Career Archives

Venturing Along With GGV Capital

As many of you know, I have been a venture partner to GGV Capital. Today, GGV Capital announced me, along with another Venture Partner (Denise Peng, formerly of Qunar) and a new EIR (and and my old friend), Jason Costa. More precisely, I have been a Venture Partner with the firm for about a year now, after years of being a consultant to the firm (as well as other firms in the past). For someone like me who is just starting out in their investing career, a dream opportunity.

Yes, I know — it is an unusual, unconventional split-role and association for someone to have, but when I look back on my work history and timeline, my career has simply never fit neatly into a LinkedIn profile. After years of struggling to find a way to cut into the investing industry, I had the fortune of choice last summer. While still raising and deploying Haystack, the early-stage VC fund I started and currently invest out of, the six managing directors of GGV — all whom I’ve known for years — were creative in finding a way for me to join them on certain key projects while supporting me in my own efforts to build up the Haystack franchise.

GGV has been, from its first day almost 20 years ago, a differentiated venture fund. The firm was founded on the thesis that the interconnectedness of the world’s two largest economies — the U.S. and China — would increase over time. Throughout its history, the GGV Capital team has been fortunate to be associated with some of the most iconic global companies and operated seamlessly, at scale, across the Pacific Ocean.

It’s worth noting GGV and Haystack operate at slightly different scales ;-)

Haystack is roughly $10M in the current fund, Fund III (and is only 40% invested). GGV just raised its sixth fund at $1.2B. As part of this special opportunity, I spend my Mondays at GGV and participate in a variety of the firm’s internal meetings. As someone who hopes to create a franchise fund, I am fortunate to have a front-row seat to learn how a large, global venture capital firm operates at scale, makes decisions, builds relationships with limited partners, and works directly with founders and entrepreneurial executives at startups.

This is all the professional stuff.

On an individual level, like many other VCs in the ecosystem who have helped me and individually been an early backer of Haystack, all of the six MDs of GGV have all been personal investors in each Haystack fund. They have even gone so far as introducing me to some of their LPs so I can build relationships with them over the long term — a very generous gesture. When GGV debates a large investment, the MDs will sometimes seek my counsel, and it feels great that they would care to ask my opinion. On the flip side, when I am stewing over a small investment in a very early-stage startup as a single-GP fund, I can always call or email one of them and have them spar with me about why I should or shouldn’t do the deal. Like with their founders, they will always make the time for me.

Almost a decade ago, I was on a path to finish graduate school and move to Asia. As part of that process, I spent many years traveling to and working in India and China on a variety of projects for the university. Ultimately, I chose to come back to the Bay Area, but those experiences in India and China still live with me vividly, and I learn so much via osmosis at GGV about how technology and consumers in Asia are building the next new things.

As we saunter into the final months of 2016, and as I set out to raise Haystack IV in 2017, I am thankful for all of the opportunity that’s laid out before me. As someone new to investing, there is no playbook and guidepost on how to do all of this stuff they call venture capital. Now, I get the benefit of working with two platforms and that is both exciting and liberating.

Reflecting On My Investment In Chariot (Acquired By Ford Motors)

I woke up on Friday ready for a day of back-to-back to meetings. Scanning my email, a few reporters had sent short emails asking about some embargo related to Chariot. I texted Ali, the CEO of Chariot, with a casual “Hey man, what the…?”

Then around 10am, my iPhone started to buzz. As with any type of acquisition of a consumer product or service — and especially one in the transportation space, which is red-hot this year — the news that Ford Motors had purchased Chariot (via it’s Ford Mobility Solutions arm [official Ford press release]) was of keen interest to folks in the echo chamber and beyond, as evidenced by the fact it was widely covered by The Wall Street JournalThe Verge, CNBC, Recode, Business Insider, WIRED, and more.

Investing in Chariot was a different sort of move for me, and it ended up being a different type of investment. Initially, I thought Chariot was a joke — as in, it couldn’t be real. Then, I received a very nice email from Ali, the founder, and poked around a bit more (see below). We agreed to meet. Over the course of a few months, we met a number of times. We didn’t have any mutual friends. I had to check his references. I even had to call his lawyer to verify his company’s bank account, records, and other items. Everything checked out.

