Deepak Jeevankumar: The first question we ask is a market question. Are you part of the future of the world’s story? Future means growth. For example, I think the future is multi-cloud which includes hybrid cloud.
We like startups that have strong multi-cloud or hybrid philosophies. Then how are you securing some of these changes happening with new hardware and new cloud? That’s a cyber security thesis.
In cyber security, we look at category transformation and category creation. Are you part of category creation or category transformation where you’re taking an existing spend, but you’re building a far better product. Category creation is when there’s nobody spending money for that problem today but is becoming a bigger and bigger problem.
Cloud security became a huge problem. We have the good fortune of investing in multiple cloud security companies that have done well. For example, Twistlock. As people start using containers, they need to secure containers. Twistlock got acquired by Palo Alto Networks for $400 million recently.
Another example of that is NetScope, which is securing SaaS applications. That’s where they started. Now, they do far more than that. We are investing in this company called Adalom, which has been acquired by Microsoft. They also secure SaaS applications.
Then we invested in RedLock, which is part of Palo Alto Networks now. We look for secular trends in different parts of IT and see if cyber would play a part of it. That’s one investment thesis we have. The other part is the people. We have to pick the right teams to ride on a disruptive wave.
There are a few things we look for. Entrepreneurs need to be very intellectually curious. Two, they need to cut through all red tape. Three, they need to be great recruiters. Four, they need to be authentic.
One of the hardest challenges about building a startup is scaling. There’re so many things you need to scale. You need to scale sales. You need to scale leadership. You need to scale culture, but you also need to scale authenticity. I’m a big believer in finding entrepreneurs who can scale authenticity and culture.
It’s not sufficient for entrepreneurs themselves to be authentic. They should be able to recruit people who are mission-driven like them and who are as motivated and as authentic as them. They cannot be there closing every deal. The salespeople who work for them also need to be authentic. The second level and third level leadership under them also need to be very authentic and motivated.
Great entrepreneurs recruit well. You’re recruiting investors. You’re recruiting customers. You’re recruiting employees.
Sramana Mitra: I have a follow-on question. When you are doing a Series A round, how much of the team do you want to see completed?
Deepak Jeevankumar: There’s a short term view and a long term view to that. The short term view is we want to see enough of the team that can take it to Series B. The long term view is, do you have a plan in place to recruit the right leadership.
For most enterprise companies, half the time we don’t need a VP of Product for Series A because the founders are the product leaders. We might not need a VP of Finance because we can use the part-time CFO. There’re so many part-time CFO services. We might not even need a VP of Engineering. Oftentimes, VP of Engineering comes in between Series A and Series B.
We definitely need somebody who can sell the product. There are very few good ones who can actually go and walk into one of the top five banks and pitch a product and get deals done. However, if the enterprise product is more on the SMB or mid-market side, we’d like to see somebody with growth hacking abilities who can look into the marketing and different kinds of creating pipelines.
I would say product thinking in the founders is important. We’d like to see some kind of sales or growth hacking depending on which part of the stack you play in. Then there’s engineers who can build the product. There are some companies that can achieve a lot with seed capital.
Seed rounds have become $5 million in some cases. In that case, we look for more of scaling like getting a VP of Product or VP of Engineering. I think more Series A startups do not have complete teams in terms of the leadership. I don’t think it’s right for us to expect it because there are things that the founders need to learn for themselves.