On raising seed capital, pitch decks and early teams

Updated: Dec 3, 2020

Why does Gopi Rangan love typos in pitch decks?

The ace investor talks to Jayadevan PK about who he invests in, how he identifies ‘agents of change’, and what he looks for in pitch decks.



Shownotes

As a new immigrant Gopi Rangan’s American Dream was nearly cut short by a car accident. Fortunately for the ace investor, he was insured, shielding him from the financial burden he would have to undergo. This incident is ingrained into Gopi as the founding partner of Sure Ventures where he invests in insuretech companies. On this episode of The Orbit Shift Podcast Gopi talks to us about who he invests in and how he identifies these ‘agents of change’, what he looks for in pitch decks, why he loves typos in pitch decks, when a startup founder should look to raise capital from institutional investors, how founders can create great teams and when they should hire lovable fools and when they should hire the competent jerks.


About the Guest

Gopi Rangan is the Founding Partner at Sure Ventures, an early-stage venture capital firm based in the Silicon Valley. He invests with the mission to enable peace of mind for all. His main areas of focus are seed-stage startups in the insurance, ageing care, mental health, wealth management, and related sectors in the United States. He is also an Adjunct Professor of Entrepreneurship at INSEAD.

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Host and Producer - Jayadevan PK

Assistant Producer - Shashwath J

Audio Engineer - Rajesh Subramanian


Transcript


Gopi Rangan: [00:00:00] The whole startup game has been so professionalized, the pitch decks and the demo days and the elevator pitches, all of those things are perfected. And I feel like entrepreneurs spend more time perfecting the art of pitching.

I would rather spend time with them to figure out what business they want to build and focus on that. Focus, that effort on that. I want to save them time on perfecting the pitch. And sometimes it makes me wonder because when there's a perfect pitch, then I have to put the effort in to find out what's the real story behind it.


Jayadevan: [00:00:48] Hello and welcome to the Orbit Shift podcast powered by FreshWorks. Startups are hard and we're all looking for ways to do better. In this podcast, we bring you practical insights from founders, investors, and experts who have been there, done that. Our guest today is Gopi Rangan. He's the founder and general partner at Sure Ventures.

It's a seed stage venture capital firm based in Silicon Valley and investing in insurance technology companies. Gopi is also a professor at the department of entrepreneurship at NCI. Hello and welcome to the show, gopi.


Gopi Rangan: [00:01:23] Thank you very much for having me on your podcast. I'm very excited to be one of the first guests on your new show.


Jayadevan: [00:01:30] It's really a pleasure to have you. Gopi, let's start with your journey. You have a bachelor's in engineering and a master's from Coimbatore Institute of Technology and Arizona State University, respectively. And then you were a venture capitalist for almost a decade. Before you started Sure Ventures.

And then at one point of your life, you talk about this car crash that you are in, and luckily for you, you didn't suffer any injuries. And the insurance company took care of the damages. Tell us how that incident shaped life thinking about investing and also a little bit of backstory of how your journey took you to starting Sure Ventures?


Gopi Rangan: [00:02:14] You're covering quite a bit of territory here, starting with my bachelor's and master's degree. I'm also shamefully overeducated and I got an MBA from NCI that actually helped me transition from the engineering world to the business world. And that's how I got into venture capital. I'll talk about the car crash because that's an interesting event in my life.


And that has really opened my eyes to many different things. Many years ago when I was a new immigrant in the US so I think I was 22-23 years old. I had just graduated from master's degree at Arizona state university. I got recruited on campus. I got a dream job in the Silicon Valley and moved to California, bought a new car a few months into it.

Maybe a couple of months into that. I had a really bad car accident on the freeway driving at 70 miles per hour. And the driver of another car who got into the accident just took off, didn't stop. So it was a hit and run. Thankfully, nothing happened. Thanks to German engineering. I was safe. So nothing happened to me, but unfortunately, a car was totally damaged and it was completely totaled. That even shook me.


