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Google PodcastsManan Mehta of Unshackled Ventures joins Nick to discuss Selection at Day 0, Investing in Immigrants, and Navigating Founder-Problem Fit. In this episode we cover:
- Walk us through your background and path to VC.
- Tell us a little more about the thesis at Unshackled Ventures. What do you look for in an investment?
- What is it like investing at Day 0?
- Talk about your approach to sourcing and how you do it differently than other firms.
- How can backing immigrant founders create a great talent pipeline?
- Do you consider YC a threat?
- What is Founder-Problem Fit?
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The host of The Full Ratchet is Nick Moran, General Partner of New Stack Ventures, a venture capital firm committed to investing in the exceptions.
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Manan Mehta joins us today from San Francisco. Manan is founding partner at Unshackled Ventures a day zero venture fund for immigrant founded startups. Prior to founding unshackled ventures Manan was head of marketing at Kno, which was acquired by Intel. Manan, welcome to the show.
Thanks for having me, Nick. I’m looking forward to it.
Yeah, likewise, talk us through your background in your path to VC.
Yeah, so I think we take a pretty unconventional pathway to VC. Born raised in Silicon Valley, son of immigrants, my father ran global sales for a company called Tibco. Really best known now because the CEO and founder of Tibco, owns the Sacramento Kings. I got a dual degree from UCLA and engineering and econ. And then took that engineering degree and decided to become an investment banker. So I did that for three years doing all tech m&a on the west coast here in San Francisco. That was between Oh, seven and 10. So quite the time, think about finance industry, and with credit default swaps and mortgage backed securities, which forever. Yeah, it was at the Royal Bank of Canada. And so courtesy of our friends up north, it was much better being a Canadian bank, specifically, in the early 2000s, they were much more conservative than some of their counterparts in the US. Well, a lot of the banks were trying to get their balance sheets to look okay. RBC saw it as an opportunity to be proactive and hire a lot of people. That conservative background resulted in very minimal exposure to the credit default swaps in the mortgage backed securities in the US. And so as a result, RBC moved up the cap tables and rank tables pretty quickly. And that was a great place to be. And so, you know, kind of the marquee transaction that I got to be a part of was $1.8 billion, take private of Skype that Silverlake Andreessen and index did together early days of Andreessen Horowitz at that point in time. It was cool to be part of that, that process. along that journey, I met the founder and CEO of a company called Chegg. Many people know them for their orange boxes, textbook rental company for college students. He was working on another startup. And I was tasked to figure out what he was doing because Chad was looking to secure some bank debt. But the CEO and founder was working on something else. And so again, conservative bank wants to know why the CEO is doing something else. And so I got to know Osman Rashid, he was a founder of Chegg immigrants, immigrant from Pakistan. And you know, in that journey, after my three years of investment banking, I reached out to him and said, Hey, would you hire me? Would you hire somebody who’s got three years of investment banking? To join your team, your next company called Kno, and I won’t forget this. I met him on October 26, in person for a 30 minute meeting, and I joined the following day, started the following day. And he told me, this will be your MBA.
So is it was it him? Or was it the experience itself that really drew you in?
A little bit of both, certainly him very dynamic, very compelling. He had built his, his pedigree, as somebody that was trying to challenge conventional wisdom, and innovate with his model. But also, for me, it was, it was a really good opportunity for me to go from theoretical knowledge as an investment banker, and, and cut my teeth a little bit on how do you build something? Um, how do you sell something? And so having no marketing background whatsoever? I asked him, you know, where can I fit? He said, How about you joined the marketing team. And I think the combination of joining an early stage team when you can still talk to the CEO, coupled with a very dynamic CEO, who had been successful, up into that point, already has an entrepreneur. And then he promised me a MBA boot camp, if you will. It was really easy to say yes. And so much so that I, my first day was the following day. We didn’t wait the weekend. We started right away. Three years into that journey. Ultimately, the company got acquired by Intel, I rose from an entry level position to running the marketing team. And it was one of those parents where you can sit in boardrooms and board meetings with the likes of Marc Andreessen, CEO and other investors. That as a 27 year old was irreplaceable. And that was my first exposure to the VC landscape, if you will, just in those board meetings, you know, right before the acquisition by Intel. I asked those mind you know, what would be the right time for me to leave to start my own thanks.
