B2B Revenue Acceleration
B2B Revenue Acceleration

Episode · 2 years ago

71: What Venture Capitalists Look for When Investing in Tech Companies w/ Anoushka Vaswani


It’s a confusing world for tech companies. Especially for new tech startups looking for venture capital.

How do you set yourself apart from the rest of the tech companies out there? How do you make your company stand apart so that you ensure that you get that crucial injection of venture capital? 

Thankfully it’s not quite as much of a mystery as it may seem. 

On a recent episode of the B2B Revenue Acceleration podcast, we sat down with Anoushka Vaswani, a partner at Lightspeed Venture Partners for a discussion all around:

  • What her firm looks for
  • How tech companies can set themselves apart
  • The hot technologies that are set to disrupt the market

To hear this interview, and many more like it, you can subscribe to The B2B Revenue Acceleration Podcast on Apple Podcasts, on Spotify, or on our website.

You were listening to bb revenue acceleration, a podcast dedicated helping software executives stay on the cutting edge of sales and marketing in their industry. Let's get into the show. Hi, welcome to be to be a revenue acceleration. My name is only in with yer and I'm yet today with an Anushka. That's whenny, but not a light speed venture partners. How are you today? But Miska, I'm doing very well, very excited to be on the show. It's a pleasure to have you. So today we will be talking about what venture capitalis look for when investing in tech companies, which is probably a very white topic, but we'll see how we can tackle that. But before we get into the conversation, Inderstey, could you please introduce yourself a little bit more to Aologians as well as the company as you represent, make speed venture partners. So first on light speed. Light speed is a nine billion dollar venture fund based in Menlo Park, or global. We have offices in India, China, Europe and Israel to and actively invest in all of those geographies. We're also a full stack venture fun so we're investing out of a seven hundred and fifty million dollar venture fun and a one point four billion dollar growth fun today. And so, internally, the mission is to be able to partner with every great tag founder looking to build the next generation public company, whether it's, you know, the your first round of funding, your seed round or your pre IPO round. And then the other thing internally, the one standard we hold ourselves too, is that if we invest, we want the entrepreneur to be able to say that we've meaningfully impacted the trajectory of their business. So, in addition, for investment team that you know works day today with a particular company, we have a whole services or such as a marketing team, a business development team to help, you know, be to be company potentially crack certain customers that they haven't been able to get into. ...

Let's leverage the lightspeed network, a talent, talent infrastructure team and then a network of two thousand CIOS. Okay, and so that's kind of lights be my background. So I'm a partner here where I focus on our growth stage investing efforts, and so I typically kind of get involved once a company has found product market fit. It is really thinking about go to market scaling. You know, when you're at twenty million and are are and looking to get to a hundred. What does that journey look like? Fire a light speed. I worked at an early stage firm called Matrix partners, where again I was predominantly focused on enterprise software intet. I also got to spend some time as a product manager, a masterclass as the company scaled from fifty to eighty employees. And then I start my career covering tech clients at McKenzie and Golden. And then, you know, personal background for me, like I come from a family that's moved around a time. So was born in Dubai, lived in Istanbul for several years, did a short student Brussels before moving to the state, and so definitely have like a big appreciation for different people, different backgrounds, different personalities, and really do feel like there isn't, you know, one founder archetype that can create a great business that makes sense and and definitely an interesting background it. I think you'll learn a lot when you when you when you travel, particularly at an early age, from from countries to countries. So yeah, definitely an interesting background. So I know salt lay speed is as invested of you know, those three hundred and fifty companies in the past twenty years and obviously multiple technology sector. So when I'm sure that there is numerous elements that you would take into consideration in your assessment before you you didn't make a move or you decided to companies, was in this mean? You know, it would be good if you could just take a show it from your perspective. All do ski elements that you are looking at what makes a company works, while the investment? Yeah, so I...

...think it differs a little bit on early and growth furnally and so early, you know, sometimes there isn't even a product. You know, you're just going based on a team and we spend a lot of time thinking through founder product bit and so you know, what knowledge or skills that can you bring to solving this problem that maybe fifty other people can? Are you uniquely kind of situated to build something here? And then, you know, ultimately the success of a company is often dependent on the people you hire. Can you, as a founding team, you know, hire and attract or World Class team? You know, are you going after a big market? And you know, if you do have a product, what does that initial product look like? You know, how does it function? where it is it fit on growth at light speed. I think, very different from, you know, other growth stage investors. We take a very venture oriented lens to everything we do here, again, where it really is about kind of team product market first, and then we also will look at, you know, metrics, understand, you know, some of the business and performance fundamentals historically, and then internally, we actually spend a lot of time talking about Outli our businesses. And so one thing my partners will really push you on when you're bringing in a company is can this be an iconic, you know company? So I think kind of part of that Bush. Let us to invest in companies like Snapchat, you'll soft APP dynamics, new tannics, which you know, have really reshape the spaces that they're in, and so that's kind of a question that's often asked through the process. Okay, and when it comes to valuation, so we we've seen a we witnessed some valuation and I guess from from people at all outside of the the VC world, we tend to look at valuation of Company and Wow, that's a big valuation for a company as May not have done, you know, a turn yet in the market.