It made me really think about risk in general. It made me think about money because it was a brand new car. I had no business buying a brand new car at that stage in life because I didn't really have a lot of money. It made me wonder, if I didn't have insurance, if I didn't have a safety net to protect me financially, what would have happened? I would have had to pay the money back, and in some way, and I couldn't go back to my parents, so they don't have that money sloshing around. So it would have been a huge burden on them. This could have put us through bankruptcy. That was the moment that I realized that basically there are two activities that we all pursue. One activity is how can we accumulate assets?


The asset could be knowledge. Asset could be physical assets, like buying a home, buying a car, buying other types of things. So that's what we work towards. And then the second activity that we do is work hard to protect that asset, make it not go away when bad things happen. It's okay, in life, if you take two steps forward and now you're forced to take one step back because of bad luck.

The way you take risks and that's how it works. But when you're forced to take five steps back and you go back way beyond where you started, then that's a very unfair life. So I started reflecting on that and I wanted to stay on the second side of the question, what are we doing to protect our lives? So I started focusing on the second aspect because that is actually what levels the playing field, makes the world a fair place for different types of people.


If one person has to take huge risks to get the same reward and the other person has to take far less risk. That's not a fair world. So having access to products like insurance and various other solutions, like this is a, a great way to build a fair world, equitable world and give us the opportunity to take risks when we go out and build those assets so we can sleep better.

So that led the thesis for why I started Sure Ventures. I want to think about what do I, I want to do for the next 20-30 years. And that mission to enable peace of mind was front and center of that.


Jayadevan: [00:05:41] This is quite an inspiring story, the way you want to democratize access to insurance and financial safety to a larger part of the world.

Because in countries like India, the coverage for insurance is pretty low, or like for example, health insurance about just 30% of Indians have it. What are some of the trends that you're seeing in the insurance space as it intersects with technology? And how do you see this shaping up access to insurance and other financial nets for the larger population?


Gopi Rangan: [00:06:20] My investment focuses primarily on insurance. I call it hardly strictly insurance because insurance is one area that I focus on, but there are adjacent areas like wealth management and mental health care, aging, all of those topics are relevant. Let's talk about insurance. In developed countries, we looked at economies like North America, Europe, insurance is well established. There are some companies that have been around for more than a hundred years, but unfortunately, the products and the services, even the infrastructure of all these companies, they are all stuck in stone-age. I used to stay no, it's stuck in decades, old infrastructure, but I felt like I was insulted the thing, the people in the insurance industry, but the previous CEO, it was said in our quarterly conference call that insurance stuck in stone age.


So I use that phrase and I look for that and I don't feel bad about insulting people in that industry because, you know, I think that it's a noble industry. So that's one aspect of it. And the other aspect of it is what you mentioned, where there are emerging economies like India and various parts of Asia.

And we haven't even touched Africa. The percentage of penetration of insurance products is so abysmally low it's like 1%, 2%, 3% of Indians have a life insurance policies, which is ridiculously bad. So that is something that we need to change. So there's huge opportunities coming up in the future in the next 10-20 years where new products will be designed, new infrastructure needs to be put in place to access new customers.


And it applies to both, established economies and emerging economies where all of this needs to change. Nothing has really happened in the past 50 years in terms of how products are designed, how business models are innovated. All of those things are stuck in stone age, even in emerging markets, it's just a totally green field.


So you can build whole new products without having the legacy of old school thinking, stopping you from creating new ideas. So that's why I'm really excited about this sector. And it's also a sector, it's not like a point in time where you have something that is good for the next few years and not another wave of something new will come up.


This is going to last for the next 10-20 years, perhaps. Just like how FinTech companies have revolutionized banking. I expect that InsureTech, when a company is all revolutionized the way insurance products are built and delivered. So I shied away from using the word insurance because we don't even know how insurance will be or whether we will use the word insurance. But that was the easiest way to describe what I do.


Jayadevan: [00:09:04] What does a typical investment at Sure Ventures looks like? And I also want to tap into your, your expertise as a venture capitalist, as an investor in the next parts of the show, where I want to talk to you about how you look at companies, how do you find entrepreneurs?

How do you sift through all the deals that you get in? What pitch texts do you like? And all of that. But before that, if you can help us understand, you know, what investments does Sure Ventures typically makes?


