Why I Left VC to Build a Toy Company

[00:00:00] Speaker 1: For nearly three years, it was my job to evaluate startups and entrepreneurs. And today, I find myself on the other side of the table, learning how to become one. I've gone from investing in startups at the WTF Fund to now joining Clapstore Toys as their third co-founder. And honestly, I'm still getting used to calling myself a founder, an entrepreneur, and all of that. And it's very new to me, which is also why I wanted to make this video, where I wanted to break it down into three parts. Break it down with talking about life as an investor, talk about why toys as a category appealed to me, and why I made the switch. And the third is almost a note to my 18-year-old self, where at this very clear path that I wanted to go on, but things didn't pan out exactly how I planned it to be, but it also ended up working out, you know. So let me start by setting some context of what the WTF Fund is and how we got here to begin with. At the WTF Fund, my job was to evaluate startups and identify young founders we could back. The idea for the WTF Fund came about in a podcast episode that we were shooting with the WTF Podcast, where in 2023, we had the founders of Zepto, Kaivalya, and Adith Walkin, where they spoke about how a 40 lakh grant significantly changed the trajectory of their business. And given that the WTF Podcast revolved around entrepreneurship, teaching young folks in the country on how to start up, how to build a business, and so on, we decided that instead of just talking about startups and building a business, how about we also back them with actual capital. And that's what ended up becoming the WTF Fund, where we started identifying and nurturing young talent across the country, gave them capital, mentorship, and all the support that they needed to build. And I was given the responsibility and the opportunity of identifying these startups, building out an entire evaluation process, screening these applications, speaking to founders, and identifying the companies that we could potentially back. And that's when I first met Vedang and Yash, two young, very ambitious founders who were building a toy company based out of Pune. And that company was called Clapsore Toys. I evaluated the business and overall it felt like the category of toys in India was very interesting. And I eventually presented it to the jury who also shared the same optimism about the category. We then decided to go ahead and fund them, which also ended up becoming my first ever private market investment. After the investment, I continued working with Yash and Vedang as I would with any other company as part of our portfolio. And this back and forth and the work that we did together spanned over the past three years from 2023 all the way to 2026. And throughout this period, the company started scaling, doing better. And the founders reached a point where they wanted somebody who could also help them come on board to help them navigate and scale for the next phase of the business. And by this time, I already knew the founders and the people who are running it behind the scenes. I understood how large the opportunity could be and the overall landscape of the market. But more importantly, I also knew all the problems that I would potentially face. And that is still a learning that I'm continuing to have where constantly navigating through problems and so on. So now I want to get into the things that I took into consideration when I was changing gears from an investments career to switching that to moving to the founders side. So the first thing that I looked at was the macro data, which was kind of in favor for toys as a category at large. Where talking about India and specific, out of the 150 crore people in India, roughly 40 crore are children with 2.5 crore babies being born every year, which also makes it a large market with a proven demand. So at a company scale, you don't have to spend too much money on marketing or education to create that demand because parents and children alike know that there is a demand for toys or going to be a demand for toys. And this is true across other categories like baby apparel and so on and so forth. So the proven demand was one side of it. And on the other, the industry at large is heavily unorganized and is now slowly moving to organizing itself. And that also creates a massive opportunity for value-added products, creating branded products and so on, which is one. And then the second thing is that before, children used to be the main driver for purchasing decisions for toys in specific. But now that split is changing given that discovery is happening online as well. And overall, toys are a fascinating category because you cater to two different customer segments where the parents are buying a product where they care about safety, they care about durability, they care about development and overall whether it's value for money or not. Whereas the child cares about something that's completely different. And if the toy is not fun, you will have that feedback in 5 minutes or 10 minutes and they're not going to come back to you. So that way, children are also a very good TG where the feedback is honest, raw, and you also get to iterate on your product faster. So in that case, children are very honest as customers. The other interesting thing about toys is that it can genuinely be a global product category. Where if you look at categories like food or fashion, preferences change quite a bit and change significantly from one country to the other. But a 3-year-old in India who goes to an English medium school can be compared to a 3-year-old in the United States and can often have the same kind of preferences, especially when it comes to toys, puzzles, construction kits, and so on. Of course, there are cultural differences and a lot of toys address that. But at the baseline or the basic toy as a functionality, it is the same product that can cater to both these kids. And the second reason why I find this market interesting is in a post-AI world, the ability to actually make a physical product and a good physical product is going to be a real moat. And manufacturing is not simply about putting a factory and getting cheap labor and put them together and you have an output. That's what it looks like from the outside where a toy company can look like a typical consumer brand. Where you see packaging, you see the website, you see advertising and so on. But behind the scenes, there's a lot going on, from material selection to assembly to safety, durability, quality control, and so on. And another fascinating thing for me is that India at a country level has made real progress here. Between FY 