Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Nick Adams was recorded in April 2020.
Nick Adams is Managing Partner and Co-Founder at Differential Ventures, an enterprise-focused firm. We discuss counter-cyclical ventures in this COVID-19 world.
Sramana Mitra: Tell us a bit about yourself as well as Differential Ventures. Let’s get you acquainted with our audience.
Nick Adams: Our fund is a seed-stage fund. We usually invest somewhere around $250,000 to a million dollars for our first check. We have a heavy focus on the data science, AI, machine learning world particularly with B2B applications.
We don’t do a whole lot in the consumer side of things. In the enterprise, we’re looking at how data can transform the way businesses will operate in the future.
I spent about 15 years in startups of different sizes and varieties, mostly with a focus on enterprise sales, marketing, and product management. I did everything from launching the US operations for a Europe-based company to working with a big data company called OPower.
Later on, I was involved in launching a natural language processing engine for a company called Rage Frameworks out of Boston. It was later acquired by Genpact.
My partners have complementary backgrounds. Mitchell previously ran businesses throughout his career. David is our technical resource. He has a PhD in Computer Science from Stanford. He’s well-known in the hedge fund world for being one of the primary people behind building the hugely successful algorithms at Renaissance Technologies.
Sramana Mitra: What sized fund is Differential Ventures?
Nick Adams: We’re investing out of our first fund, which is $20 million.
Sramana Mitra: Tell us a bit about how you define seed. Specifically, the seed stage ecosystem has fragmented quite a bit to pre-seed, seed, post-seed, pre Series A, small Series A. I try to phrase it as, what do you want to see by way of proof points before you’re willing to consider an investment?
Nick Adams: We will invest pre-revenue. About half of our portfolio, our first check in was in pre-revenue companies. We’re looking for some sort of MVP. Primarily, we’re looking for founder-market fit and timing of the market. What we tend to look for is why is this team or founder uniquely qualified to do what they’re doing.
Is there a past experience? Is it their academic experience? Was it some unique connection that they have in the industry? Short of that, then traction is definitely helpful to prove that what you’re doing is working. We don’t have a specific revenue or target that we’re looking for.
Sramana Mitra: You want to see an MVP of a product done?
Nick Adams: Ideally, but not necessarily. We tend to gravitate towards more technical founders. There’s usually some product in place. It’s pretty common. It’s rare for us to take a pitch deck or a concept on the back of a napkin.
Sramana Mitra: What about geography? Where do you like your founders to be?
Nick Adams: Most of our founders are on the East Coast of the US. About 50% of our portfolio is somewhere between Boston and Atlanta, 25% is in Canada, and about 25% is based in Israel.