The Neon Show

Gaurav Jain on Building $500M Fund, Missing Ramp and Backing Irrational Founders

• Season 1 • Episode 381

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Gaurav Jain has seen more than 10,000 startups, built the world's largest pre-seed fund, backed startups like Gamma, Hightouch and Goldcast and has missed Ramp(you can't be a great investor without having a great anti-portfolio :))

A decade ago, when Gaurav started Afore Capital, pre-seed wasn't even a recognized category. Today, pre-seed is what some of the world's most ambitious startups raise as their very first institutional capital.

When Gaurav Jain and Anamitra Banerji started the firm ten years ago, "pre-seed" was almost a slight, a label for founders who couldn't raise a proper seed round. They set out to build the world's largest pre-seed fund anyway, closing $47 million on a $40 million target, and every fund since has closed above plan. Afore now runs more than $500 million across four funds. 

In this conversation Gaurav shares his journey from Dehradun to Silicon Valley and every lesson learned about backing great startups. Like how being in the very best companies matters more than anything else. He is also convinced that the genuine bottleneck is talent. There is a great deal of money in the world and very few people who can build something truly large, which is why at the earliest stage founders tend to choose their investors as much as investors choose them.

If you want to understand how the earliest checks actually get written, and what it really costs to say no, this episode is worth your time.

00:00 - Trailer
01:00 - From Dehradun to Google to starting Afore
02:08 - The Waterloo co-op that talked him out of every job
03:18 - Back when "pre-seed" was an insult
05:44 - When Sequoia said "I guess we're pre-seed investors too"
07:26 - Afore's three products, and the experiments that failed
09:01 - Hightouch was a travel company when they invested
11:02 - Goldcast: no visa, no money, funded anyway
12:07 - The through line is always the team
14:44 - The Ramp miss
17:24 - "Founders pick us more than we pick them"
18:45 - The constraint isn't capital, it's talent
22:24 - The Solana miss, when it was still Loom Protocol
24:46 - Ramp's Super Bowl ad, the buses, his wife's business
25:32 - What he looks for in founders
28:50 - Coachability, happy ears, and the Mom Test
31:28 - The biggest mistake: falling in love with the idea
35:04 - The three things that matter, and "50% of zero is still zero"
39:25 - "100% storytelling, 0% data"
41:25 - Investing in India, and the fear of being dumb capital
44:41 - "Sign the deal before Monday"
47:26 - One engineer now does the job of 20
51:43 - Raising from LPs, the undiscussed part of VC
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India’s talent has built the world’s tech—now it’s time to lead it.
This mission goes beyond startups. It’s about shifting the center of gravity in global tech to include the brilliance rising from India.

What is Neon Fund?
We invest in seed and early-stage founders from India and the diaspora building world-class Enterprise AI companies. We bring capital, conviction, and a community that’s done it before.
Subscribe for real founder stories, investor perspectives, economist breakdowns, and a behind-the-scenes look at how we’re doing it all at Neon.
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Website: https://neon.fund/
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Connect with Siddhartha on:
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Twitter: https://x.com/siddharthaa7
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This video is for informational purposes only. The views expressed are those of the individuals quoted and do not constitute professional advice.

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SPEAKER_03

We're the world's largest pre-seed flood when we started a four or ten years ago. Free speed was not a category back then. It was actually a negative reserve for founders to not raise the speed route. Gamma that haven't raised much money in the lifetime company. In fact, they have what they call negative lifetime work, which is they have more money in the bank today than they've ever raised in the history of the business. From that note that we wrote for Carrie Travel now called High Touch was love the founder. The idea, maybe less so. Could we have foreseen that seven years later they'd be doing AI marketing? No. But I would still say that was how we should be investing at the pre-seat stage.

SPEAKER_00

Lam, tell us about the story.

SPEAKER_03

Oh man, that one hurts. I was hoping you wouldn't bring it up.

SPEAKER_00

Hi, this is Sudhahat Alwaliya. Welcome to the Neon Show. I'm your host and managing partner for Neon Fund, a fund that has invested in some of the best enterprise AI companies coming from India for the globe, like Atomic Work, Spot Draft, CloudSec. Today I have with me Gorov Jen. Gorov, welcome to the Neon Show.

SPEAKER_03

Thank you for having me.

SPEAKER_00

Gorov, your uh story is really interesting, right? You come from India, you migrated to Canada with your parents in high school. Then you build a company, worked at Google as one of the you know early PMs in the Android team, and then uh worked at another fund before starting Afor. And you did crews, and in Afor you have done some of the remarkable companies of our generation, like High Touch Gama. So, congratulations on all the success.

SPEAKER_03

Thank you. You know, as they say, you only connect the dots looking backwards, honestly, sitting as a as a kid growing up in Deheradun, uh small town at the time. Now it's gotten much bigger since it became the capital. Um, but at the time it was a small town. I could not have predicted the journey would take me where I am, but I feel very humbled and very privileged.

SPEAKER_00

So, what are some other things, you know, while sharing your journey that just changed your orbit?

SPEAKER_03

Uh, I think some of that is uh frankly just putting one foot in front of the other. I think not getting too caught up on the long-term vision. But uh, you know, when I went to uh Waterloo uh for undergrad, the thinking at the time was I wanted to be an engineer at Microsoft. At the time, Microsoft was the hottest company. By the time I graduated, it wasn't. And so much changed uh while I was in Waterloo because uh they have this co-op program where you study four months and you work four months. So I had a bunch of different internships. And through that, I learned that I actually didn't want any of those jobs. I wanted to be an entrepreneur. Um, so I ended up starting a company, and then that brought me to the Android team. So, you know, one thing leads to another. I think you just have to uh keep iterating in your mind in terms of what you're good at, what you enjoy when you get out there. I think you have to move fast. Um, I think you have to do good work and you know, you have to be patient. As they say, Rome wasn't built in in a day. And I think for me to get here, it's a 25-year-old journey. Um, and and frankly, when you look back, it feels like wow, so much has happened. But in the moment, it feels like day-to-day, you know, not a lot is changing.

SPEAKER_00

And you have accomplished a lot. I think you are what less than 40?

SPEAKER_03

I just turned 40. Yeah, that's right.

SPEAKER_00

Amazing. You have accomplished a lot, like build a fund uh in the last 10 years. That is one of the great repetitions in pre-seed domain in Bay Area. So building a name for yourself is fantastic in such a competitive market.

