Managing Partner (Cofounder) at Tau Ventures
Amitgarg

"Your network should be a fine balance between quantity and quality."

- Amit Garg

Amit outlines what he looks for in a start-up

Talk Takeaways

Watch Amit Garg as he talks about his journey from a former Google employee to an investor. As a co-founder for Tau Ventures, Amit shares the domains they focus on, their investment process, and how they help startups. He also shared his idea on network quality and quantity, growing your network, and how a startup can connect to their audience.

About

Amit Garg is currently Cofounder and Managing Partner at Tau Ventures, a seed fund in Palo Alto focused on applied AI in digital health, automation (cars, drones, robots), and enterprise. Their 15 current investments include ArmorCode (application security), Biotia (analyze pathogen genomes to prevent hospital contamination), Blendid (robotic arm for making food), Cerby (cybersecurity to harness shadow IT), Elemental Machines (IoT to improve production of foods+drugs), FidoCure (treat cancer in dogs), Freedom Robotics (cloud platform for robotics), Infinitus (helping patients navigate healthcare), Iterative Scopes (computer vision for colon cancer), RapidDeploy (unified public safety), RubiconMD (referral service for primary care physicians), Signos (weight loss through glucose monitoring), Totient (cancer drug discovery), and two investments in stealth.

Amit has been in Silicon Valley for 20 years — at Samsung NEXT Ventures where he seed-funded nuTonomy (self-driving cars, sold for $450M), cofounded a startup called HealthIQ (as of May 2019 a series D that has raised $120M and valued at $450M), at Norwest Ventures ($10B AUM), and doing product and analytics at Google. His academic training is BS in Computer Science and MS in Biomedical Informatics, both from Stanford, and MBA from Harvard. He speaks natively 3 languages, live carbon-neutral, a 70.3 Ironman finisher, and have built a hospital in rural India serving 100,000 people.

The full #OPNAskAnAngel talk

Jeffery:
So welcome, everybody. Thank you very much for joining us. We are at OPN’s Ask An Angel and we’re very excited today to be chatting with Amit because one, he’s up in the big smoke or just beyond the big smoke, I guess, if you will. But in the US and in San Fran, and we love talking to people out in San Fran because you guys have a whole different ecosystem on how the world works. When it comes to big tech and Toronto, we kind of like love what they’re doing out there, and we try to like, near as much as we can in the rest of the world and keep building up our ecosystem. But we love to see what the action is out in the San Fran and even New York model is really moving as well, right? It’s kind of the next second best epicenter of the United States. And then following on with Chicago and, even Texas and all these other great states, so a lot of exciting movement. But Amit, thank you very much for joining us today. And I think the way we want to start is if you could give us a little bit of a background on yourself, kind of where you’ve come from, what you’ve been up to and then what you’re doing today, and then just one thing about yourself that nobody would know.

Amit:
So thank you, JP, thank you very much for having me. And, I think, Toronto. Yes, it is not as big of an ecosystem Silicon Valley, but you guys have a pretty awesome ecosystem there. I’ve invested in Toronto. I’ve been there a few times. I think you are very collaborative and very supportive and are cooking up great companies, Shopify being one example. But there’s many others. So about myself, I have 20 years in Silicon Valley. Well, that’s not quite correct. Two of those were in Boston, which is another great ecosystem, but the rest has been here in Silicon Valley. I’ve worked at three different VC funds, this being the third one, which is my own fund, which I started called Tau Ventures. But I started my career at Google as a product manager. I did go to school here. I did my undergraduate and master’s degree at Stanford in computer science and bio for undergrad. And then biomedical Informatics, which is at the intersection of those two for my Masters. At some point, I did go to business school, don’t hold that against me, in Boston and the three funds that I’ve worked for included one, that’s a very large fund, Norves Ventures, $10 billion dollars under management. I’ve worked for fund 11. I joined there almost a decade ago. The other one I worked for Samsung Next Ventures, which is $150 million dollar fund. Early stage and in between, I was a co-founder of Health. IQ, which is a company helping you make better decisions around diet and fitness. That company has gone on to raise now 140 million in venture capital and is doing well, 450 million latest valuation. This is all public, by the way. But what I’m most excited about is what I’m doing today, which is Tau Ventures. I started this fund with the next colleague of mine from Norwest and it is just about a year and a half old. We have done 14 investments. There’s a couple more that we are closing right now, as I speak. So maybe by the end of the year we’ll have 16, 17. And, we focused on applying AI, artificial intelligence, focus on three verticals: additional health, enterprise, and automation. In digital health, we have investments, including computer vision to detect colon cancer. It’s called iterative scopes. We have machine learning to detect sequences, biomarkers that you can then develop antibodies against COVID and cancer, that’s a company called Potiont. We have a company that looks at drugs and dogs and figures out what type of drug, works best for what kind of cancer and dogs, called Phytocure, and etcetera. And in enterprise, we have a couple of companies focused on cybersecurity, protecting your personal information in social media. And then in automation, we have a robot to make smoothies, robots peel potatoes, chop your vegetables. So anyways, we’ll be glad to share more about Tau but to finalize your question, something people wouldn’t know about me at least right away. I’m born and raised in Brazil. It’s not obvious from the name, from the face, and from the accent. My family is from India. I subscribe to all three countries. I have citizenships from all three. For India, it’s an overseas citizen. And, yeah, I feel like a global citizen, but those three are my triangle, the core triangle I operated.