Gopi Rangan: [00:09:34] Let's start with the, the basics of what I look for. At Sure Ventures, I focus on the earliest stages. I'm the general partner in the fund. It's a solo GP fund, and I have a partner, Prashant Shah. He works with me very closely. The two of us brainstorm on every important decision that we make. Our investments are usually at the pre-seed or seed stage. Sometimes maybe a little later stage, a lot larger seed, okay. A smaller is okay. But usually after the company raises a large series A or definitely a series B, we're out, we don't play a role in that area.


The earlier, the better as scary early is perfectly fine for us. So that's the way we look at opportunities. We typically invest in startups that raise the first institutional round of capital, the first $1 to $2 million of capital that they raised. And our investment is usually about a hundred thousand dollars to start with these startups may have raised angel investments before they raised the round of funding.


Sometimes they may have gone through an accelerator, but it's not necessary, sometimes they actually go through the accelerator after raising funding from us. So there's a phase where the company is ready for institutional capital. They want to bring in professional venture capital investors into the mix.


They have grown out of the angel investment phase, where they have proven to themselves that there is something here and they are now ready for growing the business. What it is, depends on the company and what they're building, what market they're focused on, what customers they focus on, all of those things change. But in general, that's how I would describe it.


Jayadevan: [00:11:21] That seems to be a very risky proposition to come in fairly early. Do you also see a lot of companies in the pre-product-market fit stages?


Gopi Rangan: [00:11:31] I see companies at pre-revenue all the time. I see definitely a pre profit. They don't need to be cashflow positive at all.


They don't. Sometimes they have early customers that have some revenue. Sometimes they don't have a product. They are still fishing for MVP. That's also okay. Sometimes even without a product, maybe there might just be prototype or they have a concept for it. That is also okay. Sometimes it's okay to have just the team and an idea that they're still evolving and it's pre-idea stage, and that's okay as well.


You don't, it's okay to not have a slide deck. So it's pre-slide deck. And in fact, most of the companies I invested in, they have typos in their slide deck.


Jayadevan: [00:12:23] So do you look past the typos?


Gopi Rangan: [00:12:25] I love the typos! The typos are real. I think the whole, a startup game has been so professionalized, the pitch decks, and the demo days and the elevators pitches, all of those things are perfected.


And I feel like entrepreneurs spend more time perfecting the art of pitching. I would rather spend time with them to figure out what business they want to build and focus on. Now, focus that effort on that. I want to save them time on perfecting the pitch.


And sometimes it makes me wonder because when there's a perfect pitch, then it, I have to put the effort in to find out what's the real story behind it. And it takes a couple of extra meetings. Instead, I would rather have them come to me the way they are. And I like having conversations in an authentic way.


Jayadevan: [00:13:18] I think it's, it's all the startup competitions and all of that. That's professionalized pitching because, you know, you're told that you want to pitch in the next 60 seconds and you have to learn it by heart and spend a lot of time on the pitch itself.


But yeah, I get where you're coming from. In fact, several, product thinkers in the Valley as well. Talk about why you don't have to be perfect even before launch. You can just go ahead and launch it and then see where it takes you, or maybe hydrate a few times, but have a plan around how you want to iterate and get to product market fit.


I'm pretty sure you see a whole lot of pitch decks. And is that a pitch deck that really impressed you? And what does a typical pitch deck have? If you can help us understand what a typical pitch deck should have, you know, when you're approaching an investor.


Gopi Rangan: [00:14:08] So I'll tell you what pitch deck does to me, the pitch deck educates me, the pitch deck, tunes my mind for a conversation that I'm about to have with an entrepreneur.

It helps me understand what is the area of focus? It helps me understand the background of the entrepreneurs and it gives me a teaser on the concept and their vision, why they're doing what they're doing. But a big portion of it, of the substance comes from the real meeting, not from the pitch. We are definitely not at the stage where we can just throw a pitch decks and get investments.


The dial for dollars investors are probably not the right type of investors you want onboard. So you want investors who are waiting to listen to your story, are informed, they have done their homework. I spend time preparing. We have before my, every meeting and I try to research and understand a little more. And the reason is that at the end, I know where I stand.


