Sramana Mitra: Let’s double-click down on deep tech and seed investing in 2021. What check sizes are you writing and what does a team need to have in place for you to be willing to write that first check?
Karthee Madasamy: We invest between Seed and Series A. A lot of our stuff is with Series A. We selectively do seed, post-seed, or pre-Series A. Our check sizes range from $500,000 to $3 million. Our seed is probably $1 million to $2 million, but we’ve also done $3 million and $500,000.
Sramana Mitra: Let me be very specific. Let’s take those categories separately. Let’s take the $500,000 first check into a company as a category. Let’s also take $1 million to $3 million as a second category. Start with the $500,000 first check category. What does the team need to have in place for you to consider?
Karthee Madasamy: We are a deep tech fund, so we look for clearly differentiated technology and an identified market need. We also need a founder fit for both of those things. Founders need to have the right expertise, motivation, or background to provide the technology and also to deliver products to that market. We look for those three things at that stage. We don’t get big revenues at that stage because it’s harder at that stage, especially for a deep tech company.
We look for a differentiated technology. A lot of times, it might be a spin-out from a corporate lab where the technology has already been built out. We look for that. Then there are some clearly differentiated aspects to it as well. We look for the market and the kind of market problem that they are solving. At that stage, they might have done one round of either POC or a pilot.
We look for an articulated view of, “Here’s the market that needs solving. This technology and this product will solve that.” We don’t typically invest in companies that haven’t come out and started doing the company. We are looking for a full-time commitment. Those are some of our focus, metrics, and milestones that we look for in the seed stage of the company where we are writing $500,000 checks.
Sramana Mitra: What is your perspective on first-time entrepreneurs? A lot of these teams are inside labs or in universities and they are first-time entrepreneurs. They are technical founders usually. Would you write a check based on a technical founder with differentiated expertise with an identified market, but they want to go after a real pain point that you have some understanding of but not much more?
Karthee Madasamy: Yes, we will do that. What we look for is hunger. Sometimes, experienced entrepreneurs may not have the same hunger. We don’t try to look for just serial entrepreneurs. We just look for hunger. Does the entrepreneur have this hunger to make this happen? Oftentimes, in deep tech companies, the initial founders could be primarily tech founders.
We look for adaptability. It’s okay to start as a technical founder. It’s okay to be a first-time entrepreneur. Are the founders open to feedback? Are they open to giving up some of the control and bringing in business focus help? We look for those types of things. They need to be adaptable and willing to bring in reinforcements where they have blind spots. That is an ongoing warning. We have always been surprised by people who we thought were reasonably adaptable but end up otherwise. It’s an ongoing learning process.
That is what we look for. We’ll say, “Hey, you need to bring in such a type of person to complement your strength. You need these go-to-market capabilities. These are some of your blind spots. You need to have fundraising.” Sometimes technical founders under-raise the fundraising part of it. We try to explain it and then we look for people’s mindset around that. Sometimes we are wrong, but that is an ongoing thing that we keep getting better at as well. Nevertheless, we do take technical first-time founders.