1Mby1M AI Investor Forum: Angel Investor Raju Reddy (Part 1)

Entrepreneur, Angel Investor, and Board Member Raju Reddy discusses his AI investment thesis.

Sramana Mitra: Good morning, everybody. Welcome to today’s One Million by One Million (1M by 1M) Strategy Roundtable for Entrepreneurs. 1Mby1M, as you know, is the first and only global virtual accelerator in the world for technology startups.

Our mission is to help a million entrepreneurs reach a million dollars and beyond in annual revenue. With the advent of DeepSeek, we see one more step in democratization of entrepreneurship. AI is now becoming cheaper, more efficient, and more people will be able to develop on AI platforms and build products, which is an exciting new development.

This is our 673rd free public roundtable, where we do this kind of mentoring sessions. This mentoring program started back in 2008. We have pretty much been here – week after week, month after month, year after year since the Fall of 2008.

As a result, we’ve had the opportunity to work with hundreds of thousands of entrepreneurs in all corners of the world. It’s been a fascinating learning experience, not just teaching experience, also a learning experience to see what’s happening in different parts of the world.

Podcast:

We’re going to start today’s session with a long-term colleague of mine from the industry, Raju Reddy, who has been both a CEO as well as an investor. He has a particular perspective to bring to this conversation. I’m very sure you will learn a lot from the conversation. So, let’s get started. Raju, welcome to the show.

Raju Reddy: Good morning, Sramana. Thank you. Glad to be here.

Sramana Mitra: So, Raju, I want to start in an area in which you spent a lot of years of your life and which is dramatically changing with the advent of AI, which is the services industry.

Whether it is IT services or outsourced services, the services industry seems to be poised for a major refurbishing with the advent of AI. How do you view this opportunity?

Raju Reddy: To begin with, I don’t think we have seen a disruption, whether it is services or products, as big as what AI has been doing since the advent of internet. We’ve had many other technology shifts, whether it is cloud or mobile. Many of them have had a huge impact on the industry, but nothing like what internet has done, and likewise today with AI.

I spend a significant amount of my time now investing in seed state startups. Most of them are in the product space, but there are a few that are still in services. Increasingly, I think the sort of the borderline between what you would call a product offering versus a pure services model has been sort of shifting or even fading over the last ten years, even before AI.

Now with the advent of AI, I do see that I think there is a significant need for what you would call a human-in-the-loop services. There are a bunch of new age companies that are coming into play, a few that I’m involved with directly, like Cognida or Critical River, that are purely traditional services companies but much more led with some sort of a core IP-based service offerings.

Once again, I think there’s also a shift in how the products and services are starting to overlap in many of these cases.

Sramana Mitra: Yes, so I think your point is exactly right. We are seeing human-centric AI, which means human needs to be in the loop using that AI. It’s giving rise to a few different kinds of business models that are a bit of an evolution from where we were earlier.

With software as a service and the whole cloud movement, we went to a do-it-yourself model. Companies are selling software products as software as a service, but it’s really products. Then you expect the B-to-B clients to be doing whatever they want to do by themselves.

But now with AI, this model is shifting a little bit to do-it-for-me also. So, human in the loop can go in two different directions. Either it’s human in the loop in the client’s shop, or it’s human in the loop in the vendor’s shop where it is do-it-for-me model. So, whatever is the IP underneath, there is a human who’s sitting there and using that IP and delivering the value as a do-it-for-me model.

Then in some cases, the human is sitting inside the customer’s shop and using the product and delivering the value.

Raju Reddy: The one segment of the services industry that is probably right in the middle of a huge transition is really the BPO industry.

Frankly, most of us don’t yet know how disruptive it’s going to be just in terms of the millions of people employed in the BPO industry today. It’s arguable whether you need as many people now. It’s almost certain that you don’t need as many. But the question is, what fraction of that do you need in the future of BPO industry, say, five years from now? What does the BPO industry look like? I think that’s a fundamental question that I think many of these companies in the BPO and the loosely called KPO segment of the industry, are trying to figure out.

But like anything, there are always new opportunities.