Lochan Alagh, co-founder of VC Nest, shares her journey from India to Silicon Valley, her work with nonprofits, and her transition into entrepreneurship and venture capital. She explains how VC Nest is addressing gaps in the VC ecosystem by supporting emerging fund managers through collaboration, networking, education, and thought leadership. Lochan emphasizes the need to prioritize founder support over just maximizing returns, fostering a healthier venture capital landscape.
Lochan Alagh, co-founder of VC Nest, shares her journey from India to Silicon Valley, her work with nonprofits, and her transition into entrepreneurship and venture capital. She explains how VC Nest is addressing gaps in the VC ecosystem by supporting emerging fund managers through collaboration, networking, education, and thought leadership. Lochan emphasizes the need to prioritize founder support over just maximizing returns, fostering a healthier venture capital landscape.
In this episode, you’ll learn:
[1:51] Lochan’s inspiring journey from India to Silicon Valley
[9:19] How venture capital drives innovation
[12:19] Key challenges for emerging fund managers: fundraising, deal sourcing, and increasing competition
[17:56] The pillars of VC Nest: focused events, curated VC-startup mixers, educational series, and thought leadership
[22:50] Emerging fund managers are identifying future unicorns but still struggle with institutional backing (TechCrunch: 30 out of 34 unicorns were funded by emerging managers).
The nonprofit organizations Lochan is passionate about: IIT Bay Area Alumni Association, Overseas Volunteer for a Better India (OVBI)
About Lochan Alagh
Lochan Alagh is the co-founder and managing partner at VC Nest, a platform dedicated to supporting emerging venture capital fund managers and innovative startups. Before VC Nest, Lochan served as Executive Director at FalconX, where she fostered global innovation by forging strategic partnerships with accelerators and helping B2B startups establish a presence in Silicon Valley. She is also the Vice President of the IIT Roorkee Alumni Association (Bay Area Chapter), where she focuses on strengthening the alumni community. Previously, she led business strategy and operations at Cloud Harmonics, a rapidly growing startup, until its acquisition by Ingram Micro. Passionate about community service, Lochan is involved with nonprofits such as Overseas Volunteer for a Better India, working on water conservation initiatives, and New Leaders Council, which trains young progressives to become civic leaders. Additionally, she serves as a board member and secretary for the IIT Bay Area Alumni Association (2022-2024).
About VC Nest
VC Nest is a Silicon Valley-based platform designed to empower emerging venture capital fund managers and foster the growth of the VC-startup ecosystem. It offers a range of resources, including networking opportunities, educational events, and fundraising support to help fund managers thrive. With a focus on collaboration and knowledge sharing, VC Nest provides fund managers with insider strategies on fundraising, access to Fund of Funds, and connections with fellow VCs. Additionally, it offers technology infrastructure, portfolio startup workstations, and actionable insights to drive the growth and success of both funds and startups.
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This road itself gives me a lot of energy because there are people who are always talking about something new, something innovative, and it cannot happen without, you know, other investors betting on you, backing you. And that's why it's very, this is a class that excites me a lot because these are supporting the founders who are sculpting the better tomorrow. And we also want to be a part of their journey.
[00:00:30] Gopi Rangan: You are listening to The Sure Shot Entrepreneur - a podcast for founders with ambitious ideas. Venture capital investors and other early believers tell you relatable, insightful, and authentic stories to help you realize your vision.
Welcome to The Sure Shot Entrepreneur. I'm your host, Gopi Rangan. My guest today is Lochan Alagh. She's the co founder and managing partner at VC Nest. She's had a very interesting journey, all the way from India. She now lives in Silicon Valley, and VC Nest is located, actually, on University Avenue in Palo Alto, right in the middle of Silicon Valley. What is VC Nest? How did she envision starting VC Nest? What's the purpose of the organization? We're going to talk about a lot of that, but let's start with her, get to know her first before we go into more details.
Lochan, welcome to The Sure Shot Entrepreneur.