Jeffery:
Oh, that’s amazing! And great background, great story, love what you guys are doing a lot of great things. With the investment side you’ve made, I love the name of the company. Do you want to give us a little bit of a breakdown on how you came up with a Tau? And what was the reason that you chose to go with Tau versus any other kind of…?

Amit:
Well, thank you. That tells me that your fellow geek, JP, so Tau is a Greek letter. It means many things in mathematics, in physics, in biology. I did part of my undergraduate research, analyzing protein models, and how they misfold, and can cause Alzheimer’s, and Tau proteins are implicated in that. But our closest inspiration was the mathematical constant, Tau equals two times pi, so 3.14 times two is 6.28. So we went to the full extent of what that entails us. We launched the fund on June 28th of 2019. That’s when we did have our annual events. Because here in the US we write month and then we write date. This year we organized the event on three quarters of a Tau, in October. So you get the point. And Tau is small, it’s memorable, it pays homage to the teams we invest in, and the domain name was available Tau Venture. So we thought it was a fitting name for the fund.

Jeffery:
I love it. And I do like the, two times pi and the whole structure behind it, and even the background on the different formats of how Tau’s used. Different spelling but t-a-o, which is tao drumming, which is Japanese structured of drumming. If you’ve never seen it, you should check it out because it’s probably one of the sickest things I’ve ever got to watch live. I-

Amit:
I have. Actually, I have.. I had friends who did it. So you’re right. And Tao is also t-a-o.

Jeffery:
Yes.

Amit:
And yeah, in many languages in India, t-a-u means “uncle”, and it’s a slang for “you’re the big boss”, “you’re cool”. So it’s how- it works in many, many different context.

Jeffery:
Yep, I love it. I mean it has the same meaning, I guess overall too, inspirational, and a lot of things that tie into the whole culture. So I think it’s pretty cool. So very exciting to hear that. So in a lot of the things that you’ve kind of done, And one of the big part that I always like to kind of drive back into is that you carry a lot of experience through your work efforts to kind of get to when you get into venture world and you start making investments into companies. So you build up all of this experience and one of the things that I think probably, started you off and gave you a lot of exposure to this was your time in Google. And then from there you kind of moved into other ventures. You created your own. But how much do you feel that the learning that you took from Google really helped you propel you into your own company? The first one and then now getting into your venture firm.

Amit:
Well, I joined Google at a very different time than today.. than what the company’s today. I joined right out of college. Well, technically out of my masters. So I was 22 when I joined. And googly eyed, if I may use that expression. So it was just an incredible learning. I’m very, very grateful, for the opportunity to have joined Google at that point, it was probably less than 1000 people. I wouldn’t say everybody knew everybody, but you had access to everyone, and company was still private. And I was a product manager, specifically part of a program called the Associate Product Manager program. And I was the third class to go through that. There have been subsequently another. What is it? 18 more classes. And it’s a cohort of folks that Google identified as people who.. very technical, could be engineers but also have broader interests and thrust them in positions of leadership. Essentially, my duties were similar to anybody else who had a lot more experience than me. With the difference that I got a lot more mentorship and I was also given a lot more forgiveness. So I ended up being the product manager for some time on Google images, for some time on Google photos. I was part of the 6% team that did an acquisition that became Google Brazil. And these are incredible opportunity for a 20 something year old. Honestly, looking back, I’m flabbergasted that they entrusted movements so much responsibility. It is really at once in a lifetime experience. And how that shapes the rest of my life is I think, it obviously gave me a lot of knowledge. It was my first job. It gave me a lot of insight into how a company that is growing by leaps and bounds that is already a fairly big size, but that grew enormously. While I was there, we went from less than 1000 to 25,000 people. And by the time I left, I believe I was 98 percentile in terms of tenure at Google. So 98% of the people had come after me, which is crazy. But it gave me an appreciation for what hyper growth is, which comes very much in hand when you’re looking at startups. That’s Google in many ways is the architect of a startup. It continued growing at a tremendous scale even after it had gone public. So it is an incredible amount of first hand experience that I can impart to other startups, including the one that I have co-found with fellow ex Googlers. So that brings me to the third point. Besides, the knowledge and experience is the network. There have been amazing folks who have been through Google, who are still at Google and being connected. It’s like being an alumni, a great university. It’s lifelong. It’s a relationship that’s going to be lifelong,

Jeffery:
And I think that makes a really big difference when you started your own company and the part that I liked about what you just talked about is the networking component, and I think a lot of startups lack this understanding of, “I build it, and they’re just gonna come because I’m great and this is a great product and everybody’s gonna love it.” So how did you take that networking effect being one person in 1000 and then being part of 25,000 and then the 98 percentile. That’s a massive change like, and obviously pretty daunting. But you obviously knew the power of network, and you were able to work your way through, get to learn people, you started your own venture. So in that venture, when you started it off, I’m assuming, did you go in with that, “I’ll build it. They’re just gonna come,” or was there this, “I got to get the right people. I’ve got to connect with the right advisors, work with the right mentors. Bring the right developers in.” How did you kind of position that business for success?