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I didn’t want to go to any till I was relatively young, and didn’t want to pursue that career pathway, and I want to take some bets and risks on myself and so I started a company in between no and unshackled with a co founder that was on a visa on an h1 B visa specifically. And nine months into that helped me realize that his immigration status was slowing us down. He couldn’t leave his full time day job. They were sponsoring his visa. And while I can work day in and day out nights and weekends, Paul, he could do with nights and weekends. And so that’s when we realized that there’s this population of entrepreneurs that are working at co working spaces working nights and weekends, but couldn’t go full time because of employment and sponsorship. And so that’s when I started talking to Nathan, who I had met at No, he was running finance, about how do we create a solution for this population of entrepreneurs. And lo and behold, on April 1 2014, unshackled was born, we were at a specialties, discussed it, Nick, and had kind of created a framework. 30 days later, we were, we bought a booth at a large entrepreneurship conference, we were a beehive. We had made these shirts at the mall printed out startup visa, starting a company on a visa starter.
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And we became a beehive. And that was our customer validation work. We proved that this was a problem that people quickly understood that there was a solution for set out to raise three and a half million dollars in the raising a million more and unshackled fun. One was born at four and a half million dollars. And less than a year from when we conceived the idea we made our first investment. So March 15, I think we wired our first investment into a founder on a visa. And the rest is kind of history. And this is what time period. Yeah. So that first investment was 2015. And did this start as a startup idea? Were you thinking about optimizing the the path for immigrants to either work in the startup world or beyond? Or was it always a venture fund? It was always a startup idea. And what we did was really look for the most elegant product to build, right. And there was conversations around should this be a Delaware C Corp, should this be or nonprofit, or should it be a venture fund, and we explored all the pathways. And ultimately, what we realized was that if we were going to deploy capital, the underlying recipients of that capital, were looking to build venture, scalable businesses. And they didn’t want a handout per se, they didn’t want us to give them a grant. They didn’t want us to give them a donation. They want to be held accountable to the same things that everyone else in the startup ecosystem were being held accountable to, which is proven customer validation, proven go to market and ultimately scaling. And long story short, we ended up having to really understand various elements of our legal system, everything, certainly from immigration, which was a very paramount thing to understand. But also, we had to understand SEC regulation, we had to understand labor law, we had to understand securities law, IP. And when we started architecting, this and spending time with attorneys spent over 300 hours with attorneys, it became really clear that if we were going to do this, we were going to create incredible value. And the best form of taking that value and monetizing it is to the venture fund. So our product really was the derivation of a lot of customer validation and discovery. And then we had to learn how to become VCs, we had to learn what it meant to source selected support. We had to learn what portfolio construction was. And then that’s the job of an entrepreneur is to learn the rules of the game that you’re selling into, and try to be as good as you can. Amazing. So in those early days, I imagine you had a lot of immigrants reaching out, are these all folks that wanted to start businesses? Or were some just looking to to work in the startup industry? And how did you service those folks, you know, what is the core product or workflow that you built in order to enable and empower these folks to work in the industry and not run into the typical visa issues. So the goal of this was always to not compete with traditional venture capitalist, we did not believe given our backgrounds and our stage that we were going to get access to talent that that was already being sort of everybody else is the goal was to look for an entrepreneurial pie that was going overlooked, unnoticed or discounted. And that was those founders that were at day zero, that we’re on visas, and Conoco full time on it. So really the product that we built from the very beginning, composed comprised of three things, friends and family capital, you know, our first one we were writing checks with 150 to 200k. Now we write checks of 350 to 500k. But that first money in alongside or before the incorporation of the business. The second thing that we were going to do and we’ve always done is provide full immigration support, including sponsorship, we have done 170 Immigration filings since we started in 2015, with a very first investment.
