TRANSCRIPT:
slava (00:02.037)
Hello and welcome back to another episode of Smart Humans. I am very excited for today's guest who knows a lot about angel investing and getting into deep technology companies. Welcome to the show Swati Chaturvedi from Propel X.
swati_chaturvedi (00:16.426)
Thank you Slava, it's a pleasure to be here. Good morning.
slava (00:19.457)
So we always start with the same questions, which is how did you even get into this space? How did you get into alternative investments?
swati_chaturvedi (00:28.79)
Yeah, assuming we define it as including startups, et cetera. I started my career post MBA in investing. So starting at, you know, Temasek, which is a quasi public market investment entity. It's the sovereign fund of Singapore. Then moving on to Siemens Venture Capital where I did some growth investing and then moving on to a private equity firm here in San Francisco. So I was always in this investing space and then I discovered my real passion for startups.
And so I visited various angel groups. I was an aspiring angel investor. Decided I didn't like what I found at that time. So I started our own angel group for MIT alumni. So the MIT Angels was what we started. And that was my first encounter with angel investing. And I'm excited to share that one of the first companies that we actually invested in at that time, way back when, went public last year. And so it was good to see some success.
But that's how I got started, essentially. I've always been interested in investing, very interested in science, very interested in technology. It's just by way of background. And so married the two together, got into angel investing.
slava (01:39.273)
That's great. Which company was that? That just went public.
swati_chaturvedi (01:42.095)
SQZ biotech squeeze. Yeah.
slava (01:46.333)
And is that, is biotech a space that you feel comfortable with, that you were doing annual investments or was that like a flyer just, Oh, I hope this works out.
swati_chaturvedi (01:53.382)
Oh, no, I love, I love biotech. I mean, I love technology in general. And I think we have worked hard to redefine technology, to say, you know, this is based on breakthroughs in science and engineering. You know, and much of biotech today, believe it or not, is a lot about biomedical engineering, you know? And so it's of great interest to me. Wherever we're working at the intersection of data, computing, life sciences.
I really do believe the two kinds of sectors, the two kinds that are personally important to me is life sciences and kind of anything to do with software and computing and the intersection of those is what I'm really excited about.
slava (02:38.317)
Great, sounds like a lot of opportunity across those two spaces. So we know that you are an expert at angel investing and the private companies, but how about the other spaces? Are those things that you personally invest into, for example, like real estate or debt or crypto or art or NFTs or sports cards or sneakers, just as some options.
swati_chaturvedi (03:00.53)
Yes, certainly everyone has interests in real estate, which we do as well. As a family, we have some exposure to crypto, a small amount, primarily because I don't know enough about it. We've invested in an NFT company, but other than that, it's life science companies and so on. So, some exposure to other kinds of asset classes, but a little bit more conventional, I would say still.
slava (03:30.389)
Yeah, but it's all all-term investment. So when you say that real estate, for example, outside of like primary homes that one's lived in, et cetera, are you investing into it as like for some yield or to get the appreciation into real estate?
swati_chaturvedi (03:36.274)
Yes, yeah.
swati_chaturvedi (03:43.866)
To get the appreciation primarily, to get the appreciation. So it's like places that we don't live in, but you have a house there, secondary home, whatever call it, a vacation home. In this case, just a rental property, an investment rental.
slava (03:57.725)
So traditionally, people think about like the old school 60-40 mix, you know, stocks to bonds, which I know you don't believe in that just like I don't believe in that. But how far into, you know, alternative investments do you think about it from your own personal net worth? Are you a 1% allocation and 99% allocation? How do you think about it when you think about putting your money into all?
swati_chaturvedi (04:17.81)
Oh my gosh, from my own personal allocation, I would say, look, what we write, what I have written about in on the subject, I have used actually those exact same words out with the 60 40 and in with the 60 30 10, which means 10 is more on my personal. It would vary depending on each individual. My personal thing is around 10, which I think is on the higher end, you know, endowments and such do even more. But
What we write about or we think about is these are high risk assets. And so 5% of someone's net worth is possibly a good allocation. It depends a lot on your own risk profile. But what I have written about is a 60, 30, 10. And that's just an example, as I said.