I'm reasonably smart, but the entrepreneur is exceptionally brilliant. If they are not, I shouldn't be investing in them. So when I go into a meeting with a super ambitious, driven, motivated, brilliant entrepreneur. I want to earn the spot to have a conversation with that person. I don't want them to start with zero, so I try my best to educate myself so I can be prepared.


You can understand intuitively that if there's a topic that I've talked about, thought about for many months or even years, it becomes a lot easier. And that's perfect because that that's a prepared mind for an investor, but I'm also interested in topics that are new. So I have a learning mindset, I'm super hungry, too geek out on things.


[00:15:57] So I'm always looking at topics that are interesting and I get diverted very easily because of that. So that's something that I'm always watchful for, but that is the crux of the pitch deck. What the pitch deck does to me is gives me a hint on what is going to come and helps me prepare if it's structured in a way that shows what the problem is, who has the problem, how many of those people exist in the world today and what might happen in the future?


And what are different ways to build a solution in that space? Who are others in that space? It's actually great to have some competition, which shows that there's validation in the market. If this is a company that's building a whole new category. That's great as well. It's a different type of story, but I love hearing those stories too.


And there are some risks, always involved in these type of businesses. Outlining the risks is very helpful. Like what are some things? What are some challenges that you are anticipating? Where do you need to find resources to overcome those challenges? I want to be useful to entrepreneurs. If I can begin to think about some areas where I can help them, that prepares me for the meeting.

So that's the purpose of the pitch deck. So I don't look for beauty and design in the pitch deck. I look for insights that I can get out of the pitch deck, which will prepare me for the meeting.


Jayadevan: [00:17:14] Got it. When you invest before product market fit, it's a tough place to judge the real way a company may or may not go.


What are some of the signals that you look for? And you've said this before that when you work with entrepreneurs, you consider you like to work with entrepreneurs that you consider agents of change. And what are these entrepreneurs? Who do you think qualifies to be the right fit?


Gopi Rangan: [00:17:39] I'll start with maybe decent.com, Nick Soman. When he started the business, I met him when he was still in the early stages of forming the idea of what product to build. He didn't have any experience in health insurance before starting Decent. Decent is a health insurance product in the US currently they're offering the product in Texas. And the plan is to expand nationwide to other States.


It's a product for freelancers and small businesses, and those customers don't typically have the advantage, just like how large companies have negotiation powers to get the best product, best coverage for their employees. Can we bring that ability to small business owners and freelance workers, so they can also enjoy the benefits of a good product.


And in some ways, Decent, it's a much better product that even large corporation employees don't have that. So I'm very grateful to have the opportunity to be a part of the journey and support Nick. The slide deck that he had, I noticed many typos in there and insurance product market fit is extremely, extremely difficult.


In other industries, you can wait for product market fit and then say, okay, now we see that something's happening. And then it's an opportunity for us to grow this business. But in insurance, the setup that needs to be required to sell one insurance product is so high. It's not easy to get reinsurance.

It's not easy to get a fronting partner. It's not easy to get a distribution channel. But you need to have all those contracts in place before you sell the first product. And it's not like other industries where you can set up a website and see who comes to the website. And that gives you an idea of, okay, there's a demand for this product.


You have to have strong conviction on what this product should be and who might buy this product, and you have to have a vision for that. And that's what Nick Soman had. So when I met him, he was thinking about what team to build, who should he bring on board? Whether he should bring on an insurance expert onboard right away at the founder level or someone soon after that, those are the kinds of formative discussions that really were fun for me.


I was able to brainstorm, not that I have all the answers, but I was able to help him brainstorm. I was able to help him think through his choices and then he made all the decisions. And at the end of the discussion, if you look at what I contributed, it's very little. I just provided the space for them to have an honest discussion about what they are really worried about and what their greatest ambitions could be.

That's the role that I try to play. So that's one example of how I like to engage, and that's why I call them agents of change because they're changing. They're not changing for 10% improvement. They're changing for 10 times better, maybe even more. The whole industry will transform. Well, by the time Decent becomes a blockbuster success like few years from now. I think it's just a question of time before it happened.


