Amit is a Founding General Partner at First Rays Venture Partners. ‘First Rays’ specializes in seed stage investments in Enterprise Infrastructure Software themes around Cloud, Edge, Data, Security and Developer tools. He has led investments that include Enya.ai, Blitzz.io & Docyt amongst others. Amit was previously the Head of US Investments at Mahindra Ventures, a Series A fund focused on enterprise software. He has had stints as an Investor at Pear VC and Spruce Capital Partners. His portfolio included investments in Avaamo (Board Observer), Cloudleaf, Scoot (Acquired by Bird), Paid Labs (Acquired by Auction Mobility) and Pear Technology (Acquired by Avinew), amongst others.
Prior to becoming a VC, Amit has over 12 years’ experience in enterprise software as an operator across diverse areas ranging from cloud-native technologies, enterprise security, IoT, DevOps, smart manufacturing and robotics. Amit has also pioneered industry leading research out of Stanford University on Corporate Venture Capital. In 2019, he was named as one of the Top 100 corporate venture capital professionals by Global Corporate Venturing. Amit has a Management degree from Stanford Graduate School of Business, where he graduated as the Robert Joss Scholar.
Amit works closely with entrepreneurs and teams in portfolio companies to drive growth. His passion for venture investing in early-stage companies is driven by the three aspects:
- People – backing the founder’s vision in building businesses from fundamentals
- Opportunity – Technology that impacts disruptive innovation in the new software stack
- Context – Go-to-market that innovators will need to operate & be successful in the changing world
BRV Fund Manager, Ankur Gulati, had the opportunity to interview Amit in early 2022.
Ankur: Hi Amit, welcome to BRV’s VC interview initiate. Let’s kick off. Why don’t you tell us what was your journey to venture capital and founding First Rays Venture Partners?
Amit: Thanks Ankur. Pleasure to be speaking to you. Congratulations to the BRV team on this initiative. In venture I think what matters is what you’ve done all through your life and how you sort of correlate all these experiences into creating. Before becoming an investor, in the first part of my career, for the first 10 to 12 years, you can say I was an operator doing enterprise infrastructure, but more from an execution standpoint. I used to focus a lot on go-to-market.
I used to be part of CTO offices, buy software and understand really how software is deployed and understand customers. I come from an IIT background and I had CS but my whole interest was understanding really how computer science can be applied to real industrial problems and real enterprise situations. So I spent a lot of time in Infra before cloud, so I have a career, where I was looking at mostly on-premise software and then I saw a career cloud sort of came in and we started understanding how to move infrastructure from your on-premise to the cloud changes in terms of dynamics in terms of how it changes the customers lives, so I spent a lot of time in deploying rolling on projects in the software space as part of large companies.
And through that what happened was that I got naturally introduced to investments in venture so because I was part of a large senior team, I also had an opportunity to make as a customer investment into some ventures and that piqued thought process on “Hey, how, how does this work if you were to make a career as a VC?” and then I took a leap of faith. I joined Stanford Business School and did my masters there and what was interesting was you know through that lens the Silicon Valley ecosystem I learned a lot more about about the venture investing space and right after that I joined again I break this whole career joining creating First Rays as two maybe three critical experiences, one is obviously the opposite experience which I talked about. And then two experiences that shaped the way First Rays Partners is what it is.
The first experience was right off the school. I joined a venture fund called Pear venture capital and what was interesting about Pear was that they are very early stage fund, I wanted to be part of an early stage fund, because it’s I wanted to be a company builder as a venture capital investor and therefore I did not want to join in other bigger funds and at Pear what I was be very founder focus we learn the first principles of investing in terms of how do you really sort of go about picking the right People and that’s very important, how do you build your network and to get some deals and things like that, where, because at seed stage or a pre seed stage you basically don’t have Deal Flow, right at Series A you can actually see which are the companies which have been seed funded and therefore tracked.
Right, whereas a pre seed and see there’s no history right you’re basically going and scouting getting deals out of nowhere right.