SPEAKER_03

Yeah, thank you. And again, same thing here. When we started a four 10 years ago, this year will be 10 years for us. Uh, pre seed, which has now become a category, was not a category back then. You know, it was actually a negative term, right? It was reserved for founders who could not raise a seed round and were forced to raise a small pre-seed round. But we saw that that the founders were being underserved, right? So you always start off with a hypothesis, right? Our hypothesis was that these founders are underserved. And if we take this institutional capital that we are focusing on a seed and put that at pre-seed, we think we can serve these founders much better. And that's where we started. Uh, you know, at the time we uh we wanted to make pre seed a first-class citizen, so we said we're gonna raise the world's largest pre seed fund. Thankfully, there weren't many funds out there, so the bar was very low, and what the world's largest would be. Our target was 40 million. We ended up raising 47. Um, and and look, the early days were not easy. Fundraising was hard for us because how much time does it take to raise the first fund? Yeah, I mean, it took us probably nine months from start to finish. Um, you know, part of it is because educating LPs on this new category was hard because we would talk to LPs about how we think pre-seed will be the new seed, and they would turn around and call their seed managers that they were already invested in. And the seed funds would be like, no, pre-seed is a fad, it's gonna go away. We do pre-seed, whatever, it's it's not real. So it was really hard to like convince investors that this new category will come together until they talk to founders. When they talk to founders, the founders would tell them, yeah, like seed funds told me I'm too early for them because I don't have a product in market, because I don't have traction. So yeah, if somebody was willing to lead my round before that, I would work with them, right? So that took us some time to educate first the investors to be able to raise the fund. And then the founders as well, right? On, hey, look, if your first round of funding, you should call it pre-seed. You should talk to pre-seed funds, not seed funds, because you're gonna be too early for these seed funds. And that that took some time and we started this pre-seed summit. We've had founders of Pinterest, Instacart, DoorDash, you know, Cloudflare, Stitchfakes, a firm. I can go on and on and on, where we had them talk about their pre-seed journey, right? And pre seed, obviously they didn't call the round pre-seed back then, but we really had Tony Zoo, who started DoorDash, talk about Palo Alto Delivery.com. That's where this started, right? This started with this like rough idea where it was not obvious and they had to, there was it was hard to find investors, and then it certainly became obvious and it took off. And I think that just took some time. So yeah, now we look back and go like, wow, pre seed has become a category in and of itself. In fact, when Sequoia launched their most recent fund, they said, I guess we're now pre-seed investors too. So it's it's kind of amazing that pre-seed has now become uh the default first round of capital, but it wasn't always the case. And again, this is where I talk about, you know, uh, you just got to put one front in front of the other, you got to do good work, you got to do what, you know, sort of solve problems for your customers, and then, you know, good things will happen.

SPEAKER_00

And what are the things that you have done some differently at a four?

SPEAKER_03

Yeah, many things. I'd say one, um, obviously starting off with like this idea of like nothing is too early for a four, right? Uh, where uh we uh pioneered this idea around pre-seed and willing to lead rounds and price rounds before there was traction. But I think that one of the biggest things we've done differently is um never settled for what's working, you know. And I think we take uh inspiration from the best founders we invest in. The best founders we invest in are constantly evolving their product, evolving their go-to-market. They're never complacent, right? They're never, you look at their business, and every year, every two years, it looks very different than what it was before, right? And it wasn't, and they didn't change it because it wasn't working. They change, they it's working because they're changing it, right? And we looked at venture firms and we're like, wait, hold on. Venture firms kind of have the same products, same go-to-market, same strategy for decades. This doesn't make sense. So, and and part of it is maybe because we're product people from backgrounds, and we love experimenting and trying things. And the problem with experiments is a lot of them don't work. And maybe that's why VCs don't want to try stuff, because like a lot of stuff is not gonna work, but we're okay with that. And we've given a lot of license to our team to try stuff and and and a bunch of stuff has worked, which is how we now have three different products, right? Not just one. And that came through a lot of experimentation. So the the first product is where we started, which is pre-seed, which is where we lead rounds, one to two million dollar check. Companies are you know pre-revenue pre-traction. But then now we have a founder in residence product, which is for founders who we think have a very strong team, but maybe the idea needs some work still, or maybe they haven't picked their idea yet. And we have them come work out of our offices here in San Francisco and put them in front of customers, refine the idea, and then once they're ready to then run with that idea, either we'll give them more money or help them fundraise. And then we have a third product called Founder in Residence U, you being for university students, where we're now seeing increasingly um college students dropping out. I don't know how that is in other parts of the world, but certainly in the US, these uh high school students go to college and in the first year of college, they're sitting there and going, Wait, stuff I'm learning makes no sense because like what's happening in the real world is so different. And I possibly cannot sit here for four more years and learn like the ancient technologies when like agentic engineering and whatever else is the future. So what they end up doing is starting to hack on the side, things start to work, and they're like, Well, how do I make this my full-time hustle? And that's where a four comes in where we're saying, hey, look, why don't you take a leave of absence, come to our offices, work with us, we'll give you a little bit of capital, we'll put you in part of the community and help you basically build a company around it. So that came through a lot of different experiments, uh, some that a lot of them that haven't worked. But I'm glad that we're constantly iterating on our product and never feeling um like, oh, wow, well, we're the world's largest pre-seed fund and pre-seed has become a category, so great, we're gonna keep doing pre-seed. We feel like in five, 10 years, maybe, maybe it won't be pre-seed, maybe it was something else. I don't know. And I think we've just got to keep keep uh evolving.

SPEAKER_00

Yeah, what have been some of the lessons backing companies like HighTouch, Gamma, Goldcast?

SPEAKER_03

Yeah, you know, let's talk about some of the stories. So with HighTouch, when we invested in them, believe it or not, it used to be called carry travel.

SPEAKER_00

How did you meet the founders?

SPEAKER_03

The founders actually came through an angel investor who was roommates with with Kashish, who was one of the founders of um of uh HighTouch. And he himself is an angel investor and a and a founder, and and he's in our network, and he was like, look, my roommate, I think he's a force of nature, he's a special founder, you should meet with him. He's very early. So I don't know if you do investments that early. I was like, no, no, no, like we love early, so so please make the introduction. We met with Kashish. Um at the time, uh, you know, he was building something for corporate travel, right? Um, and frankly, our if you look at our memo that we wrote for for K Rate Travel, now called High Touch, was love the founder. The idea maybe less so, but you know, I think, I think, I think, uh, I think this idea can evolve into something special. Then COVID ended up happening. And, you know, corporate travel is not what you want to be selling in during COVID. So the company was forced to go back to the drawing board and try a bunch of different uh iterations. And look, we always believed in the team, right? That the team will figure out what the right thing to build is, whether it's in travel or not. Went through many different iterations, pivots, if you may. And then they kind of went back to their backgrounds. They came from segment, they really were deep in the data space. And they started off with essentially what's called reverse ETL. So like taking data um from data warehouses and putting that in the SaaS apps, which I think was like a good start, and they got a bunch of market traction, but they never, they never settled. You know, then that became kind of CDP, right? This idea of a customer 360 platform. And now they talk about a gentic marketing, right? So this is again going back to like this idea of evolving the product to go to market. I'd say that team is really, really special at that. And that's what we saw in them when we backed them. Could we have foreseen that, you know, what has it been, six, seven years later, they'd be doing AI marketing? No, frankly, it was not part of the underwriting. Um, but I would still, you know, still state that that is how we should be investing at the precedes stage. You know, Goldcast has a similar story where when we backed them, uh, these founders, and I think you're gonna have Palash on your show, you should you should he should tell you about the story of kind of raising the the first round of funding, but they were still in school, right? They were still in business school, they did not have a visa to stay in the country. Yeah, right. And they were working on something where the closest competitors had already raised tens of millions of dollars in funding from top-tier firms, right? So for a whole host of reasons, they got a lot of no's, right? They got a lot of no's. And and we're very lucky that we ended up investing in them. Uh, we ended up leading their pre seed round. But I believed in the founders' ability to build a company. And I was like, look, there's some obstacles along the way where they have to get you know, visa system in the country. I think it's solvable, especially once we fund them. Um, there's competition, but I think if you stay focused on the customer, I think you can outcompete them. And all of those things ended up being true. Their competitors all went out of business eventually, and Goldcast had an amazing exit for us and for the for the founders last year. Um, so again, you you the the through line in all of these um has always been the team, right? And and and the team's ability to really evolve and grow and iterate and let the customer lead the dance. You know, you're ultimately in service of a customer, right? Let the customer, the market kind of pull you into where where there's real demand, and then you've got to move fast, right? I think that's the other thing we really look for in teams is the are they gonna be able to learn fast or are they are they are they gonna you know iterate quickly or are they very slow moving? And then of course the third thing I say is grit, right? It these is these are long journeys, right? Um, I think Goldcast was an exception where start to finish it was five years. In most cases it's 10 plus years, right? And I think founders have to really, you have to be, you have to believe that the founders uh want this to be their last job, right? If this is working well, this they're just gonna keep keep going um with this versus looking for a quick exit or a quick flip or giving up. Um and I think that's what we really look for in in preseason. I think that's been the case in the best, our best performing companies.

