Interview with Rajeev Madhavan, Co-Founder & Partner, Clear Ventures

Radhakrishnan Chonat: Welcome to another exciting episode of CEO Insights, where I delve into the minds of business leaders, where I try to explore their journeys, their insights and strategies of some of the most accomplished CEOs and entrepreneurs in this business world.

And in today’s episode, I’m thrilled to have a conversation with Rajeev Madhavan, Co-founder and Partner at Clear. And he is a seasoned technology entrepreneur and investor. Now, Rajeev has had a remarkable track record of founding and leading two very successful companies and making early stage investments in over 35-plus tech startups. His extensive list of successful exits include companies like: Toast, Groupon, Apigee, YuMe, and, of course, Magma Design Automation, which went public under his leadership and was eventually acquired for, I believe, 580-plus million.

Now from shaping the smartphone era to investing in the next wave of tech innovation, Rajeev’s experience spans multiple industries and geographies. So ladies and gentlemen, let’s explore his journey as a tech pioneer and try to see what he looks for in early-stage startups and his thoughts on the future of technology.

Welcome to CEO Insights, hosted by Radhakrishnan Chonat. Rajeev, welcome to the show.

Rajeev Madhavan: Thank you, Radhakrishnan. Great to be here on the show.

Radhakrishnan Chonat: Rajeev, you have successfully founded multiple companies, including Magma Design and Ambit. To begin, can you share what initially inspired you to venture into entrepreneurship and how your journey has evolved over, over all these years?

Rajeev Madhavan: So fundamentally, I don’t come from a business background. My parents both have zero DNA in business. My dad was in the Indian customs, so there was like nothing in my family which was business related. But what ended up happening is I moved to after coming to Canada for my grad school, I worked in a company called Bell Northern Research. 1.5 years into it, I had done some good work in an area called Hardware Description Language, which is now the basis for all designs, or semiconductor designs that is done. It’s a matter of timing to be there in that area at the right time. Nothing else propelled me to get there.

Once I did that, I came to Silicon Valley for actually a paper publication. But I loved the weather here. I stayed here and I joined a company called Cadence. And I always relate this message, the Founder of Cadence, Jim Solomon, was on a plane with me. I had just developed a product at Cadence and we were going to a customer site. And while coming back, I asked him what would he have done differently at Cadence, right? I mean, he had done all these digital products and I’m here I was working on the analog product side and he said he would have done this analog product as a startup, and as a second startup. And what went through my mind is, well, here I am working on this stuff, why am I not doing a startup?

So within a week after that, I quit my job. And there’s somebody who has been talking to me about doing a startup. This was the Founders of LogicVision, and the three of us co-Founded LogicVision and formed it in 1991 – ‘92, I think is when we formed the startup.

So it was more because, I mean, of the fact that I landed in Silicon Valley in ‘91, ‘92, the hub of startups at that time. And clearly there weren’t that many Indian startup founders at that time. It’s not like today’s time, right? I mean, at that time there were hardly any Indian doing startups. Everybody wanted to go and work at a big company and sort of make their living. And in fact, my mom sent my sister to me and said — to say, “He’s giving up his job at a big company and he’s going by himself. He just can’t keep a job.” And so she ended up being almost a counterweight to the whole process, right?

I think, she was not at all in strength supporting me for this particular transition of my life. But in general, you found that doing startups was an in-thing with some of the people at that time. And so it was more because of the in-thing that I wanted to try, right? And you know, I mean, it was just, I knew like I could make new products in, you know, at that time, electronic design automation software. I didn’t know any aspects of business. And here I am jumping into a startup and slowly over the three companies, you learned all the gifts and all the experiences you need to be able to learn sales, business development and aspects of things. But clearly the first one was purely product-oriented startup that I wanted to participate in, and that’s what the first goal was all about.

Radhakrishnan Chonat: Excellent. Let’s talk about Magma Design Automation, which grew to become one of the largest companies in Electronic Design Automation in its space. And I believe it was instrumental in the smartphone revolution to an extent. So, what were some key decisions as the CEO or as the Founder or strategies that helped you scale Magma to such heights? You normally hear startup founders struggling to scale their business. So what sort of strategies or key decisions that now reflecting back, you believe were the right decisions?

Rajeev Madhavan: Magma was my third startup, and by the third startup, I could raise money without any difficulties, like literally. I mean, so Magma did not — whereas if you were to ask me about Ambit story, I couldn’t get money. There’s no way I could get venture capital easily, right? It was much, much more difficult to raise capital in the second one and the first one. Third one, that was never an issue. If I ask VCs for $1 million, I get $2 million, $3 million. So it — this was not an issue. So it was very well funded. We were doing something revolutionary in the sense that we were combining what used to be very different aspects of digital design. There was a thing called front-end and back-end, and it just was not converging in the right fashion. And Magma came up with an idea of combining the two, right?