Or maybe we consider that revenue and and and only look at that. So what's your take on that, because we do feel that sometimes the valuation can be Little Bit inflated. Would you agree with you disagree with what's share? What are your sorts on that? I mean, I mean I definitely think one thing that's true and comes to valuation is it is pretty dependent on kind of where you are in the market, in the market cycle, and I would say the past couple of years, you know, we've been in a really heated market and so you know we will look, for example, at public pomps when looking at either growth or sometimes an early stage deal. But then you spend a lot of time also looking at kind of private comps and like for companies in this category. You know what has that look like, and so it's definitely been a very, very heated competitive market, I would say. And then at the early stage I think folks often think about, you know, being like a core partner through the founder and think about valuation in terms of a company wants to raise x amount. Ideally we want to own x amount. What Rual Umpire Valuation. At the growth stage we don't really have ownership targets or threshold it really is about being part of a great company. And then at the growth stage, I think you do start to look a little bit more, you know, high growth public comps and even though public comps, if you, you know, think about software, are rating, you know, at all time eyes right now, and you know it does fluctuate month over month. But but yeah, I think that's something we trouble and I think it's an interesting it's valuation is depending from where you look at it. You know, I guess if you look at it from the Entre Prenol, the evaluation is got to be very high. Should again, from your perspective, is got to be fair. You know, I guess, Lu and I it's got to be. It's got deep difficult and I'm getting into it in remember, my next question is really around around...

...technology, you know, trends and what's you know thatty innovative with was disruptive, and I guess he's got to be even more complex when you're looking at a disruptive technology at is. We have some vendors that we work with in different space. Could be big data, I could be cyber I could be even analytics or whatever. Were really kind of creating the marketplace that creating the nish. And you know, when there is not a market yet, it's got to be even more difficult to us as really what suppose the actual potential of that company and and to a t except what the valuation is. But but getting into that, that question, I mean, what of this slogan that I looked at online when doing my research on late speece more all good today and I'd expect that one of late speeds mission is to be able to Wa don't see, if I do, innovative technology companies that can dis from the market. So, from your perspective, what are the trends that's you look out for? blunderstand if the destructive ID we actually strive of Ai? Yeah, one question we spend a lot of time in during any investment discussion is around why now? And so why can this be a massive company today and why hasn't this been created before? And you know, what does that look like? And so what is that? This location change trend in the market that is enabling, you know, this business and and that comes up, you know, all the time. So, for example, in the UK and Europe, PSD two is a huge kind of regulation that's taken over up intact. And so, yeah, bank now need to allow other companies to basically read someone's kind of account history and reading right transactions to their account. And so the proprietary advantage banks had in terms of being able to underwrite or offer a constant customer products because they were the sole older of all of...

...the customers data, no longer exists. And so you know that that change will enable, and is enabling, a whole new generation of in tech companies being created, which is fascinating to watch. And so I think those dislocations are things we definitely follow and think about when evaluating and looking at companies. Okay, that makes sense. So ascw question is more spacific. From your prospects, Youve what all the technologies that are out doubt the moment that we just from the markets? Yeah, I think. I mean, I think they're there are a number. So I mean one area I've been very focused on is, you know, over the past like pen fifteen years there's been this whole rise of application software and different tools and APPS that individuals use, you know, as a consumer or in the enterprise. And you know, one fascinating stat to watch is if you look at the number of APPS per employee being used within a different company. Ought to actually puts out an annual survey on this and that that number is just like steadily risen. And so now one really interesting question is with, you know, this huge pliferation of APP today, there aren't really great ways to make these applications talk to each other or integrate or create workflows, and so we're now seeing a bunch of really interesting earlier stage companies, whether it's a Zap year or whether it's you know, we're caught out a number of other really interesting companies that are doing this integration work and enabling that, and I think will continue to see that. If from like a pure technology perspective, one really interesting trend that's playing out is around streaming data. And so typically, when a company would, you know, incorporate data or analyze it, it would typically done be done in batches. You'd analyze all your data grab insights from it, but there's...

...so many things that are continuously gathering ongoing data, whether it's like a sensor at a truck or, you know, even website clicks. And there are a lot more companies now enabling others to work with streaming data and to derive actions and analytics from them, and that was something that previously, you know, companies struggled with. How do you store, manage, monitor this data? And so if you didn't have kind of that foundation, doing analytics on streaming data is very, very hard. But that's kind of this really interesting like back change that's continuing to take place. Naturally, you know, everyone talks about like enablements and AI and machine learning. Yes, big thing. There are a lot of, you know, applications incorporating, you know, those types of technologies in different ways. We have an investment in this, you know, we have multiple investments in the space. One of our investments in the space is, at any vision that's operating in the World Faf recognition, which is, you know, increasingly being used in a public safety, you know security context with kind of cameras and doing facial identification, and that's kind of becoming this emerging trend, and so I think there are a number of things, dependent on kind of what space you're looking at, that are kind of changing and involving that area. Yeah, not at that. That's makes fascinating space. So I would I would concer with which you you just said. I'm sure we'll have lots of people do to the Wi you are and the company you represent. I'm sure with have lots of CEOS, of thunders of companies or people are start up a different words and position of maybe people were even invested and show or those of that sort of company at all listening to the podcast on this podcast. So if you are any an advice for those people, what would you tell them? Is, you know, what are the ways would you give to a start up funder that is looking...

