Amit Garg is one of two Managing Partners of Tau Ventures (Tau). Amit and his Partner Sanjay are founders-turned-investors. Amit has worked at two VC funds and has exited those funds for up to 10X. Amit is a strong believer in building and leveraging the community around him.

Tau primarily invests in seed companies focused on AI in healthcare. Tau is based in Silicon Valley with half of its deals coming from abroad. Tau manages $80 million in assets and has just over 40 portfolio companies.

When you started Tau Ventures, how did you find yourself grappling with new concepts?

When you don’t know the answer, you know how to find out the answer. You leverage your network. If it’s a legal question, obviously you talk to the lawyers. If it’s an accounting question, you talk to your CPA. I think the harder questions are the ones that don’t have a person to answer. Questions concerning strategy, business, and hiring. These are based on a mixture of research from everything that’s out there and you doing user-focused studies. You will obviously
have your own gut intuition of what could work and what won’t as well. Then, you take a leap of faith.

Did you find yourself making a lot of mistakes starting out?

We make mistakes all the time and learn from our mistakes all the time. I am making fresh mistakes as we speak by running Tau Ventures. When we were starting Tau Ventures, there were a lot of things that we didn’t know we didn’t know. For example, how to go about fundraising. To be honest, we had not done that ourselves and so we only had ideas. We sort of knew from other people’s experience and from everything that we had read, but it was the first time that we went out and did it ourselves.

There are things that you may be aware of but you only learn by doing. If there is a single lesson I’ve learned, it’s that being able to talk to other VCs, whether they have already built their own fund or are building their own fund, is amazing. We learned a lot from other people, and we learn what to do and what not to do by having mentors and guides.

As two cofounders, do you ever find yourself grappling with your partner on potential investments? If one of you is all in on a company and the other isn’t?

Healthy disagreement is grounded upon trust and respect, so we don’t always agree. I think that should be the case!

Our votes are agree, disagree, and consent. A lot of the best deals are based on consent, where you don’t need unanimity around the table. In fact, that’s true of a large group of investors that are working together. Unanimity is usually very dangerous because that means either the idea is too obvious or that there’s a group thing going on. What you want is a little bit of disagreement because the data shows that the best companies are the ones that are at the very edge of what is possible and not possible.

Earlier, you mentioned doing your homework on investments. Could you speak on what exactly this entails?

Cautiously optimistic here that we can actually build a 10X fund and the secret to that is being disciplined and diligent. We look at 2000 companies per person per year. We end up taking a first meeting with 10% of those, a second meeting with maybe half of that, so maybe 100. Then the third meeting with maybe even half of that so 50. By that point we get to 25 deals we’re pretty serious about and we’re writing deal memos. We’re very big believers in putting your thoughts down on a piece of paper because the very exercise of actually thinking things through and putting them down reinforces and helps you question the holes that you might have in your thesis.

We look across all the usual suspects; (1) the market, (2) the product, (3) the technology, (4) the competition, (5) how much money they’re raising, and (5) what they will use funding for. We especially focus on the team, primarily at the seed stage. A great set of people with a good idea will always figure it out and to us it’s preferable to a good set of people with a great idea. A good set of people will always be limited by their own abilities and aptitude and skills, but a great set of people will figure it out. If they find out that their idea can’t be better, they will change it, they will improve it, so we pay a lot of attention to backgrounds of the folks that are involved in the company. How did they come together? What are the missing profiles? How well would they work with us? What are their plans for growing the team? A lot of things that are a little bit more intangible. It’s understanding what caused this set of folks to go and build this particular company at this point in time and why they’re better positioned than anybody else now or in the future. These are the questions you really want to ask.

Interview conducted by Big Red Ventures Fund Manager Inder Singh.