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And the third thing that we we saw, which is a little bit more commonplace is how do you connect the unconnected, right? How do you how do you provide the network of resources to help a company succeed faster. And if you can combine those three elements alongside the incorporation can a pie that was simply just working nights and weekends, you could actually get in at relatively compelling economics, very similar to how friends and families typically invest, maybe in people not so much the idea, and that would allow them to have these immigrants appears to have a pathway to other traditional venture sources. So whether you’re going to YC, Next, you’re going to get capital from First Round Capital or floodgate, you name it, they become natural recipients of founder that we promise on ramp so that they can then fund them. And so the idea has always been around a bottoms up approach to entrepreneurship, to give them the resources to be successful. But really, more than anything else, it was our tip of the cap that suggested that traditional venture sourcing was not finding all the right entrepreneurs, it was following a lot of other people. We wanted to challenge status quo, made a commitment that if you fund these entrepreneurs, you were not funding adverse selection, you were rather investing in the rising stars that no one else knew about well, and helping create those stars to some degree if Otherwise, they wouldn’t have the opportunity. Yeah, I’m the first one to say this country is narrative of immigrants finding a way is well documented and consistent. I don’t know if they would not have a way without us. I think it’s just a matter of how much longer would it have taken? What I believe is, as a venture capitalist, our job is a customer service job. And every business that we all fund as an industry may exist without us because guess what, before PC existed, so two businesses, but our job is to help them move faster. So whether you’re deploying a $3 billion fund or a $30 million fund, your job is fundamentally there to help those entrepreneurs move quicker. And so for us, it just made sense to help these immigrants who are now getting all the immigration hurdles come a product, but they can move quicker. That second component of your model, is there. Is there something that’s novel or unique about the 300 hours you spent with attorneys to figure out how to sponsor these folks? Yeah, and ultimately, it comes out to be quite simple. In the end, we are in a position where if the startup cannot sponsor themselves at their own company, the founders cannot sponsor themselves their own companies. unshackled can sponsor your visa as unshackle being the employer. So we can operate as an r&d Technology Lab. We are an r&d technology lab. So we can use our balance sheet to sponsor you such that if you’re on a specific visa that requires employer employee relationship that requires prevailing wages to be paid, all that can happen through the unshackled structure. So that was what we effectively said in the very beginning, which is it’s one thing to say we can help those that have extraordinary alien visas is one thing to say those we can invest in immigrant with green cards, is something totally different to say, regardless of your immigration status. You can start your company because of a check today. But you guys don’t take leadership position in the company itself. You just have a separate arrangement with the founders in cases where that’s required. Yeah, founders set up their Delaware C Corp, we invest, let’s say $300,000. For some valuation cap, we’re on the cap table standard safe notes. We don’t reinvent the wheel there. If we need to do their sponsorship at unshackled, we can deploy that through payroll. So effectively, they are now employed as a shackle, but they still own all the IP, it’s all pre assigned to their own company. Everything operates feels breeds, like any other venture Fundable Company, there’s no transfer of IP because if there was, that’d be a taxable event at fair market value. It was all constructed so that if you are any investor after us, it would not require any more work on your part God in the standard investing diligence that you do. And then what about folks that come through the pipe that are interested in working for startups, but maybe not leaving their own? I’m sure you get a lot of really talented folks that love to join a rocket ship, you know, how are you triaging and working with those folks? The end of the day, our job as a as a conduit is to connect them to these companies, right? Every company operates with a set of open wrecks and needs and can as those are made apparent to us and towns looking for opportunities. The truth is, is every one of our portfolio founders will hire both native born and foreign born. It’s just part of their DNA, right? And so many of them will also hire domestically and internationally because they have access to those networks. And so as a result, the aperture of opportunities that can reach a population is significantly wider. And there’s never going to be a situation where, you know, I’ve heard this from seed funds that tell founders, if you’re looking for talent