slava (05:05.677)
Sure. And then you mentioned some exposure to crypto. How do you think about putting money into crypto? It doesn't sound like it's your number one expertise. So do you stick to the bitcoins and Ethereum or do you go beyond that? Or are you trying to find a manager or how do you try to get your exposure to crypto?
swati_chaturvedi (05:22.622)
At the moment, it's Bitcoin and Ethereum only, very specifically Ethereum. But you're right, it is not something that I spend a lot of time researching. I think it's a case, in our case, it's a case of just be a little with it, just be a little invested in it. I do believe, my personal belief is that cryptocurrency is going to become real and it is a...
worthwhile investment at the moment. But because I don't spend enough time researching it and I'm really a big proponent of due diligence and knowing what you're investing in, therefore it's been small, small. And as it, when it comes to managers, I don't know, I believe in this indexing business. I think Ethereum is a good proxy for many things, you know.
slava (06:16.993)
Tell me more. So usually, you know, the market has a little bit more money in Bitcoin than Ethereum. So if you're indexing, that's what would happen, but you obviously are overweight Ethereum. So can you give us some more color on why that is?
swati_chaturvedi (06:32.614)
Well, I think the technology is more fungible or it's more usable across things. So you might see it being used more than the Bitcoin. That is the only reason based on my limited knowledge of things at the moment. I also think Bitcoin is overpriced. That's just again, my version of limited knowledge of things, but that was those were the two big reasons.
slava (06:59.277)
Well, you're welcome to your opinions. That's why we all get to have them. And how about in terms of the broader market outside of your specific expertise space, which is the private investing into the companies, which we'll jump into in a second. How do you think about how the table is set today for where we are in the market? Given all the geopolitical, given inflation concerns, given recession concerns, the positives in terms of employment, et cetera, et cetera.
How do you think about deploying $100 today or whether or not to hold or how to diversify, et cetera, et cetera?
swati_chaturvedi (07:35.406)
So I think things are frothy. I don't think we know the direction that things are headed in just as of yet. At least on the market side, we've seen it go down substantially and then recover as it did even over the past weekend. I think there are some positives to be had. Like you said, employment is pretty good. The market, in fact, I would say the employment market is overheated at the moment. I mean, given the salaries that we're seeing at least in the Bay Area.
and the real estate prices are high. So there are some positives to be had there. But yes, I think inflation is a concern, the geopoliticals, all those things that make the markets nervous are happening. They're happening together. But I'm not convinced that we have reached resolution just as yet. It is not clear to me that this is going to be a bear market, how much bear it's going to be. I mean, regardless of what, you know, I know that Y Combinator put out its whatever guidance to startups.
I thought it was more fear than is needed. It's more panic creating.
slava (08:41.889)
Can you expand a little bit on that for our listeners? So what exactly do Y Combinator say?
swati_chaturvedi (08:46.822)
or why Combinator said that the world is coming to an end, you should, you know, all hands on deck and cut your costs and change your plans if you're going to fundraise in the next six to 12 months, you're gonna have a hard time, we don't know how bad it could be, stuff like that. I think there is some legitimacy to that, but it's not all doom right now.
I think maybe it will take a little bit more time to resolve itself. So that is one. To your questions, okay, how do I think about how the table is set? I think the table is kind of, we are just kind of still moving around the table, figuring out where to sit right now, right? But that said, it is wise to be prudent if you're in a startup, you know, don't think that it's the end of the world, but it is wise to be prudent and go slower on the spending or.
floor on the hiring if you have to. But I think, so I'm not like, if it were about buying stocks, I'm not all in just as of yet. Because I'm waiting for it to, you know, if you look at places like Google and so on, they have fallen substantially. I would buy those. There are some sectors that have fallen substantially. Tech, very specifically, has fallen substantially. I might buy into them. Because I think it will rise again, right? This is not.
