Yanev Suissa: Obviously, we are financial investors and we do financial analysis. When I invest and decide on a company, what I’m looking at is not a ratio analysis of their past stock performance. I’m looking at the team, the market, their product, and their technology differentiation. It’s a much more on-the-ground advisory active type of investing. If you don’t do that kind of active investing where you can really be helpful and add value to the company rather than just throwing money around, then it’s not going to really work with the kind of returns and successes that you want it to be.
I do think we have a market here where there’s just money everywhere. The financing risk has lowered a bit because there are so many people you can get money from. That does not necessarily correlate with two things. It doesn’t correlate with there being that many more smart investments or companies, although tech is clearly here to stay and there are more opportunities.
It also doesn’t necessarily correlate with it being smart to take dumb money. A lot of entrepreneurs now, because there’s a lot of money, will chase valuations. They will take massive amounts of capital that they don’t actually need. That ends up coming back to hurt them. So that’s one major point.
The second major point is there are two ways to do venture capital and really be successful. I think one way is to be a seed investor which you guys have a ton of experience with as a network. As a seed investor, you make 100 or 200 bets. I would argue that it’s very hard to be a real advisor and board member when you’re making 100 bets and have 100 or so companies.
Spray-and-pray is what a lot of people call it. You’re putting your bet on a bunch of different things and as long as one or two of them is a Facebook and a few of them do well, you’ll do well.
The other way to be an investor is to be able to fund the company through its life cycle. So being able to do seed and A, and B, and C, and rather than making a ton of bets. Rather than play the odds, in a way, we’re going to actually spend time on thesis and have a somewhat concentrated portfolio. It will be focused on the things that we know are built well with a great team and that we believe we can help make even more successful with our participation.
There’s risk in any startup, but let’s increase our odds and decrease our risk as best we can as a team, as a partnership, as an investor, and as an entrepreneur together. Then you stick with that company and help it navigate.
So basically you pick the horse and then not just drink Mint Julep on the sideline during the race. You help it win the race at the same time. I think that those are the two best models. I don’t really believe in folks who just focus on a particular series or who just focus on one very niche sector only. A lot of folks focus on just one geography. I think those models are a bit outdated and have, over the years, proven to be not effective.
Sramana Mitra: So you are more on the camp of the spray-and-pray model.
Yanev Suissa: No, not at all. That’s why we do seed A, B, and upwards. We are quite a concentrated portfolio. We develop specific species in the enterprise space – data, cloud, security, edge computing, health IT, education software, or lending platforms. We develop a very specific thesis in cooperation with some of the big partners in our ecosystem and say, “This is where we think an industry is going. Let’s find the best team and the best players solving it in the way that we think is the right way to solve it and that has the biggest potential to have an impact and to be a big return financially.”