And that was very interesting and that and I think I was very comfortable doing that and that gave me a lot of confidence, but one of my big learnings from that stint was the fact that I did not get a sense of a theme-based sort of focused approach at seed. A lot of what we do at seed-stage is like you’re doing investments, based on what founders think, but therefore you’re only believing and you have a certain ability to sort of understand the space, but the ability to value-add also decreases because you are divergent. So I had a company in the fintech space, I had an AI company, I had a couple of companies which went IPO, but they were too dramatically different companies. So one was an enterprise software, but another was a more physical/digital company. Now between all this, I was struggling to understand how we would value-add, because I had an operating experience, and I wanted to really apply that. And I kind of struggled to see how you can apply that generically to every startup that you would invest in, and that was very hard for me to absorb. And therefore I wanted to really branch out and see how Series A looks so that happened to become my second stint, that I led a Series A firm in terms of investment and there, it is very different right. You are theme-based, you’re very focused in terms of what kind of investments you want to make.
You are tracking deals coming from seed to series A you are co investing with other larger funds, you have a lot more diligence to do because you have a lot more data points on the company. And therefore Series A was a very different sort of experience for me.
There are great learnings from there, like using a theme based approach to filter and see which companies would fit in and which companies you would like to pass-on are very important.
And having the ability to help startups get into customer sets early to get more momentum for the company is also very, very cool right, but obviously at Series A you’re not actually company builder like back at seed, so my heart was still back at Seed.
For me, combining these two, I said, let me like, and I think these two students are very useful, but I wanted to create a product which is basically a specialized seed fund.
So, First Rays grew out of these two experiences where it is very theme based, it’s a very specialized focused fund in Enterprise Infrastructure Software.
It draws upon my enterprise infrastructure background and uses some of the principles that I learned at Pear and then later in the Series A fund, where we are very focused on 4 themes, we take cloud infrastructure, we take data infrastructure, we take cybersecurity and we take what we call as Future of Work but it’s mostly developer tools it’s mostly to do with open source software and things like that which are shaping the way bottom of our Community led growth is sort of defining the future of how software is going to get consumed in an enterprise right so.
So between these 4 themes what we invest in, and therefore it is a focused fund it’s concentrated in terms of the kind of portfolio that we will add. All of our companies sell to a CIO or CSO or a developer. So these are like a very narrow set of buyers that we are focusing on targeting the software products for and therefore, our ability to add value to this company significantly more so, so when we created First Rays, the thought was to create a very, very specialized focus Enterprise Infra Fund.
We don’t take deals in energy, space we don’t do deals in fintech space we don’t do deals with mobility space we just kind of have to pass-on many of these things we don’t do ecommerce we don’t know marketplaces it has a lot of know that we have to say, but that that’s what sort of defines us and that’s what kind of makes us unique in that we specialize a lot even at Seed and pre-Seed.
Ankur: Amazing, thank you for taking us through the entire journey, and I think my lessons from this would be a focused approach, tapping into your own experience and intentionally going ahead and working in different stages of companies in the VC space. Now moving on to the next question.
What are some of your key lessons in venture capital? What makes a good investor?
Amit: Yeah I think so there’s a lot of lessons I think we learn, and we are also learning as we’re investing.
I think first is, I think let’s start with the founding team itself right, so we have now created a mental model of what sort of founders should we invest in right, and I think that’s very important and there’s a lot of pattern matching that you can do.
I would encourage all of you to think about your existing portfolio and see what has worked, what sort of founders really made it and what founders and what’s the mindset right.
I think all founders are trying to do something unique, but I think at the end of the day, what is important is do they have a significant amount of self awareness. Do they have the ability to wait through not only good times but bad times when shit hits the roof?
Because, not every startup journey is always going to be high. There’s going to be a lot of higher ups and downs so when the downs come, how do they sort of face or do they have the inner balance and the endurance to face some of these things. I think that is one of the fundamental things you want to see in the founding team, and then the second aspect of the team is their own capability, so I would really focus, so one is the first the inner personality, the ability to sort of see through what the founders really are can they go build a large company, the second is actual execution capability right?
So who’s the team? So is this a technical team and a go to market team, or is it just a technical team. And if it’s just a technical team can they go and get a go to market person. Do they have the ability to hustle? Do they have the ability to build distributed teams? Today we are in a world where everybody is saying: hey we want to work remotely!
