Investing in Transformational Technologies — Raj Ganguly, Co-Founder of B Capital Group

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In this episode, Miguel Armaza sits down with Raj Ganguly, Co-Founder & Managing Partner at B Capital Group, a growth equity firm with $1.5 Bn AUM focused on investing in B2B startups across four technology-enabled verticals: Enterprise technology and Consumer enablement, Fintech and Insurtech, Transportation and Industrial, and HealthcareTech and Bio-IT.

Raj also serves on multiple boards and is a Senior Advisor to the Boston Consulting Group. He is an MBA graduate from Harvard Business School and graduated from the University of Pennsylvania’s Wharton School and School of Engineering from the Management & Technology Program.

Listen to the full interview --> Spotify | Soundcloud | Apple Podcasts

When it comes to VC founding teams, B Capital has one of the strongest lineups in the industry. Co-Founded by Eduardo Savarin, Co-Founder of Facebook; Howard Marks, former Wharton professor, Co-Founder of First Round Capital, and one of the architects of ARPAnet; and Raj Ganguly, former Managing Partner of Velos Partners. Raj and Eduardo had mutual friends from their Harvard days and developed a close friendship a decade ago over a shared belief that the strongest companies to come out of the next decade would look a lot different than the last decade. Years later in 2015, as they were considering moving forward with a fund, the duo flew to NYC to meet with Howard for a 30 minute sit down and ended up meeting for over three hours and deciding to launch B Capital.

An Exclusive Partnership and Global Focus

When Raj and team started to think about the structure of their new fund, they were inspired by Bain Capital’s relationship with Bain & Company. Raj had spent some time working at Bain Capital and envisioned a similar arrangement with an equally prestigious consulting firm. So they struck a strategic partnership with the Boston Consulting Group (BCG) where BCG is able to build strong relationships with up-and-coming disruptive companies and B Capital gets valuable access to industry insights and the corporations BCG works with. Raj is noticeably proud of this relationship and sees it as an important step to helping early-stage companies scale, grow, and accelerate their path to growth.

B Capital is a global company and they approach everything with an international lense. The global focus makes sense, particularly because it reflects the company’s own makeup. They are a team of immigrants and outsiders distributed across California, New York, and Singapore who aim to find the best companies with global ambitions, wherever they are. Their goal is to make sure they provide the resources for the portfolio companies to go global and help them understand what’s the right time to scale across borders.

Global Fintech Potential

B Capital is convinced banking and insurance are in the midst of a large-scale transformation and they are putting their money where their mouth is — close to 40% of their portfolio is invested in the financial sector. Fintech touches everything and is the backbone of most of what consumers and businesses are involved with. Raj explains they believe financing services will continue to be fundamental for consumers and businesses and they want to invest in the startups that will transform the financial industry not just in the US, but around the world in markets like India and Indonesia.

Fundraising in times of COVID

On June 30th, 2020 B Capital announced the closing of its new and largest fund for a total of $820 million with the goal of investing in 20–25 companies. A lot of the fundraising process happened before COVID, but the last stages of closing and funding took place right in the middle of the pandemic. This situation challenged long-held beliefs of always having to jump on a plane to sit face to face with LPs and forced the team to adjust and have their discussions over zoom. They realized video conferencing can be a lot better than expected and were able to build relationships and secure new investors this way. Moreover, they also realized they could conduct due diligence for new portfolio companies remotely.

Since the pandemic started, B Capital has made dozens of new investments. Some of them have been rounds to support existing portfolio companies but they have also added several new companies to their portfolio. Interestingly, in many cases they have gotten to know these companies purely over zoom and other forms of technology and have gotten comfortable with the new reality. Mr. Ganguly acknowledges the process can be time-consuming as it requires more meetings and has made them rethink the best way to get to know people and companies. Reflecting back on their pre-COVID approach, he believes they took a little too much comfort by looking at someone in the eye and sitting across the table from them when in reality this is an imperfect science. By not relying on physical meetings, the team is asking tougher questions and has raised the bar of their conversations to understand the strengths and weaknesses of founders.

SPACS, Direct Listings, and the Road Ahead

Raj spends a lot of time thinking about the process of going public. After all, many of B Capital’s companies could become publicly listed within a few years of their investment. He believes the traditional US IPO process is broken, particularly when you look at all the listing, transactional, and banker fees and you realize listed companies and founders end up getting only a portion of the capital to help the company keep growing. These inefficiencies have made people question the current state of the market and he is not surprised by the meteoric rise of Special Purpose Acquisition Companies (SPACs) and Direct Listings. In his own words, “SPACS will continue to be a viable alternative until the process of going public is fixed.”

Raj is convinced over the next decade there will be a few hundred transformative companies that will be built in large traditional industries like financial services. At B Capital, they aim to partner with these firms early in their lifecycle and will continue to look for revolutionary startups in every corner of the world.

Raj Ganguly

Raj Ganguly is a co-founder and Managing Partner at B Capital Group. He currently serves on the boards of Winmore, Journera, Atomwise, and Evidation Health. In addition, Raj is a Senior Advisor to the Boston Consulting Group.

Previously, Raj was a Managing Partner of Velos Partners, a global venture growth firm with offices in Los Angeles, Singapore, and London.

Before his career in venture capital, Raj spent six years at Bain Capital, conducting operational due diligence and driving growth and operational improvements in portfolio companies across the United States and Asia.

Raj earned an MBA from Harvard Business School, and summa cum laude honors as a BSE and BAS from the University of Pennsylvania’s Wharton School and School of Engineering and Applied Science, where he graduated from the Management & Technology Program as a Benjamin Franklin Scholar and Joseph Wharton Scholar.

B Capital Group

B Capital Group is a growth equity firm focused on investing in B2B startups across four technology-enabled verticals: Enterprise technology and Consumer enablement, Fintech and Insurtech, Transportation and Industrial and HealthcareTech and Bio IT.

Miguel Armaza is Co-Host of the Wharton Fintech Podcast and Co-Founder of Gilgamesh Ventures, a seed-stage investment fund focused on fintech in the Americas.