And we were not the first company, there was another company which had been formed 1.5 years before us. And so right at the get-go in the first meeting, like so we went in, got the money, had about eight people that we hired in the first one month. In the first year, we hired about 80 people. So, it was a very aggressive ramp. We had a very strong engineering skills and engineering management and hiring capability. For example, when we set up our team in India, we went to IITs. We gave the interview candidates a set of papers. They had to come in prepared, and we were just – and it was always about how good they are technically. So it was an elite technical team that we hired.

These were the best of the best people that joined the company. The culture was set, obviously, by me and as the kind of fearless leader that you had to do. And the very first meeting, I told them, like, we are 1.5 years late because the other company had been formed a 1.5 years earlier. They did not have a product, but I sort of used it very effectively to drive a pressure to launch at about a week later than them, when we launched the final product. So it was like, from get-go, we had objectives for every week, every day. And we were just a pretty hard-strung team of very technically strong people that existed in the company.

So the creation in the early days was driven by this, you know, we got to beat the other team. We had a different approach. They had a different approach. It turned out we had done it right, and they had gone off the rails and done a completely wrong implementation, but we did not know that. While you’re developing, you don’t know that, right? You just sort of have to know that your execution is right, and you have to get going.

So it was a great team from that perspective. I had a phenomenal Board also. I had people who were the who’s-who of semiconductor, you know, Andy Bechtolsheim, who was the founder of Sun Microsystems, the first investor into Google. He was an investor in us. This was in ‘98, right? I mean, in fact, Google was not there at that time, which is like very interesting that, you know, all these people had worked at Magma on the Board. I had one person who was very strong from a financial perspective, Mark Perry, and everybody had their own expertise on the Board, and they could teach me a lot of things.

So, for example, in Magma, we launched the product in the second year. Third year, we did $13 million, 13, right? Zero to $13 million run. So it was not an easy thing, right? You’re out with customers. 80% of the deals, I’m very, very involved. The other 20% also involved. So it was a pretty intense way of trying to close revenue quickly and get to capture the market as quickly as we can. And I still remember the financial person on our Board, Mark Perry from NEA New Enterprise Associates, he came to me and he said, Rajeev, I think you can go public, but I think your entire finance start — staff was done. You have to start from the scratch.

So we ended up having to fire about five or six people in the finance organization, restart the entire finance effort, right? Because that was something that I didn’t know how to put the right quality when I started the company. I knew all the Engineering side and the Technical side, the Support side, and even the Sales side had done well. So I had to rebuild that and we filed for IPO. So it was a Culture of Excellence that we had within the company.

And the team, you know, I mean, I couldn’t have had a better team than I had at Magma. I mean, at the e-staff level in the early four years, everybody had been a CEO, right? I mean, and even later, people who were hired and groomed have gone on to become the CEOs and VPs of top companies. I’m mighty proud of the fact that probably about 1,500 to 2,000 people in the Valley had worked for me in that organization. There’s at least 400, 500 of them who are now holding Exec positions across the Valley. So it’s a testament to the fact that it’s a phenomenal team that we have, that we built and continuously made sure that the team quality is kept up. Right? So that was, there’s no exceptions to that.

And we had this thing where, you know, in Sales, two strikes, you’re out. If you miss twice, you’re gone. And Engineering was, you know, your — the best had a salary scale, which is unmatched in the industry, right? The top 10% of the company were in what we call the KC model, which is Key Contributor model. And we did that purposefully, and everybody could come into that KC plan. You may get removed from it next year if you don’t perform. So, it’s just basically a performance-driven company with a great OKR and performance management that was done to create the core products, right? So that was the best thing that we had done as a company.

Radhakrishnan Chonat: Remarkable. You mentioned how you struggle with raising capital in Ambit when you first started.

Rajeev Madhavan: Yeah.

Radhakrishnan Chonat: Shifting gears a little bit. Is that a reason for you to become a venture investor? I’m seeing you have had a remarkable success as a VC with Toast, Groupon, Apigee. So what specific qualities do you look for in founders and startups before making an investment?

Rajeev Madhavan: So, you know, I talked to you about having a great VC in NEA’s Mark Perry and on Magma. I did not have such a great experience before that, right? I had all — because I was raising money from people who really were funding the project based on some customers or some activity that we were doing. But nobody really funded me as an entity, and they did not kind of — were not really good investors as far as having a relationship.

