Tag: eniac ventures

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When Helpful is an Action Verb | Aakar Vachhani | Superclusters | S2E5

Aakar Vachhani is a Managing Partner and a member of Fairview’s investment committee. He is involved in research, due diligence, investment monitoring, and business development for Fairview’s venture capital and private equity partnership and direct co-investment portfolios.

Prior to joining Fairview, Aakar was with Cambridge Associates, a leading investment advisor to foundations, endowments and corporate and government entities. He was responsible for analyzing private equity and venture capital investments in support of the firm’s clients and consultants. In addition, he led research and data analytics projects on the firm’s private equity and venture capital database. Aakar also spent time with MK Capital, a multi-stage venture capital firm with a sector focus on software and cloud services.

Aakar Vachhani holds a B.S. in Economics-Finance from Bentley University and an MBA in Finance and Entrepreneurship & Innovation from the Kellogg School of Management. He is a member of the Board of Directors of San Francisco Achievers and the New Breath Foundation. On top of that, Aakar established and leads Fairview’s San Francisco office.

You can find Aakar on his socials here:
Twitter: https://twitter.com/aakar15
LinkedIn: https://www.linkedin.com/in/aakarvachhani/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

Listen to the episode on Apple Podcasts and Spotify. You can also watch the episode on YouTube here.

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[04:29] Growing up in a household of 10
[09:36] Aakar’s leadership style when he was a child
[12:12] Why Aakar turned down a job in insurance back at home
[17:25] The third time Aakar applied to Cambridge Associates
[21:56] How Fairview aligns incentives with each investment they make
[26:15] How Fairview helps their GPs
[28:58] How Fairview gives pitch feedback to GPs
[32:54] Reasons Fairview passes on a GP
[34:58] How does Aakar define what a “new manager” looks like?
[37:55] How did Aakar build out Fairview’s SF Bay Area practice?
[44:26] Fairview’s onboarding process for new hires
[47:21] Why Fairview’s investment decisions need to be unanimous
[52:17] The balancing act between a narrow thesis and a big market
[56:09] Why Fairview invested in Eniac Ventures
[57:56] What does a helpful LPAC member look like?
[59:30] Typical questions GPs bring to their LPAC
[1:01:13] How do the best GPs communicate strategy drift to their LPs?
[1:03:01] Why LPs dislike strategy drift
[1:06:28] What new technologies does Aakar think LPs should pay attention to?
[1:08:30] Aakar’s core memories
[1:11:45] Thank you to Alchemist Accelerator for sponsoring!
[1:14:22] If you enjoyed the episode, it would mean a lot if you could like, comment, share, or subscribe!

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Are You Fishing in a Pond? Or Excavating a Pond?

fishing

The other day, I had a super insightful conversation with one of my awesome teammates here at Alchemist Accelerator about access and exposure. The difference between accelerators and emerging early-stage managers.

I’ll preface that for investors, particularly emerging managers, the three things you need to win are sourcing, picking, winning. And to be a GP, you need at least two of the above three. But for the purpose of this blogpost, I’m only focusing on sourcing.

I’ll also preface with the fact that I may be biased. I started in venture at SkyDeck, an accelerator. Additionally, I advise at a bunch of studios, incubators and accelerators. Moreover, I worked at On Deck when we launched our accelerator. And now, I’m here at Alchemist Accelerator.

I truly love early-stage programs. The earlier the better.

Instacart’s recent IPO is a clear example of venture returns compared to the public market equivalent as a function of stage. The earlier you invest, the more alpha you generate to your most liquid comparable.

Source: Axios

It’s the difference between a market maker and a market taker. A price maker and a price taker.

Though admittedly, one day, this too may become saturated, just like how venture capital went from 50-60 funds in ’07 and ’08 to now over 4000 in 2023. Do fact check me on exact numbers, but I believe I’m directionally accurate.

Let me give a more concrete example. Harvard is a phenomenal institution. And there’s a Wikipedia page full of breakout Harvard alums. But as an LP, if 50% of your managers, despite having different theses, all have half their portfolio as Harvard alums, then you as the LP are overexposed to the same underlying asset. The same is true for Stanford. Or seed or Series A funds investing in YC founders. All great institutions, but you’re not getting your buck’s worth of diversification.

The only caveat here is if you’re not looking for diversification. After all, the best performing fund would be the fund that invested a 100% of their fund in Google at the seed round. AND holding it till today. Realistically, they will have had to distribute on IPO.

The question is are you a fisher? Or are you a digger? One requires a fishing rod; the other a shovel. The latter requires more work, but you’re more likely to be the first to gold. Like Eniac was for mobile. Or Lux to deep tech.

So how do you know you’re fishing in someone else’s pond?

Easy. Your deal flow includes someone’s else’s brand. Whether that’s Sequoia or YC or SBIR. It’s not your own. You don’t own that pipeline. A lot of people have access to it. It’s no longer about proprietary deal flow, but about proprietary access to deals to borrow a framing from the amazing Beezer.

If your deal flow pipeline looks something like the graph below, you probably don’t have a sourcing advantage.

Source: Nodus Labs

Now that’s not to say there aren’t a lot of nonobvious companies coming out of YC or these startup accelerators. Airbnb, Sendbird, Twitch (the last of which Ravi who I work with here at Alchemist happened to be one of the first institutional investor for, so have heard some of these stories), and more were all non-obvious coming out of YC. And have also seen the same for companies coming out of Techstars, 500, and Alchemist, where I call home now. But that’s a picking advantage, not a sourcing one.

The flip side is, how do you know you’re excavating your own pond?