[00:01:29] Lochan Alagh: Thank you, Gopi. Thank you for inviting me.
[00:01:31] Gopi Rangan: Tell us about yourself. You grew up in a small town in India called Panipat, then you had an amazing educational background. And more recently, you moved to the U. S. and now you've established yourself in Silicon Valley.
But let's start with your journey from where you grew up. Tell us a little more about that.
[00:01:51] Lochan Alagh: Gopi, I grew up in a small town called Panipat. Panipat is very famous for three historical battles (Battles of Panipat - 1526, 1556, 1761). And I'm a daughter of doctors, so my parents absolutely wanted me to become a doctor. But I took a different route.
I studied at IIT, Indian Institute of Technology, Roorkee. And after that, I joined as a scientist for Ministry of Environment and Forests.
I'm sure you have been meeting a lot of techies here, but I am little unconventional here. I joined Ministry of Environment and Forests for the conservation of river Ganga. It is, you know, a well known river. It is supporting the lifelines of millions of individuals in India. And I thought that my life is set. I joined a central government job. It was very valuable for the work I was doing, but my parents had different plans for me. They found a guy in Silicon Valley and when I met him for the first time, I didn't even know a lot about Silicon Valley.
And hoNestly, I didn't know the term 'Bay Area'. He told me about that. And yeah, it was an arranged marriage. I kind of agreed to that. Now I think of that. I was like, "wow, I was very brave doing that." But I moved here and first year as a dependent spouse was very challenging. I moved here on H4 visa, I did not know driving, and I did not know anyone in the entire United States.
And since it was an arranged marriage, and my husband was a techie, we didn't have a lot of conversation before the marriage. So, a brave me moved to the United States in 2015. Uh, it's going to be 10 years soon. Initial few months were challenging. But it was the best time for me to move to the United States, especially given my background in environmental conservation.
California was hit by a major drought in 2015, and they were looking for people with water conservation and environmental conservation background. So I started working for a non profit called Sustainable Silicon Valley, and we were working with Governor Brown's office to lay down the guidelines on water conservation for commercial properties and residential properties here in the valley and in entire California.
As soon as I got my work permit, it was a good time. I started a startup. The executive director of the nonprofit laid down the vision. She shared that vision with me and she brought me in as a founding member of that startup. It was an environmental consulting company, and as per EPA mandate, small and medium businesses had to submit sustainability reports to EPA, and we were preparing those sustainability reports. A small startup, we started growing, and due to regulatory changes, we had a new government came in, and EPA didn't have that mandate anymore. So we had to pivot, but our startup could not survive for a long time, and things started going south.
And I then joined another startup, a cyber security company with Pradeep Aswani. That actually gave me a real flavor of Silicon Valley. I joined as a business strategy and operations head there, worked very closely with the founder. And he has been a serial entrepreneur in the Valley. So this was his fifth startup. And our startup was doing really well. After three years, we had a phenomenal exit. I actually truly experienced the Silicon Valley startup culture through that startup. So I was there. Our company had a great exit and after that I joined Ingram Micro. In a startup, we were running at 120 miles an hour and at a big company, when a startup gets acquired, you're just part of a small team.
And I wasn't enjoying that. So everything slowed down. We were spending more time on processes rather than, you know, getting actual things done. So I went to Pradeep. I was like, "Pradeep. You know, I'm not having fun anymore." And he introduced me to a group of phenomenal Indian entrepreneurs who have built multiple companies, seen failures and successes, actually.
Some of them even took their companies public. They started a platform called FalconX and they had a vision of helping upcoming generation of entrepreneurs, primarily in the B2B space. So they all had vision, but they didn't have anyone who could execute their vision. So I was brought in in FalconX as a first person and I started working with these phenomenal group of entrepreneurs.