Mark Perry made me realize while at Magma that there is a gentleman VC that can exist, right? I mean, you can actually go and help the founder, just like giving me the advice to fire my entire finance team and put it together. It was really good to be under the tutelage of somebody like that, right? I mean, he was very, very good. So when I was selling Magma, he asked me to come and join NEA. It was the tail-end of his career at NEA. I spent a month or so at NEA. I wasn’t sure I wanted to be a venture capitalist, to be very honest until he kind of again gave me another opportunity. And I spent a month or two at NEA and then realized NEA is too big for me.

There’s like hundreds of partners, so I should do something by myself. So I decided I’ll try a little bit of the venture by myself. One or two companies I started, I thought, well, then it quickly became 10, 20, etc., and you started investing in companies. And in 2015, that became kind of a — convert your hobby into a vocation. That’s essentially what happened to form Clear Ventures, right? Obviously in ‘98, I had my first exit in Silicon Valley with Ambit. Ambit was bought by Cadence. So, I had some money and I did between that point and the end of Magma, I did about 25 companies where I was angel investor, right? And this was the time Silicon Valley was just growing quickly. Lots of founders, lots of Indian founders coming in.

Remember, in ‘90s, Indians were not considered to be great CEOs in Silicon Valley. I can tell you this question. At one of these companies, a top VC in Silicon Valley asked me this simple question. So I know you, I mean, he didn’t even know me, but he made the assumption I know how to write software. So he said, Rajeev, I know you can write code, but who’s going to sell and who’s going to be the CEO? And we ended up having to hire somebody who’s pretty weak in terms of every aspect of the CEO side of things, right? He could just go and sell, whether it is an RE or your stuff, he really doesn’t really care or understand. And that model of selling works only to a certain degree. It doesn’t work in tech.

You end up having to build that relationship with your customers and you have to understand what their requirements are at an intrinsic level. So, you know, and clearly, we had the skills, but we were not interested in having the skills at that point. So it took about ’98 – ’97-‘98 for us to start having CEOs, etc. Even when I went public in 2001, there were only two or three other public CEOs of Indian origin. So, it was a very different aspect of things. It was Steve Sanghi at Microchip and, you know, Brocade, a couple of peer companies like that, but there weren’t that many CEOs of Indian origin at that time.

So it’s a transition that has happened. Now, obviously, we are considered, you know, born leaders. It’s almost like expected that you will have Indians on the leadership team from day one. So it’s a big change, but it has taken time and effort in making those changes. So it’s great to see that, but at the same time, you know, it has all got to do with execution, performance, and continued execution in a company like Magma, right? You just need to keep on doing that.

Radhakrishnan Chonat: Rajeev, I need to thank you for changing the perception and making our lives easier. So I think, you know, AI also stands for American Indians who have made a name for themselves in the Silicon Valley and all over the world. Oh, you mentioned about how you founded Clear Ventures, 10 years ago. So as a co-founder and partner at Clear, I believe your focus is on early-stage tech investments purely, right?

Rajeev Madhavan: Yeah. So we focus 100% on being the first check. We only have one company out of the list where we are not the first check. You know, I mean, in other words, there are some angels and others who are coming earlier than us. But in general, we are at the stage where you can put something on the whiteboard, write it up, and we can sit down with you, understand that technology. In fact, I mean, but for that, venture is not very exciting. Frankly, for me, venture is exciting only because you’re being taught something new by some of the experts in that field, because whoever is forming a company in that area is at a viewpoint from years of thinking or working in that particular segment, right? So you’re being taught by some of the best experts in that particular given area, and he or she is, you know, a driven soul in that particular area.

Now, I think somewhere in the last six years, a little bit of that changed because everybody wanted to do a startup, whether they actually had that, it was more cool than anything else, right? Not realizing that if you go down that startup, I mean, a lot of people take umbrage on things like, you know, while you have to work 80-hour, 90-hour weeks, that’s minimum, right? I mean, you don’t have a break if you’re a startup founder. And if anybody is getting to the fallacy of thinking, “Oh, I’m going to do a startup and my lifestyle is not going to change”, it’s total BS. You have to put your startup out of footing, which is, I mean, look, I had three children, a startup and two kids, right? I mean, and I probably spend more time in the early days with my startup. It’s not probably, it’s almost 100% sure that I did that because you just have to breathe, live that startup 24/7.

I mean, getting up and doing anything necessary to get the customer to be successful, to make a sale, to make the right hires. So this is just the culture with which a founder needs to operate, but that’s not always the case these days. So people need to ask themselves, am I that hardworking individual? And it’s not just the, you know, I have a great knowledge in this space, I’m great in this space. That takes you only to 20% of the game. The remaining 80% is, you know, breeze on your knees, crawling your way through and making it work. So if people are not ready for that, this is not a game for them.

Radhakrishnan Chonat: Excellent. So I’m sure there are a lot of startup founders who are going to listen to this, possibly reaching out to you. If I were to ask you, what sort of an investment thesis do you form before deciding to invest in a startup, the first check? And what areas of technology are you most excited about as of today?

