1Mby1M Virtual Accelerator Investor Forum: With Greg Sands of Costanoa Ventures (Part 2)

Sramana Mitra: Let me ask you a question in what you’re seeing. I’m completely with you and I’ve written extensively on this topic. The opportunity in AI is in applied AI. The unfair advantage is in the hands of people who have really deep domain knowledge in a particular domain where you apply the stack and solve a business problem. You mentioned agriculture, for instance.

If you look at that particular company, where is that domain knowledge coming from? What is the genesis and anecdotal founding of that company? How did this expertise come together – the combination of reasonably good understanding of the AI stack and the domain knowledge?

Greg Sands: One of the things that we all experience are people who have the technical knowledge and start out saying, “How do I apply it?” Sometimes, one can find them a business partner who comes from the domain and has the domain experience. In this case, it was a little bit of serendipity.

The founder was, in fact, looking for a problem to solve but had been introduced to a professor of aquaculture who said, “If you apply it in this context, you may be able to help optimize feeding patterns and identify health problems and some other things. That was an initial thread that a relatively young founder started pulling. For me, the thing that is so impressive and the kind of thing that we look for in founders is, there’s a natural curiosity to say, “That sounds interesting. Let me go pull it.”

There’s salesmanship in being able to show up at big companies and say, “I’ve fit together this thing. Let’s pilot this.” In the end, being open-minded about the kinds of problems that might present themselves and being disciplined enough to say, “Is this a big enough problem that anybody would care?”

Sramana Mitra: Very interesting. I’m always curious about the origin stories about companies especially when there are cross-domain expertise involved. People’s lives don’t cross paths naturally. How do these problems get solved? It’s always very interesting to watch.

Greg Sands: This is a challenge for all of us. We have our networks. We have our areas of knowledge. It does require this natural curiosity and the willingness to just follow that. As a venture capitalist, I meet with a person who’s talking about things I know nothing about. But that’s an impressive person and sounds reasonable. I’m just going to go figure it out. It comes with this spark of being impressed by a person enough to say it’s worth figuring it out. We can’t write a check until we’ve done the work.

Sramana Mitra: On your side, you have to do the same amount of work to understand the opportunity at least to be able to make that decision. What about your current portfolio? What are the highlights of the portfolio? What have you invested in aside from the two that you mentioned that you’re about to close? How did you process those? Why did you choose to invest in those?

Greg Sands: A recent investment that we announced is called Roadster, which is an omni-channel e-commerce infrastructure sold to auto dealers. It’s a very experienced product team. They built a beautiful and highly functional product. Interestingly, they built it to offer consumers to service themselves. They decided to pivot and make it a tool available to dealers. It got rapid traction. We had to go investigate what auto dealers are currently using, what are the constraints in the industry, and what is the influence of big dealer groups and auto OEMs.

We came away thinking that there was a great opportunity here to replace tools and technologies that had been built 20 years ago. The other thing that I’ll note is that it was a company that had been largely angel-financed. Their original orientation was, “We’ll just keep doing more of angels and notes.” We said, “We think it’s actually a great time for you to do Series A. You should take more money because you can deploy it successfully in something that’s already working.” It’s a great time to bring on an institutional partner to help you do that.

Another one would be Alation which is an enterprise data catalog. It is founded by Satyen Sangani who remains the CEO. We led the seed financing. We incubated it here at Costanoa and subsequently led the Series A. They just did Series B over the summer led by the team at Icon Ventures. That’s another one that I’m excited about. It demonstrates the role that seed financing can play for us.

We’re willing to invest very early around great people. We can incubate. We have an operating team and a partner for sales and marketing that can work with companies day in and day out and help them grow more efficiently and figure out how to lay down those first foundational bricks of building companies.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Greg Sands of Costanoa Ventures
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