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I still didn’t invest because it was so early. In that time, Ali and I became friends (spring and summer of 2014), and eventually I told him that I’d like to invest a little but mainly introduce him to everyone I know. At that point, Ali had raised some money from friends and family, had gone through the local Tumml accelerator, but couldn’t get past that milestone. Notably, Ali put down nearly $100,000 of his own money to lease the initial vans to get the service going. It may not sound like a lot given all the money floating around the Bay Area, but when you hear a pitch from Ali, you could feel that cash commitment was more than just a pound of flesh.

Chariot careened onward over the years, getting to the point where so many consumers would use it frequently (it had incredible retention rates), riders would spend over half a million dollars per month just along a few routes in San Francisco. It turns out that lots of people just want to get to work and back home without hassle, and they’re willing to pay a bit more than Muni for that comfort, but a bit less than UberX. Chariot added some interesting twists to its expansion model, most notably that it would encourage commuters to organize themselves and crowdsource their demand for new routes and “tilt” a new line. Along the way, Chariot outlasted nearly all of the other well-funded competitors in the space, and while we all know it’s hard to raise funding, imagine for a moment pitching Chariot during a time when Uber is surging worldwide and in your backyard. That is another level for degrees of difficulty.

I finally got to talk to Ali late last night, the day of the news of the acquisition. He told me the whole story of how it unfolded, and how he drove it to a close. It’s not my story to tell (more on that soon), and those details are a bit beyond the point. What’s most important to me — and when I’m writing this now, I don’t even know the size of the outcome [1] — is that working with Ali never felt like work — we were and we are friends. Work has evolved to a point that in some special cases, you are just hanging out with and helping your friends. As Ali was building up Chariot, he would periodically reach out to me, to ask me how I was doing, how building up Haystack was going. He even went so far as to ping all of his old banker friends and big families in New York City (where he’s from) on my behalf. Ali has called me countless times expressing his deep frustrations with some aspect of his quest to give birth to and nurture Chariot, and we have had our share of difficult conversations. There was a time where we didn’t really talk for a quarter or so, but we always remained friends. That made it even nicer to chat with him last night and hear the details — I could hear in voice that he was both excited and relieved, that a part of the race was over and he could energize for the next challenge ahead with Ford, which frankly sounds like an incredible opportunity for him and his team [2].

Some of the “exit” blogs from the investor-side can veer over into analysis — I could’ve have written how Ford is perhaps transforming from an automobile manufacturer to a transportation company. Or, some of them veer into the realm of how much work the investor did to help build the company — I did the syndication stuff, the YC stuff, etc. and I helped close some candidates, but to me, the real story is that Ali and I became friends through the process, and that’s what I’ll remember when I look for the next investment to make.

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[1] I received over 50 emails and texts yesterday from friends. All asked about the price, too. I have no idea! I wish I did, believe me. Ali is a vault. What I learned from this process is sometimes even larger firms don’t know the final price of a deal until the wires hit.

[2] Ali wanted me to mention that he is continuing with Chariot, full steam ahead, now with more resources at his disposal, and he is aggressively hiring: www.chariot.com/careers

The Story Behind My Investment In Saildrone

Years ago, I used to work in Oakland, commuting downtown daily while living off Dolores Park. That seems like a lifetime ago. Now, entrenched with work and family in the Valley, I rarely get to make it over to the East Bay — I wish that wasn’t the case, as I do believe many great founders emigrated across the Bay Bridge for slightly more sane rents and in anticipation of the changes coming with the spillover effect of entrepreneurship, as well as Uber’s new building in downtown Oakland. Perhaps the promise of gritty new founders and food with real taste will lure me back over time. I hope so.

Earlier this year, I invested in a small company in the aviation defense space. The founder of that company works closely with various agencies associated with DARPA and the Department of Defense, and even before the ink dried on my investment in his company, he told me about another “drone” startup in the East Bay — but this one built autonomous drones for the ocean. What? He couldn’t remember the name, so I did some web sleuthing and finally stumbled upon the company, indeed located in Alameda. I had a number of mutual connections to one of the co-founders, and reached out to him directly.

He wrote back right away.