There are some sectors which haven't fallen and you know, one can wait and see and there's reasons so oil and gas and so on There's reasons why they would do better is because oil is expensive right now. So I think it is a situation where you can go sector by sector and you can be intelligent about applying the geopolitical situations to each sector and seeing whether they are fairly priced or not. So
There's some volatility in the market. There's money to be made. I don't think an index right now is the best thing to do because some sectors are more volatile than others. So that's my opinion.
slava (10:46.317)
So you mentioned Google has dropped a bunch, so you might buy as an example in the public markets, but would you translate that to the private markets as well? Is it time to pick up some attractive pricing or is it time to hold and wait?
swati_chaturvedi (11:00.462)
So one of the things that I will say is that across the board, valuations have been very, very high. Especially in fintech, we've seen like 80x revenues, the valuations, which have been super high, which was always crazy in my view. So I was never of the opinion that you should ever invest. So at least the companies that we tend to go for are certainly more reasonably priced. But yeah, I think those will come down.
it might be wise to wait. Like I said sector by sector and I will say that at least in the private markets things were overpriced. There was a lot of money chasing fewer deals. So I think it's wise to be realistic about valuations if you're a startup and to be looking for deals if you're an investor. Sure.
slava (11:51.605)
So transitioning to the angel investing. So you said you started angel investing, was it at MIT? Was that the first time or, and what year was that?
swati_chaturvedi (11:57.622)
I might be in Julia.
Oh my god, 2014?
slava (12:03.121)
Okay, great. So 2014 was your first angel investment? Nice, and so how many high level have you done to date?
swati_chaturvedi (12:06.914)
Mm-hmm. Yeah.
swati_chaturvedi (12:11.018)
Oh my God, it's single digits because I went and got over invested into Propel X. But after that, I invested in a few more. One was a life science company. It's a gene therapy company. I invested in an NFT company like I mentioned to you. A couple here and there. Oh yeah, I invested in a pretty late stage company, Neobank.
Yeah, so it's really single digits right now, but those where I have very high conviction.
slava (12:47.305)
And how do you get to that conviction?
swati_chaturvedi (12:51.918)
It's due diligence. A lot of it is market, you know, and what the market is at today and where it's headed and so on and so forth. So very specifically, I do believe in life sciences and gene therapy is going to be a big thing and that I knew even then. So within that space, you know, you look around a little bit at what companies are doing. And I think if my personal style is, is a little bit more high level where I'm convinced about the market, I'm convinced about the specific technology.
there may be lots of competition in it, but the market is big enough, and then you kind of go into one so that the chances that you're going to be terribly wrong are lower, right? Same with this whole new bank situation. I mean, in this case, the company was late stage enough that they have lots of revenue. So you know that you're getting into a pre IPO company and the comps are priced at 10X. So, okay, it's meaningful. With the NFT situation, I think it was that I do believe,
Again, it's the broader market trend, metaverse and whatnot. And I have believed in this alternative universe for a very long time. I think it is coming to fruition now. And companies that are participating in that are led by reasonably good people with good investors. Even if they're super early, I think it's OK to make a small investment there. And again, the investment size also varies a lot, depending on what stage the company is.
So like, you know, one might make a bigger investment in a later stage company and a smaller investment in an early stage, which is what I have done. So, yeah.
slava (14:31.278)
And then how do you go from MIT angel investing to Propel X?
swati_chaturvedi (14:37.038)
Well, there is a big opportunity here. Private markets are twice the size of public markets or SEC reports. They have the potential for much higher returns. More and more companies are staying private. And on top of that, the specific sector that we started by focusing on, which is deep technologies, is my passion.
There, companies tend to be what I call sleeper hits. You won't know it's a hit until it's a hit and then it's too late, right? Tesla was a case in point. It was funded by Elon Musk and the government forever and all of a sudden is this big hit. And people that got in early made a lot of money. I know some of them.
So the thing with deep technology companies, there's this greater potential and I am also personally passionate about technology and science. So we started Propel X as a way to connect investors with deep tech companies in the beginning. I mean, that was our starting point. Of course we branched out since, but that was how Propel X started.
slava (15:42.173)
And can you tell us a little bit more about exactly what Propel X does and for our listeners that maybe aren't as familiar, how they can get involved?
swati_chaturvedi (15:49.566)
Yeah, absolutely. So Propelex is broadly an alternatives investment platform. That's our vision. And currently, we offer three different types of alternatives, direct startup investments, which is our mainstay. We started in deep tech, then we did fintech, we've done some consumer tech, enterprise SaaS. But always and always, we're looking for a deal, a good deal with good investors and so on. So that's the number one thing that we offer, direct startup investments. The second is investments into venture fund.