We are in 2024, we are talking about AGI coming in a thousand days. So one, what sort of an investment thesis do you form before? And two, what are the areas of interest picking, you know, your interest at this point?

Rajeev Madhavan: So, you know, let’s look at AI, right? So probably for the last eight years or so, we’ve been doing AI investments in the last six, probably using lots of this large language-model type work. Essentially, there were two or three ways we could go. One was at the core of it, there was a lot of new fabric that needed to be designed, right? I mean, this is Silicon. And obviously, I’ve done a lot of work in that space, having done the startups. But NVIDIA was my biggest customer. Jensen was my, you know, used to beat me up, you know, if I screw up on any one of our software releases. So I knew them, respected them enough. And I realized that to take them on, it is a little bit foolhardy, because you have to raise $1 billion-plus. And none of those startups have really made a lot of traction.

If you look at it, AI is still driven 80% by NVIDIA chips. Maybe there’s some Google chips and others that have done some things. So we stayed away from the hardware fabric side of things. We had access to getting all of the ones that have been formed were pitched early on to us, right? But the thought process was, unless you are highly differentiated, and you can sustain the difference, it wasn’t like Jensen, as long as he’s a CEO, is going to beat the hell out of you. So it’s not a wise man’s decision to get into that.

The second one, which we little bit played in, which is the fabric of software aspects of things, right? Everything in from — a lot of companies in basically making sure that the software, ML-Ops, AI-Ops, you know, the operational software of running it and making it all automatic, analytics capabilities, development capabilities, you know, basically, RGI, all sorts of capability that needed to be done. There were the second layer.

We looked at it. This is Silicon Valley in 2019 and ‘20, which was sort of heavy valuation. People were putting in valuation that was absolutely stupid. So one thing I learned is, love technology, but don’t fall in love to put good money into a cesspool of a lot of startups, right? So stayed out of that area, but AI applications, things that use AI to build different things. So many, many things that have been done in the past using complex software, where there’s a lot of heuristics involved and, you know, you basically are applying, you know, a lot of computer science with 30, 40 people writing the software and are given first version of software. Those things could be done with significantly lower engineering talent and create a better company, right?

So for example, we have a company doing Taxes. We have a company doing RPA, Robotic Process Automation. We have a company doing Healthcare where it’s automating the, you know — understanding and helping the physician both detect what the issues are and then, you know, be able to file the right tax and insurance stuff. All of that operation completely A to Z being done in software. That’s the current area that we actually look at. We look at applications where you could reset the old vendor or form something new that cannot be done in the past because you couldn’t hire that many people to put a new software layer together, and completely redo that whole traction, right?

So a lot of things, including security being rethought in that fashion. Today, security is like, do you run this tool, that tool, this tool, but completely automating all of these things and getting a much better flow and much better solution for the end customer. That’s where we have focused a lot on, right? And this could be an enterprise, this could be in some aspects of consumer, but most of our investors — investments as Clear is in Enterprise side of things. So that’s the focus.

Yes, as a personal investor, I’ve done some investments in India, etc. For example, in [Sarvam], you know, the large AI model for India with multiple languages, they just launched a few months ago. So — but the core operation is clear, is very much focused on AI applications and where can things that were done in the past or things that can be done new be reset with AI as the core functionality with which it can be redone.

At the end of it in five years, the world will say AI is just yet another tool. Yes, it’s a computer science wise, it’s a major step up. And a lot of people that used to write software programs will not be needed. I mean, it will be done by the software doing AI will eat software. And that’s well underway right now. So, I mean, it’s almost like, you know, I mean, when I first thought of applying for engineering school, somebody told me, don’t take civil engineering, it’s all done, take electronics or computer science. In the next five years, we’re going to reach a point where learning programming and computer science useless to do because the computer is going to beat the hell out of you on doing that.

Radhakrishnan Chonat: True.

Rajeev Madhavan: So, you need to learn something beyond that, which is actually today stats, math, you know, AI layers, etc., that ends up being the next layer today that we are looking at, right? So, that’s a big change. So, we focus heavily on AI applications today. That does not mean if a chip comes in or some tech comes in, we don’t look at it. We have, you know, a lot of semi-investments and various investments. But the core thesis that we create is a bunch of applications. And we build our own AI tools to help us find people who are – who have done work in this area, and then we chase them to do their own startups, right?

Sometimes they are happily employed at Apple, Google, etc. And our job is to tell them, “Hey, you’ve done this, get the hell out and do this new startup”, right? So, that’s the thought process with which we operate essentially.

Radhakrishnan Chonat: Excellent. Just for the benefit of our audience, what’s the size of your AUM or investments and how many startups have you invested in so far at Clear?