So I was there for five years and that journey was remarkable because it not only gave me a chance to work with upcoming entrepreneurs and work closely with them to think how, you know, new founders are thinking, what are upcoming trends, what are upcoming technologies, but it also gave me a chance to learn from existing successful entrepreneurs, get to understand what their mindset is, how they became successful. And also when you are in that culture, that entrepreneurial bug sometime kicks in you as well, and that inspired me to start VC Nest. But there has been small twist in that journey as well.
Before starting VC Nest, I joined MDSV as a partner in this fund of funds. So we have been investing in emerging fund managers and I have been talking to a lot of fund managers and realize that there is a gap. Working with founders at FalconX, I realized that as founders when you are early on in your journey, you're working on your story, you are working on your product, you're trying to understand what the market looks like. But when you're going to investors, you're actually selling your product. When you become a fund manager, you are trying to sell just yourself, your vision, and it becomes a very different journey. I see a lot of similarities between emerging fund managers and early startup founders, because you're also trying to walk on a journey by yourself and trying to do something different. Fund managers support the entrepreneurs and entrepreneurs are building amazing technologies. But at the same time, when you're starting something new, it's very challenging. And the support is needed at both the areas. For startup founders, I saw that there are a lot of accelerators and incubators. But for emerging fund managers, there has not been a community supported by real estate where fund managers can actually come, collaborate with one another's.
And that gave me an idea of if these fund managers are truly supporting the founders, why don't we support these fund managers? And that was the origin of VC Nest. I was fortunate that I got a good location on University Avenue, and my partner, Badru Valani, who has also been an entrepreneur himself, actually, he truly believed in this vision. And that's how we started VC Nest.
[00:08:09] Gopi Rangan: Fantastic. What an amazing story. Just like any immigrant parents, your parents wanted you to become a doctor just like them. I am pretty sure now, they are very proud of you. Although you didn't become a doctor, the number of things you've accomplished and the zigs and zags in your journey and across the world is just absolutely fascinating.
I see that you've touched water conservation on the public sector side and later on the nonprofit side in the U. S. And you touch the startup world and the techie side and accelerator side on the startups side, fund of funds, and now starting your own, actually pioneering, if I may say, a new way of supporting fund managers. As an emerging manager myself, and I wish VC Nest existed when I started my own firm six years ago. This is exactly what the world needs today, because the community is screaming for someone to put together an organization like VC Nest. And I'm delighted that you're doing that. I wanted to ask more about that, but let's start with some of the basics. Why is venture capital interesting to you?
[00:09:19] Lochan Alagh: As I said that this is a cycle. If I am a founder and if I'm working on a bigger vision, I cannot do it without supportive partners. And investors play a very important role. We are in Silicon Valley. We are building the best of the best technologies. We are working on breakthrough innovations and it cannot be done alone.
There are investors who are willing to take bets on amazing founders; not only just bets, they are their partners throughout their journey. People are not able to work on a brighter future if this ecosystem doesn't exist. And that's why venture capital plays a very important role because these breakthrough innovations need a lot of funding.
And that comes from, this asset class. Like right now I'm interviewing here with you sitting on University Avenue. We are just five minutes away from Stanford. This road itself gives me a lot of energy because there are people who are always talking about something new, something innovative, and it cannot happen without other investors betting on you, backing you.
And that's why this is a class that excites me a lot because these are supporting the founders who are sculpting the better tomorrow. And we also want to be a part of their journey.
[00:10:36] Gopi Rangan: And for all these reasons, I love venture capital as well. As a VC who invests early in startups, I get the privilege of watching these companies grow from scratch and many of them make it big.
It's a privilege to have the opportunity to do that, even better when I'm able to invest and actively participate.
[00:10:56] Lochan Alagh: It's not only about returns, it's about the impact these companies can make. Like Zoom, it was such a powerful tool that kept everyone connected during pandemic. No one was expecting that the entire globe would be in silo during the pandemic. And this technology kept everyone united. There is truly a power. A lot of founders I meet, they are doing phenomenal research on cancer, on diseases that have never been cured, on brain sciences, and VCs are truly backing these founders.
It's not only about just the financial return. It's also the impact that this asset class makes on, you know, humanity overall.