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On a visa, don’t do it right now wait till later. It’s too hard that would never happen and unshackled portfolio company, right, just the antithesis of what we do. And so all that said and done, here’s the truth of it are 61 companies that we’ve invested in now have created over 1200 jobs. So what’s happening is if you support immigrants at Day Zero, their natural job creators domestically, not all their hiring are foreign born, in fact, I would argue, is 8020, native to foreign. And as a result, you create opportunities for a much wider spectrum of people who then can join these early stage companies. And I think that’s a recipe that makes a lot of sense. Well, it’s a country that was built by immigrants, right. And in a world now, where talent is probably the most challenging thing when it comes to big business or small, and it’s the center of many conversations, when you go to conferences and whatnot, this is really a way to open up access to talent, instead of suffering from the constraints of poor policy. You know, look, we started this back in 2014, and 2015. Right. At that time, it was the Obama administration, followed by the Trump administration, followed by the current Biden administration, every one of the funds that we raise is a 10 year Fund, which means we’ll see at least barring any constitutional changes to different administration’s at minimum during a fund cycle. So our approach has always been that we have to be a solution across policy and politics, we have to be a stable platform that can protect the right for innovation in this country, and also protect this idea that the best should still come to America and build what they want to build here. I like to remind people that even Fox News started by an immigrant, Rupert Murdoch, is a native Australian. So it’s not to suggest that right versus left, both sides can agree that if we can secure and support these innovative minds, policy and politics really don’t matter beyond a certain degree, just as long as we’re creating more jobs. And that’s why I go back to this idea, we we can create that talent, population and support. It sounds like your model is robust. And it’s not at risk for different policy changes and administration’s because you’ve got this architecture where you sponsor can create this employee relationship. Is that fair? Yeah, I mean, it’s something this country has federally funded before too, right? Whether you think about a Livermore Labs, or an r&d facility, it’s really that structure, just deploy, not for corporate gain, but rather for entrepreneurial game. And that’s what took some time in thinking where, you know, Xerox r&d, a little more r&d, they would spin out, commercialize, and then take licensing revenue. Our business model is to take equity as any other VC would and bet on long term returns. Amazing. So didn’t mean to jump right down the rabbit hole here, but this is fascinating stuff. Tell us more about the thesis II lead, do you follow? What’s the cheque size? Do you have a standard equity arrangement like YC doing this day zero investing, you know, what was the rubric for unshackled? Yeah, earlier, the better 60% of our commitments have happened before the company was incorporated. So we are truly trying to live up to the world words of friends and family round. Our typical cheque is between three to $500,000, we seek out eight to 12% ownership. And the way we do that is by going as early as possible, we don’t try to go shake founders down when they’re moved on. We simply accept the fact that we missed it, or we can become a co investor. More importantly, we have lead rounds, or might say lead means we didn’t want anybody else. In 75% of the cases we’ve invested. So three out of four companies in our portfolio, we were the first check, were the only check. We may have been going on that set a cap on the terms, we strongly believe that our product market fit is when everybody else is waiting for somebody else.
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We’re happy to be that somebody else we’re happy with the signals that other people will follow. We are industry and vertically agnostic. So we don’t everything from plant based proteins to cell towers and space. Certainly a lot of healthcare in between that FinTech even things in the crypto space. We are very much underwriters of people. And we constantly talk about this idea of we invest at founder problem fit, not a problem product fit, not at product market fit, not at go to market fit. Pre see is all about the founders fitting the problem, and then being underwritten to go validate what product they should build for that problem. So I want to double click on that. But before we do before we leave the last topic, anything on the sourcing front that you guys are doing that’s unique to identify these potential great immigrant founders. Yeah, so the two things that we probably do more unique to our strategy outside of mobile
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The referrals and inbound stuff. First of all, every deal warm or cold comes to the same online form. So we are blind to where you’re coming from who referred who. So he found us on Google, or you found us through his podcast, or Elon Musk sent it to us. Same for the programs that we run that are dedicated to finding this talent population are two. The first one is a university fellowship program. So we’re very confident that our generations Ellis Island is our university system is the port of entry for a lot of founders, a lot of immigrants. And we now have fellows at across 50 different college campuses, who effectively our extension of a fund for not compensated, but they’re taught the very fundamental basics of being a venture investor, they’re involved in some of the deal pitches. And they get a very active role of learning through the fund.