Jayadevan: [00:20:35] Looking at the name, decent.com. I think that itself is it's an amazing mission to start off with. What else did you see in Nick besides having this, if I may, a grand vision to really do things better and be decent about it? Did he have the initial core team in place? Did he have sort of the market scoped out and all of that? Or was it more art and science?


Gopi Rangan: [00:21:01] It's more art than science. I want to say that with the caveat that it's not just all intuition and they just show up and blindly throw darts. That's not how it works, but there is a significant subjective component and it's very, very difficult to turn it into a formula.


I'm a big believer in data driven decisions. And that is one of the things that can change the way ventures works. There's a significant lack of diversity in venture capital. Mainly because people invest in people who they know, people invest in people who they like and who are often very similar to them.

And that breeds a lot of bias within the system and entrepreneurs who don't have the advantage or they don't come from privilege. They are significantly disadvantaged. And for us to change that, now it on one side, it's the right thing to do, but it's also from an investor point of view, an opportunity. If people aren't investing in great entrepreneurs, just because they have biases.


It's my opportunity to take those a shot. So I really liked that and that's going to change the way entrepreneurship works. So I don't look for a formula and it changes with case by case. Sometimes it makes sense to look at market. Sometimes it doesn't make sense to look at the market because the market itself is not there yet.


And we're expecting the market to show up three years from now or five years from now. So at that stage, how can we do market sizing? We can do all kinds of analysis and we can do all kinds of hypothesis, but it's all theoretical. Everything will change in the next six months when we realized that the product needs to be slightly different and we're now chasing a totally different piece.

So I don't focus a lot on analysis paralysis. The number one thing that is important to me is a longterm commitment to a mission. And that's what Nick had. And I'll give you another example. I invested in a company called Mile Auto. Mile Auto is a paper mile auto insurance business. Fred bloomer is an insider.


It's a slightly different profile compared to Nick Soman. Often outsiders tend to have creative ideas. Yes. And they come with a fresh perspective. Fred also has a lot of that, but he also, as there's unfair advantage compared to many other insurance founders, where he understands the insurance market really well.


He also understands telematics really well. So someone with the two best skills to have, he is able to build a product with a solid business model that has great unit economics. All of those things are very important. It doesn't help to sell insurance product that makes losses and no visibility to get. To profitability that just doesn't work. It is the economy of scale is not going to turn this into a profitable business.


Unlike in other industries like e-commerce. So at the get go from the beginning, solid business acumen is required. And that was very important for the business for Mile Auto. And Fred is the best leader to have started a business like that.


So I look for the combination of entrepreneurs with great skills and insight, unique insights, right. Combined with the right idea that they can pursue. And when they have that with a longterm mission to change something and they are committed to building it for the long haul, that is very exciting to me.


Jayadevan: [00:24:33] Okay, so we're going in for a short break. If you're a part of a startup, don't forget to check out the FreshWorks Posada program. You can follow the link in the description to apply for free credits, to use freshwater products that design to make business processes efficient. So you can acquire customers for life.


The other question I had in mind was when should a startup founder look to raise capital, whether it's pre-seed or seed capital, is there a certain point at which I should go out and look to raise from an institutional investor versus an angel investor who I've been known that person? And I've been grazing from them.


What's that point at which I make this call?


Gopi Rangan: [00:25:16] The nomenclature of pre-seed seed stage series, a stage series B stage, all of those things that keeps changing, I'm struggling to figure out what they all mean. Sometimes I've seen in series a companies raised in the early days, it used to be $3 million, $2 million.

That used to be series a, but now there are startups that raise a $40 million series a and I have no idea what these names mean anymore. What is more important is yeah. Where is the company? What stage is it? What do they need money for? And how much do they need and what investors do they want to bring on board?


The best time to raise money is when there's an inflection point in the business. When you are able to show some traction, the traction could be as simple as building the right team. Sometimes the traction is showing some early progress with the product and in the market. So when you have that conviction that, okay, this is really going to unlock potential.