So do they have the ability to global distributed teams or do they have the domain expertise to tackle some of these challenges that are going to affect the economy and kind of get thrown at them. Whether it is in the technical challenges with the scaling up challenges and things like that. I think so from a team perspective so you’ve got to break it down, it is a very, very strong factor from our side, and I think there are lots of learnings and the kind of people who work and then the kind of people who don’t work and, like what sort of founders, are they going to be, are they going to be leaders are they going to be followers? So many times what happens is startups go through this journey and we’ve seen that, over and over again in our portfolio is that sometimes they have to get a new CEO in to become really like fundable, which is basically saying they’ve got everything they got a great product, but they don’t have a great CEO who’s able to keep the vision and to build the company and things like that so sometimes all of these understanding of this I think makes a huge impact on the investment and how the investment would go. And I’ve seen numerous instances of asking, hey can the founders cut the burn, understand what’s required to be done, can they turn around the company, you know and are they going to get burnt out and kind of fall apart. So I think, from a team perspective, that is supercritical.
Second, for us, the learning is that venture investment is also a lot driven on momentum and we can keep saying all we want, but a lot of investors that I don’t want to say it, but a lot of investors invest just on the basis of social proof and FOMO.
That you know what’s cool like crypto Is an example of what is happening. A lot of people who even don’t understand it, want to put money in crypto. Because there’s a lot of money going into crypto and everybody is moving in that.
So, I think, also understanding, where the market is moving ahead of where and it’s and so in venture you’re looking at bets which five years or seven years down the line, are going to become mainstream themes, right.
So therefore, but at the same time, you also want to make sure that you are not like a 15 year horizon right because you also have a fund life, we have to return a fund within the 10 year period or so. So you have to also think about what sort of investments you want to make right.
And not just you know, just have broader themes right within those I would encourage investors to sort of learn, constantly learn whether it is through the founding companies or it is whether, through the sort of you know attending conferences or understanding, where technology shifts are happening or understanding buyer’s perspective. Or how trends are moving, I think it’s extremely important to have your own themes set in terms of where you think you’re going to strategically look at your portfolio next set of portfolio companies is also very important right.
And a lot of stuff is out there it’s not that you have to do your own research, a lot of you know so peer to peer other venture investors who write who understand have your own perspective but read a lot of stuff I would I would really encourage people to do that.
So I think between these two, I would say you can make good investments.
But having made good investments, I think one of the learning is how are you going to sort of work with these companies? So for us, I think one of the big things, has been when you make an investment, I think we have to really add value like it is almost like a game of service right venture investor capital is a service industry, I feel.
And in the service industry it’s not about your ego it’s not about you know oh i’m the investor and I can just ask you questions it’s about how you really understand how to help the company is important.
It’s not about hey can you just get the five customers it’s about can you make those relevant five introductions so that can you or can you set milestones where at are like hey what is a realistic number of conversations you need to get to get to the customers and sort of encourage and also help founders to get to that point right. A lot of VCs, and it’s a very interesting point, that a lot of VCs who sit on boards don’t necessarily actively involve themselves at the company but they are obviously asking questions and a lot of things, but I think also understanding, where founders need help, bringing some of the help either through your own network because you if you have invested in the company, you also better have a network to help the company right, I think that is an extremely important right, I know that one of my companies was going through a Series A and I was day to day texting my founder to really understand where his diligence was, where he’s getting stuck where he needs help. So there’s a tremendous amount of effort that you can put as a VC and to help the founders because founders are also alone in the journey. You have to understand that aspect of it, I think. So one is choosing the right investment. But, having made the right investment, helping the company. We talk all the time to Series A folks, I talk to Red Point, I talk Battery, I talk to partners in Sequoia, Lightspeed. Name the fund and I talked to them. Why do I talk to them? Because I want to just keep sensitizing them about my portfolio and what’s ready. They may get excited about a particular company, they may ask for an introduction to a particular company.
Not all founders can do that, but you can do that as a VC because you’re talking peer to peer to another VC and trying to see if they will be interested in this theme, so I think doing that helps.
Ankur:Thanks. I think the three main take away from this is that you look at the founders, their capabilities and what drives them, keeping on top of trends and being curious as an investor and then thinking of your venture firm as a service to the founders and helping them in the journey.