[00:11:36] Gopi Rangan: Yeah, it's at the forefront of innovation. What are some challenges that you notice among emerging managers? Let me clarify who emerging managers are.
Emerging managers are VCs who are starting new venture capital firms. And they are called emerging managers because they manage money. And they are emerging because they haven't established themselves yet and they are new in their journey of starting a firm. The other side of the market would be established managers. These are big brands that have existed for a long time and they have multiple funds under their firm. So let's talk about emerging managers and what challenges do they face. Lochan, you've seen many, many emerging managers through the funder funds and now through VC Nest. What are challenges that they face?
[00:12:19] Lochan Alagh: I would even classify emerging fund managers into two categories. There are emerging fund managers who start off from, you know, they have experience of working in big funds and they just move out and they start their funds. They have run funds and they also have connections with with LPs.
Whereas if there are fund managers who are starting fresh, like who were operators in the past or, who were investment bankers or working in corporates. But if they want to support the entrepreneurs or invest in them, it's extremely challenging because emerging fund managers primarily enters two things.
One is fundraising and second is fund deployment. The biggest challenge for emerging fund managers I see is fundraising. Identifying the right LPs, telling your story because your fund managers, you are selling yourself, you are promising an LP that, "Hey, I'm going to give you, you know, 5X returns, 7X returns, 10X returns."
And an LP is believing in you. So you don't have a product to sell. Yes, you are selling your strategy, but it's essentially the relationship that you are establishing with the LP. But even before establishing that relationship, fund managers are facing a lot of difficulties in who to reach out to. Who are the true LPs that they should be talking to?
In fact, at VC Nest, we started our series with potential LPs. We have invited fund of funds to share how they evaluate fund managers. And then we are also inviting institutionals and endowments to share their perspective on what they're thinking of emerging fund managers. But the first challenge is fundraising and second is deal deployment, like getting into some good deals. These are the two big challenges.
The third is storytelling. Even if a door opens up for an LP to believe in you, every fund manager has kind of similar story to tell that "this is my deal sourcing strategy and this is my fund deployment strategy." But how to differentiate in that and how to tell your story in a powerful manner is the challenge that I've seen in fund managers.
And then getting into really good deals is a challenge because as an emerging fund managers, you have to show your track record, but you don't have a track record. You know, you're starting fresh and you also want to get into good deals. An LP wants to see your credibility. An LP wants to see that you are a thought leader, that the industry you're deploying in, you have knowledge, you have expertise. Unless you are able to showcase that it gets very challenging.
And also number of emerging fund managers. See, the number of LPs has not increased significantly, but LPs are solicited by a large number of emerging fund managers. In last two years, the number of emerging fund managers has increased to 2500, and the number is continuously increasing. There are more platforms like Coolwater Capital, VC Labs.
We are seeing an uptick in the number of emerging fund managers, and these are soliciting the same LPs. If you're not going with your differentiated strategy, it's very hard to raise capital. And the last two years were very challenging because there was not enough liquidity in the market.
You can only get capital if there is liquidity. And not many companies were public and the stock market was, you know, uh, dwindling as well. So there were a few challenges in overall macro economic conditions, but also the number of fund managers has increased significantly.
[00:15:40] Gopi Rangan: You've touched on many, many challenges, many important challenges here.
When an emerging manager decides to start a new VC firm, they have two challenges. First is how do you get deal flow? And how do you raise money for the firm? The first one, usually they arrive with the confidence that they can get good deal flow and they know how to work with founders and they have some experience in the past either as an angel investor or worked at a different firm so that part they may be right or wrong but they have the confidence that they know how to do it. But the second part, which is fundraising, many emerging managers don't have experience. Many of them don't even know who these LPs are, let alone how to approach them, how to tell the story, various other things.
Starting from there and many other industry trends that you've mentioned; and the number of managers has increased, LPs have not increased. Actually, we don't know who these LPs are, so it's hard to even quantify whether the LP community has increased in size. I can see all of this forming the genesis for VC Nest. So what does VC Nest do?