We can leap to the next stage if we raise some capital and pour more into what we're already doing and it's working very well. That could be the time that is often the best time to raise money. There are different times as well, but this is the sweetest spot for any business to raise money. At the time of raising money, it's important to think about it from a perspective, how long will this money last? How much do you want to raise so that you can focus on business without having to focus on fundraising for a while? And what is that period of time? Often the period of time is about 18 months or so. One could argue that in today's environment when things are so volatile and there is so much unpredictability in the macro market, you may want to push that a little more.


In the upmarket when things are fantastic, you could shrink that 18 ones to maybe 12 months, or maybe even less than that. Some risky entrepreneurs know that investors would back them with them. I hope that they can all put their module together and somehow get the next round of funding. But that idea it's a little risky in today's world.


So I would think about as an investor, I'm always thinking about how much do they need to raise and how, how long will this last. And if it's in that ballpark range of about 18 to 24 months, that would be the way to think about it. At the earliest stages, it's more important to bring the right people on the bus.

It doesn't matter what brand they have. It doesn't matter how much money they have. All of those things are secondary. The most important thing is to bring the right person on board. So as an entrepreneur, you want to think about is this person a great signal? Great signal to bring follow on investors, even in the current round co-investors and follow on investors in the next round of funding, is this investor a great signal to hire new candidates?


Can you go up to a candidate and say, this is the investor that is backing us, and therefore you should join the business. And it gives an extra boost of confidence during that process. Can you go to a customer and say that this is an investor that's onboard with our business. And that gives the entrepreneur confidence to say, no, that's why you should buy our product.


And the customer is also able to recognize that it doesn't mean the brand. It means that what is the role of the investor, please? For the startup. If you get a big brand, you begin to question what's in it for them. Often big brands have never raised a billion dollars of an, a new fund. Making a very tiny investment.


Even if that investment turns into a 20 X, 50 X doesn't make any difference to a billion dollar fund, but an investment that I make the at that stage. And I only invest in my sweet spot and I don't stray beyond that those investments make a huge difference. To me. So I'm perfectly aligned with the entrepreneur and that works finding investors who align with the sweet spot for both sides is really, really important at that stage.


Jayadevan: [00:29:31] You're talking about bringing the right people on the bus and the signals that that can give out. I think it's important from a brand visibility point of view and all of those reasons that you just talked about. A lot of entrepreneurs have also cautioned that you shouldn't ideally be raising money from specially early stage, even though they're been investing you shouldn't be ideally raising money from like really big funds or several of those late stage companies, because it's a huge signaling risk. If they don't do it, follow on investment for whatever reasons.


Gopi Rangan: [00:30:05] There are array of issues, usually in a large fund, I don't want to pick any names and bash them, but now you pick any large fund that has a billion dollars. And if they're investing at pre-seed or seed stage, you begin to question, will you get the top partner at the fund?

No. So then you're going to get a different partner that's junior or new to the fund, and they're still exploring the relationship. So if you get an investor like that, What if a year or two later the investor says, you know, I really liked the team and everything, but you know, venture's not for me. I'm going to do something else.


I want to go back to entrepreneurship or find something else to do. Now what happens to the investment? It stuck with the firm. You get a different partner. That's going to inherit the transaction. Yeah, that is tough. And especially at large corporations, this happens very often with corporate venture capital groups.


And the characters change that changes the entire dynamics. And now you are stuck with that investor on the cap table who may or may not add value and often will be detrimental. That's why it's very important to bring someone who is aligned with where you are with the business. So I have no business playing at the series a and series b stage because I'm not going to be an important investor that relationships are already established and the kind of help they need at that stage.


I used to invest in series a and series b stages and serve on boards of companies, but I don't get much fulfillment at that stage. I get a lot, lot more fulfillment at the earliest stages. But there are some others who like that stage and they like to engage with companies when everything is in place and they're the early customers are in place and they there's proof of concept for, uh, how the technology works.


