other four do well.
You have to figure out how late you are in the game and how crowded the space is and get into the nuances.
Europe has lagged the US and China on AI infrastructure. How concerned are you by that, and where do you see it going?
You need it. Governments have been setting up “AI growth zones”, which is good.
Entrepreneurs are not going to build infrastructure, so that’s where you need the government or the telecom sector to step up. Because you get the application layer, but if you can get cheap compute, it just makes it easier and easier to expand.
France has done it, the UK is doing it, Europe is doing it. And that’s where, when you’re talking about regulation — you need land, you need clearance, power, transmission and some guarantees […] if that can all work in a synchronised manner, that’ll be super helpful.
Is AI here to stay? Is it going to disrupt SaaS? Is it going to disrupt the way we search? Is it going to disrupt the way we shop? Is it going to disrupt the way you call up a British Airways call center? 100%.
So should you have a bet in each vertical? You should. Now let’s go figure out who the right entrepreneur is, with the right backing.
And you’re working out those bets right?
Yeah so, the other day I was talking to someone who said BA has maybe 10m people on their frequent flyer [scheme]. There is no reason why when I call BA or I call British Gas or whoever, I should repeat my information.
There should be 10m personalised AI agents, so when I call them they say “This is who you are, this is where you fly. A, B, C”. I should have my own personal agent — and it’s not that complicated and not that far away.
How do you think about the relationship between India and Europe from an investment perspective? Is there much cross-pollination?
I would divide it into two: There’s the mechanical, big infrastructure players in Germany, France and so on, where we will build compute. The Indians’ first port of call is to go to the US and build out. So if you’re a SaaS player in India you want to go to the US.
But what I’m seeing more and more — especially in the English-speaking hubs like Amsterdam, Berlin and London, of course — it’s a good alternative to set up shop. Why? You’ve got the timezone between India and the US, the cost of human capital is cheaper and you’ve got a choice of expanding in both markets, which pay a lot more to enterprise than Indian enterprise.
So everyone wants to conquer the US, basically?
And Europe. Everybody wants to go to the US because it’s bigger, but you’ve seen other [options]. There’s a company called ChargeBee which [opened an office in] Amsterdam and will build a pretty solid business in Europe.
There are more and more European companies now coming to India because it is a big consumer market. Tech is one section, but whether you take luxury or any European brand, they all want to be there.
I’m conscious we’re talking about Europe like it’s one big blob, but there are of course lots of different countries inside Europe. Which ones do you find interesting?
The hubs are there. Paris is a big hub; Berlin is a big hub. The Nordics, Amsterdam, London […] In Eastern Europe, there’s not one particular hub, but you do have a lot of talent coming out of there.
It’s quite funny. Everywhere else in the world, if you’re interacting with the top four or five funds, we see that as good deal flow.
But here it takes that extra effort because Berlin has its own VC community, Paris has its own VC community, so you really need to be going back and forth to get good deal flow.
Read the orginal article: https://sifted.eu/articles/softbank-partner-sumer-juneja-interview/