[00:16:46] Lochan Alagh: One more challenge I want to bring again because of this new innovation supercycle, Gopi, a lot of established fund managers or even private equity funds who are investing in later stages are now getting into deals early on. Because of this AI supercycle, many companies, they don't need later stage funding, because all your processes are automated. AI is doing the heavy lifting. And within a short span of time, we have seen this with companies like OpenAI. With very few employees, you are able to get to, you know, multi-billion dollar valuation.
And that's why these private equity funds, they're also getting into early stage. And that was not the case earlier. So even it looks easy that, can source good deals, but it is not. And even for endowments, they do not have enough trust and confidence in emerging fund managers. And also their check sizes are usually very big.
They do not want to write smaller checks because then for them portfolio management becomes very challenging. And that's why institutional investors do not touch emerging fund manager segment much. And also, these growth stage funds and private equities are also now venturing into early stage. So the space overall is getting extremely crowded.
And the genesis of VC Nest, of why we started that, was this big gap we saw in emerging fund managers ecosystem. For emerging fund managers, it's essential that they collaborate with others to not only exchange deals, but also exchange that knowledge and information.
We have multiple pillars here. Definitely this entire industry thrives on relationship. The VC industry overall, it's all about networking and relationship. So the first genesis is we do a lot of events and these events are not just random events. These are focused events. As I mentioned earlier, we invite LPs to share their perspectives because many times we have seen that fund managers even do not know who right LPs are, how to approach them, what are the new programs that these LPs are launching.
Last month we invited Sapphire Ventures, they launched a program with CalSTRS and many fund managers came to me and they said that they didn't even know about this program that they launched with CalSTRS for emerging fund managers. So these events are quite educational for fund managers, and it's helping them to understand LP's perspective.
And second, we have been doing very curated VC startup mixers. As I said, University Avenue overall is a place for good founders. But even for VCs to get access to good deals, there has to be a platform. So we host a lot of startup VC mixers at VC Nest for startups to get access good VCs and VCs to get access to good startups.
And we are not doing just random mixers. We are actually focusing on multiple verticals so that this curating process is easier and also it's effective. So the focus on events is mainly, on fundraising and, deal sourcing. So that's why, you know, we have launched these LP series and also these private VC startup mixers.
And second is education. As a fund manager, you are emerging fund managers, especially you're not a big team. You are a single GP or two GPs. You are trying to raise funds. You are trying to deploy. You are doing your due diligence on startups. And it's very important for you because you are managing other's finances to stay top on regulations on compliances.
So we have also been launching uh educational series with big force like Deloitte, E&Y, with certain banks on all these audits, on compliances, on regulations. So that covers the educational sector. And third is thought leadership for fund managers to establish their credibility. LPs need to know that, yes, they have domain expertise. And that's why when these, when we do these verticalized private VC mixers, we also give these fund managers a chance to speak on their perspective. And, as you are doing your podcast, as VC Nest we also want to do, maybe we can do that in collaboration, a chance for fund managers to market themselves, to establish their brand and for this storytelling, which is a very important component. We just launched two months back and there are so many plans on our roadmap. We've also been working with some executive coaches to help these fund managers prepare their story better, because you knock so many doors and you kiss so many frogs, but you have to close some of these deals. And it's very important that your story is formulated right and it's told in a right manner.
[00:21:14] Gopi Rangan: VC Nest is only a month and a half old. It's a very, very new organization and I can see that you've become so active and you've already produced so many high quality events and brought the community together.
What is your long term vision? What will VC Nest look like? What do you want it to be?
[00:21:32] Lochan Alagh: I'm wearing both hats. I'm an entrepreneur and I'm an investor. And as an entrepreneur, this is not a company that I can say that it is going to be a unicorn or it is going to go public. For me, the success truly is when all these emerging fund managers would say that, "okay, I want to be a part of VC Nest." Like YC is for startups, VC Nest is for emerging fund managers; everyone wanting to be a part of it and becoming a global organization supporting VCs and fund managers.