There's a product that's already established in the market. Now it's just a question of growth. A lot of the other risks are taken off the table. That's the stage that some investors like


Jayadevan: [00:31:58] plus a little bit about building those early teams, the first few employees, do you take a look at that team? Do you help founders hire? And many times founders themselves are not great leaders. They might be great engineers. They might be great at one thing. And may not yet be the people person, not only that you expect a founder to be as the company scales. How do you to judge that software aspect of an entrepreneur?


Gopi Rangan: [00:32:30] Let's start with different phases here. Founding team. The founding team is usually a collection of people who may or may have worked together. And it's good to have some industry, but sometimes no, you can't. If you wait for everything to start a company, you're never going to start a company. So sometimes founding teams come together without having worked together for long periods of time.


And that's okay. But the founding team I've been in like a, probably a thousand pitch meetings over the past few years, the strong pattern I see with founders that are successful. They are slightly above average on the confidence level. They're not super over confident that they dismiss everybody else, but they are not under confident overachievers at all.


For sure. Yeah. The confidence index changes, but there's a spot that they land on usually, which is slightly above average. And that little bit of overconfidence is fantastic to have. And the reason why they have that is that they have a view on the future. If that happens, that's future state of what they paint to me happens, it'll be a better world for everybody else.


[00:33:38] And they have a vision for that, and they are living in that future. So that's why it's frustrating for them when things don't happen. And they are confident that if it's, if everybody follows their lead, the world will be a better place. So that's the first thing that they look for. I look for in a founding team.

The first set of employees are usually expert in certain areas. It could be a technology expert that understands specific things. Maybe machine learning or artificial intelligence. It's also important to bring employees on board who can round out. Yeah, the team, the founders usually have a set of skills and a view for how they want to build a business.


But it's nice to add a few people that that will help. Create a full team, maybe the founders, I don't have a lot of business development skills. Maybe, they have a visionary idea. It's good to here, someone on board who can help with that on the business side. So that's a role of an early employee, only employees, more than the skill they bring.


It is important to have alignment with the founders on how they think their vision, their values, their leadership style, their management style that is going to bring out the best out of their skill more than just the hardcore skills itself. There's a beautiful Harvard business review article that came out many years ago.


There was a two by two matrix that talked about what people do bring on board, and it talks about competent jerks and lovable fools. So if you do a two by two matrix on one axis, you have the skills. And the other axis is how easy it is to work with them. Work for them. You obviously want the top right quadrant.


Well, people are fantastic and they also have great skills. You always want to avoid people who don't have the skill and are difficult to work with, but between the other two choices, people who may not have a lot of skill, but they are great to work with. And the other choice, they have exceptional skills, but they're very difficult to work with.


The early employees will fit under the, the lovable fools category. They're not really forced, but they have certain specific skills, but they're much easier to work with. They will wear different hats. They were willing to learn. But as you go further and further, uh, in the business, if you look at, uh, if you were to go to a brain surgeon, right, you would rather have the guy with exceptional, optimal skills are very difficult to work with and it's okay because you're looking for performance.


You're not looking for, you're not going to stay with the brain surgeon for a long period of time. There's a period of time where you need him or her, and then you move on. So in those situations, it's okay to work with a competent jerks. But at the founding stages of the business, the earliest, I like a lovable fools.


It's perfectly. Okay. Good to bring someone onboard who doesn't have a lot of experience, but is super interested in an area and they are willing to contribute. So that's the stage with no, when the company goes from two or three founders to the first 10 employees beyond the, they tend to go to 50. That's actually very critical time because that's when the culture of the company is beginning to set.

What is being said in meetings, what is not being said, or what is okay to disagree with and how do we make decisions? How do we change our plan? All of those things become apparent to the team and it becomes easier for others to follow certain styles. And that style becomes the culture. Beyond the first a hundred people.


When you see the culture of the company, you will see that the original seed of that culture was started in the first 10 to 15 employees came on board. That is also the time and nutrition begins to happen. Like sometimes that people don't find a good fit and they begin to leave. So those are all trends that happen.


Jayadevan: [00:37:28] And this is very interesting. We had one of our engineering leaders STS Prisaad on the podcast, which has yet to be released. And he talks about a very similar approach to building your early teams, especially when it comes to working with your early engineers.