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We’re on the fourth version of that today. The second program that we wrote is something called a round table program. And this is really paying homage to where we started, which is, a lot of these immigrants on work visas, can’t raise their hand and say, hey, I want to start a company, because their employers may not want them to be declaring that they can’t do it. And so we run a program called a round table program, which is a no cost, no expectations, where we effectively allow those that are on work visas to learn how to start a company on visa, how to find a co founder, how to do customer validation. And ultimately, you know how to build your team. We teach them topics, we invite other VCs to kind of share their perspectives. And that’s it. There’s nothing at the end of that program that is required of anybody. It is simply a six week program that you can learn how to do things. We have made one investment out of that so far, which certainly serves the nice pipeline. But beyond that, everything else is you know, as you’d expect, it’s referrals. And in about the undergraduate students, you said you’ve you’ve had 40 of those, are they actually sourcing founders? And in does that also mean that the average age of founder in your portfolio is quite young, you know, folks that are coming out of university? Great question. So the university fellowship program is not meant for undergraduates only it’s for undergrads, Masters PhDs, can we have fellows across the board, the number of schools that we’ve had a fellowship program at is now crossed 55, zero. So we’ve done everything from Miami Dade, to Harvard, to UC Berkeley, to UT Austin, we look at where we see the largest populations for national students and spin up a program there, these students are certainly helping us source, they are sharing the solution, the strategy, and the funding resources have been shackled to their student population. And they’re bringing more entrepreneurs into our funnel, as it relates to average age of our founders is closer to 30. Across the fund, and that’s because there’s there’s just a lot of combination that play into it. University fellowship program, maybe account for 20 to 25% of our total deal flow. But the round table, existing portfolio, founders on visas tend to pull in a slightly older population. And so we see that the average age is kind of high 20s. So how does your sourcing break down? How does it shake out between referrals, the online forum and then some of your your programs here? The last time I saw this 20 to 25%, comes from the university fellowship program, about 35% are called the sources. I found you on Google. I was searching for this, I saw some blog posts, we kind of put that in the category. If you didn’t get referred to us, we get about 20% or so from existing founders and investors. And the rest is a mixture of events that we do or podcasting that are attributable. But yeah, it’s pretty balanced. Amazing that you’re getting 35 percenters or so cold. That’s a nice figure. So alright, let’s talk more about selection Day Zero founders coming in often, when you meet a founder early, that’s really bright, really talented, lots of potential. The idea still maybe underdeveloped, or, you know, you talked about this founder problem fit, maybe talk us through what is founder problem fit mean in how do you underwrite something that is an idea is not a business with a business model, and maybe even the target market and the customer is underdeveloped? Yeah, first of all, you got to be really, really comfortable with being wrong. And you got to be as comfortable as a founder is, and being committed to this journey for a long time. And so, if you have those two fundamental aspects covered, it’s really easy to bet on ideas. It’s really easy to bet on people. But if you don’t, if you have challenges around, that it might take longer, or that I’m afraid that I might be wrong betting on this person. You probably should ever be a pre seed investor, because you’re probably gonna be underwriting a bit more metrics. So that’s the starting point. The entire founding team of unshackled partnership, we love sausage making without knowing the ingredients are yet, right. Like that’s what’s happening. And so the way we go about this is a couple ways. The first thing I put on founder problem fit is appreciating the founder. One of the things that I think a lot of VCs may not ask as part of their evaluation is, what’s the distance you’ve traveled to get to this point today?