Amit:
Well, the answer is yes. Anything you start, there is a component of having a belief, “belief in yourself” and in being able to figure out the answer because people will join you if they see that you are willing to do everything it takes, in order to help the business succeed. Everything that’s legal, by the way. So I think it is a small group of people that ultimately pushes forward through a vision and then more and more folks to start coming through to that vision. And I have an old analogy, that that other people way smarter than me had come up with 30 years ago, almost, it’s if you’re taking over an island in the beginning, you need commandos. You know, you need people who are Marines. Call them like people who do everything you need to do that have a founder mentality, and one person rarely can take over an island. You need a small group of them, so you find a great co-founder, and that’s where the networking comes in. Very initial group of folks that you, that you work with are folks that ideally you have network, that you have got to know well, that you have perhaps worked together before. The second stage is, once you have taken over the island, you have soldiers. So people who will make sure that you can keep control of the island. It’s a different mentality. It’s people who come into the Series A and Series B. They’re obviously still fantastic folks, but the character of the company is a little bit different at this point. The odds of success are also different at this point. And then the analogy is that you eventually going to the state… into the stage where you need policemen for the island. Policemen are people who are keeping things in order. So it’s, it’s when a company may be serious D or E or has actually gone public. So it’s a different mind set, a different skill set. Other folks have explain this in with many other analogies. I like this one because it makes it very visceral that as a company grows, the network that you have within the company also changes in how it behaves, how people relate to each other, and obviously, the network that you have built in personally that you bring in to join the company, how you pitch the company also changes.

Jeffery:
And did you find that when you were building this and like you said, you were going through these stages, taken over the island, and doing the little right things that moved it forward, you’re going to have things you probably did wrong. Was it always an attempt to expand your network? Always trying to find new places, to pitch new places, to speak to new environments to get in front of? Was that part of the corporate structure on what you were getting people to do inside the business? Or was it only to the top management? How did you kind of get the word out? Like you can do marketing. You can do all those normal things that we all do. But the power of influence, the power of speaking in front of people, and getting in front of groups makes a big difference to your business. Is that something that you put into the culture and push it forward as well?

Amit:
Well, you bring up a great point, which is, should you focus on quantity or quality of network? And that is true whether you’re running a venture fund, whether you’re running a startup, whether you’re part of the corporate, at the upper level, middle level or at an entry level, it’s, I think, it’s a fine balance between quantity and quality. If you have a very small network of very high quality, that’s great. But you will still be limited, and how much reach you have. And if you have a huge, huge network, it’s a very brittle network. It’s people who barely know who you are. You happen to be connected on them, then it also it’s going to backfire. So it is striking the right balance, research has shown over and over and over that as human beings, we can maintain X number of relationships that are very meaningful at one given time. Most of us can maintain, may be a group of around 50 close friends or depends on your definition of close friends. For some people, that definition is 5, 1 close friend or, but we have the ability to maintain meaningful relationships with a smaller group, and I call that the first circle. And then there’s a second circle. And then there’s a third circle and a forth circle. And what I found is that the very first circle, maybe close friends, maybe close colleagues. I don’t want to call the first degree because you might still be first degree on LinkedIn, but them not being part of the first circle, really. But the first circle is the folks that you will interact with the most, that we learned the most, and that you want to hang out with after hours after working hours. The second degree network is 100 times bigger. It’s all the people that know the people you know, and the third degree is even much larger. It’s exponentially larger. So for a VC at least, I found that the 2nd and 3rd degree network, especially the third degree, is the most powerful. I need the first degree network. I need the people I know well, obviously to work with them, to collaborate with them. But I’m more likely to know of an opportunity or to come across something that I haven’t thought of myself, not from the people I know, but it’s the other people that they know are the people that they, they know right, because that’s when you discover new things going on that you hadn’t come across yourself. So what I encourage to everyone and myself included is a good reminder is that obviously focused on a great first degree network, great inner circle. But don’t neglect the other 2nd and 3rd degree effects because I have found most of my jobs in my life, not to my first degree or even second degree. But through my third degree, if somebody told somebody who told somebody.

Jeffery:
That’s brilliant and I the reason why we kind of were going down this path is because when you and I have talked originally, we talked about these ways of connecting and the social networks and the growth of this area. And I think that in this space of venture capital and startups, there’s a lack of understanding of how powerful building a network is to build your company or how powerful a network is to build your venture firm. And you obviously went through this when you’re building your original company, you learn this from being in Google, which was starting from nothing and growing its way up. And now, you’ve started this in your company, and now you’ve gone into other venture firms, and I’m sure that you probably learned through this experience and the other 2 venture firms you were in before yours, that they may have not been the social elites. They may not have been very communicative in that space on learning who the 2nd, 3rd degrees were, but you’re implementing a lot of that into what you’re doing today. And that is a big difference from the way venture capital used to work and function. And I think if you take that learning and you say, how do I push this to my startups? Because there’s a huge miss here that startups aren’t realizing that the more knowledge and the more people they can fit in that 1st, 2nd and 3rd circle, the better equipped their business is going to be to survive and grow, and have more investors more interested because investors are onto the same weight. How big is your network? And we asked those questions at the same time, because when you’re doing a search, I want to know that you’re everywhere. And is that something that you try to trans… position into all of your startups when you’re making investments?