SPEAKER_00

And how did you meet the founders of Gamma?

SPEAKER_03

The founders of Gamma we met through um another Angel investor uh who used to work with the founders of Gamma at Optimizely. So the founders of uh Gamma came out of Optimize. This was a company that was in the A-B testing space that was, you know, really did well uh at one point in time. And uh my friend, my business school classmate, uh used to be uh colleagues with him at Optimizely, and these guys were the Gamma founders were spinning out starting Gamma. And my my friend said, Hey, look, you had you had invested in Airtable, uh, which is a sort of an analogous company in the sense that Airtable built a pro seamer horizontal tool, in their case, focusing on Excel and like sort of making a better version of Excel, if you may. And Gamma's initial thesis was we can do the same thing for PowerPoint, right? PowerPoint is obviously used by millions of people, but hasn't changed much in decades. Um, but the world has changed a lot in terms of how we do work, right? We don't like sit on our PCs anymore, it's a lot over the cloud, it's on our phones, it's very collaborative, and we think there's a new kind of uh version that that should exist. Um so I think that that was probably why I got pulled into that that that opportunity. And and we were very lucky to invest in the first round of gamma. And the company, again, has changed a lot over the last you know few years. And of course, the world has changed a lot, given AI, especially. And and this team really leaned in hard on AI. As AI started to take off, they've instead of fighting AI, they said, well, hold on, this will give superpowers to our mission. I think we can achieve our mission faster, better, you know, um quicker. So so I think the the team really leaned in on that. Um, and and they become one of the most used AI kind of consumer companies.

SPEAKER_00

And uh you mentioned earlier that you missed ramp, uh, right? Tell us about the story.

SPEAKER_03

Oh man, that one hurts. Um, I was hoping you wouldn't bring it up. Um, so I think this has been a learning for us um where our business really is a business of exceptions. You know, our venture capital is really a power law business where a few investments end up really moving the dial, end up mattering. And and exceptions could be in many different ways, right? Exceptions could be with the founders' background, could be the idea, could be the market, could be so many different things. And I think one of those exceptions we have to feel comfortable making is around the deal terms. You know, when we saw Ramp, and and frankly, Ramp was um, as you put it, our right to win because my co-founder used to be on the board of their previous company called Parabus. Um, so and then the founders of Ramp were actually one of our first LPs in fund one. So, you know, when we were starting our fund, we obviously called founders uh that in our network who had had exits uh to see if they wanted it to support our fund. And and and Curry Miraric were one of the first people to put their hand up and said, Yep, we're we're in. And then I believe like a year later, they came to us and they said, hey, we're starting this new company called Ramp. Um obviously we we loved them, we we thought very highly of them, and the idea was interesting as well. But given that the repeat founders, uh, their first round of thing was like a 25 billion post money, which to us at the time, we're like, wait, hold on, we just like raised this pre-seed fund on this thesis around investing early. Early generally means low price. They're raising a 25 post. Ah, like we debated, debated, debated, and we're like, this is off strategy. And so, you know, thanks, but no thanks. Of course, one of the biggest mistakes we'll ever make. Um, you know, I think the company's last evaluation was $32 odd billion dollars, would have been an amazing outcome for us. But we have used that learning to iterate. Um, you know, again, going back to this idea of like evolving the product. So now we added what we call a non-core bucket, right? These are investments that we would have loved to make them core, but for whatever reason, it's out of spec. It generally is because of deal terms, it's out of spec. And and it's usually repeat founders, right? It's usually founders from a risk perspective, it's still pre-seed, right? So it's pre-traction, pre-revenue, pre-product, you know, pre-product market fit. Like all those things are true, but because of repeat founders, they're able to command a higher price. And we think that is still pre-seed, you know. Like again, we're not gonna get the ownership that we want given the checks that we write. So it can't be core, but I think we want to make those exceptions and do those as non-core investments when we see them, when we're lucky enough to see them. So, anyway, that's helped us improve our product, but you know, the mistake still hurts.

SPEAKER_00

And how many times do you have to do convincing the reverse pitch to get in a company?

SPEAKER_03

Every single time. Every single time. I think uh, you know, we're we're in the business where founders pick us more than we pick them. I think uh I think if you look at venture capital, it seems like a business where you know we sit around like Shark Tank style and we're like, yes, no, yes, no. That's not how it works in reality. Uh in reality, it's really a sales shop, right? You're selling people to take a meeting with you, you're selling people to take your money, which by the way, is is a little crazy to think about. Um, you know, as somebody who grew up in India, I didn't know anything about venture capital. And I remember when I was um when I was going to become a VC, my my uncle, who's a lawyer in India, he I was trying to explain to him what venture capital works. And he was, he kind of listens to me and he goes, Wait, so you give people a million dollars, like what collateral do you get? And I was like, nothing. We just give them a million dollars and like hope for the best, you know? And and it sounds crazy, frankly, to most people on this planet. I and it should, it's it should sound crazy because it is a little crazy that it works. Um, and and and not only that, not only do we not get any collateral, but we have to sell them to take our money. And it's and the reason for that is because um there's the constraint actually is not capital. As I've realized over time, there's a lot of money in this world. The constraint is talent, right? There's a lot of people who want to start companies, so that's not the constraint. There's very few people that are really good or could be good founders, right? And a lot of things have to go right, right? You have to be technical, you have to have all the qualities that we talked about. It is a very hard job. You have to be, you have to be a little crazy, to be honest. Not only do you have to be really smart and hardworking and and and and and you know, all those things, but you also have to be a little irrational because the people that we invest in, they can get amazing jobs anywhere, right? They're not starting a company because they're unemployed, they're starting a company because that's what they want to do. And risk adjusted is a terrible way to make money because most companies go to zero, right? So when you see gold, a lot of other people also think it's gold. So you have to then convince them to take your money as to why you're the best partner for them to get to the next stage. And that's why we've always stayed focused. I think it would be easy for us to become a multi-stage fund. But the problem is the moment you become multi-stage, your focus shifts and you're not able to do justice to that zero-one jury. And we feel like because we're so focused, we're able to make a very cogent case to our founders that we very confidently believe that we will increase your odds of getting to product market fit, of getting to Series A more than anybody else.

unknown

Right.

SPEAKER_03

And I think that is how we how we sell founders to work with us.