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Right, not in the mileage, but in the journey, starting from your childhood, your family, your upbringing, how’d you get to America? Why? What did you have to prove along the way to land in this position today? Right, it’s not your LinkedIn profile, it’s not the last employer, all that is fine. Doesn’t we all can pattern match to. But ultimately, I go back to a very fundamental thing, winning is not about fitting in standing out, our founders want to win. If they fit in, no one knows who they are, if they stand out, they might have a chance, that whole idea of pattern matching to selection just blows my mind and fails at every course of the way. And so by us learning the distance they’ve traveled, the life choices they had to make, going from a coconut farmer, to not going to college, but becoming a world record holding the Rubik’s Cube, to traveling the Silk Road to come to America. If you don’t ask those questions, you probably don’t know what type of entrepreneur you’re back. Especially when they have one idea that might shift the following week to something totally different. Right. So that’s, that’s the first thing is understand the founder. And you hear incredible things about people, right? Especially if you can earn their trust, they share a lot more. The second thing is this idea of the problem they’re solving problems are infinite, we all can read about them, we all can talk about them. But if you’re going to talk to me on a problem that I can do Google research on,
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you’re probably not building it off of some key insight that you’ve had to validate. So one of the things that we look for is early stage entrepreneurs or founders that are willing to go the extra effort to validate whatever key insight they think they have to see if someone would actually want it to be ever solved. And a lot of times, you’ll hear founders come back to you and say, I want this in my own career, I saw it. I said, wonderful. Can you now talk to 20 customers without going full time on this, to at least convince yourself that it’s worth 10 more years of your life, put it in that context, and all of a sudden the bar rises for everybody. Right? When I asked a founder to commit 10 years, getting paid $75,000 a year, they go wait a minute, I’m making a quarter million dollars right now, why would I do? Right? I got a similar question. We asked why do you want to spend the next 10 years of your best years working on this? And so really quickly, what you start to see is, how did their life story come to meet this problem set and does their life story and their experiences give them a unique advantage to solve this problem that they have now identified? either directly or indirectly. And before you know it, you start to see this combination of founder problem fit. And if you notice, we’re not really asking about what product you’re gonna, who are your customers? Yeah, we want to know their thought process around it. But I’m not underwriting that. Because, for example, we had a founder that we backed about five and a half years ago, whose big vision was to help homes use less energy, so that we could actually enact some change on climate and consumption. Today, that company he built, is now providing senior health care.
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And here’s, here’s why it’s a fascinating shift. They go from thinking about how they’re going to solve a problem for the home, which is automated sensors. So the house can act autonomously. But it had to start with first automating all the manual processes that didn’t have devices connected to it evolved into, hey, wait a minute, these sensors can do a lot more by tracking movement to location, that movement and location could actually tell you where you need lights on lights off, which then led to wait, who else needs to kind of know what’s happening? Oh, maybe these health care facilities, Senior Health Care Centers, will be really benefit by knowing when their patients are falling, when they’re moving, how much they’re moving. And before you know, you saw this little zig and zag, ultimately solve a very big problem. And the founder problem for him. It wasn’t about senior health care, part of the Medicaid and Medicare. He was much more hey, I want to solve a problem that could utilize sensors. But now let me go find what the problem is because that’s powerful when you think about it, and that happened in five years, right?
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We’ve now raised 10s of millions of dollars, been very successful.
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But that’s what we’re underwriting we’re underwriting that to zig and zag. Because we think people saw Paul’s that businesses, often you don’t hear about the truth and all the stories, right? If the startups may want to position things a certain way, or when they get funding, you know, the business is x. And so they talk about X, right, but they don’t always want to uncover that, you know, their beautiful baby originally was something completely different, because it doesn’t feel maybe as authentic without all the context. Yeah, and I think that’s a, that’s a function of just attention span, in general from people, right. As much as we love hearing, you know, 20 minute life stories, we tend to be very limited in how many times we can hear that. And so one of the features of venture fundraising and capital raising is that, you know, this idea of an elevator pitch, you gotta be short, concise, and impactful. So I think that’s a feature of just venture industry. But that’s why we love, love, love, love, spending time to learn that journey, because that’s our heart. That’s our Arvin investing, it’s just spending a little more time learning a little more about the person. And then before you know it, we can help them go from founder problem fit, which is your pre seed stage of investing to what we think is seed, which is problem product fit, that onramp is really inspired by just the life journey. Because you don’t need to do a lot in this current market to raise your seed round. Easily got it, you got to show that somebody cares about your product. And then going from C to series A is our journey from problem product fit to product market fit, show me you can do it again. I think series A to B is about go to market fit. And so before you know it, you kind of see that at each step of fundraising, you got to build that narrative a little bit. And we get to be at the earliest point to learn all the narrative.
Okay, so good segue, how are you working with these companies in that support context, right, you’ve invested now what is unshackled doing to kind of help them achieve these various milestones move on to the next phase.
