In part 3 of our 5-series blogpost on Blume founder Karthik Reddy’s conversation with Deepak Jayaraman on the Play to Potential podcast, Karthik shares the secret sauce behind venture investing. It’s not about picking the best founders but instead getting the best founders to pick you. The full conversation is here.
Moving on, I am very curious about the early few months whenever somebody joins a new place whether it’s a new industry or a new company or a new culture and specifically in the VC industry, what I find interesting is that it’s a long lead time in terms of feedback of performance, it takes a while before you get a sense of how you are doing as an investor, so what’s your experience or what’s your advice to people to deal with the first passage of play till the real feedback starts kicking in?
So I think if they have already joined it’s too late for one part of the advice which is what we give to a lot of people who come knocking on our door which is saying find any avenue which allows you to work with startups as much as possible before formally enlisting as a VC so even if you are doing it in your early 30s, it goes back to the exercise that I did for myself and for the team. If you are not ready for a 10-15 year journey it’s a nonstarter, the economics are that way, leave alone just actually going through the success part, even the economics are pretty back ended, so why are you joining if you don’t believe in the journey that long? So it is almost like committing to a 15-20 year journey/relationships, set of relationships even with the people who run that firm, the philosophy of that firm etc. and saying I am smart enough give me the job, so we encourage a lot now, given the variety of portfolio that we have so go join one of our portfolio companies, how can VC startup experience hurt, it is fantastic, you will learn so much and depending on what your skill set is even though you might be a mature 35-40 year old, advice is always go as early as possible, not necessarily if you want to sign up as a co-founder and you fall in love with an idea, even better, go try out the journey, if you are successful you will make a lot of money otherwise you have done exactly what we have asked you to do. It’s like a mini MBA without the additional cost.
…the opportunity cost of time being the cost.
That’s the only cost but you learn so much; because we have portfolio choices today we tell them you pick a city, you pick a sector I will give you three options; now what’s interesting and this is actually true of what happens post them joining as well is for the first time they realize how much they are respected by the entrepreneur; and why is it any different if you are already having a VC visiting card versus actually being on the outside pitching to that entrepreneur; it is exactly the same…why would an entrepreneur once he has taken your money, why would he respect you for anything other than what value you can add to him? So if you are sitting in the outside and you don’t have that agenda, you have still got to convince the guy that you are good enough to be in the firm and if you had actually become the VC, let us say this part ended in both of us agreeing that he is a good candidate and he came on board, and on day one what locus standi does he have in the firm? Nothing. I probably trust him, entrepreneurs will ask who is this kid, he might be six years younger than my colleague but he will say who is this guy? What does he know? My relationship is with you; so we had this challenge in Fund 1. We picked a lot of the portfolio and then we parachuted in two three guys and the entrepreneurs only wanted to talk to us; so they are habituated to a certain extent, so which means the job goes back to some of the characteristics I explained 30 minutes ago, if you are not able to win over the entrepreneur by the value you can add to them, the difference you can make to their day to day in their day to day lives, he is going to say I will see you as little as possible and not as much as possible and if you are not seeing the entrepreneur as much as possible you are not learning. So the first six months 12 months clearly forget about dreaming anything bigger than just learning. Maximize the number of meetings you can go to, tag the partner, tag your colleague, join in further meetings, volunteer to help where you are not asked, win your way through because that’s life for the next 20. Why would he pick your money for 500K when he has 20 other choices; it’s exactly the same conundrum. Just because I have a tag called Blume you are not necessarily a slam dunk; you have to go win over why he wants to work with you, or she wants to work with you.
…my colleague in my previous firm Egon Zehender would say, people pick the photographer not the camera; at the end of the day are you the person delivering the value.
Which is also by the way, I mean, though you didn’t ask, I will disclose it, is the secret sauce in Venture Capital. The greatest VC firms are built on the back of a reputation, that they have the ability to make the founders arguably successful, or feel good about the journey…some of those attributes. And so they want to work with the best VCs for that reason. So the trick of the trade is actually, it is not about you saying I know how to pick well, it is whether the best entrepreneurs wants to pick you. In the U.S. it is more true because there is a dearth of