Rajeev Madhavan: We have about 300 – about 350 million assets under management, U.S. dollars. And we have about 30 companies that we have invested already into this portfolio. We are at the end of fund three. And to me, you know, I mean, every 10 years, you have to change your life. I wanted to, in my mind, every startup, I kind of moved after 10 years. So, this is a 10-year journey that I absolutely wanted to do. And it’s been great because you get to work with the best engineering talent that you could ever find in your area, challenging you and, you know, teaching you a lot of things that otherwise would have taken, you know, huge masters degrees to learn, essentially.

Radhakrishnan Chonat: True. What sort of exit strategy are you looking at? Do you make the companies that you have invested in IP already? You said you’re the first person to cut the check. So, at what point are you going to exit at Series A or much later?

Rajeev Madhavan: So you — we haven’t exited – we have exited four companies which have been sold in our portfolio. One of them, Robin Systems, makes a pretty healthy returns for the fund. But in general, I look at the particular market at that time to decide whether we should sell or not, right? And there are two or three functions. One is an external function of — is the market tightening up? So, let’s say venture capital is going to be tight in the next few years because obviously startups rely on that. And it may be late-state funds, late mid-stage company, but, you know, if the friction to get that is getting high, the startup’s momentum could slow down. So, you have to look at taking that into account.

You have to look into by then you have a team, you know, the team is ready to go the distance, right? I mean, some people take their first $30 million, $40 million and say, okay, I want to get out, right? I mean, then you have a management team which is not IPO-ready, right? I mean, if you want to have people with IPO-ready, it’s like I’m pulling in one more gamble and running to make it big, right? So, essentially, you have to make a determination based on the company’s technology, leadership, as well as the management capabilities, right? And the market itself and the market includes a combination of venture as well as customer situation at that point.

So, you have to make that decision. I mean, there are one or two of my companies that from day one I told the team, I have no other path other than an IPO, because you’re cutting new ground. Once we succeed, it is just that you’re not affordable by anybody. And I’ve kind of brainwashed the founding team. They know I keep saying that line just because it is that opportunity, right? And there aren’t that many opportunities that come about where you can radically change the world in some fashion or shape, right? I mean, and when you see that, you absolutely should go the distance and try and fight the good fight.

Radhakrishnan Chonat: Excellent. Segueing a little bit, let’s talk about your leadership style. How has your leadership style evolved over the years? Especially now that you have transitioned from an Operator CEO to a full-time investor. What core leadership principles do you believe in or do you follow? I’m sure my listeners would be interested in knowing that.

Rajeev Madhavan: So, the first and foremost thing is this, right? I always say this in a startup and this applies even to a very large company. You can’t sweep things under the rug. The rug is very small in a startup. It will pop out the other side very quickly, right? So, you have to understand that you have to handle the issues in a very straight and efficient manner. There is no amount of hiding or staying away from a particular issue that’s going to save your skin at the end of the game.

Radhakrishnan Chonat: True.

Rajeev Madhavan: Second aspect of the thing is, hire people better than you. I mean, I’m glad to say everyone at Magma was better than me. I mean, I would put that out there and say, look, I had such a phenomenal team that it’s always fun to be challenged by somebody and you don’t want a yes person, but you want a person who, with whom you can debate, have a good argument. But after the argument, they need to know I’m the CEO and we make a decision, we will run that way and we will put every effort in that fashion, right? So, you need to build a culture of, you know, give the feedback, discuss the feedback, come with a solution, but move on, right?

And at the end of it, you know, I mean, every CEO is a little bit autocratic. There’s no doubt about that. I mean, if people think you’re going to be a total democratic system, that’s all bogus. It’s never going to happen. So, but having said that, you know, you need a culture where you allow people to raise the things because otherwise you’re not going to find the right issues that otherwise will get you at some point in your life. So, knowing that and encouraging that is important, but also at the same time, the company needs to understand and the whole culture has to be, you know, execution, you know, the excellence of that is all what you’re striving for. The best excellence on execution is what you’re striving for.

Look, every company is formed for two things. One, for, you know, create whatever product or technology you’re creating; two, sell what you’re creating. Everything in between CEO, finance, legal, everything in between, we are cogs in the wheel of making things happen. These are the only two things that matter to a startup. And as long as you focus on those two things, you will be okay. And you cut the bullshit on the middle there, right? Make sure that all the people in the middle understand that your job is to make sure that these two sides are very well done. So, you are a cog in the whole wheel of making that happen and you’re not the king of itself, whether you’re a CEO, CEO, it doesn’t matter, right? I mean, so every company has got only two objectives and that’s all you need to focus on.

Radhakrishnan Chonat: Build and sell.

Rajeev Madhavan: Build and sell.

Radhakrishnan Chonat: Wonderful.

