If you have been bootstrapping and think you are ready for investors, you need to learn how investors think. First, please study our free Bootstrapping course and Investor Introductions page. Then start looking for entrepreneur – investor fit. Today I introduce you to Deepak Jeevankumar.
Deepak Jeevankumar, Managing Director at Dell Technologies Capital, discusses his fund’s focus and preferences. You can listen to a podcast of our conversation here or watch the roundtable video below:
Sramana Mitra: Tell us a bit about your background as well as the current focus of Dell Technologies Capital.
Deepak Jeevankumar: I have been with Dell Technologies Capital for three years. I grew up in India in a family of doctors. I’m the first non-doctor in three generations. I decided to become a computer engineer. I worked for Sun Microsystems and then moved into the venture capital world about 10 years ago.
Dell Technologies Capital is the investment arm of Dell Technologies. We invest about $100 million a year. We have been in business for about eight years. In eight years, we have made about 100 investments. 40 of those have already been acquired, and five have gone public.
We invest mostly in Series A and Series B. Investment check size goes from $5 million to $20 million. We mostly lead or co-lead the round. The investment focus areas are anything in enterprise infrastructure from cybersecurity, cloud infrastructure, developer tools, to semiconductor chips, storage, networking. Sometimes we do a little bit of middleware and application layers.
Sramana Mitra: When you do Series A investments, what do you want to see in terms of proof points? If you’re doing a SaaS deal, do you have a particular MRR or ARR that you are targeting? How do you benchmark those deals?
Deepak Jeevankumar: That’s a great question. Enterprise investing has the highest variance in what we look for. In consumer investing, it’s usually some version of consumer traction be it number of users, number of daily active users, or monthly active users.
In enterprise investing, it varies. For example, consider a semiconductor company. By creating chips, you are not going to have revenue when I take the Series A investment. Then we look at the background of the founders whether they have designed and shipped chips before. You’re going to give them somewhere between $10 million and $20 million without revenue.
On the other hand, if it’s an open source company, we look at open source community traction. One of the metrics used today is the number of GitHub stars.
Another metric uses the number of downloads and how many people are actively using the project. By Series A, part of the project is in the market. You are having somewhere between a hundred to a thousand GitHub stars.
The other piece of the metric is not just how many stars you have, but can you actually build a big company out of this and why are you the most well-equipped to build a big company? That’s where we look for authentic entrepreneurs. Why are you the person who’s well-equipped to create this product? Do you have an authentic story behind this?
There are some cyber security products which take a long time to build. We don’t look for revenues in those. There are many cyber security products that you can build with seed capital. Typically, we look for $50,000 to half a million in revenue there. If it’s SMB-focused, it’s probably lower. If it’s enterprise focused, then we are looking for a handful of customers. That’s the challenge of enterprise investment. There is no one bar.