Historically, we've offered a venture fund. They're coming more. We'll be starting our thematic funds and ruling funds shortly. And then the third is hedge funds. So we are onboarding our first hedge fund shortly again. So the idea is that this is meant for accredited investors to invest in alternatives more broadly and get exposure to alternatives at smaller ticket sizes. Historically, as you know, it takes a quarter million to enter a hedge fund or a venture fund.
We have brought that down to 15,000, 20,000, it depends on the fund itself, but 15,000, 20,000, 25,000. And with hedge funds, it's particularly interesting. I mean, that's one of my favorite asset classes. Why? Because it's liquid, you know, it's liquid and by its definition, you're supposed to be hedging against the markets. And in this case, what we're working with is a commodities trading fund. And right now, commodities are very volatile.
By definition, a hedge fund will make money when it's volatile times. And so we're excited about that. We're excited about it.
slava (17:24.181)
So you've used the word deep technology a couple of times. Can you explain what that means exactly?
swati_chaturvedi (17:29.998)
Yes, absolutely. So, yeah, we were one of the first, I think, the first to start using this phrase deep technology as a way to separate, see, even a pizza delivery app was a tech startup way back when, right? And the idea is that there are companies that are leveraging breakthroughs in science, breakthroughs in engineering, to bring to market solutions that have the potential to
cancer cures, for example, food growth, growing mechanisms for growing different types of food beyond meat, you know, impossible food, all that kind of thing. Life sciences, creating abundant energy for all, taking us into space. So these are companies based on breakthroughs in science and engineering. It's not just the next piece of delivery app, but there wasn't a specific way to separate them out from a tech startup. So we started using this term, deep technology.
which kind of took on a life of its own. It's a global thing now. But really that's our definition, is companies that are based on breakthroughs in science and engineering.
slava (18:38.773)
I appreciate that. And how, you mentioned life sciences a few times, how does one get into investing into life sciences, or how do you identify what's a good life sciences company?
swati_chaturvedi (18:50.162)
Yeah, so well first and foremost make sure it has some published research, so not a perinose in other words. And it has, so life sciences is really a broad spectrum. There's drug companies, right, which are developing therapeutics. There's diagnostics companies, there's medical devices, there's software companies at the intersection of all of these. There's, and very specifically in software are like
hot things right now are identifying drug candidates, identifying drug targets, etc. So software based or using AI to identify all of those. So there are those software companies as well at the intersection of all of these analyzing genomics, proteomics, those are the next few things. So it is broad spectrum and there is some regulatory risk.
in it getting approved versus not. So I think the things that I personally look for when it comes to drug companies, so I do, contrary to many other investors, I do believe in drug companies because they have the potential to offer incredibly high returns, right? So it's like zero to thousand. A medical device would be maybe zero to five. A diagnostics company maybe would be zero to a hundred, but really outsized returns is drug companies. So a software company would be zero to 50, maybe, or maybe more.
So I think it's useful to think of these as these different sub-sectors. And angels in particular tend to do a lot of medical devices and very specifically because you don't face so much competition from venture VCs, right? And when you do, then it becomes a very big exit and that's okay. So personally, certainly on our platform, we've done across the board all of them.
I personally believe in therapeutics quite a bit only because of the potential for very high or outsized returns. But those are very hard to diligence. Those are you actually it is a gamble mostly. It's very hard to diligence because even if the science is working in the lab, there's no guarantee it's actually going to work in the clinical trials. The clinical trials themselves may not be designed perfectly and so on. So there's many points of failure in that before it can actually get approved.
swati_chaturvedi (21:14.614)
But that said, only because it offers outsize potential, so the approach there would be to invest small amounts, very small amounts, tiny amounts, right? With someone like medical devices and diagnostics, you can actually do quite a bit of research and validation. Typically, these things will be, you'll have proofs of concept, especially in diagnostics, there'll be people using it for research and other things. So there's the ability to do more research.