We’ve talked about the fact that you run a focused fund in Enterprise stack. Now moving on we would love to know within this focus area and in general, what are the trends that particularly excite you?
Amit: I think one of the good things that we have is that we have very focused pillars of investing. So if you look at how we are thinking about say cloud infrastructure, I think one of the big things that is obviously happening is, you have the big cloud companies, but within those core cloud companies a lot of the companies, the smaller on the mid market enterprises who are today want to be on the cloud but just don’t have the resources and the ability to execute everything. So provisioning on the cloud, making sure you’re able to manage everything on the cloud I think it’s still a challenge, a lot of what is happening today is you know if you want to move to AWS or GCP or anything there’s a whole amount of work that you need to do as a company to even get on that platform and then understand what’s happening and and there are good companies like now HashiCorp, which just went IPO, which helps you do that. whether it’s TerraForm or others that help you do that, but still a lot of people need hand holding. So within cloud infrastructure itself, there are a lot of opportunities there that you can look at.
Within the data side and the data infrastructure space, there is again a huge huge opportunity, as you know, there’s Snowflake, which is a cloud data warehouse company. Data warehouses is a huge thing. Now data lake is another big area with Databricks and people like that. So all of your infrastructure is now being sort of run out of, say, through the SnowFlake data warehouse or the Databricks, Datalake and things like that. But now within that again there is a tremendous amount of learning companies need to do and also the sub stack that sort of emerging from that. For example once you have a data lake or data warehouse, how do you sort of run ML ops and there is a lot of opportunity in the data side itself. Again that sort of emerges from some of these trends Cyber security I feel is evergreen it’s completely sort of getting broken down every other day. I don’t know whether you guys track the news, there was a new log4j vulnerability that was just released that kind of caught the whole weekend attention of almost every firm in the US. And, before that there were solar winds about six eight months back and so there were huge issues with cyber security itself and then cloud native is kind of changing the dimension in terms of what sort of cyber security tools, you should use and things like that, so that again there’s tons of opportunities there in terms of investing and I think developer tools, is emerging very strongly, open source software is becoming mainstream in terms of usage, a lot of smaller companies don’t want to spend on expensive software, they tend to buy more open source software to construct your what you want to architect in your product. So I think, from our standpoint, enterprise software is only here to scale. One of our biggest pieces is that as Moore’s law sort of slows down hardware innovation is definitely slowing down.
Therefore, all the innovation in terms of employer performance enterprise, whatever you want to get as an efficiency is at an enterprise performance as to come from software right, so you will start seeing enterprise infra software becoming more and more of the center of it.
Right, if you look at the 2020 set of IPOs, I think the biggest Snowflake and you know there were others who are already I think six or seven companies made to the IPO and I think this year 2021 as well, there was a good number of IPOs from the enterprise infrastructure. You are going to see more and more of that happen so from our standpoint, I think this is a, this is a great time to be in the enterprise infra software space.
Ankur: Thanks and now to change gears a little, I would like to ask you for advice you have for startup founders that are seeking venture capital funding so somebody who comes to you?
Amit: I mean there’s lots lots again as a founder I think you’re constantly learning.
My advice would be first, if you are seeking funding first understand where you are in your journey and therefore, what sort of funds do you want to reach out to. Do you want to proceed and or what class of investment, are you looking for if you’re looking to raise a large seed, are you very clear about the idea. Do you guys have the domain expertise to really go there and raise a large funding and/or you just kind of try to form your idea and trying to create.
So, I think, you need to start thinking about venture capital as a multi-stage game and therefore understand where you are in your journey as a founder and therefore go to the right set of funds. I would encourage all founders to research a lot about different kinds of venture funds and even before you take a meeting with a venture fund, understand what that fund invests in, who is the partner behind the fund, what are the prior investments of that partner, do they understand my space. Don’t blindly reach out to folks on Linkedin or in other social media just because you know they are a venture investor and you want to get connected to them.
