The husband-wife duo of Ruchi Sanghvi and Aditya Agarwal have held top jobs at some of Silicon Valley’s biggest tech companies. While Sanghvi is known for being the first woman engineer at Facebook, Agarwal was chief technology officer at file-sharing company Dropbox till 2018. Sanghvi went on to launch South Park Commons (SPC), named after a San Francisco neighbourhood, in 2016 as a collective of engineers, founders and researchers.
Since then, SPC has grown from being a learning group to a platform that has raised two funds to back entrepreneurs with very early stage ideas. Having expanded to New York, SPC is now eyeing India even as it is in the process of launching its third fund. Sanghvi and Agarwal spoke to Samidha Sharma and detailed their plans for India with Flipkart cofounder Binny Bansal. Edited excerpts:
Tell us about the origins of SPC?
Sanghvi: At SPC, the initial group was 10 people, and the idea was we would study topics that were on the cutting edge of technology. This kind of a learning group really resonated with a lot of people in Silicon Valley. Quickly we grew from 10 to 30 people.
Was it purely academic in nature back then?
Sanghvi: We all had intentions of wanting to start something, but we were still learning. If you think you’re going to backpack to the base of Everest and meditate and suddenly have this fantastic idea, that never happens. What you want to do is to have all these people in the same room talking about the same problem and finding solutions. From 2016 to 2018, I was financially funding the community.
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Which early companies did you fund from 2016 to 2018?Sanghvi: Pilot was one of them which does accounting services for other companies and SMEs. Other companies were Graph and Compound.
Why did you raise outside capital in 2018?
Sanghvi: At that point, the operating cost of running the community was too expensive for me alone… So I wanted to find a way to make it financially sustainable. The solution was that we would raise a fund and the members would give the fund first right of refusal into their companies. We would invest up to $1 million in their companies and in exchange the fund’s management fee would pay for the operating expenses of the community.
What’s your plan for India? Which other market are you explaining into?
Agarwal: Our long-term goal at SPC has always been to bring our philosophy of ‘negative one to zero’ phase to anywhere where there is talent, ambition and a hunger to explore new ground and build companies. India is perhaps the most dynamic and interesting country for technology entrepreneurship in the world right now… Ruchi and I are working closely with (Flipkart cofounder) Binny Bansal to bring an early-stage incubation and venture project to the India market. We are also evaluating the UK to expand into.
You’re involved with the Adani Group as well. Any details?
Agarwal: I’m working as an advisor to the leadership at ADL (Adani Digital Labs) as they build out a very exciting product roadmap. I’ll be offering guidance, perspective and strategic insight across different functions and verticals, in particular, from my time as the lead independent director of Flipkart.
What setup would you require for operations in India and the UK?
Agarwal: We will need a bunch of initial strong members and a partner. Maybe do a cross like venture or collaboration with a local partner. It’s a hard model because in some ways you have to take a leap of faith that the people you’re getting into the community will launch interesting companies. Our goal was that we are not investors for the sake of it but are product people. Nobody seems to be supporting entrepreneurs at the point that they just need to go and think about crazy new ideas. As soon as you have an idea, we have accelerators, you can go apply to a YC (Y Combinator). But sometimes we just need six, nine, 12 months to go out and create or ideate about the world. When I think about what we’re going to do at SPC, I think this is a way to kind of bootstrap creativity for the world’s smartest people.
How do you look at the Indian entrepreneurial ecosystem?
Agarwal: In some ways, India’s economy is glorious, but it still has a long way to go, and there’s a lot of basic infrastructure you need to build. But there’s still more of an underlying sense of optimism and ‘can do’ as opposed to dysfunction and default pessimism that I think you see across a lot of the West. I say this as someone who’s been involved in India and getting more involved in a couple of things.
How did the transition work from being a self-funded, learning-focused collective to taking outside capital? How do you maintain the same ethos?
Sanghvi: We were lucky because the provenance of SPC was always a learning community and the fund was a means to an end versus others where deployment of capital is the most important thing.
How much did you raise for the first fund?
Sanghvi: I realised that a lot of seed investors do not do the kind of modeling we were doing back then. Seed investing is the hardest business in all of investing because the returns aren’t that lucrative when you get diluted down. What I wanted was not to get paid, but more to have enough to cover the operating expenses of the community, so we started with a $55 million fund.
How different is SPC to YC? You’ve mentioned it’s more like an anti-incubator.
Sanghvi: A lot of people who come to SPC come even before they have an idea or that they want to start a company. We call this phase the negative one to zero phase and there is no one in the ecosystem that supports that phase–that’s our unique value proposition. An average SPC member’s tenure is about nine months and you take those months to build a conviction, which is a very slow and frustrating process. Then when you actually raise capital, you’re not wandering around trying to figure out what to build or how to find product market fit. You’re actually working towards very concrete goals.
How do you describe yourself then—as a fund, an incubator or a community?
Agarwal: When you join SPC, you come here, you explore, you meet other people, you build, you get feedback. Maybe you decided to start a company. If they start a company, we get the right place to invest. The status we have here is–what are you going to work on? Are you building? How can I help you in your exploration? This is quite different than a YC or any other incubator, where the currency of your status is that how much money have you raised? Which investors are you talking to? When are you going to raise your next round?
How long do you plan to stay on this highly curated path?
Agarwal: We have found good success in scaling on a per-location basis. You can have 150 people in each of the top 10 most interesting cities in the world. In New York, the kind of demand for what we’re building has been great.
What is the size of your New York community and when was it started?
Agarwal: We started 18 months ago, it’s hitting close to a 100 now.
Will you scale the size of your next fund?
Agarwal: Fund two was $140-150 million in 2021. We’ll announce fund three soon. I think that everybody wants to scale. With scaling comes a bunch of nice properties, you get to have more companies, hopefully more hits but at the same time, the biggest issue with scaling is that you cannot lose sight of the values that have actually made you good in the first place. In our case, the value proposition of SPC is rooted around a deep sense of connection to the other people in your community and a sense of not being on a factory line.