SPEAKER_00

No, I was a founder like 2012, 2017. My first round of 300k pre-seed or seed, whatever we call it, right, was made up of 40 angels. So that kind of product never existed, right? Where I could keep my cap table clean and don't have to get 40 different signatures and convince 40 people. Yeah. It took me like three to four months, even to close the last five or 10k.

SPEAKER_03

Totally. And it's not just time, but it's also people who may not quite understand how venture capital works, right? The fact that a lot of them go to zero, right? Some of them might be friends and family. It's a little awkward to lose money for friends and family. They probably can't help you as much because they don't have like domain expertise. They've never seen a venture-backed startup. So for a whole host of reasons, it's like not a good setup, right? Not a good setup. And that's why we believe like institutional funds like ours and yours exist to be able to provide that best product for the founders of that stage, right? Where we understand what we're walking into, right? We understand the risk we're taking, right? We understand the ups and downs. Look, the zero-to-ones journey, it's like one step forward, two steps backwards, you know, two steps forwards, one step backward every single day, right? The first few months are just like banging your head against the wall, trying to figure out the right idea to work on. We're okay with that because we understand that that's what it takes to find, you know, the high touch and the gamma. Like they all went through these ups and downs. If you're not used to that, it can be a an uh a you know tense place to be in that relationship between the angel investors can be can be tenuous for that, for that reason.

SPEAKER_00

And and the hardest thing to accept for both founders and investors is the journey is very nonlinear. You don't know like if you're hitting a rock 100 times on which hit the rock will break. Totally.

SPEAKER_03

Totally. And then even after it breaks, then that's good for a little bit, and then you gotta break another rock, you just gotta keep doing, right? It's just like high touch went from travel to then reverse ETL to CDP to AI marketing. There might be next frontier. I don't know, right? And I think that is um that it's just a constant. Constant kind of evolution that I think as investors, we've seen the movie enough that I understand that that's what that's par for the course. Somebody who hasn't seen the movie, it may not be as obvious.

SPEAKER_00

And uh what have been some of the other misses in your journey? And what are the lessons like in from the ramp? You learned that like the valuation cap is not a barrier for pre C, right? You need to find exceptional talent to submise whatever the cost, whatever the ownership would be.

SPEAKER_03

Yeah, there's a few others. Um the one that comes to mind is Solana. Uh the founders of Solana when it used to be called Loom Protocol. Believe it or not, we're actually in this office here that you're sitting in today. Um, I think the first round might have been at, I don't know, the high single digit post money, maybe low double digit post money. I think the company haven't checked in a while, but it's like tens of billions of dollars, maybe $100 billion market cap. I think there, um the the reason we we we struggled to get there is uh it was crypto winter when we saw it. Um so crypto wasn't hot. Um B, I think you needed to have a very nuanced understanding of crypto to be able to appreciate what they were pitching at the time. Um I think C, we failed to imagine the future with the founders. Um, where the founders, Anatoli um and and his co-founder were here, and they talked about, you know, how they were building a layer one protocol to compute with Ethereum, but this was gonna be a lot faster and transaction speed's gonna matter and so on and so forth. And they talked about how that could be the future. I think we just failed to imagine that that if that if that is true, why that'll be so big, right? And I think we got stuck on that, on that first piece. Um, you know, if I was to go back, could I could I pick it up not being a crypto investor? We're a generalist investor, you know, we pack back people more than ideas, and a lot of times ideas change as we were talking about earlier. So I don't know, that was a harder one um to to grok exactly what the learnings are. Besides, I think our business is about imagining the future, right? Alongside the founders. And it's not about what can go wrong, but it's more about what can go right.

SPEAKER_00

Yeah, because in my own journey, right, across four funds, we are now raising neon fund four of uh $50 million. We have about 65 companies still now. I have never regretted on any company that failed, but I have the regrets were always a company that became known for the author.

SPEAKER_03

Yeah, it well, and and you know, the the more painful part is when uh it's in the anti-portfolio and you saw it and you could have done it and you didn't do it, and the company is successful, you see it all the time every time. Oh, all the time, every time. You know, I was watching the Super Bowl last year, got a bunch of friends, we're excited to watch the Super Bowl, turn on the TV. The first ad is ramp. You know, and I'm like, man, like I love Eric and Curry, but like, dude, it doesn't need to be in my face, you know? And like every I'm driving around San Francisco, ramp on all the buses and everything, and I'm very happy for them. It's great. Like, oh, and get to I'll tell you this other pain, painful point. Um, at a four, guess who we use? Ramp. My wife's business, guess what she uses? Ramp. You know, and it's like ramp is in my wallet, and it's like everywhere. And but I you look, I think in a way it's good because it keeps you humble, right? It keeps you on your toes. That like, you know, you just cannot take anything for granted, right? I uh when I every time I meet a founder, you know, and we meet as a team, like 10,000 plus companies, right? It's easy to be like, oh, this is not gonna work. But I remind myself that I could be looking at the next ramp right now, I could be looking like Solana right now, and we have to be intellectually honest, we have to do the work, we have to search for the truth, we have to be open-minded, we have to imagine with the founders. Otherwise, it's gonna be a painful journey.

SPEAKER_00

What kind of spark and craziness are you looking at uh when you are backing them at pre-seed? Even first-time founders with no pedigree.

SPEAKER_03

Yeah, I mean, look, founders come in all shapes and sizes, okay? Uh I really think uh founders and companies are snowflakes. And it's hard to like generalize on like this is exactly what we're looking for. Even if you look at high touch founders versus gamma founders versus goldcast and you know, Solana, Ramp, they're very different people. Um, but I think I think there are some similarities. Um, I think one is um they're really deep in the details. You know, they're not top-down thinkers where it's like, well, you know, the McKinsey study said this market will be big. So that's what we're getting.

SPEAKER_00

Nobody quotes McKinsey studies. I have realized that about the best of founders.

SPEAKER_03

That's right, right. Versus like, hey, I have discovered this like, you know, niche opportunity. Maybe not a lot of customers just yet, but I believe for these customers that I'm going after, this is a hair on fire problem. And my product, while not perfect, is a 10x product, you know. I think that and then the you can keep digging into the details with them, and it's like there's never like a bottom, you know, and they can go into a lot of lot of detail. Um, I think you know, one of the questions we ask is just like walk us through the like the last six months, right? How many customers have you talked to? What have you learned, right? How has a product changed? How's your thinking changed? Because again, I'm trying to extrapolate like the last six months to like what the next six months, six years may look like, right? And you're trying to understand like, is this a team that has has speed? You know, you're also looking for founders that have faced some adversity, right? I think uh building a company, as I mentioned, is gonna be a lot of ups and downs. There is gonna be adversity, it's gonna be hard, right? Um, and the surface level that looks like these companies were like overnight success stories, it's never like that, right? Have somebody having built a fund now uh and a company in the past and and seeing my wife build a business, man, it's it's hard, right? Um, so I think you're looking for those kind of founders. Um, again, the questions we ask are very different. We do a lot of back channel to really triangulate and understand this person that we're backing. Um, you know, like the the noon founders, they're they're interesting because Adite, like he went to IIT. Apparently, he had to do a JEE, the whole entrance exam to get her to IIT, but he went there for design. And I was like, wait, hold on. So you're not only is it really smart, you're also like a great designer. Like, how do you find this combo? And there's probably like, I don't know, a handful of people on this planet that have that background, you know. So when he's trying to marry design and code, I was like, this is like your opportunity, you know, you understand this really authentically. So, you know, like sometimes you see that kind of pedigree, sometimes you don't, but you're just trying to understand that that person or people behind the company.