And devices and diagnostics both fit in well with the engineering mindset also because more biomedical engineering than anything else. So there you should do research and figure out what is the, I mean the standard, what is the market, who's the competition, blah, blah. And then what software? So software companies, again, you can do more research. They should have revenues at that time already, just like any other software company. So.
slava (22:09.097)
I guess as an operator myself and an investor, I feel comfortable investing into software companies but life sciences I'm afraid of because I feel like I'm not a doctor so I don't really understand it. So what would you say back to other people who are listening who don't feel comfortable with life sciences because it's like completely different than their day job? Can you just again double click on how do I get comfortable investing into these like drug companies that I mean I don't know.
about any of this stuff.
swati_chaturvedi (22:40.426)
Well, yeah, yeah. Drug companies, I don't think anyone can ever get comfortable. It's like I said, it's a gamble. But outside of that, right, I'm not recommending at all that one go for something that you're not comfortable with. Do your research. You know, we are a regulated entity. Do your research. Only invest in things that you're comfortable with. But there are two points I wanna make. Another, a doctor might say, I'm a doctor. I know nothing about software. Should I ever invest in software or not, right?
And what I would say to you and to him or her is look at the public markets. All the people that invest in Genentech and Illumina and others are not all doctors. They're not physicians, they're not pharmacists, they're not, they're actual investors. You have lots of hedge funds, you have lots of individual investors investing in that. The reason they're able to do that is because there exists research.
These companies are required to disclose things through their 10 Ks, 10 Qs and so on. So you can read it up, understand the market and then make informed decisions. There's also a lot of chatter, whether it's on Seeking Alpha or Kramer or whoever. There's a lot of chatter on CNBC. People are discussing these companies, they're discussing technologies, the pros and cons of each, et cetera. And...
At the moment, I would say it's true that in the private markets, that does not exist. There's a lot of information asymmetry, which makes it incumbent on you to do a little bit more research, a little bit more digging. Turns out it's not that hard. It's still common sense. I'm not a physician. Nor am I a life science expert. My background is not in life sciences. But you get to know them just by asking questions. And one of the things that people don't ask enough is about data. Okay, you did...
You're doing this medical device. What is the experiments you've done? What is the data you have? Show me the results. You're doing this drug company. All right, have you done an animal trial? What were the results? And then they'll show you these graphs which show you how many mouse experiments they did or monkeys or what have you. And you should ask questions. And that's how you get into it by sitting in on investor calls, sit in on a few, ask a lot of questions.
swati_chaturvedi (25:02.458)
and use some common sense, do some research. Typically these companies will provide papers and materials and there's lots of stuff out there, even in the, you know, it's sometimes more academic and you may or may not have the propensity to dig into it. But asking questions is something that's doable.
slava (25:21.521)
You mentioned investor calls seeking Alpha or Kramer. Where else can I find this information? Where else should I be doing research? What should I be listening to? What should I be reading?
swati_chaturvedi (25:33.342)
Well, certainly on PropelX, I mean, I'm sorry to, on any angel group, in any angel group, and certainly on our platform, we host investor calls. Any angel group hosts investor calls or investor meetings, and which is where you should go and talk to other investors and see, right? If we host, I'm sure other platforms host investor calls as well. And so you attend that investor call, and the one thing that is super important is to ask questions.
And that's how you get to know these companies and ask those questions. And other things that I personally read, MIT Technology Review, which we get for free, and things like that, which are par for the course. I mean, the ordinary, even in the Wall Street Journal, you have sections where they talk about what is the latest. What is the latest in life sciences? What is the latest technologies? And so on. So it's not that uncommon.
But yes, today in the private markets, there is some information.
slava (26:38.217)
Are there particular blogs or podcasts or newsletters or emails that you subscribe to or that you like that do cover life sciences or deep technology?
swati_chaturvedi (26:52.13)
So I follow the MIT technology review, to be honest.
Beyond that, I honestly don't have the time to do too much. But there are lots of people who do. FIERCE Biotech is one media outlet if you wanna do life sciences. But I personally, FIERCE, FIERCE Media, F-I-E-R-C-E, FIERCE. Like FIERCE Media. FIERCE does a bunch of things, but biotech and life sciences.
slava (27:14.177)
Sorry, what was the name of that outlet? How do you smell that?