Rajeev Madhavan: Everything else is just a mechanism to get there and not the measurement criteria in and itself.

Radhakrishnan Chonat: Very, very, very profound thought there. Rajeev, now that, you know, we have discussed about your roots in India, especially from God’s own country, which I’m personally very proud of. What’s your take on India’s current tech and startup ecosystem? And where do you, from your vantage point, see the greatest opportunities for growth and innovation in India? Any thoughts?

Rajeev Madhavan: So, you know, every time I come there, I go to Bangalore and I sit down and I see a lot of startups, right? I mean, I kind of arrange at the back. My observation, I mean, India has done a lot of new things in marketplaces, right? I mean, whether it’s payment platforms, etc. India is on the forefront of things that are marketplace-driven, okay?

When it is enterprise level, India is not. The last few years, you’ve seen a few of companies come in that wave of things, right? But I’m observing one of the traits that I saw in Silicon Valley as well, and remember Silicon Valley has been a creation process from the time I started doing my startups in ’94- ‘93 timeframe to now, right?

At one point, a lot of people who should not be doing startups are doing startups, right? I mean, it’s just, it’s an in-thing. And it’s the lifestyle of things that I talked. So, I look at some of these founders and I go, this is not the right person to be doing a startup. He or she has to know that and ask that question and be wanting to say, “I’m going to put everything aside and make this my number one, number two, number three job and my life.” That is not — you know, that I saw in the last two visits to Bangalore, my God, there are companies who are the founders, hedging bets by doing two, three things. This is not a hedging bets business, right? So, it’s like, you’ve got to pick a goal and you have to go.

The second thing, I mean, obviously that I observed is it’s sometimes easier to raise money right now in India than even Silicon Valley. There’s an influx of money coming into VCs and venture in Bangalore. And obviously it’s still, you know, given the size of India, it’s still small, but for a tech entrepreneur, it may be easier to raise money in India than it is here, right now. I mean, that’s just because some things that I would not fund had gotten funded there. I’m looking, “Wow, okay.” I mean, I look at it, there’s like 30 companies in this, right? Why are you funding this space?

Now, having said that, the Indian entrepreneurs is that jugad is built into our system, right? I mean, we, you know, take the shortest path.

Radhakrishnan Chonat: Unfortunately, true.

Rajeev Madhavan: Right? Which gives us a lot of advantage. I’m not saying that as a negative as much as a positive, right? I mean, so I find that in a few areas, a lot of startups that are getting formed. There’s a lot that is also happening because of nationalistic attitudes now. This is across the border, by the way, whether it’s here or whether it’s in India or whether it’s, you know, everything funded by this new last five, 10 years of, you know, the world order being such that everybody has got a little bit of nationalistic chain associated with it.

So whether it’s space, well, I’m going to do this — for sure, I’m going to do that. So there’s a whole pile of activity underway on that. I’m not somebody, I mean, nationalists is important, but a business has to stand on its own merit and cannot be dependent on emotional, you know, read of the people of the industry or the customer at a given time. Doing it as part of that makes a lot of sense. My first company, we worked a lot with the U.S. Department of Defense. They were our customers, but, you know, your life cannot be built around those sentiments. It’s got to be built around, thus has become a sustainable company in the longer term that you’re building.

So coming to India, it’s an interesting thing. There’s a lot of startups happening, and it’s great to see that. I’m hopeful that in the next five to 10 years, I mean, right now, probably Tel Aviv is, after Silicon Valley and maybe New York and Tel Aviv is the second, you know, hub, Bangalore may well overtake these two and could become the number two or number three taking China into account, though China has become a lot more captive internally-focused things than in the past. So, there is clearly an opportunity in India to create all the startup hubs across the country, and that is an absolute great thing that will create a lot of employment in the country.

Radhakrishnan Chonat: Have you come across any deep-tech startups in India that you are very excited about? Forget the funding part. I mean, there is this talk that, you know, when it comes to deep-tech or when it comes to actual innovation, Silicon Valley still trumps Bangalore by a mile. Anything that is actually, you know, exciting for you that you have come across without naming?

Rajeev Madhavan: Look, I mean, there’s large language models custom to India for Indian news. As I said, I funded one. I funded a couple of other companies, only one in real deep-tech in India, which is this large language model for Indian — for the Indic languages, basically, right?

Essentially, I mean, if you look at English and all the large language model that have been built, that is much less, you know, suited to some of the Indian languages that exist. And so how do you actually bring about that? Great to see some good work happening. And I funded a company in that area. I’ve seen a few deep-tech startups. But by far, in terms of tech – deep-tech, clearly the line you said is right. Silicon Valley will trump any day India, that’s because, you know, there are fundamentally one or two great institutions in Silicon Valley in the form of Stanford and Berkeley and the professors. And then there’s probably the hub of all the researchers from Google, you know, to you name it, every company is situated here. So, the teams and the people get to meet each other. And that results in a lot of questions and funding that happens only in Silicon Valley.