SPEAKER_00

And uh what have you let's say some of the lessons that you shared, what have you said uh that this is non-negotiable while backing a founder?

SPEAKER_03

You know, look, some of the um obvious ones are obviously just around integrity, yeah, right. Um, as I mentioned, we don't get any collateral when we give money to people, so there's a lot of trust involved there. And it's not just what we hear in the back channel about founders, but also just how they how they you know work with us when we're um negotiating the deal or or talking about the future and so on and so forth. So I say like that, that's probably one. I think the second is like lack of coachability. I think when founders feel very closed off to feedback or for us to poke, you know, uh uh poke uh not issues, but like, you know, questions around what they're building and they feel very like, you know, defensive about it. It's not that I want them to be able to coach them, but I think I want them to be open to like listening to that feedback from customers, right? I don't want to have them have what we call happy years, right? Happy years is like you don't really hear the negative stuff, you only hear the positive stuff. And I think you want founders to um to really search for the truth, right? Um, I think it's really hard to convince people to use your product, to pay for your product. So I think you can't get there by being overly optimistic. You know, I think you, you know, there's a mom test that, you know, there's a book uh that I think is like goes into a lot of detail around like how to really, really, you know, not just like let your mom tell you, like, oh, this is great, let's go do this, but like really search for that, for that truth. And it's a it's a weird like dichotomy, right? Because at some level you want them to go search for the truth and and and not be happy ears. At the same time, you need to be outrageously optimistic to build a business, you know, because it's gonna suck along the way. And for you to do this for 10, 15 years, you have to be a lot of optimistic person where you're like, no, no, this is gonna work. I know it's gonna work. I know it may not seem like it today, but I have this confidence that it's gonna work. So having that that combination is is um is important and that not everybody's able to balance those two things. I think that stuff is what comes to mind. Um, you know, obviously some of the basic stuff around like can they attract resources to their company, whether that's capital, talent, customers, so on and so forth. I think they need to have some level of gravitas and pull uh to be able to do that. Because look, the reality is uh I can give money to these companies, but I don't want to be the last check into the company, right? If it's gonna be a big business, they probably need to be able to attract more capital, right? Um, uh sure they found a co-founder and maybe they can find a few more engineers, but I don't want that be to be the last talent that goes into the company. I want them to be able to convince people who in a rational world would not be joining your company to be able to join your company, right? Because you're gonna pay them less, you're gonna make them work more, there's more risk with this company, but they're still gonna join your company, right? Like that is the kind of talent you want. And same thing with customers, right? Like rationally, they should not be using your product because they could lose their job, whatever could happen, but somehow you convince them to be able to do that. So I think that's sort of what you're what you're looking for, which I think is it's sometimes, you know, if I look at the anti-portfolio, some of the companies we've invested in that haven't done well, I think it's where we've um missed that in our diligence, right? Where um, you know, the biggest mistake I'd say we probably made is like fell in love with the idea, right? Where it's almost like you think, like, if I was building this company, I would uh I think it's gonna be really big, but the reality is we're not building the company, right? We're we're like a coach at best, right? But ultimately the players are the ones that have to make all the plays. And um I think it's it's really important to be able to um to pick those people well.

SPEAKER_00

And you know, uh uh the founder of uh uh Goldcast has said that, you know, um that uh Gorov writing a check when we were two weeks away from giving up is the kindest thing that something has ever done. Palas said that.

SPEAKER_03

Uh I look, I I'd like to think I did it purely out of kindness. I I did it because I thought they were gonna build a big business, so she did. Um I I I I you know, I don't know if it's the luckiest thing uh that we've done, but it certainly you know has worked out well. But look, I I I I can see from his perspective, he sees that as being a gesture of kindness because they heard so many no's, right? They heard so many no's and we finally said said yes. Um, but I think it's because you know the the way we underwrite people and deals is very different than most people, right? We're willing to take risks that others are not. And I think that's why I believe it wasn't a gesture of kindness. It was just we saw it and we're like, this is gonna be big.

SPEAKER_00

What are the most non-consensus things that you have ever done?

SPEAKER_03

Oh man, uh, there's so many things. Um, you know, certainly a lot of deals that we have done uh that have been non-consensus. I mean, frankly, most of the investments we do at a four are not consensus. And we believe that's where the alpha is. Where um, you know, I think if it was obvious, then um then somebody else would would also see it. Either the price would be too high or it wouldn't be our opportunity in the first place. Um so so a lot of the deals we debate them internally a lot. And as long as one person is excited about it, it gets done. Uh, it doesn't have to be a consensus deal.

SPEAKER_00

It doesn't have to be even a partner to get super excited.

SPEAKER_03

No, only one person on the team has to get really excited. And obviously, my co-founder and I um, you know, can do deals, but even on the team, we give them a lot of latitude to be able to um to advocate for companies. And there'd be many investments that we've done where my partner, Animatter, and I might look at it go like, I might not have done it, but this person has clearly done the work. We pushed back hard, they've come back with answers and responses to that, and we trust their diligence, right? We trust that they're advocating for this and we should, we should do it. So, and I think that's how you frankly find alpha again, going back to the business of exceptions, right? If it's gonna be obvious, and that's not where the exceptions are.

SPEAKER_00

What are what is the the lowest ownership and the highest valuation that you have gone to till now?

SPEAKER_03

As an entry price?

SPEAKER_00

Yeah.

SPEAKER_03

You know, there's been some stuff we've done in the non-core bucket, um, where uh it was repeat founders, usually, that we that were expensive. Um, a company comes to mind called Koala that we invested in repeat founders, I believe, out of a segment uh that was a pretty expensive uh deal for us to get into. They they were doing well, they raised a series A. And then they actually got acquired by Cursor and we got Cursor stock. And we'll see where that movie kind of all ends up. But right now it's looking really good for us. Um, and again, it just goes back to like the reason they got acquired by Cursor, I think it's a lot of it was for the talent, right? Just an exceptional talent in the team, and and they're now running the enterprise business for Cursor. So uh if you just, you know, chase great people, uh obviously you want to get in at a low price as possible, but you know, you will eventually do well. You know, in our business, I think three things matter in that order. I think number one, it's a power law business. So you've got to be in the best companies. A few companies end up driving the returns, whether it's for your fund or for the for the industry, and you've got to be those companies. Number two is ownership, right? Where you want to own as much as you can of these companies, not just at the entry, but at the exit, right? It's not where you start that matters, it's where you end up, right? Obviously, very hard to increase ownership in best companies, so you better start strong, but it's all all about where you where you exit. And number three is the entry price, right? Um, obviously lower the better. But you cannot skip a step, right? You cannot chase low prices in companies that are you know not that excited about or the ownership is low. You can't have high ownership at a low price in not great companies. Because guess what? 50% of zero is still zero. Yeah, right. And by the way, if you're in great companies with low ownership and a high valuation, not ideal, but you can still return the fund and then sell, right? So ultimately we see things in that order. Um, and there's probably companies where, again, they've done well, but the other two things weren't as good as we wanted to be. And and look, outside of repeat founders, if we generally don't invest in companies that have a significant amount of traction, because there are other investors that are really good at that, right? It's not to say that's not a good company, it could be a great company, it's just not in our focus area, you know, it's not on our ICP, if you may. Our ICP is finding usually non-celebrity founders, right? A lot of them first-time founders, before it's obvious to everybody else. What that means is usually, you know, little to no revenue, usually no product, you know, maybe the idea is not even fully baked yet. Like that's that's our space. And like if those companies are expensive, like something is wrong. Maybe they're running a process. And a lot of times, we know the question we ask ourselves is why are we part of a process? Like, we should have met these founders before they were running a process, before they even were ready to fundraise. Like that is a time we've got to intersect with founders and help those founders. Um, and if we do that consistently, then the entry price should be low and the ownership should be high.