Yeah, we’re pretty practical about this, right? Because there’s, there’s a litany of things that come up. But there’s two parts that we focus the most on as customers and capital. Right? When we look at the venture ecosystem in the requirements, your next round of funding is about as close, unfortunately, a reflection of your momentum as anything else will be. And so if we can help founders understand that, and secure their right customers in the right source of capital, we give them a shot to build up the right team, to build up more product to sell again, and do everything else. And so everything that we do is focused on that the one data point that I can give you, some of that we’ve kind of peeled back is in a game where everyone is trying to build something exponential, for every dollar that we’re investing, how many more dollars will be unlocked. For the last six years, for every dollar we invest in our founders have now raised $30 more. So what that means if we invest a million dollars, they’ve raised 30 million after us. For us, that’s a really strong indicator that we are the signal and others are willing to follow that our playbook to go from pre seed to seed has some merit to it around the customer validation around the problem validation around the product validation that allow seed investors to underwrite and and help them the next step, certainly behind all that are things around supporting immigration, supporting them on their fundraising strategy, sometimes dealing with founder disputes, legal challenges, all those things come up. But programmatically, we focus much more of our effort on customers and capital, because we think those are the unlocks the next milestone of your business. I mean, inherent in your model, as you’re doing, I think you mentioned more than 40 investments for the funds in so you’ve got a number of investments to manage, you also are investing at day zero. So there’s, you know, more time we refer to this as being in the wilderness here. When we invest really early. There’s this exploratory phase where you’re trying to figure out what exactly is the right value proposition for the right ICP and the right market segment, the right business model is that difficult to manage this range of investments when some of these founders really need a thought partner to kind of work through these strategic items. We tend to call these founders Davy Crockett to kind of go into the mountain trying to figure out where am I going next? And not a lot of Dwight Eisenhower’s yet and so it’s it’s a very fascinating way to look at it right because they are going to wander for quite some time. For us. One of the things that’s really been helpful is typically when we invest co investors come in pretty quickly. These are typically angel investors, or early stage VC funded tend to be much more vertically focused. But that said, because we’re industry and vertically agnostic, can what we invest in, we can extract strategies from space technology to telco and that that thinking is far more valuable.
35:00
I think it’s really important to underscore that we are not investing in founders, that needs to be told what to think. We are investing in founders that already know how to think. And our job is to give them knowledge. So they can think with their own framework on how to think uniquely about solving the problem they’re going after. And so I think our superpower is that because we are agnostic.
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We can help them through narratives, to stories, other strategies, to think outside of the industries box, to solve a problem, right to solve either a customer engagement problem to solve a customer sales process problem, to solve a Talent Recruitment problem.
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Because these ideas are shifting so much, it doesn’t make a lot of sense for us to, to be so focused on what the industry best practices are. Again, it’s not about fitting as standing out, I think that’s where we have a little benefit. You know, this may be a little soft, but I was meeting with a group of our founders, and we invest super early, and we were talking about the reasons they select new stack. And there’s some well documented things that we do like on the capital front, right. But then when we start peeling back the layers, and kind of your point earlier about getting into the true stories of these founders, what they’ve been through what they’ve had to persevere through the essence of the response I got from the group was it was trust, like of all the investors on my cap table, high levels of respect for everyone, different distribution of trust between investors. And it sounds like if you guys approach it with an open mind, and you take the time to understand the people authentically what makes them who they are, and their entire background instead of just what they’re building, and their tech chops, I bet you the trust quotient is much higher with unshackled, that’s just a guess,
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is probably the most important thing of our industry. Right? Because, and especially for early stage investor,
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there are certain undeniable business situations that make it really hard for early investor to keep on investing to keep on keep a high ownership as a company skills in wheat. We can talk about that from the venture perspective for a long time. But I can’t help but remind I even say this in a lot of pitches. When people ask, you know, how should we think about raising capital?
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The first thing I always say or we always has a firm is, remember, you’re selling a part of your business, you may be getting capital in return, but you’re selling something that you currently own. And if you can remember that. And you can put that as your how you approach these conversations, decide then who you want to sell it to. It’s really important. And I also like to remind them, like, look, let’s say this investor is getting, writing you a $10 million check at $100 million valuation all feels really good. You’re selling 10% of your business on a post money basis, I promise you, that investor will never do 10% of the work in your company. So again, you are selling a part of your company for not the equal amount of work. So decide when you want to do it, who you want to do with, and how often you want to do it. When you start to approach the founder from their seat, it’s so much easier to learn all the good, the bad, the ugly. And end of the day, what’s trust is the sharing of information. And so that ends up helping us a lot to bring resources that can help him before becomes a five alarm fire. Right. It’s it helps in a lot of ways it is soft, but it’s earned over time. And it takes a lot of consistency and a lot of availability. But that’s that’s what customer service is. This is why we buy certain brands over and over again, because we trust him. So when quickly I’d like to get your take on YC a bit right? They’ve scaled Are you investing typically pre YC, post yc. For those companies that do engage with the program in do you see them as I don’t know, a competitor, complimentary. yc is the most common follow on industry of unchecks. Interesting. It’s not something that’s done formally. It is simply it could be a function of just how many companies they invest in, it could be in the stage that we invest in, it could be some of the work that we do. But out of all the investors in the market, it is the most common.