Amit:
Yeah. No, that’s very insightful question. I think, the message here is that there’s going to be a small group of people that is invested in your success, but there’s going to be a much larger group of folks that are vested in your success. It’s going to be your customers, it’s going to be your suppliers, it’s going to be your obviously employees but their extended networks themselves. It’s going to be, the lawyers you are working with, the accountants you’re working with, the HR persons that you might be working with outside of the company, right? So there’s all of these stakeholders in your business, and, you obviously cannot possibly interact with all of them at all the time. But as an entrepreneur, you should be aware that there’s many, many other folks out there who may know about your company, who may be helpful in some ways, and what we try to do with our startups, these are early stage startups, mostly seed stage, we try to remind them VCs by almost definition are very powerful nodes in an ecosystem because we aggregate a lot of networks, we aggregate a lot of people, we aggregate a lot of knowledge, we’re paid to learn in some ways. So we encourage all of our entrepreneurs to really, really utilize their VCs well. We prefer investing in companies where the VCs are very active rather than passive. You could have a.. an investor who has a fantastic reputation, but if they’re not giving you their time, their attention, then all you’re buying is a brand. And look, brands help. Brand open up doors, but then you have to utilize that brand to do something about it. Multi-stage funds coming in into a seed stage that is usually what happens is they’re buying an option value to put more money in in subsequent grounds. And you get the benefit of being able to leverage that brand to open up doors for yourself. We like, especially when it is an investor who will put in their time and open up all these doors for you. Investors are not the only ones that can do that for you. And so we encourage our startups to create newsletters and send out an email once a quarter and update all their stakeholders what’s going on, and at the right time, doing publicity, doing PR at the right time, sharing updates on social media. I mean, we live in a world now where, access has basically, the cost of access is zero. We can reach anyone anywhere, but the cost of attention has actually increased, getting people’s attention, their time, their mind share has become more and more expensive because of that. So, promoting yourself or publicizing too much is also actually very detrimental. You have to make sure that it’s meaningful updates, meaningful asks. And when interacting with people, further entrepreneurs, we encourage them to have a very specific ask. Leave it open ended also but have “I would like to accomplish this with by working and collaborating with you,” because people respond much more to a structured acts rather than to open-ended asks.

Jeffery:
And what.. I love that! I’m going to throw out one tip, my brother calls that first circle the trust circle, and the reason why I like that is because it’s you’re close, It’s five or 50 people, but there’s enough trust in that circle that you treat them like gold. They are also feeding into their networks, and the same thing happens in the 2nd and 3rd levels. So the more attention value you can put into those structures, the more that’s gonna push out, branch out to help you bring in more clients in the long run, or at least people to learn about your brand and learn about the growth of it. So I love how you structure those down. And then you mentioned the attention change. And I think this is quite a big piece to that networking side, which is you’re trying to find meaningful ways to connect with your customer. You don’t want to inundate them with too much information. You want to bring some quality information to them. So what do you find is the best way for a startup to really connect with their audience and build that network? Is it, multiple touch points at a time? Because now you’ve got TikTok, you’ve got every single application out there on social. You’ve got email, you’ve got commerce, billboards, you name it. There’s a million places to touch somebody. What do you feel is kind of in that early stage for people to get out there and really work that network so they can build up that next cycle of sales but ensure that they’re going to keep building up and it’s going to build on their AR or their MRR over time?

Amit:
It depends. There’s no single right answer for any one startup, but there are certain principles that apply. If you are a consumer focused company where you and I are end consumers and users, then it is in your interest to have a loudspeaker to tell as many people as many times as possible about what you’re doing, right? This is the prototypical consumer companies: Facebook, Google, Snapchat, TikTok, Airbnb, Uber, right? That is actually a minority of companies. There are I would dare say a lot more companies that are B-to-B or B-B-C. Are you selling? Let’s say, into hospitals, right? Providers and payers, in that case, publicizing to everyone doesn’t make sense. What you need to make sure is that the stakeholders, the partners, the decision makers on.. within these other institutions know about you and believe in you. So a common strategy for additional health companies is to have key opinion leaders that will endorse the company, that will do pilots with you. Maybe you have a.. oftentimes you will have a scientific advisory board or medical advisory board, right? You’ll have credibility around what you’re doing so that maybe you reel in a small fish and that small fish helps you get to the bigger fish. That is a typical strategy for many enterprise companies where you get a small contract so that you can show results and get a larger contract. I have seen the opposite of this to where companies will deliberately go to very, very large contracts from very large corporates, and it means spending a lot of time within the sales cycle, sometimes as much as multiple years, a couple of years. But once you do land that particular contract, then you have a windfall in terms of revenues and perhaps, staying power. It’s very hard to displace you. So if that’s the case, if you’re operating within those constraints, then make sure you map out who are the decision makers and influencers within the corporate that you’re trying to partner with. And I often recommend going both from the top and from the bottom. The folks who will be working most closely with you, who will be implementing it, should be the people that you need to have convinced so that they will actually do the work and the people from the top, meaning the upper management needs to be brought in so that they will approve it, right? So you need to work both those angles if you’re using that strategy. So whether it’s enterprise, whether it’s digital health, whether it’s consumer, whether it’s focused on large employers, large corporate or small companies, I think the key thing for any entrepreneur is to recognize this, is to understand what am I doing? What am I building? Who am I selling to? Why am I selling to? Wha are people seeing in it? And the more of that understanding that you have, the better you can craft that message. Marketing for the sake of marketing or PR for the sake of PR, both recipes for disaster. I think they should always be purpose driven. It’s like, Why am I doing this?

Jeffery:
And I like that purpose driven. It’s 100% a good way to focus yourself and figure out where you’re trying to go, and using that sales cycle of bringing value to your customer or consumer learning what they really want and then pushing at home. Is there.. you find a lot of value in getting influencers. You mentioned getting people that are proficient or bring a lot of value into a space. If it’s a keynote or somebody that has that wait for your business, do you recommend influencers? There’s a lot of influencer media out there now, today. So many platforms that are pushing this and, influencers. I don’t know what the number was, but over a million followers, there’s something like, 50,000 people or some crazy number. Maybe with five million, I don’t know, some crazy number of influencers that really have a lot of impact. Is that something that you would help your startups and push them and say, “Hey, you know what? Put this into your plan. It’s going to help you move your networks. It’s gonna help you grow your product positioning.”?