So in deep-tech, yes, the first differentiation can happen here. But remember, I talked about using that deep-tech, how do you create an application that — the jugad value of Indian experience can actually help tremendously?

Radhakrishnan Chonat: True, true.

Rajeev Madhavan: So it’s not the deep-tech in and itself that’s going to make the difference, right? Okay, it’s how do you use the deep-tech to create something of value that differentiates you as a sustainable company on an ongoing basis. I think for that, you don’t need to fund a deep-tech -company.

So I think, you know, India has to focus on what is the great thing that India can do and achieve, right? I mean, and differentiate. That’s what the country should be all about, right? I mean, it should be, that’s where the entrepreneurs have an opportunity because that DNA of how do I solve a particular problem in the quickest, fastest fashion, with the shortest amount of thing, that’s in your DNA and my DNA, right? That is built-in. So if we can just uncage that aspect of things, we will be successful on that basis, right? So deep-tech, you know, yeah, papers can be written from everybody. And the beauty of what’s happening today is all that research is getting published and getting to be democratized in six months to a year after that, right? I mean, this is the world we live in. Whereas when we came in ‘91, none of those papers and research was being, you know, seen anywhere in India, right? So it will take like 10 years, five years, etc., for it to work its way.

Now, within weeks, months, it’s all there, right? There may even be Opensource code, there may be papers published. It is much, much easier to know what is being done in a particular space today than it was a long time ago, right? And the beauty is applications clearly have the upper edge in creating sustainable companies on a longer term.

Now, the question is, who comes up with that? And I think India is well suited to be able to do that. So, you know, there shouldn’t be an inferiority complex on deep-tech. It should be an inferiority complex and we use the deep-tech a lot quicker.

Radhakrishnan Chonat: Superiority complex on jugad, excellent. Now, what advice — I mean, throughout the interview, you have told about startup founders, you know, either, you know, trying to make a quick buck or – So, generally, imagine somebody is just starting out or thinking about starting out on their own, the entrepreneurial journey. And as you said, the struggles that you have had from the family pressure and all that. So, what advice in general would you give to youngsters who are listening, who are experts in their own fields, but either they have just started up or thinking about starting up?

Rajeev Madhavan: So, again, so all the things that talked about excellence in the team, excellence in the execution is things that are absolute must that you must build, right? I mean, and you, when you’re starting up a new company, you’re not an expert in everything. It’s never ever the case, right? I mean, my first sales experience is a comedy in some sense, right? I mean, it’s literally, I have made a joke out of those things because we just have no experience of selling software, right? Complex software. And it’s nothing about the people as much as what you know is what you can do at that point. So, bringing in the right people to help you is an important thing.

By the way, this is a transition that all entrepreneurs here of Indian origin is outside to make. When we first came into the country, when somebody’s offering us a help, we viewed that as there must be a catch here, right? I mean, no, there are a lot of people with experience. Yeah, they’re putting in their money, but actually their money is not as valuable as their experience. So, you should be able to take their experience and get the right feedback, right?

In India, I’ve seen a couple of startups where I’ve seen where they would not tell me all the bad news. They would tell me all the great news when I come to Bangalore once every year. Everything is hunky-dory because I’m an investor. So, you just kind of put me to feel like, “Oh, this is all great”, but that’s not what you should be doing. You should be asking me about the negatives that you’re going through in your life, right? So, be open in what you build. Take the right advice, but overarching thing is eventually you need your family support, right? I mean, if I had my wife and kids, I appreciate the fact that they stood by when I was not there. I was missing in action. I was completely MIA, but they could do that and they could support me through that, right? And if you don’t have such a support system in place, which by the way, Indians have a lot more of that than a lot of other cultures where that’s not the case.

So, that is another, just like the jugad, you know, a big check mark. This is also a big check mark that exists, but make sure, right? Because systems are changing and people are changing. You need to make sure that they understand that they are going to be a big part of that execution that you need to put in.

The last thing is do not take in your mediocre performance as a standard. You just cannot put that up in a company or startup. You just have to lead and lead from the front.

Radhakrishnan Chonat: Excellent. You talked about missing in action, MIA. Now that I caught you at 5 a.m., your time sipping coffee for this interview, walk us through how do you manage your non-existent work-life balance. And any tips on how you have evolved as a person over the years?