2015 to 2023, India's toy exports increased from 96 million USD to 330 million USD. And over that same period, the imports fell from 330 million USD to around 160 million USD. Which means that in 2015, the imports were 3.5 times the exports, but by FY23, the exports were twice the size of the imports. Which is really interesting to see how that shift has happened in India. And that turnaround came from a combination of higher customs duty, compulsory BIS safety certifications, and international buyers who were also trying to diversify their supply chains away from China. But we should also be honest about how early India is in this entire process. China still manufactures roughly 70% of all the world's toys. And in 2014, its entire toy export to the US was at around 10.5 billion USD, which is 30 times India's total toy exports. So India still has a long way to go. And the reason why China is so good is because it has spent decades building a complete ecosystem around tooling, around molds, electronics, components, testing facilities, and skilled suppliers. And the reality is that India can't compete against them today by saying that we have cheaper labor or that global companies want to diversify into India versus China. We genuinely have to build that capability over time. And this also means better product design, better quality, and so on. Which is also happening at a structural level where the government is also trying to push for it. Which makes this overall sector and industry an exciting one to be in. Because I do see that there are tailwinds. Apart from that, I also think there are structural advantages in India that were worth exploring. On one end, we have a very large domestic market which can design, test, and improve the products before taking them overseas. The second is that India already uses English as its native language in both professional and its business environments and communication. Which also helps us. And obviously, that doesn't make us better automatically. But it does help with international relation building and with other English-speaking countries. It does help when you can speak in English. The United States alone is a toy market that is worth around $45 billion annually. And if we can crack that market and build trust in that market, there is a huge India-to-the-globe opportunity that is waiting to be unlocked. Not only for the US, but for the rest of the world as well. And again, the larger opportunity is to build from India to the world and not in the traditional brands of the things that you associate India with like Ayurveda, yoga, clothing, etc. But by actually building a truly global brand where you forget for a second which country that product actually originates from because the product in itself is that good. Take Lego for example, right? You don't associate a Danish brand with Lego because of the fact that the product itself is so good. And for me, that's what's interesting about building in this segment where you have manufacturing as a capability that we need to build over time. We already are seeing that with imports increasing or actually decreasing and exports increasing. But also an opportunity to truly build a brand from India to the globe. And now part 3, which is almost a note to my 18-year-old self, where for me, there's also a personal reason attached to why this transition means so much to me. When I was 18, I was studying for my 12 standard board exams from a tier 2 city in India called Triwandrum. And broadly, I was optimistic about the future and also wanted to move to a place with opportunity. And I was also constantly trying to figure out which colleges I would get into and trying to get into the best college and so on. And in that process, I was clear on wanting to pursue the Chartered Accountancy course as well. And the idea for me and why I wanted to do that were three things. I wanted to be financially successful. I wanted to be healthy in the process. And I wanted to be happy in that process. And apart from those three big goals, I'd left everything up to the open to figure out how I could go about it. But in the process of pursuing that course, I also got completely absorbed in it, where between college and attending my CA coaching, in some deep level, I convinced myself that it was the only way of achieving my goals. And then fast forward a couple of years, where I'd cleared a bunch of the CA exams, all the way up to the CA finals, where in group one, I'd given the exams a couple of times over and over again, and was not able to clear it by a margin. And this was despite everything in my life going really well, where I'd started working as an investor, I was actually a lot closer to my end goal versus where I was initially, but I was still very stuck on the whole CA dream and still held onto it very strongly. And that's when I actually had to take a step back and think about it from first principles to ask myself, what is it that I truly want in life? And again, going back to the three things that I wanted was financial success, health and happiness. And then ask myself whether CA is the only way to achieve that or not. And when that answer was clearer to being no, I could figure out that it was more of a sunk cost that I was trying to hold on to versus pursuing something that I truly wanted, which is why I also decided to take a step back. Instead of doing this over and over again, a couple of times. And yeah, so I think overall, just going back to my 18 year old self where I'd given the future version of myself a lot more autonomy to have fun with the process and trust yourself that you'll figure it out was something that I was not doing. And in this transition, I also just gave myself the option and the ability to change my goals and also ask myself what my core things that I want to achieve are and keeping the way that I'm going to achieve it fairly broad and open ended, which is what I think my biggest takeaway from the 18 year old version to the 27 year old version of me today is. So overall at 18, I thought progress meant choosing the right path and sticking to it. But today as a 27 year old, I think that it's also being okay to change your path once in a while, question the path that you currently are on and giving yourself the option to choose again if it doesn't serve you. And again, I still don't know exactly where all this is going to lead, but I'm also becoming a lot more comfortable with uncertainty, where you always don't need to have a clear plan for the entirety of how things are going to pan out, but just have enough conviction and confidence on the next step and the step after that and trust your future self that you'll be able to figure it out along the way.