Understand, if I’m an enterprise software company I get tons and tons of Linkedin requests where there’s somebody saying hey I’m building an e -commerce marketplace, I’m building an energy company and you take a look at a Fintech market. I’m like dude you should please know what I am investing in before you reach out to me on Linkedin right, so I will never make that request or a meeting with such people. The other aspect is to use your network correctly.Don’t just do cold reach outs. Use your network. You know, look at people who have been there. Other venture funded companies if they are in your network will be great ways to sort of reach to VCs or even join an accelerator, if you don’t have that kind of network join an accelerator, which can help you in the right way shape your idea shape your deck and be able to bring you in front of other investors. So that’s another great way to get to VCs and things like that. Also look at your team. I think, look at what is required in your team to be built early on, so that you can go and present a picture, there you can go and build this company together, so I think before you reach out to VCs as a lot of preparatory work, I would recommend most founders to do and sort of take that idea forward.
I think yeah pretty much I want, I want to advise the founders.
Ankur: That’s pretty useful advice for startup founders. I have been a founder myself before and I think I missed out on a few things that you mentioned. Now we’ll go into the next segment, where I basically seek your advice for professionals, especially college students who want to break into the VC space. What would your advice to them be?
Amit: So I remember one of my professors actually telling me this and it’s a very simple thing. He drew me a large circle on a large map and he then roomie a very small way and said hey look where how many VC jobs do you think are there in the ecosystem of total jobs that you can find right. I want to just emphasize that venture capital is a small industry. It’s a very niche industry. Obviously, as funds are growing more obviously will find more, but people still don’t recruit that many people all the time.So, it is a tough journey to be a venture capitalist. So that’s the number one thing that you need to know right second Venture Capital is also a place because it’s a small team so usually small teams and venture capital, a lot has to be taken on by every team member, even if you’re a young team member and, therefore, what do you bring to the table is what a lot of people look for right. Whether it’s your ability or skill set to really bring a network, along with you, which others can really envy, or rather the partners really value or the fund. Or it is your ability to have a deep understanding of the space in which you want to really be working in. Ability to mine companies or research companies or whatever, so all of that, I think there’s an important aspect of building yourself into that mold before you sort of say hey I want to be a venture capitalist, it is, I remember that you tend to say hey everybody who comes and says, I want to explode becoming a VC, but is it is venture capital part of so you have to be a good people picker if you want to be a good VC but for young people, I will say try to work on your network, be more externally interface interfacing, understand where you want to invest in, choose the funds, you want to talk to. If you’re a generalist, build some expertise which you can say hey look I’m passionate about these few areas and these few pieces and within that understand and say hey well how would I research companies that are coming in the space, what do I know already about the space. And then find the right sort of funds, who are who are investing in that space right, so therefore I think it has to be a very curated sort of work that you need to do to get into a venture role.
Ankur: Thank you and add a couple more questions here, just advice from you in terms of are there any books students can read and any blog/people that you follow that can help them get into the industry and prepare well.
Amit: Obviously they’re going to be lots of books but I don’t know whether I read any books to enter venture capital.
I would say, track how other people have either entered or other people have been successful in venture capital. So you can be successful venture capitalists if you do a few of these things. One, you yourself are a startup founder who’s gone through the journey yourself so you’re able to guide other startup founders and that’s one way of succeeding in venture roles. So if you have a startup founder who has gone a long way iIn your own startup you can then demonstrate that, look I understand what it takes to build a startup and therefore I can coach and kind of create value for other founders. The second is you can actually be an investment banker who has gone and seen tons and tons of deals. So as an investment banker you go and search deals you actually know what’s happening in this ecosystem, you have a very high amount of network. So you will say, find that people who do spend one or two years in investment banking roles end up joining the venture role as an investor or an analyst or whatever so that’s another sort of route to sort of becoming the third is, you want to think about taking a skill set which I think is useful back again in a company’s journey which is either you are a product manager right in a certain space in a certain domain right you’re a pm, you know, in a certain kind of company or certain type of category of companies which you can then bring back to the fund as the companies invest in, say companies which are trying to build products in that space and all you are or are you are a sales leader in that same category of areas and, therefore, you know how companies can scale and if you’ve been a sales leader in a young company and taken it to from zero to one. Again, you have to be able to substantiate some value that you uniquely bring to the table, and I think that is, I think, crucial for joining a venture fund.
Ankur: Thank you so much for the advice. This concludes the set of questions that I have, and I think this entire episode would be very, very helpful to students in the Cornell community and students at large, or for anybody who’s interested in learning about getting into VC and how one can craft their career.