In a few days, I rearranged my schedule for the day in SF and took a trip across the Dumbarton Bridge, up 880, and snaked my way to Alameda, out to the shore, and into the old hangar that now houses Saildrone. I got to meet the team, toured the facility, and saw the construction of various sizes of bright, buoy-orange seatless catamarans, outfitted with a neat onboard sensor panel, solar panels, and an unforgettable dorsal fin. I went through the motions in meeting, but in the back of mind, I was mainly thinking, one, “How do I get into this company?” and two, “How can I help them raise the round they need to?” I immediately assumed the former would work out, so started working on the latter, and am happy to have brought along a great VC firm into the syndicate around the Series A.

There are so many things Saildrone can do, but perhaps the most interesting is in its cost-efficient capabilities to continuously collect ocean temperature data down to the fractional degree in various ocean microclimates. For those who know how climate change models are built, one of the largest assumptions in those models concerns ocean and sea temperatures — a vessel like Saildrone can capture a granular-level of temperature data that can hopefully better inform and bolster those models. And, this is just the tip of the Saildrone dorsal fin, so to speak.

Saildrone is an exciting investment for me that touches upon three seemingly unrelated themes I believe will play a part in defining the future: (1) The market for industrial robotics, including autonomous drones (whether aerial or water-borne) will be enormous — I have a future post coming on this topic and my various investments in the space, stay tuned; (2) That local governments and municipalities will be under financial pressure from lower tax bases to reinvent their operations and services with software (which lines up with my investments in Remix, OneConcern, and Seneca); and (3) The rate of climate change is actually accelerating faster than even most liberal models can predict, and will force many coastal nations to set aside billions of dollars for FEMA-style funds to pay for all sorts of technologies to help deal with the effects of rising sea levels and atmospheric change — this lines up with OneConcern, and now Saildrone (check out a video here and see yesterday’s coverage in The New York Times).

The Story Behind My Investment In Mux

Earlier this year, Mark Zuckerberg stood in front of a deceptively simple and elegant slide that laid out the future of what Facebook will focus on. In that slide, we see everything from satellites to artificial intelligence, and beyond. In addition to far-out technologies, we also see a heavy emphasis on the power of video — delivered on the web or via mobile. And as 2016 has unfolded, we see mobile video exploding across brands like BuzzFeed (with Tasty), new brands like Arsenic, and of course, Facebook and its various mobile properties getting into the game alongside players like YouTube and Snapchat.

As everyone knows, increased video consumption in general is large consumer trend. While there’s certainly opportunity to invest in new brands emerging built on top of social networks, I am also interested in what founders will help power the underlying infrastructure of the growing market. Relatively speaking, watching video online or on your phone today is still relatively a new thing — and the experience isn’t great. We know a huge wave is coming — across America, most video consumption at homes is still via traditional cable — the Rio Olympics had 26M prime-time broadcast viewers in the U.S. versus about a half-million or so streaming viewers. Eventually, this will flip. Who will make that so?

On the Friday after the W16 YC Demo Day, I reluctantly took a meeting at 4pm, right before picking up my daughter at daycare. A friend recommended I talk to Mux because he also invested. Ten minutes into the chat, I was very glad I did, and 90 minutes later, as I drove away, I was figuring out how to squeeze into the deal. The founder of Mux, Jon Dahl, and his team are known in both the video (Zencoder) and open source communities (VideoJS) for bringing a deeply rich and technical background to their field.

Earlier this week, Jon asked me if I would write something in conjunction with Mux’s funding announcement. “Of course,” I replied — I am proud to be an investor in Mux, but I don’t like “timing” my posts with the onslaught of news, so I’m writing this today on a lazy afternoon where fewer people will see it. That’s no matter. Additionally, Jon pummeled with stats about the online video industry and technical jargon to include, but that wasn’t why I invested. In invested in Jon because the depth of his experience in his field is self-evident, because he received a strong recommendation from a close friend, and because the initial core of the company he’s building has started out with his friends — he doesn’t have to turn into a full-time recruiter to get off the ground, and within their long-lasting network, Mux can snap its fingers and get to millions of ARR when its first product hits.

Jon’s background and his team’s background give them a headstart in what will be a large, growing, and dynamic market. I simply believe that Jon and his team can do what they say they’re going to do, and it’s been fun to provide a pinch of help along the way. But the truth — the dirty secret — is that Jon and his team don’t need much help to get out of the gate. And, I get to go along for the ride.