Amit:
Yeah, so influencers is the term we have been using when it is primarily a consumer company, right? Like influencers we think of as celebrities or artists. If you are building a music company, you obviously want influencers with influence of musical taste and of music listeners to be part of your inner circle, perhaps. We call it key opinion leaders, when we’re dealing with digital health companies or health companies in general, doctors and scientists. We call them, experts. If we are dealing with, let’s say cybersecurity company, you’re a cybersecurity expert. You may be a CISO, Chief Innovations Security Officer… information and security officer, right? So, you.. the terms we use are different depending on the different industry. But what it boils down to is that you are leveraging folks who have credibility in whatever you’re building. And I think credibility is very important, especially when your startup doesn’t have much credibility. Right? You may have some credibility of yourself because of what you have achieved in the past. You could be a very famous founder, or you could have been a very famous leader at a corporate. So you will bring some credibility. You’ll bring some credibility also through your mission. I think the ultimate credibility is your own product if it’s a good product, but to hack your way through and to reinforce the message, you absolutely should have credibility, borrow that credibility, and one way that a lot of starts doing by having an advisory board. Bring in advisors and give them some equity in the company, so that they have, not just immoral or a relationship based steak, but they have a financial stake in your success. Once again, being invested in your success is a way of being invested in your success and you want to maximize that as much as possible. So we did build an advisory board at Health IQ. We built an advisory board at Tau Ventures, and in general, while I say yeah, absolutely, do it. Don’t have an advisory board just for the sake of having an advisory board, but have an advisory board for specific purposes, maybe you need advice on fundraising that you’re not getting necessarily from your investors. Maybe you need more connections, maybe you need that scientific credibility, maybe you need Shaquille O’Neal to open up doors for a sports company you’re building like, absolutely. You should have them as much as possible. Investors, advisors, employees, suppliers, like all these are different groups that you can have affiliated with your start up.

Jeffery:
This is brilliant. So on the side of credibility. And again, I love how this shaping for how startups really have to think about how investors are thinking but also how they need to take care of their business as they go through these stages. And you mentioned there’s personal, there’s different influencers, but really, it comes down to the product and have some influence. But you really need to build some credibility. These types of people or these types of groups, are going to bring that credibility to your business. How does the, and you mentioned this a little bit before, big brands venture, they bring some credibility to your brand and your product because they’re investing you. How much can a business utilize that? And is there a way to utilize that? Like when you raise money, everybody knows you posted online and it kind of goes away. But how do you use the credibility that one of my clients is WalMart or one of my investors is Tau Ventures. How do I get the same impact out of those two? Because we all know the brand name of winners. But maybe we don’t understand the value that Tau stepped up and put in a million dollars. That’s pretty impactful. That’s more impactful than what WalMart is doing. But how do you bring that synergy back so that start up understands when you’re looking for money, you got to go to the right venture firm, you got to go to the right influencers, to build your company, you got to get the right advisors on your team, and give them some value because that’s going to bring a lot of value to you. How do you kind of full circle this so they really understand the value of what’s going on here?

Amit:
Yeah. No, it’s a great question. I’ve written about this topic quite a few times in my blog. I published it on Linkedin, which is how we discovered each other. So for anybody who’s listening, if you’re more interested, I’m putting a little shameless plug here, feel free to check out some of the things I’ve written and there’s many other folks who have written way more eloquently than I have about this topic. But I think what you’re asking JP is, how do you maximize the value that an investor brings to you? and I think brand is one of them. It’s not the only one. A lot of entrepreneurs, I think, I wouldn’t say ‘make a mistake’, but assume that if I’m getting an investment from so and so, that’s all I need to think about. The ‘so and so’ may have a great reputation, but they may not have expertise necessarily in what you’re doing. They may not have give you the time to actually for you to debate with them, for them to open up doors for you, for them to provide the type of mentorship, governance, challenges, right? Like a good investor challenges as entrepreneurs. So I think those two are very important factors to keep in mind. Also, once again, it is the brand, to a certain extent, the reputation, let’s call it. The specific expertise and I mean, some of this is the funds expertise, but even more so the specific partner who is investing in you. At the end of the day, that person is the one that you are going to be interacting the most with, and you need to have a great working role or build a great working relationship with that person because if… think of them as in many ways, more than employees there, there are co-owners of the business with you and and it’s hard to find, and hire and fire employees. Really hard to even harder to hire, fire an investor. So make sure you sign up with a good with folks you want to work with. So beyond expertise, the third factor I mentioned is giving the time, and then the fourth one is one that I rarely see entrepreneurs probe deeper in, is the actual structure of the fund that’s investing in you. Maybe it’s a great fund, but they’re out of funds, they’re committed fully, and the check that they’re writing to you would be a very small one. They don’t have more reserves or it could be the opposite, or it could be the fact that you’re raising a seed. You should probably get the money from funds that specialize in the seed because that’s what they’re focused on. That’s what their model is. That’s what their expectations are. Just to give an example here, I’m always hesitant of very large funds. You can call them multistage funds, doing investments that are too early. If you get a million dollars from a billion dollar fund in your seed stage, you suffer or you have the risk of signaling effect. If they don’t follow up in the next round, ideally leading the next round, you shot yourself in the foot. Everybody is going to ask, the market’s going to ask is, Why is that investor who has access to all the inside information not leading the round? Or at least, you should get them for pro rata? So it is a double edged short, and there’s many other 2nd and 3rd degree consequences of a stage mismatch. So I encourage entrepreneurs to think through all of those factors. At the end of the day, you want to work with the investor that will, in aggregate, do the most and be the most helpful to you. That may or may not be a large investor that may or may not be a famous investor that may or may not be, investor that gives you perhaps the most amount of time. It’s a combination of all those factors, and I think you were going with this, so I’ll bring up that point at Tau Ventures. We have a little bit of personal brand. We have a little bit of brand for Tau, but obviously we are a newer fund. We are not a 50 year old fund that has a 50 year old history. So we’re building that as we go. What we provide especially, is we know the domains we’re investing in, very specialized fund. We’re investing in those three verticals AI as being the horizontal connecting them. We’re both engineers who turned into product managers, who turned into entrepreneurs, and investors. So we’ve gone through this journey of ourselves, and we are going to put in the time. So we.. between the knowledge, the expertise, and the experience, and the time that we put in, I, you know, I.. we have heard from many entrepreneurs that they really appreciate those three things. Oftentimes, far more than just working with a very well known fund.