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Six or seven of our professionals have now gone to YC after our investment, we have yet to make an investment in a YC batch company, post YC Demo Day. That’s not our stage we invest before. We underwrite that first level risk. And so I have a
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pretty strong amount of respect for how that can help a company go from
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precede seed. There is something that PG, Sam, and Michael have built there that is undeniably connected to customers and capital. And if those are the pajetta engine fuel that you need to move, then by all means, I think it’s great. Now that said, that would suggest that you that 54 companies not go to YC. Right. So 67 are gone there. 54 have not hit is not the only pathway. But I have consistently seen just the network resources and the partner customer capital come out of it. It’s hard to compete on their track record.
This question is called three data points. I’m going to give you a hypothetical situation with a startup. And you can ask me three questions for three specific data points in order to make your decision. Let’s say your approach to invest in a precede consumer social startup companies based in SF, they have 200 daily active users, and they’re growing 5%. week over week again, you can only ask three questions for three data points, what three questions do you ask?
The first one is to define your retention metrics. Second question is, what’s your net promoter score? How much they love you? For the flipside of that is a superhuman test. How likely are they going to release it? Yep. And the third one, which is not a founder story, I would obviously ask, why did you start this? Like, it’s not a data point, unfortunately. But it’s one that would inform me the most?
Again, Manan, if we could feature anyone on the show? Who do you think we should interview and what topic? Would you like to hear them speak about?
Oh, man, I’m a really big fan of David Epstein.
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You know, he wrote the book range.
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Before that sports gene.
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He’s active on Twitter, he’s engaging on Twitter, former sports, I want to say Sports Illustrated, managing editor, but the book range, Malcolm Gladwell wrote the foreword of the book, and the whole book contends the idea of the 10,000 hour rule that Malcolm Gladwell made so kind of famous, right, in the fact that Malcolm Welcome at afford saying this the most compelling argument I’ve heard against it.
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I think it’s extremely powerful in the fact that the book book talks about how some of the greatest
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creators and innovators have been people that can go really wide very quickly, as opposed to be specialists, so generalists or specialists, I think that’s a really powerful message for a lot of CEOs, on how they hire, how they augment themselves. So they can be really a great general per se, hence the term generalist. And I think, just so much insight.
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But then what do you know, you need to get better at?
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There’s so many things I can read. Um, I think that the first and foremost is becoming a better listener. I think, the more you can listen, the more present you can be in a conversation, the more likely to earn trust faster, can learn more. Right? And that’s, that’s this game. Just game is all about understanding. And that’s life, too, right? That’s what my wife and my daughter, it’s, it’s my friends, my family, my entrepreneurs that we back, being a better listener has profound benefits, you know, mine, and I’ve done hundreds of interviews, and nobody’s ever said that. So cheers to you for saying that. Just to wrap up here. What’s the best way for listeners to connect with you and follow along with unshackle?
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We’re, like I said, we respond to anything cold and warm. I don’t think LinkedIn is the best source anymore. Because it gets so noisy. But if you’re an entrepreneur, on our website, there’s a pitch us form. You fill it out, at least three members of our team will see within five days.
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And if you are trying to reach out to us directly, just email us our our emails are pretty accessible. It’s not complicated money that unshackledvc.com. And so yeah, hit us up, and we’ll do our best to get back to you as fast as we can. Well, our mutual friend, Eric Sippel, recommended you for the show. And now I know why he did. So. Congrats on all the success. I appreciate you thank Nick.
Transcribed by https://otter.ai