Jerry Colonna Breaks Me Down On The Reboot Podcast

A few summers ago, I was driving from mid-Connecticut to JFK to pick up my brother-in-law. On that long drive down, I stumbled upon a podcast where Jason Calacanis and Jerry Colonna were chatting. I loved the discussion, listed to the entire podcast again, and wrote about it here. Embarrassingly at that time, I didn’t know “who” Jerry Colonna was.

Now I know.

Jerry’s current entrepreneurial endeavor is Reboot. Broadly speaking, Jerry and his team focus on coaching in an entrepreneurial setting, with a particular focus on helping people realize the obstacles and traps they themselves place on their path. I’ve listened to a number of podcasts with Jerry and it’s uncanny how he quickly isolates muscular tension.

From afar, I can understand how the crowd may think being an investor is easy and/or luxurious. And for some, it really is. But, it is also an outcomes-driven business, and it’s hard to know how you’re doing, it can be very competitive, and it is rapidly changing as new investment models and firm emerge. Brendan Baker recently tweeted about this and it is a good thread. As I have done here, I try to share my journey through creating Haystack and raising small funds. It’s really hard, but I love it. And while I’m perhaps more open about it than others, Jerry took his scalpel and made an incision right where some of the pain and doubt reside. It’s a bit painful for me to listen to this, but I hope it will be useful to me (and others) as it reacts with oxygen.

Thank you, Jerry, for the opportunity.

Here is the podcast conversation with Jerry. I’m usually quick to say what I’m thinking, but you’ll notice here I stutter a bunch and there are some long pauses. That’s all due to the fact that Jerry quickly cut to the heart of the matter and surfaced a topic that’s not so easy to have a conversation about.

At the end of the conversation, Jerry challenged me to write down four questions and write out answers to them. I thought about them this summer, and here are his questions and my brief answers.

1/ What kind of man do I want to be?
Beyond the basics of providing for and caring for my family, friends, and colleagues, I want to inspire others around me to have confidence in my dependability. I may not say things they want to hear, but I hope to be consistent. I want to focus on fewer things and pay them the attention they deserve. I want to age with grace while staying as close as I can to newer generations who come of age.

2/ What kind of father do I want to be?
I want to spend as much time with them as I can without the need or pressure to be doing something specific in each moment — just being around each other. I want to foster a home culture where our family takes trips together, looks forward to hanging out together, where family members help others without prompting. I want to be a father who lets my kids make the little mistakes they’ll eventually learn from, and to be a reliable, strong resource for them as they mature and encounter life’s greater challenges.

3/ What kind of leader do I want to be?
I haven’t really experienced being in a leadership position. If someone else does look to me for direction, on- or offline, I would hope that I could be someone who consistently does what he says he will do and isn’t afraid to change his mind when the facts change or are examined from a different perspective.

4/ What kind of investor do I want to be?
I want to attract and align with visionaries who can articulate a far-off future that stitches together complex themes, technologies, and movements. And when I find those people, I want to earn their trust and respect to help them in the ways that I believe I can. To find these people, I want to spend time with them, to read as much as I can, and write about my experiences along the way so I can continue to learn, to be challenged, and continuously shape and refine my ideas for the future.

Light Blog Housekeeping

Every summer, I try to revamp or clean-up this blog. For this summer, it was more about clean-up. There are still some loose ends to be polished up, but briefly, here’s what changed:

1/ The “Haystack” Name: For some reason, I named my site “Haywire,” and that name permeated through Mailchimp, throughout my site, and for other places on the web which syndicate what I write. It rightfully created confusion, all the way to the point where people thought that was the fund name or that I worked for Haywire. It was a stupid idea on my part, and now that’s fixed. Sorry about the confusion.

2/ Top Navigation Bar: I removed “Discussions” because it was never used, replaced “Haystack” with “Portfolio,” and added a Table of Contents along side the Archive, which is reverse-chronological. I hope to add some interesting tabs to the navigation bar over my career.

3/ WP-Engine Hosting: I moved over to WPE. Still not easy to manage, but this site is all I have, so I want to make sure I retain full control over it.