...to get funding for that company? Why should this starts? What do they need to think about and how do they get in touch and the start the process? So I think regardless of stage, you want to be very, very pressed on your story to articulate kind of where yours a company and where you're going, and I think that's kind of the first step. And then the second step is to kind of come up with a list of investors you think could be great partners for you, who specifically you think would be a great partner for you and kind of the right introduction in. And then at the early stage, you know, I think a lot of founders get get advice about like you know, don't spend too many cycles talking to investors. You know, pick one time to do your fundraising, get the right intro in, kind of speak to a bunch of investors. Closed around that, you know you can go back to focusing on your business, which I think. I think it's true at both stages. I think one thing that's more true, I think, at the later stage, is that often times it is based on longer term relationship. So, yeah, growth investors will know, you know, all the company for long periods of time. I think they'll often be like multiple touch points in an ongoing dialog and it is kind of a much larger check size, and so it's very helpful to kind of have an ongoing kidence with a couple of firms or people that you might be interested in partnering with down the road. That's definitely how I think about you know, think about your never were thinking about or watership. Would it mean that, for example, you you may speak to a company that you think he's interesting, but you you probably are maybe six months, twelve months, eighteen months down the light from investing with it, because that relationships. You want to see the journey and basically you can a full most do a bit of diligence prior to do the prop conversation that you that's what you're saying. You know, I think that's true. And oftentimes, like the companies we might be speaking to on the growth stage, don't need to raise money.

You know, some companies might be profitable, some might have raised a large round and you know, I'm thinking about raising any time soon, and so I think that often often drives it, or you might you know, typically, you know, we wouldn't. On the growth stage. A company typically finds product market fit and then we get involved at a slightly later stage. But having that longstanding relationship from those early stages is just kind of Nice to build the relationship because, yeah, you know, yes, on our end we're partnering with the Entrepreneur, but on the entrepreneurs and you know, you're making a lifetime commitment or a ten year commitment with an investor and so you want to feel really comfortable about your fit with the ember erm and you know life is too short and you want to surround yourself with kind of the right people and people you enjoy, you know, having that regular cadence with. And so I think it's super important on both sides. Yeah, no, no, agree with you, and I think it's almost like bringing you. You can of bringing new bomb Membo as well, as they will be a voise that will be constantly with you for the for the foreseeable should show. So it's it's like any relationship where you need to make sure I shoot you know exactly what you are gets your engage reason and I think it's it's going to be the probably the best setup is when you've got the entrepreneur really selecting the investor and the investor you. It's kind of almost like a marriage, if you will, and everybody is up, everybody wants to get together, which is which is good. And what about these advice on on spending the money? I mean, I know that you guys say, you say, you mentioned early on, and which Keta. You've got different element like business development, marketing, and you've got probably a ton of people that can support you, which mean that you probably don't just look at the investment from a spreadsheet perspective, but but also you've got some human power out the back end to support the the entrepreneurs. You're wrong, but do you have like a set of rules in time of how the the investment needs to be invested,...

...or do you let the entrepreneur completely go? Is it just a key by case by case basis? I think it really depends on the entrepreneur. So ultimately kind of they're the one running a real element day to day of the business and thinking through, you know, the right way to allocate that capital. And so some businesses you need to spend, you know, significant amounts and sales and marketing. I think that's true for a lot of businesses and some, you know, there might be like a big, R and d element or, you know, a success element, and so I think it really depends on kind of each company and where they're out of their life cycle, and I agree with you. Think that makes sense. I was just wondering if there is a some sort of a formula, but they're reason not. So I'm glad you you can on me, so please love me know. Yeah, well, you know it would be with the sort of thing about officials. So I just wanted to thank you for your insight to that, Nich cat. I really appreciated the fine that you take the time. Unfortunately, we getting to the end of all station today, but if anyone was listening to the these postcasts would like to get in touch with you, you know, engage with late to preventure. What was the best way to tongage revengers, cat? I think email is usually easiest. On No SHKA at lsbpcom. Yeah, perfect. Well, once again, thank you very much for our thing today. It was absolutely a pleasure to have you on the show. Yeah, thanks so much for I really enjoyed this too. operatics has redefined the meaning of revenue generation for technology companies worldwide. While the traditional concepts of building and managing inside sales teams inhouse has existed for many years, companies are struggling with a lack of focus, agility and scale required in today's fast and complex world of enterprise technology sales. See How operatics can help your company accelerate pipeline at operatics dotnet. You've been listening to BEDB revenue acceleration. To ensure that you never miss an episode, subscribe to the show in...

...your favorite podcast player. Thank you so much for listening. Until next time,.

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