Singularity on CNBC

A few weeks ago, I took part on CNBC’s ‘The Pitch’ on the ‘Enterprise Inc’ show. The show is now up on YouTube, and can be found at:

http://www.youtube.com/watch?v=yvm9_iztdOU&feature=related (Part 1)

http://www.youtube.com/watch?v=fGYG8-2lQ7c&feature=related (Part 2)

http://www.youtube.com/watch?v=LWEcTsIKAdY (Part 3)

TiECon Chennai 2009

I will be there tomorrow, and will be taking part in the Pitch-To-A-VC segment. So if you are around, stop by and say hi!

I will also try to periodically tweet from there at www.twitter.com/tejus_sawjiani.

Making seedstage investments work

So we gave a recent interview with VCCircle briefly outlining our thoughts & model going forward. You can read the interview here.

We’ve done a range of investments in the last few years – ranging from seed stage, late stage VC, inside-out PE and so on and so forth. As a consequence, we’ve put in a lot of thought in trying to find a workable model for seed stage investments.

This is a difficult problem to solve – just take a look at all the incubators and seed stage funds out there, most of them with limited success. We’ve put together a new business model for seed stage investments, that will be different in many ways from a conventional early stage fund. I will briefly outline a few of the key differences below and expand upon them later:

• We are staying away from traditional compensation structures as fund managers. In any investment we make, we will be significantly personally invested. We don’t make money until our investees make money.
• We will concentrate our positions in a handful of companies, where we will take significant equity. Our goal is to find situations where we can add value, and leverage those situations. We won’t spread ourselves thin and diversify excessively. The goal is to be ‘narrow and deep’ vs ‘shallow and broad’.
• We will be invested for the long term. We expect to hold on to our companies for at least 8-10 years. Where appropriate, we will help our investments raise follow-on financing within 12-18 months.
• The goal is to validate our investment by bringing on additional investors on board.

We’ve spent a long time thinking about how to make seed stage investments work, and the above is just a brief distillation of our thought process so far. We will keep expanding on our approach going forward.

Investing in Developer Tool Companies

I met a founder at an interesting developer tools company recently. We got talking about how difficult it is for dev tools companies to get funded.  This is generally due to a couple of reasons.

For one, it’s difficult for investors to understand the value proposition. Usually, one needs to find the right kind of investor to appreciate the value that is being delivered by the product, and to understand the pain point that it solves. Given the volume of pitches that an investor might hear, it’s usually not very easy to pique investor interest.

The other important issue is defining the exit strategy. Some companies I’ve seen are one trick ponies (micro-ISVs) that will provide some degree of cash flow, but with very limited exit potential. The exceptions do exist, but they do nothing more than prove the rule.

It’s not that we wouldn’t fund a developer tools company. It’s just that one needs to be understand the embedded scalability issues that are inherent in this business.