4/ Formatting Miscellany: I increased the font size, added more sharing buttons at the bottom of each post, tried to improve my short and long bio, did some jujitsu to get around ad-blockers (even though I don’t have ads, they still mess up some social icons).

5/ Removing Comments: It’s an end of an era for me. Comments on the web are done. I may add FB Comments Plug-in in the future, but not holding my breath. I love the Disqus product and team (have many friends there), but comments on my site died a slow death and it was time to rip the cord.

Transparency Is Coming To Venture

Today is a big media day at Haystack Fund! Just kidding, but for some reason, previous discussions I’ve had with reporters and media all seemed to surface online today. As I was reading through them and figuring out how to share them, I noticed a theme running through the conversations.

Why all at the same time?

If I had to pick a reason, it would revolve around the idea of transparency in venture. Now, I don’t mean transparency for transparency’s sake, as many people leverage it for their own branding or marketing — and there’s no harm in that. For me, I am thinking about the future of how private companies are discovered and get financed. Part of that future, I believe, will be operating in an environment with more regulatory oversight over how reporting is conducted in the private sector. That means, how do companies report to their venture investors, and how do venture investors report to their investors, the limited partners? And, as more information is shared, how do all parties ensure the information isn’t shared more broadly without a record of who has keys? These are all pertinent yet thorny questions, and with political change in the air, I see these coming.

That theme comes out in the conversations I’ve had below:

1/ Katie Benner of The New York Times: Katie is a friend and a darn-good reporter. She has written before for Fortune, The Information, Bloomberg, and now The Times. She also wrote a great piece on how employee options work at Good Technologies, shining on a light on a topic that affect so many in the ecosystem. Recently, I spoke with her and am quoted in her article today, titled “Making Startups’ Financial Data Free And Open,” which appeared in the July 25, 2016 Times.

2/ Guesting for StrictlyVC: Each summer, I get the pleasure of writing for StrictlyVC while my friend Connie takes a much-deserved break and searches the shores of coastal Maine for rare sea glass. Last Friday, for my column, I wanted to share more details about what I’ve learned in raising three small funds. You can read the FAQ on StrictlyVC here. For some reason, I get a lot of questions about it, and I’ve committed to sharing the lessons I’ve learned (with a grain of salt) here in an open way. The angle of transparency I’m going for here is that it’s really hard to get the funds up and running. Just this weekend, I talked to a friend who has been a founder and had a huge, notable exit as an investor, and is still having trouble raising a small fund. More on this below.

3/ Interviewed by Harry Stebbings on The Twenty-Minute VC: You have probably heard one of Harry’s podcasts. This guy is a machine when it comes to creating, editing, and distributing podcasts. And, he really prepared for our conversation. In the discussion, we chat about topics such as: defining “founder-friendly;” branding in VC, experiences in raising a fund, and more. I want to stress again that Harry did a great job editing this down to 20 minutes and you can listen to my soothing voice, but not when you’re driving, please — you may fall asleep at the wheel! (Link to Apple Podcast here.)

Venture Capital as a Hyperlocal Game

A few weeks ago, Chris Mims of The Wall Street Journal wrote a great piece on the struggle between entrepreneurial energy spreading across the country while the dollars allocated by LPs in venture capital funds increases in concentration in the Bay Area. Specifically, Mims reports that while the share of U.S. VC dollars allocated to startups in L.A., NYC, and Boston roughly amounts to 20% overall over the past two decades, the share going to Bay Area startups has ballooned from around 30% two cycles ago to over 50% in 2016, when we saw many large funds scoop up massive LP dollars.

This is a touchy subject, because for a variety of reasons, the Bay Area isn’t the most welcoming place considering the costs and cultural corners, yet as the country emerges from the Great Recession stronger in aggregate, the “cap table” of that rebuilding has shifted dramatically to the coasts (and a few coastal cities in particular), and especially, to the Bay Area. Additionally, before I begin this post, I want to disarm the chorus in advance — I know that companies can be built anywhere, and that there are plenty of examples of VCs in the Bay Area investing outside their market, as well as great VC firms which are headquartered outside the Bay Area. There’s an advantage to being local, and those who breakthrough outside this chamber deserve extra credit, for the odds are more difficult.