SPEAKER_00

How did you meet Adite from Loon?

SPEAKER_03

This one is a funny story. I actually met uh Adite for the first time through his wife, um, who I don't know exactly, I remember how I got introduced to, but did he, yeah, that's right. Uh uh, because she she's also founder herself. And she had pitched me her company, um, which is doing really well from what I can see now. But unfortunately, we passed. Um, uh, but but uh thankfully she had had a good enough experience with me that she was kind enough to be like, actually, my husband is starting a company now. Would you like to meet? Um, so she introduced us to Aditea about a year actually before we ended up investing. So we stayed in touch with Adite. And then when the round was coming together, um, John, who's now joined uh joined uh Noon actually, used to be at Scribble, he kind of gave us a heads up that hey, like a round is coming together now and uh and then we're we're planning to invest in that round. Do you want to take a look? So we we uh we moved pretty fast and ended up investing in the in the round. So, you know, and again, going back to source saying you never, there's no silver bullet in this, right? And by the way, I get more deal flow from founders who I I have said no to, who I've passed on than founders who I've invested in. Right now, of course, partially because there's a hundred times more founders who I've said no to than the founders I've invested in. But I think it's really, really important for us as investors to make sure the founders have a good experience when they talk to us. They should feel like, wow, well, Gorb didn't decide not to invest. He's probably he's gonna regret it, which is I probably will. But at least those 30 minutes were useful. You know, at least hopefully you walked away with I've pushed your thinking a little bit, you know, you've thought about things that you weren't thinking about before, like I asked good questions at least, you know? And I think that that part is important to us. And that is why I think founders, when they're asked by somebody saying, hey, I noticed you're connected to Gorov on LinkedIn, like all right, you know, do you know a four? They might say, Hey, look, they passed on me, but I think had a good experience, so you should still talk to them. I think that is very, very important.

SPEAKER_00

And how do you coach your set of founders for leading the next round?

SPEAKER_03

Yeah, look, um I think raising money, um especially the round right after us, um, you know, if if our round is 100% storytelling, 0% data, the next round is still 90% storytelling and 10% data. There's some early data, but it's not like it's obvious that it's like, you know, breaking out. It's not like millions of revenue, right? It's still early. So I think a lot of the time work we do, and this is where we can be very helpful to founders, is really crafting the story, right? But crafting the story for investors, not customers. It's a different story, right? The founders are so focused on selling their product every day and they're so in the weeds as they should be. Sometimes it's hard for them to like, you know, take a step back and figure out what the story is for investors, right? Or they feel like, why should like I just look at the data or like let me just walk into the product, like that should be enough. But the challenge is like when you're an investor, you see so many companies and you're human at the end of the day, and you're trying to predict the future, you have to prioritize where to spend time, right? And I think where to companies where you, after the pitch, you walk away and go, like, you know, I felt something there, those are the companies you end up taking more seriously. And I think it's our our job to help our founders get there, right? It's our job to help our founders kind of figure out how to tell a story that's very compelling and that's backed up by the data. Um, and then also getting them in front of the right investors at the right time, right? Because again, this is at series A or seed series A, still a lot of judgment and subjective decision making. And not everybody is gonna look at the same company and like come to the same conclusion, right? I think our job is to sort of play interference, to be like, oh, talk to person A. I think they, you know, I've already told them about the company and they seem really excited. Don't talk to person B. I've mentioned the company, and it's just not in their thesis or not a focus area for them. And and help you kind of optimize your time that way. And then of course, as they're running a process, really be that coach in the background, where literally, like when companies are active in the process, I'm talking to the founder like three times a day. They're BCCing me on responses to send to the the the investors. When the response comes back from the investor, they forward it to me. They're like, hey, what's the question behind the question? They're asking for this, but I don't think this is the real question. What's the and I can help you coach that because I've I see at any point in time a dozen companies fundraising. So we have this incredible like data points on like what it takes to be able to do put a successful fundraise together, and that's where we look to help our founders.

SPEAKER_00

Do you only invest in SF Bay Area founders?

SPEAKER_03

No, there's no uh constraint from a geographical perspective. Our um our fund allows us to invest globally. Um now that being said, vast majority of our investments are in the US. Uh, and within the US, they tend to be around San Francisco, a little bit in New York. Um, you know, I moved to Canada as I do a bunch of investments in Canada as well. But we've increasingly done a bunch of investments in India as well, right?

SPEAKER_00

Especially companies only in India?

SPEAKER_03

Yeah, some in India is a company called Numi. Um, you may have heard of in the consumer space, consumer fashion that we invested in. Um, so that one's based just in India. A lot of the times um it's cross-border, right? Like a noon or something or goldcast where the engineering team might be in India and the founders are here and they're back and forth. So um, you know, we're totally open-minded to that as well. I'd say those are probably the big kind of pockets of where we end up investing, but we have an investment in a company in Latin America, we've an investment in a company in Africa, we have a couple in Europe. So we can totally invest um uh uh, you know, uh globally. And what we also find though, a lot of times is the founders may start off in India or may start off in Europe, but they want to move to the Bay Area. And I think that's where we can be very helpful to them. Our offices are right in the heart of San Francisco. I think if you map our office, it's halfway between anthropic and open AI. So we're like really perfectly, you know, positioned from a talent density perspective. Um, and then we have like 20, 25 founders at any point in time working out of our offices, right? And there's a company that we share where the founder works out of this office. And because we can build that community around them, so when they come from outside of the Bay Area, they don't know anybody here, we can kind of you know, um uh plug them into the community and suddenly they have you know all the friends that they need.

SPEAKER_00

And uh how many of companies today are from India, let's say, like exactly like Neomi?

SPEAKER_03

Just based in India with like no US operations? That's a that's a few. I think there's like two or three. But one of our companies uh uh called Onyx was acquired by Curefit, um, which I understand is like a pretty popular brand and of fitness in in India and hopefully we'll go public at some point. So we found ourselves in some of those companies. Um, you know, I think part of our challenge uh candidly is if you're building for the Indian market, I just don't know if sitting here I understand that enough to have a thesis, a non-obvious thesis, right? Um even Numi was frankly, a lot of it was the founders just came across as really strong. Um, I don't know if we had a thesis around like fashion in India. And like my worry sometimes is like I don't want to have the dumb capital where like all the Indian investors like you who are sitting in India have said, like, you know, this is not a good idea. And then I'm like, oh my God, it works in the US, it'll probably work in India, you know? It's just I just don't want to be that in that in that place. Um, so I think we probably have seen a lot. I saw a company recently doing something in furniture, for example. The founder seemed really strong. It's a really interesting idea. I just don't know if I have an unfair advantage. In being able to pick the right one.

