Lesson: Picking Winners with Ullas Naik

Step #6 Adding Value: Deal-chasing vs company building

Anytime we're investing in a company, there's a reason we're investing. We're investing because we want to have that investment grow in size. The way you have the investment grow in size is for the enterprise to flourish. And for the enterprise to flourish, the entrepreneurs have to execute to a certain plan. But they cannot do it by themselves. They need the entire ecosystem to be helping and the investors are part of the ecosystem. So as an investor, I should be doing everything possible in order to be able to help every company that I'm involved with as much as I can given my set of connections that I might have, that could be value-added to them. Sitting down with them for strategy sessions if they need that, tactical execution if they need that.

So different people have different amounts of bandwidth to be able to provide to this. But certainly if you're a prominent investor in the sense that you're a prominent investor in the context of that syndicate, then you should be trying to add value on strategy, tactics, governance. As well as business development leads, recruiting. All of those things are open areas where the entrepreneurs can do with some help from seasoned investors.

The other area, sometimes, which is helpful also, is just communication. Where sometimes, communication between founders breaks down and they need an adult to come in who can help them sort of grease the skids and get that communication going again. I've played that role often with many of the companies I'm involved with.

My model for my fund requires me to stay involved at least through the Series A. At which point in time, presumably, they'll have a board of directors with a very seasoned investor joining the board of directors who can then help. Then, I'm always involved, but perhaps the level of engagement decreases a bit.

At least it was a model. It's not played out exactly like that. I've still stayed involved in many of my companies where their Series A has been raised. But I suspect that I invest more and more, I will not be able to physically manage that. So over time, that level of involvement will decline. It will be a very heavy involvement from seed through Series A on everything from strategy tactics, fundraising strategy as well. Then a slightly more tapered involvement after that.

I love the shiny new penny as well, like everybody else, because it's always exciting, something new and that the thrill of the chase is also a big part of this. So I enjoy that just as much as everybody else. But at the same time, I realize having been an investor for a long time, that just the upfront investment alone is not adequate. That's just one part of the equation. The other part is actual company building. So I do spend a fair amount of time.

I used to be on boards before. These days, I'm trying not to take board seats, although my last investment which I just closed last week, I did join the board. But I'm trying not to take as many board seats. I'm trying to be as value-added as I can outside of a board setting.

But I think, for me, it's half and half. Different people, it's different. Some people, especially the seed stage investing side, are predominantly deal-chasing because that's what their model calls for. It calls to invest in a lot of companies with limited involvement and involvement only when the entrepreneur calls on them. Whereas in my case, it's slightly different. I have very regularly scheduled sessions with all the companies I invest in. Once a month at the very least, often in some companies' cases, multiple times a month.

When there's a recruiting push going on, when they're looking to hire VPs, I'm involved on weekly calls and such as well.