The point of this post, however, is to share some observations on how location — either via proximity or distance — drives so much dealmaking, and then to share some ways to overcome geography. I’m reminded of the lyrics of a Tina Turner classic: “What’s love got to do, got to do with it? What’s love but a second hand emotion?” Just replace “love” with “location,” and the answer is: A lot.

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Why is location so important to LPs, those who invest in VC firms, and the VCs themselves?

1/ Only way for VC firm to exit is IPO or exit (or selling shares in future rounds). IPOs are rare, and becoming tougher given the startup narrative to stay private as long as possible. Exits are also rare, and most of those big exits (per CB Insights) occur in California. If location drives M&A, location will also then impact where a VC allocates dollars. (Location also helps drive a closer bond between VC and founder, which helps in cases like special liquidity events for an early investor to sell shares, among other techniques.)

2/ Proximity affords VCs more time to track a founder or investment. Whereas the seed world moves on quick decisions, I’ve seen many VCs track potential investments for about a year, either waiting for the timing to be right and/or to gain a better picture of the company and team. Here, proximity drives familiarity and eases the fears of an investor who may not otherwise have enough time to get comfortable with the risk presented to them.

3/ LPs want their GPs to be active managers of their investments. It’s possible yet still hard to be an active VC or Board Member when the company is a 6-hour flight with a connection away, but yes — I know — many do it. But, that right has to be earned. If you look at the folks who do this well, they are considered rainmakers by LPs. And, there aren’t tons of them.

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Ok, if this generally the reality, then what? Here’s how I briefly breakdown what startups at various stages should consider about Bay Area capital:

Seed – If you’re outside the Bay Area, raising seed capital in the Bay Area is hard. Seed capital is mostly institutionalized now, meaning those investors are investing other peoples’ money, and in order for them to get a return, they need to see a large potential multiple on what is a smaller check, and one where their stake will get smaller with success via dilution. For founders in ecosystems like LA, Boston, NYC, Seattle, Chicago, seed ecosystems have emerged thankfully to pick up the slack. Those funds can theoretically be more “active’ with their investments by being local, and theoretically help prepare those seedlings for future rounds, where the Bay Area may come into play. For those who are pre-seed or in the seed stage without much traction, it is really hard to raise a seed round in the Bay Area because local investors here have so many options to invest locally.

Series A and Series B “Classic VC Rounds” – Because of the economic incentives of traditional VC funds (firms managing $150m to $1 billion or so), those GPs have to allocate their dollars to the best economic opportunities they see, regardless of location. It is already quite difficult for a Bay Area company to get a Series A done, so imagine how that risk increases for something out-of-market. That said, and no one will say this publicly to you, but the bar is exceptionally higher for a Bay Area VC to make an out-of-market investment. Yes, they will miss good companies (as I wrote last night about Dollar Shave Club). Luckily for founders, non-Bay Area VCs will invest out of their own market, as we saw with Dollar Shave as well, or with east coast firms that invest in Europe, and so forth. For those founders who are outside the Bay Area and seeking a classic Bay Area Series A or B round, the formula to score one is to (a) demonstrate exceptional growth, where you will be offered multiple term sheets, or (b) invest in a long-term relationship that eases the fear of location in the eyes of your target VC.

Growth VC, Pre-IPO or Pre-Exit Rounds – At this point, more people want to give you money than you have room to take, and regardless of your location. So if you make it here, location doesn’t matter.

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This is a tough subject to write about. I know it’s unfair, especially as so much of the rebuilding from the Great Recession is seen through the opportunity of building a business. Everyone wants to be Zuckerberg or be on Shark Tank. Everyone wants to be CEO or an investor. And while it is possible, location drives a lot of it, and that particular location isn’t an easy one to physically crack into.

I myself have flirted with the idea of not living in the Bay Area given the increased traffic, congestion, and cost of living, but then I see the power of the local network effect and get nervous. So much of what I do is a local game. Hyper-local, in fact. I’m in awe of those who do it outside the physical network because it means they are even stronger. We moved back to the Bay Area in 2011, and I wonder how hard it would’ve been even if that was pushed back a year. As I’ve shared with you all here, I’ve had a very hard time finding a space in the ecosystem and generally believe my proximity to the epicenter helped me increase my “surface area of luck.”