SPEAKER_00

And what's your process to make sure good companies don't slip through?

SPEAKER_03

Yeah, you know, we meet uh as a team, believe it or not, three times a week, right? So most venture funds have a partner meeting once a week, usually on Mondays. We've extended that to three times a week because we want to make sure if one of us on the team, if a team of seven investors now, sees something they like, there's a team meeting right around the corner where we can discuss and debate it and figure out like key diligence points and move fast in decision making. What we don't want is you meet something on Monday afternoon and you gotta wait for Monday to like discuss this with the team, right? I mean, but we our our whole thing is like if we like it, we should have signed the deal before Monday. All the other venture funds are gonna discuss the deal on Monday. By Sunday night, if you like this deal, do whatever it takes to get it signed. If you have to show up at the founder's house, you do that, right? If all of us have to show up at the founder's house, we do that. If all of us have to meet a Sunday at the office and discuss the deal, we will do that, right? They're like things move fast. Um, you know, and the founders were investing in, I think, also appreciate that because they want to move fast, right? And they like that we move fast. Um and they they like that everybody else moves slow and we move fast. I think that kind of also going back to like selling them on working with us. Um, we often hear from founders, they're like, wow, how did you get so smart about these space and like my background so fast? Like it's been 24 hours since I first talked to you and I've already met like half your team. Yeah, you know, and it's because when we see something, uh, if I if I really like it, you know, it's like a alarm goes off on our Slack and like P0 on one of the channels where it's like, hey, I just saw something that I think is is special. And like, hey, you, you, you, can you meet this company? And then those people would drop whatever they're working on, meet the founder the same day, or like first thing next day, and and and then we're constantly talking and we all sit next to each other like about that company and trying to make a decision pretty rapidly. Because also, and founders at this stage they don't want to spend a month fundraising, right? I've been a founder myself. Um, you want to just raise money from people you like that understand your vision at fair terms and move on and go build your company and sell to customers, build a product. Like if you think about it, there's two founders raising a pre seed and they're both fundraising or meeting investors. Nobody's writing code. Yeah, nobody's selling to customers, right? The business is essentially shut down for the per for the purpose of fundraising. Nobody wants that, you know? So I think we've just got to be able to move fast, search for the truth, do the work that we need to get smart, make a quick decision and get it done.

SPEAKER_00

You mentioned about earlier that uh the reason to be based between SF Bay area, especially particularly between the offices of open air and thropic. The talent is really good, but the talent is also super expensive.

SPEAKER_03

Yeah, look, a lot of times, I mean, that's why we're probably seeing a bunch of our companies like Goldcast or uh Loop or Noon building kind of go-to-market functions here, but the engineering team in India. And I think that's actually a pretty good setup, especially if you can have a senior leader being based in India. I think it's hard to just outsource coding to the other side, but I think if you can have a real engineering center in that in that country, I think it could totally work. Or or different parts of the world. We have companies in Argentina and so on and so forth. So I think that's partially how you solve for it. Um, I think the good news now is with agentic engineering, um, you know, companies can crank out a lot more code for the same amount of input. Um, you know, historically, 70 cents of every dollar we would give as VCs to founders would go towards hiring engineers. Yeah. Right. Because they don't need machines, they don't build factories, right? What is the cost, right? It's people, right? It's engineers. Um, but now one engineer can do the job of 10, 15, 20 engineers, right? It's only getting more, it's only getting better. That's great, right? That's great. Maybe one senior engineer who's not cheap here can suddenly do the job that like you might have needed 20 people in the past to do. And I think that's that's sort of what you're starting to see is like companies being able to produce product much faster, much cheaper. You know, companies like gamma that haven't raised much money in the life of the company. In fact, they have what they call negative lifetime burn, um, is a term I'd never heard before, but it's a new term I've learned, which is they have more money in the bank today than they've ever raised in the history of the business, right? Not just cash flow positive today, they have more money than they've ever raised in the history of the business, starting as time zero. And it's because things have gotten so much more efficient. So, look, talent is expensive, and again, everything has pros and cons and trade-offs, and every founder has to figure out for their own purposes what where they should build the talent um machine. And look, some folks are more the cutting edge of technology or maybe more on research and infraright, they should be here. If you're building more like app layer stuff, maybe you can have a talent team be somewhere else where you can find good engineers, but maybe not, you know, the ones the cutting edge who are coming out of OpenAI. So I think it it really does depend company by company.

SPEAKER_00

And can you talk about a few portfolio companies that are hitting it out of the park that we didn't discuss?

SPEAKER_03

And there's quite a few. Um, obviously the ones we talked about are maybe some from some of our older funds. Um, those are more well known. Um, the newer ones are less household names, but hopefully they will be in a few years. Um, I'd say the one that comes to mind is a company called Tasklet. Um, this is started by the founders of Firebase. I was a seed investor in Firebase back in 2012. Uh, they sold that to Google. It was a great outcome for us, but also more importantly, became one of the most used developer tools in the in the world. Um, and they helped really build that inside of Google. Then they spun out uh to start Taslet. Again, the founders of Firebase were one of the first LPs in a four. So we've got, you know, it's interesting to see the journey of I give you money and then you invest in my fund, and then and then and then we got a chance to invest in the next company, which initially was called Shortwave. And it's an email new type of email client, which is a lot more efficient, faster, so on and so forth, than Gmail, which all most of us use at a four and we we love it. And that was well, that was growing and doing fine. But as as AI started to really take off, they asked themselves the question of like, what can this really be? Like email client is good, and email has a lot of information, obviously, about us, but what can we do with that? And and through multiple iterations over the last you know year or so, it's essentially become the way I think about it as like open claw, but like fully managed for you. So you don't have to get your own hardware secured, none of that stuff you have to worry about. You literally go in here and I've agents for a whole bunch of different things. So, for example, every morning I get a daily brief on like who am I meeting that day? It does research on those people, how introduced me, what context do I have? So, like I'm very prepared for my day. There's like a bunch of agents like that I've built, and all you gotta do is just check ChatGPT, you you type it out, and and you can pick which models you want to use and like it integrates to all your tools. So, like Gmail, Slack, Notion, whatever, you know, edge coronola has access to everything. And it's amazing, right? It's amazing, and it works 24-7 because it's in the cloud. I don't know, I can turn off my computer, it's still working, it has virtual machines, so I can do computer use in the in the in in the cloud. So anyway, it's been awesome. And it's a company that's gone from zero revenue earlier this year to I think right now, like north of five million revenue.

SPEAKER_00

Well, what how do you spell the name of the company?

SPEAKER_03

Tasklet. So T-A-S-K, like task, L-E-T, like let, tasklet.ai. Um, folks should check it out. Um, it's it's been a game changer. And especially for like, even though I'm technical, a lot of times I'm like get lazy on like setting up like the hardware, software provisioning and all the security stuff. I I love stuff out of the box so I can focus and get things done and move on to the next thing. And for if you're like me, just love efficiency and want to just like see the output and not have to deal with all the inputs, TASLIT is perfect. Um, so that's one company that's like really starting to take off. There's a few more at the B2B companies in the healthcare space that are doing incredible work. There's a company called Blooming Health that comes to mind. You know, something like a trillion dollars are spent in the US every year on non-social security welfare programs for people. And this is basically an agent that helps get the right benefits for the right people at the right time and that does some really interesting work around voice AI and stuff to make them make sure the benefits get to the right people. Um so that's another company that's really interesting. There's a whole bunch, um, you know, we can talk for another few hours about that.