Jeffery:
Love it. And, yeah, that’s exactly the direction you’re just opening up these doors and you’re figuring out, you know, we need a new space. This is our thesis. This is how we function. And we’re going to bring the most value to your brand and your business by working with us and having us invest in you. And I love all those points. They’re great! I like the mismatch one and I think we’ve had this conversation so many times that people don’t realize. But it’s also on the raise features too. But on the mismatches that you may go after the wrong business, have them come in, and then when that next round comes, they have no interest. And all the investors are asking, “Are they coming back in? Oh, they’re not coming in. Ah, maybe I’m not interested. Something must be up,” and it does, it spoils the whole thing, and it can cause a reverse effect. In our case, we like to use the scenario that we don’t go past this number. So 10 millions our number, we don’t invest past that. So it doesn’t matter how many times forward. We are a pre-seeding seed, we don’t go past that. So it helps that we work with, understand that we’re going to take you this far. We’ll keep reinvesting. But at that point we have to walk away. And I think that, it sounds like, that’s something you have to take in mind when you’re building up that ecosystem and you’re getting investors for your startup. You have to look at those parameters as well.

Amit:
Absolutely, absolutely. A diligence process is as much about the investor getting to know the entrepreneur as for the entrepreneur to get to know the investor and asking all these questions. And I encourage investors, entrepreneurs everywhere, to get to know the investor, ask hard questions. Here’s one other metric that, an actual metric that can be useful. Ask the investor, “Who else has followed after you invested?” Right? Like, let’s say, you’re a seed investor, “Who picked up your companies in the series and the Series B?” That should be an indication that this investor has made good investments or not, and whether they have built true relationships with other investors. So pick up their companies later. So if you’re raising a seed or pre-seed, that is key, is how do you…achieving this current milestone, how well does it set-up set you up to achieve the next milestone?

Jeffery:
I like that. Yep. I can only write so fast, you gotta slow down. Just kidding. Alright, that’s brilliant! That’s good. Very cool. Well, I think we’ve done a nice full circle. We really touched on that whole avenue of what does it take to build a network. How do you work that network? How do you feel everything into buckets and then start tying in everything with investors and around your board? The only last question I would throw on this is when you are putting together this structure for your board and you mentioned that, you know, give them shares and give them some equity or some value, what do you think is probably the most appropriate for a startup to look at and doing that? Not so much from the investor side. You already know that equity or convertible note, whatever, that might work out too. But what do you recommend is a good positioning for, say, a team of three advisors that you’re going to bring on. How would you structure that to enable the startup to win? But also in my motto is, “The more money you make other people, the more money they’re going to make you.” So how do you figure out what that looks like? With those advisers, what should you structure like?

Amit:
Yeah. No, great question. And once again, there are principles and frameworks here. There’s no right or wrong answer, a definite black and white answer. The principles I have are: take into account what the advisor is bringing to the table in terms of his or her experience, network, the time that they will put in. Similar questions to what you were asking as an investor. Obviously, the expectations are going to be very different, right? An investor will own a lot more and will ideally spend a lot more time with you. But for an advisor, the framework I have, at least based on our consistent experience in Silicon Valley and many other parts of the U.S. By the way we do invest in Canada also, is that an advisor is putting maybe an hour a week, you know? It’s not.. if it’s anything beyond that, then you’re looking for a much, much bigger commitment. An hour, a week, or maybe even an hour, a couple of other week, you have a quick call or a quick email exchange now and then you may meet in person. It’s not a heavy handed advisory agreement, and typically, you build an agreement for a couple of years instead of three years or four years or one year. A couple of years seems to be the right fit. In the valley we have the most common employment vesting schedule is, four years with one year cliff. So I think of it advisors that look, two years is the roughly the watermark for you to get to the next milestone, the next stage of fundraising. So create an agreement for two years, don’t have a vesting schedule, or at least if you do, don’t have a cliff, if you have a vesting schedule then have it quarterly rather than monthly because the advisor is, you should not treat that person as an employee, you should not treat them as an investor. It’s a lower level of commitment, and then in terms of how much percentage you give, once again take into account what they’re bringing on the table. But something within 0.1 to 0.5% of the company of the seed state sort of makes sense. I have a logarithmic scale in my mind, which is, as the founder you should own in the double digits. As a early employee should own maybe in the first digits and as a middle to later stage employee owned in the 0.1% range in terms of equity. And that’s where I’m pegging an advisor, right? It’s equivalent to the value that maybe employee number 50 is bringing to the table. Obviously, if they’re doing more, then you can bump up the equity, and you want to keep into two years. In my mind, it’s the right balance because there are some advisers who, after some time may not give you as much time, as much attention, or simply their advice is not as relevant. So if you keep it for too long, it’s diminishing returns. You can always renew it.

