Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Preeti Rathi was recorded in January 2019.
Preeti Rathi, Partner at Ignition Partners, discusses the changing dynamics of seed investing.
Sramana Mitra: Tell us a bit about yourself as well as acquaint our audience with Ignition Partners.
Preeti Rathi: Ignition is an early stage enterprise-focused fund. We have $1.5 billion under management and are currently investing out of our sixth fund. The sixth fund is a $200 million fund focused on early stage. So seed and series A are our sweet spot. From a check size perspective, we do anywhere from $500,000 to $8 million depending on the size of the round.
While we don’t really have any strong ownership requirements at seed, at series A we like to lead or co-lead. We want to really do a small minority check at series A. I think one of the major ways Ignition strongly differentiates from other funds is, we are the investors that will not just offer a check, but will tirelessly work along with the entrepreneurs.
So when we put in a check, you don’t just get a partner who made the investment but the entire Ignition team who will put in the needed work and effort into helping the entrepreneurs build a company they envisioned.
Sramana Mitra: Double-click down a bit on your seed strategy. What is considered seed-worthy in your shop? What do you want to see in terms of validation or MRR if you’re doing SaaS? What’s the current thinking?
Preeti Rathi: From a progress perspective, even if they’re looking in a company at seed stage, we are one of the firms who would like to partner with startups when they have a product already ready and have some traction going as well. In today’s world, you have friends and family round, the seed, then you may have a second seed or pre-series A. We are probably a good fit at the second seed stage. Or if you’re at a stage where you’ve made reasonable progress in terms of getting to customers, that’s where we’ll be a good partner.
Sramana Mitra: By the way, the terminology we’ve been using – and somehow the industry is starting to coagulate around – is friends and family, pre-seed, seed, post seed, pre-series A, series A. Let me ask you what traction means? Can you quantify that into MRR, for example?
Preeti Rathi: I hesitate to sort of quantify it in precise numbers because it just depends on what market the entrepreneurs are going after. If you’re a seed investor, you’re looking to invest in technology that may become mainstream only a few years from now. You know you have early adopters to begin with, but it becomes mainstream where everyone’s like “Okay. That’s a technology or product we can’t live without.”
It takes a few years. If it’s one of those frontier technologies, as they say it, you can’t really expect a huge traction there versus if you’re an entrepreneur who’s building a product in a well-known sector or space and products have existed, you just have a brand new technology or a business model that’s different. In that case, the kind of traction we look for would be different.