SPEAKER_00

And can you share your journey in fundraising? Because, like, you know, that's the undiscussed part of venture capital on when VCs like us have to do this. What have been some of the learnings? What have been some of the toughest times? And how did you, you know, uh eventually build your ICP for your LPs?

SPEAKER_03

Yeah. You know, um, I think where it really helps is to have empathy and uh an understanding of what it's like to be on the other side. I think the challenge for LPs is they're getting inundated by new funds and emerging managers and microfunds and so on and so forth. So I think that one of the biggest things they're all looking for understandably is differentiation, right? What is your right to win, right? Why will you see this deal in the first place and why will you they pick you versus somebody else, right? And then of course, can you form the right portfolio to be able to have, you know, generate alpha, right? And alpha is like not just a net 3x return because they can get that from other places, but like a 510X, right? So all of those things have to, so I think storytelling becomes really, really important. Because if you think about it as a VC selling to LPs, what I'm basically saying is hey, give me money to invest in companies I haven't met yet.

SPEAKER_01

Yeah.

SPEAKER_03

I don't know what they'll be building. But just trust me that they're gonna be good companies, you know, and like especially as a generalist investor, I don't even know what sectors they're gonna be in, right? And like I don't know who the follow-on investors will be, but like just give me money. It's it's like it's absurd, like the ask you're making, right? Especially as a first-time fund with no track record, which is why it's hard. Um, so I think your storytelling bar is really, really high. At least with like a company, you can show the product, right? You can be like, hey, check out the demo. I can't show anything. I don't know what I'm gonna invest in, right? I can tell you the strategy of how to find them, but like, is it gonna work or not? I have no idea. So I think that that's why understandably raising a first-time fund is hard is hard. I think storytelling has to be really, really uh top-notch. Um, and the other learning has been um it is a long journey, right? There were LPs who passed on fund one who came into fund two, there were LPs who passed on one and two who came in three, and then probably there were LPs who passed on one, two, and three came in four. I think, you know, as a as an investor, sometimes when I, because the way we operate is when we passed on a company, even though if it becomes ramp, I can't really come back and invest later because we're so stage focused. So I kind of assumed if an LP passed, like I move on, right? But I think the learning has been and is, it is important to kind of show that progress of the business and the track, it track record and so on and so forth, and they might come around and still invest in your funds. So just because it passed, it's not a I hate you, you know, never again. It's sort of like I don't get it yet, but I let me see a little bit more color here. Um there's been many, many other learnings. Um, honestly, um I think you've got to, but it all comes back to like being able to demonstrate differentiation, being able to demonstrate the right to win, um, you know, really putting our founders front and center and like having them, you know, um really sell the story for us, being very communicative and transparent with LPs. Uh, I think also we were lucky that we we had a mostly institutional LP base in the first fund. I think a lot of times uh first-time funds tend to be a lot of high networked individuals. The challenge with that is by the time you're raising your second fund, even third fund, you may not have a lot to show because companies are early. They wouldn't have exited, the exited ones wouldn't be very good, the markups might be few and far between, especially depending on when in the cycle you you raise your first-time fund. I think when you raise from institutional funds, it kind of almost is an expectation to invest in at least two funds or three funds, right? And then by that time, you've better have something to show. And that helped us. I think in in fundraising, frankly, every single fund you know has been oversubscribed, right? We've always gone over target, we've always the hard cap. Um, and I think that's been a lot of that has been just an incredible LP base that we have. And it's mostly the same LPs. I mean, 90% of our capital always comes from existing LPs. And frankly, there's always demand to do the whole fund, but we cut them back because we always think it's good to build a couple of new relationships in each fund cycle. But you know, our LPs always been happy to do ProRata in every single fund. Even the fund has gone from, you know, initially the target's 40, we raised 47, then it was 75, we raised 78, then it was 125, we raised 150, then it was 175, we raised 188. And, you know, so it's always been like that. Um, and we feel very, very fortunate.

SPEAKER_00

Got it. And how did you manage to keep, let's say, uh, 90% institutional LPs across all your funds?

SPEAKER_03

Uh your question is like, um, did we pick institutional LPs initially? Yeah. Yeah, look, I think some of that is um, you know, both Animeter and I uh we came from funds before, right? So while we were first-time fund managers, we weren't first-time investors, and our previous uh fund uh GPs were very generous in making introductions to a lot of the institutions that we've gotten to know over the years, being in those funds. So I think that that helped. Um, I think we've always tried to prioritize um, you know, the institutional LPs just because, you know, we think um even though we can find capital maybe more easily somewhere else, it's short-term right, long-term wrong. We almost think of fundraising this fund as like also raising the next fund right now. So, like, are we putting ourselves in a place where as long as we deliver, right? Obviously, we have to deliver, there's nothing for granted, but if as long as we deliver, the next fundrais should hopefully be easier.

SPEAKER_01

Yeah.

SPEAKER_03

And look, fund four, we raised in 2023. That was like a really tough time to be raising money, right? Around here, where uh ZERP is gone, you know, AI is in the doldrums, uh, AI is still sorry, uh uh uh uh tech markets are in the doldrums and AI is still early, but it was still oversubscribed, right? And I think it's because the LPs kind of saw our track record from the first three funds, you know, they said, hey, look, you've been executing on the strategies that you told us to do. The results might be early or the macro might not be very good, but we'll still back you, right? And I think that's that part is important.

SPEAKER_00

Well, and what are the best uh DPIs that you have delivered across the funds?

SPEAKER_03

Yeah, you know, um the the what I can share is like our all our for the first three funds are top quartile, um, DPI and TBPI. Um and uh, you know, it's it's been through like some organic um MA that's happened through companies like KubeCost that was acquired by IBM and Goldcast and a bunch of other stuff. We also are pretty active in the secondary markets, right? Um, you know, companies take a long time to exit these days, starting uh from, you know, where we invest at idea stage to like really becoming a public company takes longer than it ever has. Um but the the nice thing is that secondary markets have become pretty robust along the way. So if you have good companies in your portfolio, you can usually sell either that position or sell part of the fund and so on and so forth and recycle capital to your LPs. And that has allowed us to stay top quartile DPI, which, you know, um the LPs are very happy about because, you know, ultimately we're not in the business of just investing, but we're in the business of returning capital to our LPs. And the returning capital part is very important, and not just returning eventually, but returning in due course so they can keep recycling the capital. Uh, because it's not just about DPI, but it's also about net IRR, right? And I think we're very mindful of those two things.

SPEAKER_00

Well, thank you so much, Gorov. This has been a wonderful conversation. Thank you for being candid.

SPEAKER_03

Well, this was fun. This was fun. We got into a lot of stuff. I know we can talk for a few more hours here, but uh thank you for having me again, and uh, hopefully the folks find it useful.

SPEAKER_00

Yes, yeah, absolutely. I enjoyed it, and hopefully, my audience also enjoyed it.

SPEAKER_01

Thank you.