Jeffery:
Agreed, and I think what the process of as we’re moving quickly, you know, by the time you get to that second year or going into your third year, you’re looking for more, maybe a growth advisor. You’re looking for a different skill set, and maybe you’ve taken all you could from those initial advisors. So it’s always good to replenish, get new ideas, and get new feedback. But you may want to keep one or two behind because they still bring a lot of relevance, as you mentioned. And they’re going to continue to feel the fill that funnel and keep getting a new value, and vice versa.

Amit:
Absolutely. And we have talked a lot here about how entrepreneurs can leverage or can learn and can gain. Let me just take the flip side here. I think the best entrepreneurs are those that end up, to use a crass analogy here, giving more than taking. Entrepreneurs who are truly collaborative, who truly go out of their way to help, their employees, their advisers, their investors. I do believe that the universe ends up helping them. And there’s research being published under this. Also is that, people who are actually more helpful or perce- and therefore perceived to be more helpful, end up getting more help also. So I think we all have this image that sometimes the leader of a company is somebody who is barking down orders and getting his or her way and, imposing their will, and there is a certain element of truth to it. But I think the exceptional leaders are those that exercise what I call level five leadership that are truly, truly collaborative. It’s “Hey, it’s about us winning the game, Not about me.”

Jeffery:
I love it. Hardly agree. 100% 150%. Like, like, like or whatever the.. If we had this button on zoom, it would be the like button or the heart button. Whatever. But brilliant. Love it. Awesome. Okay, so now we’re gonna kind of quickly transition. I think we’ve, like I said, we’ve gone a long way, and that’s awesome. I learned a ton. I think that was brilliant. We’re gonna jump right into kind of the rapid fire questions which, well, we’ve answered some of them. But you know what? We’re gonna redo them just because it’s the purpose of getting that startup and mental and understanding where you’re coming from at Tau Ventures. So, 1st question, What’s your favorite part of investing in startups?

Amit:
Working with the entrepreneur is no question about it. The fundraising process is, it means towards an end. Talking, and debating, and sharing, and panels, writing, all of that, is means to an end. The ultimate thing is making great investments and working with the entrepreneurs to help them succeed.

Jeffery:
Perfect, how many companies do you invest in per year?

Amit:
This year we have invested in, I think by the end of the year, we’ll hit almost 10 new investments, which is aggressive. but normally, I would say between my partner and I were maybe investing eight new companies.

Jeffery:
Okay,

Amit:
Once every one or two months.

Jeffery:
No. And that’s great. I find that the average is for an angel investor, you’re looking at 2 to 4, and then investment firms are looking at 6 to 10. So you guys are perfect. Like, love it. You’re at the top peak of doing lots of great things. So that’s awesome.

Amit:
Well, it does slow down as your portfolio enlargest, JP, and also, we are a first fund in its just beyond the first year. Right? So we are going to be exceptionally active. It naturally slows down the cadence because then you’re working with the portfolio companies.

Jeffery:
Agreed. Okay. Any verticals that you like to focus on?

Amit:
So we focus on three digital health, enterprise, and automation. My partner handles enterprise, given his background, he knows far more than I do. About that vertical automation and something that we share between us. We have equal backgrounds, and then I take the lead in digital health. And I do think that digital health is not for the faint of heart. It’s challenging in many levels. It has regulation. It has long sales cycles, but it’s extremely rewarding because you create value. It’s very easy to see what the value of creating. And, I think I don’t need to say more in these pandemic times and how necessary it is. So I think health care is going through a revolution. It was already happening before the pandemic. With the pandemic, I think we’re going to come into a renaissance for how many more, you know, how much more innovation we’re going to see in the digital health. So I’m doubling down on it.

Jeffery:
Love it. Do you have any due diligence requirements that you look for before you make a commitment? So things that-

Amit:
We do not require-

Jeffery:
Yeah.

Amit:
I’ll tell you what we do not require. We do not require meeting somebody in person. We had done investments before the pandemic where we have not met the founder in person, the founders in person. We have done diligence. We’ve done a lot of diligence. We got to meet them through video and phone, but we didn’t meet them in person. And that is not a requirement for Tau Ventures. In fact, more than half of our investments this year have been new investments where we did not know the founders before have been fully virtual investments. We obviously would love to meet them, but it’s not a requirement. What we do require is working through the process with us. We like to understand why this team, what is their skill sets? What are the gaps? How well would they work with us? And then the other, team is technology. What are you building? How you building it? What is the differentiation? And then the third thing is, how do you go to market since we’re doing the seed investments, and how do you scale this further? So the framework I have here, if you notice, is team technology traction, TTT, I came up with that myself. If anybody likes to give me credit, but, it’s indicative of our diligence process. We write pretty extensive deal memos for ourselves. We actually unusually do share them with our entrepreneurs. Once we decide to make an investment, we show them everything we did, how we did it, and let them see how we’re thinking about things. It’s a great way for them to realize everything that’s hot and also to give us feedback. That is not typical in the VC industry.