Rajeev Madhavan: Yeah, so, you know, I mean, until Ambit was sold, I probably had zero hobbies other than, you know, software and, you know, sort of not even run, no exercise, nothing, right? I mean, and in Magma days, you know, your arteries are blocked a little bit. You find, you know, cholesterol and all the modern-day issues that have come about. And I started exercising, etc. But I picked up a hobby, which I’m mighty proud of, which was by accident. I got some roses and I now run a rose garden at home. I have around 400 to 500 varieties. I have around 3,000 rose bushes.

Radhakrishnan Chonat: Wow. Okay.

Rajeev Madhavan: So Saturday morning, 5 o’clock, I get up and I have two gardeners and me, they spend the whole day. I spend the time till about 11. And it’s a cathartic feeling. Okay. I mean, I don’t do anything else. I don’t play. Yeah. So nowadays I go to gym for an hour, four days a week, but otherwise I don’t do anything much other than this garden on Saturdays. If I’m in town, I’m certainly doing some work there and kind of enjoying.

I’m not enjoying the actual flowers. I never stop to look at the flowers because I see all the issues of this thing is dying. That thing is dying. I got to fix it. So, I’m one of those half-empty characters, not a half-full when it comes to my own garden. And others, including my father-in-law and my cousins and everybody can enjoy or my partners can enjoy the garden better than me because I don’t stop to smell the roses. But having said that, it’s a very cathartic feeling to go and spend time on Saturday mornings to do this. So that is something that I take pride on and I work a lot on my garden every Saturday morning.

Radhakrishnan Chonat: That’s very interesting. Now those — of you from your friends and family network listening to this, make sure if your next Valentine’s Day, where you can get the flowers from.

Rajeev Madhavan: Yeah. And I do organize a couple of events here in Atherton, just kind of letting a lot of people come in and take a look at it. It’s a startup that I’m mighty proud of.

Radhakrishnan Chonat: Excellent. Rajeev, before I let you go, this is something that I ask all my guests. Can you share a few books that have significantly influenced your leadership journey or your entrepreneurial journey that probably will be very useful for my listeners as well as me?

Rajeev Madhavan: So in terms of leadership journey, I would name one book which I was forced to read. Okay. I’m even going to give you a story here. When I was doing Magma, we had a competition with a company called Avanti, which was done by somebody called Gerry Hsu. I mean, if you look him up, he was a character who basically would essentially beat up employees, get things done, et cetera, et cetera. I mean, he’s a real tough nut guy. And so he was the one who was competing against us.

Technically, we are much superior than what they have, is that they have an old generation of tools. But he decides when we first won our first account that he buys Sun Tzu’s Art Of War, you know, and he gives it to his exec team. And nowadays I do give that to a lot of my exec teams, because it’s actually very interesting of how to take on a war and look at it. I’m kind of, a lot of the YouTube videos on war, every one of them probably I’ve seen in some fashion, right? And thinking about how it goes about and how strategically you win is important.

This is a great book for execs who are under competitive threats, under fights, in which every startup is. I mean, if it’s an uncharted territory and you’re getting in, that’s probably one in a million startup. Everybody else is kind of going through. And of the learnings from it in terms of how to win battles, how to take each beach at its own merit is a very good book from that perspective, right? So recommend it for execs, give it to execs. There were a bunch of others that also I do, but it is a very well thought out old school, because you’re talking, you know, on early ‘80s, not, you know, not recent dynasties that you’re talking about.

But things haven’t changed much in how we should think about in leadership. Leadership is good leaders existed then, good leadership exists today. What are the best characteristics of that? And what do you need to be to get the best out of your people? And, you know, I wouldn’t, this is also something important. When I started out, my first company, in the leadership scale was very little to zero, and I did a poor job. Even at Ambit, I would say I did a poor job managing people. By Magma, I had improved enough to survive initially. And then we got a lawsuit with Synopsys, a lot of money being wasted on something else. They’re trying to hire my guys. I upped the game really substantially better. And you learn a lot from those experiences in improving your leadership scale.

So I recommend things that help you improve that, which is not, you know — 80% of the people that I fund, at least, are not repeat somebody who’s been a CEO and now doing a startup, right? I mean, that’s not, it’s somebody who’s been in the balls of creating some great technology, who wants to go and do something new.

Radhakrishnan Chonat: True.

Rajeev Madhavan: He or she hasn’t managed more than, you know, 30, 40 people, if any, right? I mean, look, when I first started out, I managed six people, right? When I did LogicVision. So you sort of, you know, getting that, having the right advisors to learn that, to see when you’re making mistakes and correct yourself. Those are the best things that you need to do. So that’s the life in which I would leave that question.

Radhakrishnan Chonat: Excellent, excellent set of recommendation. And Rajeev, it’s been an absolute pleasure picking your brain. And thank you for taking the time at such an early hour for you. I look forward to more such interactions and absolute pleasure catching up with you.

Rajeev Madhavan: Look forward to it, Radhakrishnan. Thank you.