You don't want to work with those brilliant jokes, you right at the beginning, because that makes life extremely difficult in a startup. I guess that's when we talk about founding teams, uh, that are a combination of a hacker hustler and a designer. What are your thoughts on that?


Gopi Rangan: [00:38:01] I like the hacker hustler description, but I almost, I also want to put a caveat in here because I think the, the idea of building a startup without thinking about longterm consequences, I think we've gone too far with that idea.


We really need to reflect on what we are, building who we are building for or what impact it has on people. And what are the implications for the longterm. Facebook and other companies they've gone too far with the hacker culture where they haven't really thought about longterm consequences. So we don't want that.


Now. That is the reason why I set the mission for the firm is to enable peace of mind. I do not want to invest in companies that purely lead with the hacker culture. Go before I


Jayadevan: [00:38:46] let you go. I have a couple of, uh, lighter questions. If you were to advise somebody who is starting off that career in life in general, what would your advice be to that person?


Gopi Rangan: [00:38:57] I don't want to call it advice because I don't think I'm in a position to give advice to anyone. Advice is almost an instruction, but what I want to share with people, especially at the earliest stages in their life and career is that there is a spark of entrepreneurship that we all have. It took me a while to recognize that and give it space to glow. With Sure Ventures, I'm an entrepreneur myself. I have more empathy for entrepreneurs now than I ever did because I've started my own business. That spark of entrepreneurship is present in everyone. Sometimes that spark dies out along the way for various reasons.


Especially with, uh, middle class people, we get into the rut of salary. And once you go into that and you stay with it for awhile, you get used to that predictable salary coming in, by the way, it's not going to be predictable, that things will change abruptly without your control, and you have to get used to it.

It's actually very risky to get addicted to a salary. So if you can break out of that and you can keep that spark alive for a period of time, if you need to build something to get experience, or if you will, even if it's about not putting some money in the bank, so you get some comfort, that's okay. As well.

But keep that spirit of entrepreneurship alive. There will be a time it's not about age. It's just a, the question of mindset when it is right. You will have that slightly above average level of confidence, go and say, no, I'm going to build this and keep that alive. And that will allow you to, to build something on your own and you will get the confidence that no matter what happens now, I can build a product. I can build a business, I can sell something to people and I'll make a living out of it and that is liberating. I feel like a lot of people lose that along the way. And then they find themselves at the age of 45, 55 and it's too late and they have lost that spark. And it's really hard to reignite that spark from scratch again.


So, if you can keep that spark alive for as long as it takes for you to say, I'm going to start my own thing. I think the world will benefit from more entrepreneurs like them. We need more, uh, brilliant entrepreneurs who, who can build innovative solutions and change the way we live for the better.


Jayadevan: [00:41:32] I think it was the CEO of Disney, Bob Iger, who said that when a door opens for an opportunity, you should have the wherewithal to walk through that door, which is what you're saying.

The ability to take that little bit of risk, and that dies out when you are stuck to a cycle of paychecks and salaries. Yeah, this is beautiful. Thank you so much Gopi for taking the time out and talking to our listeners. And a quick word to our listeners. Gopi's podcasts, you can find it on all the platforms, all the platforms, he interviews, venture capitalists, and founders, and all of them.

You can also find him on Twitter. And LinkedIn he's fairly accessible and has some really amazing insights to share with you. So thanks again, Gopi. Thanks for your time. Really appreciate it.


Gopi Rangan: [00:42:18] Thank you so much for giving me the opportunity to share my thoughts and insights. The name of my podcast is the Sure Shot Entrepreneur. I interview venture capital investors and ask them questions about how they make decisions. My goal is to show insights on the process of an investor. So entrepreneurs can learn more about this black box of venture capital. So with that, I hope to be able to promote the spirit of entrepreneurship and I like the spark and keep it alive for a long time.


Jayadevan: [00:42:50] Thanks everyone for tuning into this episode of the Orbit Shift podcast. Before you go, if you haven't already check out the FreshWorks for startups program, I promise it'll be worth it. And thank you again. I'll see you next week.


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