I wanted to write this post because this issue has come up a bunch with founders I interact with outside the Bay Area, and I know reporters or larger VCs won’t write about it because most reporters don’t understand the nuance to the financial issues like Mims detailed out and the investors don’t want to cut off any potential flow of deals.

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There is a silver lining, however: With billions more people coming online worldwide over the next decade, with new geographies emerging with their own capital bases, with traditionally underrepresented minority groups begin growing into the dominant majority, and as larger Bay Area firms grow even larger fund sizes, the types of opportunities created over the next two decades may look different than what occurred over the last two decades. And, thankfully, there are plenty of LPs and VCs (even in the Bay Area) who see the opportunity and are positioned to take advantage of it — or have been taking advantage of it for quite some time (more on this in a future post). You’ll hear about those returns over the next few years.

The Story Behind My Investment In Myra Labs

This is going to be a fun story to write about Myra Labs.

About a year ago, my good friend Nakul told me I should meet this guy spinning out of Bloomreach — Viksit. I happen to know one of the founders of Bloomreach, who quickly pinged back to endorse Viksit as one of his top engineers. We met up last summer, and at the time, he was developing a bot for chatting inside Whatsapp. We met for coffee in Palo Alto. A few weeks passed, and we met again, and during that time, Viksit had single-handedly built integrations into other chat apps, made friends with folks who were working for Telegram, and had somehow smiled his way into developing some relationships with more closed mobile messaging platforms.

We met a few times and while I initially didn’t think it would work at scale, Viksit always had a non-obvious and insightful rebuttal to any areas of doubt. He is relentless in this way — and I will come back to this trait. As the summer ended, I hadn’t gained enough confidence in the specific application (going directly to consumers with these bots), but I had gained confidence in Viksit. This was right around the time I started my Fund III and was writing what would be larger checks (for me, relatively). I committed to Viksit that I would invest and also open my entire syndication network to him. I gave him a strong recommendation and made a ton of intros. I was searching my email for the exact date and text: August 31, 2015. In the email, I wrote:

MYRA

Round: $300-350k open on $5m cap, 20% discount; Small round, just me, a Waze co-founder, and early Whatsapp eng, and the two founders of Bloomreach, where he was previously (this may be best-suited to individuals).
Background: Myra is an intelligent assistant tied to a phone number and virtual machine for each user. Viksit himself has already built integrations with Whatsapp, FB Messenger, regular SMS, and Slack.
Risk and Fine Print: I know what you’re thinking – “uh, another bot. Won’t the clients just own this like Moneypenny and FB?” So, I dragged my feet on this for the same reason for weeks, but Viksit handled every strategic question I pummeled him with for weeks. He is a very deep systems thinker and strategist, in addition to being an incredibly productive engineer. I know his former boss (Bloomreach CTO) very well and he also is investing and remarked on his drive and intellect. He’s been obsessed with all the messaging platforms, and that’s essentially why I am investing — the sheer size of all the world’s messaging clients and their restrictive power and influence over how those billions of people will use the web is super interesting to me.

Then the round started to break down. Viksit and I had a number of hard chats. I don’t mean to imply that I could save everything as I have a very small fund and rely on the broader network to syndicate and co-invest. As I replay those conversations, I know Viksit was nervous and there wasn’t much I could do except give harder advice on how to keep going, raise less, lower the cap, etc. To his credit, Viksit stayed with it. He eventually caught the eye of one of the best seed VCs out there (as well as this little, new enterprise tech company called “Slack”), and after a month of deliberation, got a larger seed round with a fantastic investor. It took much longer to happen, but it happened.

That’s the relentlessness I referenced earlier in the post. During those difficult investor meetings, Viksit slowly digested the feedback from the community — mainly that the opportunity to go direct to consumers inside siloed native messaging clients would require too much permission and, therefore, too much friction. Viksit shifted course and moved Myra away from direct-to-consumer and, instead, focused on empowering developers, big or small, to build conversational interfaces in a platform-agnostic way. In this manner, when messaging clients break out, or when new interfaces (like voice) emerge, Myra is flexible and extensible enough to handle the terrain. Additionally, their architecture can recognize similar users across applications, so that you (as a user) don’t have to worry about resubmitting your preferences within each silo each time. The machines actually learn who you are within the context of your interaction. (You can read more about Myra and link to their site here.)