I’ll preface by saying having your own Slack or Discord “community” is not enough. Or having your own podcast.

I put community in quotes simply because having XXX members in a large group chat isn’t indicative that their presence is really there. Is their seat warm or cold?

I love using a stadium analogy. Imagine you sold a couple thousand season tickets to a team. You can name whatever sport it is. Football (yes, the rough American kind). Soccer. Basketball. Baseball. You name it. But despite all the tickets you sell, a solid percentage of your seats each game is empty. Can you really say that your team has fans? All you did was sell a couple of cold seats.

You can make the same analogy with likes or comments on Instagram. Which seems to be a problem these days, when an influencer with a couple thousand likes per post starts hosting their fan meetups, only to realize they rented out an empty hall. In case, you’re wondering for the IG example, it’s due to bots.

All that said, I like to think about excavation in the lens of competition for attention. Everyone only has 24 hours in a day. 7 days in a week. 365 days in a year. And as someone who is expecting any level of engagement from others, you are fighting for attention with every other product, person, and habit out there.

Perks of being a consumer investor, I think about this a lot. But in the same way, having an unfair sourcing advantage is the same.

Is the greatest source of your deals tuning into you at least four of the seven calendar days in a week? Or if you have a professional audience (i.e. only product people, or only execs), are they engaging at least 3 workdays per week or 8 workdays per month? Are they spending more time reading/listening/engaging with you than with their best friend?

If you have a community, do you have solid product-market fit? Is your daily active to monthly active over 50%? You don’t need a massive audience, but for the people who are primary sources of your deal flow, are you top of mind? As Andrew Chen says, at that point, “it’s part of a daily habit.”

Is it easy for them to share your content, what you’re doing, who you are with others? Does sharing you or your content generate dopamine and social capital for them? Do you embody something aspirational? Is your viral coefficient greater than 0.5? Even better if it’s 1, then you’re ready to go viral.

And do people stick around? Do the seats stay warm? Is your community self-propagating? Is your content evergreen? Or do you produce content at a voracious pace that it doesn’t have to be? Do you live rent free in people’s brain?

And once you do invest, are you the weapon in the arsenal of choice? For instance, 65% of Signalfire’s portfolio use their platform weekly to learn and get advice. But more on the winning side in a future essay.

In closing

To truly have a sourcing advantage, you need to be building your own platform that is impressionable and regularly take mind space from the founder audience. But if you don’t, that’s okay. You just need to be really good at picking and winning.

Photo by Popescu Andrei Alexandru on Unsplash

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The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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Where Does The Team Slide Go In A Pitch Deck?

soccer, team

There’s a comical number of debates around where the team slide goes in a pitch deck. In fact, this blogpost may end being more of a meme than have any substantive value. Nevertheless, here’s to hoping that by the end of this essay, there’s some semblance of a call-to-action for you. The “too-long-don’t read” answer for the order of your team slide is… it depends.

Why “why you” is important

First, let’s start from the “facts”.

  1. The earlier your company is, the more your team matters to an investor. The more mature your company is, the less it matters.
  2. If your investor doesn’t understand your answer to the “why you” question, you’re not winning any gold medals, much less a check.

I tweeted two days ago:

Investors have, effectively, three questions they want answered in the intro meeting.

  1. Why now?
  2. Why this?
  3. And, why you?

“Why now” tells an investor why they should look into the space. “Why this” tells an investor why they should look at the solution. But if we’re being completely honest, if an investor is a specialist and not a generalist, and even if they were the latter, you’re not the first person who’s brought up the exact same “why now” and “why this”. Even if you answer the first two questions perfectly, there’s still no reason as to why you should be the one to take this product to market. Investors, if they were more blunt, would just thank you for your market research.

On the other hand, if you can answer the “why you” question, you give them a reason to have a second conversation with you. And the whole goal of the intro meeting is to have the second meeting. Not to get the check. Don’t skip steps. As a footnote, your mileage will vary with angel investors and micro funds. For them, speed is their competitive advantage, not their check size nor possibly their network or resources. While they will try to be helpful, they’re not a platform – yet. If you answer the “why you”, in the worst case scenario, your investors won’t regret backing the startup. You just weren’t lucky. But they’d probably be willing to back you again if you started another business.

The reason why so many VCs regress back to metrics and traction is because you’ve failed to answer the “why you” question.

So, where does your team slide go?

Based on the above “facts”, the younger your startup is, the earlier you should put the team slide. To give investors context as to who you are. This matters a bit more for partnership meetings, as well as if this is a (relatively) cold pitch. That is, to say, if you AND your co-founders don’t have a prior relationship with the people you are pitching to, move the team slide to the beginning.

Eniac Ventures, an incredible seed-stage firm, recently wrote, “We believe that it should probably be slide 1 or 2. That’s because investors want to become familiar with the people behind the product early on, whether we’re flipping through the deck or you’re pitching us directly. When the team slide is second, it also gives you a great opportunity to walk investors through your background and impress upon them why your unique set of experiences makes you and your team the best one to build and scale the product.”

In closing

But, that might not be the case for you. The investors you pitch might have a different set of priorities. I always go back to the question: When going into the meeting, if the investor could only ask one question, what is the one question they need the answer for to give them enough of a reason to take the second meeting?

Then your pitch deck should be in that order of priority.

If you’re tackling a problem most people care little about or where it’s non-obvious, talk about the problem first.

If it’s not a revolutionary product and it already makes sense, talk about why you and your team are the best equipped to tackle this problem.

Photo by Pascal Swier on Unsplash

*Edit: Added in second tweet

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