Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Venktesh Shukla was recorded in September 2017.
Venktesh Shukla, founder of TiE Angels and General Partner Monta Vista Capital, discusses some shifts happening in the world of seed investing.
Sramana Mitra: Tell us about TiE Angels and how you work with investors and entrepreneurs.
Venktesh Shukla: TiE Angels is a 7-year-old organization that is a collection of individual investors who, in general, tend to focus on B2B companies. The whole idea is that the collective wisdom of the group helps make better decisions, improves deal flow, and helps the entrepreneurs better. I’m also a VC now. I have a seed stage fund called Monta Vista Capital. The bulk of my time is spent on Monta Vista Capital, but I still participate in TiE Angels.
Sramana Mitra: How big a fund is Monta Vista?
Venktesh Shukla: The first fund was for $10 million. The second fund, which we’re in the middle of raising, is $30 million. The first fund made about 20 investments. About 18 of them were B2B.
Sramana Mitra: Your focus is on the B2B software segment?
Venktesh Shukla: That’s an accurate statement to make. The only exception is in consumer areas where deep technology IP is the differentiator and the driver. Otherwise, B2B is the default focus.
Sramana Mitra: Can you talk a bit about the stage? What is the comfort zone for you, TiE Angels, and Monta Vista? What do you look for in what you’re willing to consider as an investment?
Venktesh Shukla: In general, TiE Angels and Monta Vista Capital are seed stage investors, which is before the VCs come in. We look for, at least, a team. We look for a big idea but we also look for validation of that idea. Validation doesn’t have to be revenue or a developed product developed.
Have you talked to people and potential customers in the domain? What do the potential customers say about the problem you’re trying to solve, the urgency of solving it, and the willingness to pay for solving that problem, and how much are they willing to pay? It’s not just around the idea but also the experience and expertise of the team, as well as the validation of that idea in some form.
Sramana Mitra: When you say you’re looking for a big idea, talk to us a little bit about where in the B2B software segment are you seeing these big ideas? Maybe, a few examples of the kinds of things that either you have invested through TiE Angels or through the first Monta Vista Capital fund.
Venktesh Shukla: Here’s an example. In Big Data, there are a lot of companies that seek to solve the problem of unstructured data. There are also traditional companies like Teradata and Exadata from Oracle that solve the problem if you have only structured data.
The reality is that you have a mix of unstructured and structured data in huge quantities. There’s no solution to that because all the Hadoop-based solutions really don’t have a good sense of structured data and how to handle that. A solution of this problem requires a fundamental understanding of not just relational algebra, which is behind databases, but also a very good understanding of how to handle unstructured data. That’s a big problem to solve.
Another big problem to solve is, there are a lot of chat bots right now to automate customer support. These chat bots would, very soon, need to pull out information from their SAPs and Oracles. It’s not a technology in isolation but a technology that knows how to work with all these backend software. Innovation, by itself, is okay, but innovation should be solving a particular problem.
Another example would be in cybersecurity. All the existing products are rule-based, which means they are based on prior experience and expertise of the team. The cyber attackers have become so sophisticated that you need solutions that can evolve and think for themselves, which means artificial intelligence. How do you apply machine learning as a replacement or enhancement to rule-based solutions that exist.
The interesting thing is, because of cloud, the problems that used to exist in data centers are migrating to the cloud. All these problems need to be solved again plus it’s generating a new set of problems. I don’t think that all these problems have been solved. There are a lot of new problems to solve.