In the time that we’ve gotten to work, I would say that Viksit and I have the most “tough conversations” I have with any startup. It’s partly because we are comfortable with each other and I have now known him for a year, partly because we are both prone to debate and argue in a mild yet relentless manner, and at times, it has led to one of us getting frustrated. I am sure he’s frustrated with me right now in reading this! But, ultimately, we are friends and have built up trust, as well, and he can really create a rich product and evangelize his vision to a degree that’s rare to find. I’m lucky to be a small part of it all.

Since that initial email above, the attention toward bots has exploded, this past April 2016 to be exact. I wrote about the craze here. As I surveyed the market, I was lucky in retrospect to pick Myra early because it is in the #2 category I outlined (“picks and shovels”) and, so long as they can woo developers to build with them and help them scale, the company can grow as the more activity goes inside messaging clients and interfaces, and/or becomes more conversational in nature. Ultimately, no matter what does happen, I know the Myra team will always bob and weave their way to the best opportunity — and I want to publicly congratulate Viksit on not only putting up with me, but also staying the course during a challenging market for fundraising. It all paid off for you.

The Story Behind My Investment In ScopeAR

Back around the holidays in 2015, one of my LPs (who is also a friend) sent me a note about a YC company from the most recent batch, S15. I had been at YC and saw the company, but hadn’t been thinking about the “AR” space. I know they’re unrelated, but previous to this, I had made one small investment in a VR infrastructure company, but it isn’t a space I would claim to know well. As a few months passed, however, I had picked up interest in industrial software and robotics, so learning about ScopeAR again proved out to be excellent timing.

Discovering and investing in a company like ScopeAR is yet another case of where the founders guide me (the investor) to learn about their technology and market in real-time. Within a few email exchanges and conversations, it was apparent to me that Scott (the CEO), David, and Graham would be easy to work with as co-founders. On top of this, I liked their enterprise and/or industrial focus (which fits within my themes), and it was immediately clear how their solution would save companies money from Day 1.

Luckily for me, by the time I had invested, ScopeAR had already won the business of companies such as Boeing, Lockheed Martin, and Honeywell, among many others. ScopeAR boasts two products to date — WorkLink (a platform to create smart instructions), and Remote AR (powering remote collaboration via AR) — which help their customers increase savings from industrial hazards, operator errors, and operational inefficiencies.

When I invested, the main interfaces were largely considered to be iOS or Android platform devices. In a serendipitous turn, I was invited by friends at SVB to a small drinks reception and conversation with Satya Nadella, who during that chat specifically called out Hololens as a major core focus area for the company in enterprise settings, and that in such settings, AR might be the first technology to be adopted on the platform. Once I heard this, I ambushed him (in a friendly way), called up the ScopeAR site on my phone and he deftly introduced me to his SF-based Corporate Development Team — I was able to follow-up and got the team in touch with Microsoft on this initiative.

That’s about all I’ve done so far, and as I write out this story, I realize just how fortunate I am that my friend tipped me off to the deal, that enough time had passed for me to develop an interest in the space, and the founders were extra nice, kept the same terms from their round, and let me slide into the deal. They did me a huge favor, and for that I am grateful and want to work extra hard for the team. I recounted this story last week at an industrial hardware meetup I co-hosted with Lemnos, and we joked that the deal was sort of like a “booty call” at the end of the round. As they say, a seed round is never closed — and thank heavens for that.

It is crazy that within a year of ScopeAR’s time in YC to now, AR has gone from a concept to something millions of consumers interaction casually on their phones, either through Snapchat or Pokemon Go, among others. In a work context, it is easy to envision how processes can be improved by using connected cameras with information overlaid on top. Given the way the winds are shifting, I look back on this investment decision with a smile. It’s easy to imagine a world in which ScopeAR’s current customers use new platforms and go deeper into various industries. And, lucky me, as I was able to hop on the train just as it was leaving the station.

Haystack is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2016 Semil Shah.

“I write this not for the many, but for you; each of us is enough of an audience for the other.”— Epicurus