But VC Nest also has a separate capital that we invest in startup founders, and we co invest with many of our fund managers as well. Overall, our charter is to support the entrepreneurs that are sculpting the better tomorrow. And we want to do this with the fund managers because at the end, their goal is also to invest in good companies. And we are helping these fund managers to invest better, to invest in companies that are shaping the better tomorrow. And we want to do that alongside them. This is our long term goal.
[00:22:32] Gopi Rangan: It's a very bold and ambitious long term goal, indeed. There are many things changing in the venture capital ecosystem. If you had the power through your efforts at VC Nest, if you were to change one thing about how venture capital works today, what would you change to make this industry better?
[00:22:50] Lochan Alagh: See, even in venture capital, based on even when I was designing VC Nest as a platform, I interviewed so many fund managers on this concept and overall as an industry of what they think. Some fund managers just have a vision of maximizing their returns. If your vision is only to maximize returns, you would be squeezing the founder somehow.
You just do not want to only focus on your returns. You also have to support the founders that are trusting you to be your partners in the journey. One thing, everyone looks at a venture world as an asset class where they can get multiple returns, but we also have to look on how we are supporting the founders in a meaningful manner. And second thing is, yes, I see a gap that many institutions, many endowments are not still not looking at emerging fund managers as an industry.
And that needs to be changed because there are so many good companies that are funded by emerging fund managers. In fact, 2024 TechCrunch data shows that 30 unicorns out of 34 have been actually funded by emerging fund managers. So this asset class is very powerful in identifying the companies that are going to go public or that are going to have multi billion dollar returns. There are more and more opportunities, and I think the bigger players, in the industry have to allocate capital into smaller players. Only then this ecosystem would get richer and richer.
[00:24:18] Gopi Rangan: Thank you for highlighting the importance of emerging managers. And these are the VCs that will shape the future of venture capital industry, and they are the ones that work with founders at the earliest stages well before they become unicorns.
I'm glad that you highlighted how important it is to cultivate this community. We're coming towards the end of our conversation, and I want to ask you about your community involvement. Is there a non profit organization you are passionate about? Which one?
[00:24:46] Lochan Alagh: I am actually involved with a lot of nonprofits.
I sit on the board of IIT Bay Area Alumni Association, a lot of executives in the valley, like Sundar Pichai from Google, and other big executives in multiple companies are, are IITians. And it's actually a privilege for me to be a part of this organization. I have been associated with this organization since 2017.
It's a very powerful community of executives of technologists who are building great companies and who are working on phenomenal products because we have more than 15, 000 IITians who are working on some of the best companies, technologies here. So it's a privilege to be associated with that organization.
I started from environment and and ventured into tech. And it happened to a non profit as well. It's called Overseas Volunteer for a Better India (OVBI). I was working there and that organization was serving farmers in India who were committing suicide.
So I became a part of that non profit. And through that, I got connected to some of the techies in Silicon Valley. And that's how I got my first job in a cyber security company. So when you work for a good cause, something good happens to you as well. I think it's all karma.
[00:25:58] Gopi Rangan: Lochan, thank you very much for spending time with me today. What a fascinating journey and I'm delighted to hear your arranged marriage brought you to the U. S. and how you've embraced this new country, the new culture, a new way of working, new way of living and you are on to something great. Good luck, and I'm delighted to see that you are embarking on this journey to make a change in Silicon Valley.
[00:26:23] Lochan Alagh: Thank you so much. And I would say Silicon Valley embraced me more than I embraced Silicon Valley. Thank you so much for for inviting me.
[00:26:33] Gopi Rangan: Thank you for listening to The Sure Shot Entrepreneur. I hope you enjoyed listening to real-life stories about early believers supporting ambitious entrepreneurs.
Please subscribe to the podcast and post a review. Your comments will help other entrepreneurs find this podcast. I look forward to catching you at the next episode.