Okay, great, fierce.
swati_chaturvedi (27:27.558)
is their thing. That's one that I followed in the past. Certain investors, I mean Breakout Labs is their friends and I like them. So Breakout Labs was originally, and they're a partner of ours also, but it's good to see the companies that they invest in to attend their meetings, to attend their annual events. It's fun also.
swati_chaturvedi (27:57.674)
So they are a fund which is originally back, is even today back by Peter Thiel. And then, so those are some investors that I like in this space.
slava (28:10.249)
Great. And then as the last question, what would be one investment you would recommend today for our listeners and that three years from now we're going to, you know, follow up with you and check in how it did. And you're going to try to hedge and just say some generality. So we want specifics and we know it's not investment advice. So what would be one specific investment that you're excited to make?
swati_chaturvedi (28:33.51)
Oh my God, I'm a regulated person. I'm not even allowed to make this recommendation. So, well, let me think of what I can say. Maybe I can talk about sectors in general.
Um.
swati_chaturvedi (28:54.662)
I do believe that this whole NFT thing has something to it. It's hard to pick very specific NFTs, right? Because you don't know what's going to catch on, what's going on. So I'm not going to say, oh, buy this NFT or that. But I think the broader space has legs to it, which aren't quite apparent just as of yet. It's too nascent. But I think if I had to pick something, I'd be excited about that. That's similar to a drug company.
You know?
slava (29:24.165)
How about in the deep tech and the life sciences? What would be the one trend that you really would want to invest into today?
swati_chaturvedi (29:31.95)
proteomics. So proteomics, proteomics. So like what genomics is analysis of genes and so on. So sometimes genes are expressed, sometimes not expressed, but what is reality is seen in the proteins that exist in your body. And so you want to be able to analyzing those proteins and developing targeted personalized medicine is what it really leads to. Targeted therapy is based on those proteins.
slava (29:33.762)
Which one?
proteomics
swati_chaturvedi (30:00.234)
Let's just call it personalized medicine. How about that?
slava (30:03.73)
medicine so instead of genomics it's protonomics.
swati_chaturvedi (30:07.63)
for Teomix.
slava (30:08.961)
Proteomics, no N. See that I'm getting taught right now about all this stuff. Are there any public companies that are doing any of this?
swati_chaturvedi (30:11.263)
Oh yeah. No, that's okay.
swati_chaturvedi (30:19.562)
proteomics I'm not sure but it is relatively I mean
New.
slava (30:29.377)
So it's mostly private companies that are doing it right now. And can you give like a few examples?
swati_chaturvedi (30:31.954)
Yeah, yeah, yeah. Let me just... I'm sure all big companies are doing this in terms of, yeah, top 10 companies that provide. I mean, there's a lot of, but they aren't publicly traded. I don't think so, but I can send you some names.
slava (30:53.357)
Can you name like one or two without saying that, you know, just who they are?
swati_chaturvedi (30:59.174)
Yeah, so I can give you an example of one of our companies that we did proteo wise that came out of Yale. What they're trying to do is what Illumina did with genomics, which is rapid sequencing, et cetera, you do with proteins. And that is proteo wise, P-R- That's an early stage company. So, I mean, I don't think it's relevant to many people. And I mentioned it. It's something that was featured on Propel X.
slava (31:13.897)
And sorry, what was the name of that company? ProteoWise.
swati_chaturvedi (31:29.366)
something that I learned a lot about proteomics by just sitting in on those investor calls and talking to them, ask questions. But I do think that that's a trend, you know, personalized, when it comes to personalized medicine has to be at the intersection of genomics, proteomics, and so on.
slava (31:45.501)
I love it. Thank you so much. This has been quite the journey of discussion. We learned again that 60-40 is dead and people should be investing into alternatives. We covered deep technology and I got taught about life sciences. My favorite part is how many times you said we should ask questions. Everybody should understand that as a listener. We should all be curious forever and always keep on learning. And proteomics has no end and it's going to be an exciting next phase.
swati_chaturvedi (32:11.306)
Oh
slava (32:13.145)
of investment opportunities across life sciences and technology. So Swati, thank you very much for joining.
swati_chaturvedi (32:19.362)
Thank you, thank you, Slava, it's a pleasure.
slava (32:22.017)
We look forward to having you back again.
swati_chaturvedi (32:24.15)
Thank you. Would love it. Bye bye.