Jeffery:
Love it. Outside of the DD requirements, are there other things that you like to focus on? Like outside of the paperwork and stuff like that? Is there anything else that you really hone in that you want to make sure lines up to your theories and thesis of what you’re doing?

Amit:
AI, for us is a horizontal. It’s at the same place that maybe mobile was 10, 15 years ago, or a cloud or Internet 20 years ago, right? It is a tool. In the very near future, nobody’s going to say I’m building an AI company. It’s going to be understood. So we focus a lot on learning consistently, constantly about the latest that’s happening in the eye, including what’s happening in Toronto and Montreal. Especially, I think for better for worse, you guys have the far more in AI per population, per capital, than I think any other country in the world. And we are always eager to learn. I mean, this is, VC in some ways is an incredible profession for folks who are inherently curious because you’re bombarded by great ideas and great people. And you have to have an inherent curiosity to always try to understand large, seek more, ask questions and go deeper and deeper. So the joke is that VCs are a mile wide and an inch deep. We are trying to be maybe not a mile wide, maybe half a mile wide, but then also half a mile deep. The entrepreneurs will certainly know far more about what they’re doing than us, but we want to know different things from them so that it can be a true partnership.

Jeffery:
Well said. Love it. Do you like to lead rounds?

Amit:
Yeah. Absolutely. We are happy to. Our fund is not big enough yet to lead most rounds. If it’s a smaller seed, we have the capacity. We also to circle with of our LPs to be able to increase our check size. What we have found ourselves so far is more in the position of being the second largest check or being a colleague, but we’re certainly open to it. And I’ll preempt perhaps a question you have, we are comfortable with any kind of structure, whether it’s a convertible, whether it’s a safe, whether it’s a prize round. We.. our record strategy is seed, but occasionally will look a little bit later, a little bit earlier. Also, our average check size is somewhere between 250 to 500 but we can increase that substantially by circling up with our own investors. So in some companies were brought in more than two or three X that.

Jeffery:
Awesome. That’s great. And board seats. You guys take board seats?

Amit:
Whether there’s a board or not, we like to be involved. At the seed stage, oftentimes there isn’t aboard. And when there is a board, we do like to be on it. We don’t need to have the board seat. It depends, obviously, on whether we have enough ownership, but we like to certainly be board observers. And in fact, I have.. of the companies of ours that have boards. I am on the board of all of them, whether it’s a board seat or board observer. But we have very few companies that have official boards, because at this stage, you typically don’t.

Jeffery:
Correct. Okay, Cool. Awesome. Well, thank you for that. So now we’re gonna have one, I guess. One big question, and then we’re gonna do a couple little personal things. But the question is that, what we like to dive into is, you know, throughout the time that you’ve been working in venture world and making investments and working with startups, there’s always kind of that heartfelt story where, you know, a startup, she or he kind of went, maybe they were sinking. The company wasn’t going to work. And then they just did something. Or it was last minute. Something happened, and boom, it took off. I’m always looking for kind of that story that give and invigorate people to say, You know what? It’s not the easiest thing to do, but you’ll find your way. You’re going to get there. And here’s a startup that did X, Y and Zed. Do you have any kind of stories like that you can share that really emphasizes what a startup really has to go through the wind?

Amit:
Man. So many, I mean, every single one, every single start that we have invested in or that we have been part of the one that I started. Right? I.. gosh, do I have to pick one story in particular? Let me give you a couple of principles. One is, tell you, I think Vince Lombardi had this quote that, “Victory ultimately doesn’t go to the strongest or the fastest, but ultimately goes to the one who thinks he or she can win.” Right? So I think there’s something to be said about grit and perseverance, resilience. There’s many synonyms to this, the founding team especially. But the early team that truly, truly believes that yes, they can actually, succeed are the ones that have a shot at succeeding. If to start with, you don’t think you can succeed, or that you will sputter halfway through. You’re almost guaranteed to suffer that fate. It becomes a self fulfilling prophecy. Just believing in it is not enough, though, because you have to also work hard for it. But believe I think, is half of this equation or one third of this equation. The other one third is working hard, and then the other one third is probably, luck. Honestly, it’s luck. But I have had investments in companies where, they simply ran out of money and continued working for another year without getting paid. They believed in it so much. I’ve had a company that ended up being recap, while this was my partner’s company that ended up being recapped, and ended up taking off completely at being sold for billions. I have had companies where it didn’t take off, where the founder and the CEO ended up fighting with each other and ended up imploding. So, ultimately, a business is a collection of individuals. Yes. You may have other assets. You may have, computers and data centers, and many other things. But ultimately, when you’re building a startup, tech startup, your people are.. I would argue, the most scalable, the most important assets that you have. You can even have the greatest technology in the world. But if you don’t have great people, that technology is not going to go anywhere. So, I hope I answered your question there. Yeah…

Jeffery:
Yeah that’s perfect! A nice big focus of a lot of things and that was great. That was good. Thank you. So we’re gonna kind of shift a little bit to the personal side. What’s your favorite sports team?

Amit:
I guess that is unquestionably the Brazilian soccer team. I was born and raised in Brazil. It’s, I don’t think I even have a choice. I do root for the team at the World Cup, and I, whether they lose or when I’m always gonna root for them.

Jeffery:
Well, they do have a few good players on the team. I’m not gonna say that Neymar is not a great player and then like that, but he’s pretty good. So you guys do have a lot of players that really topped the level of football, so..

Amit:
Well, thank you. Yeah, well, I will. I’ll only say that Brazil is the biggest winner in history. So five World Cup titles. You know there’s nobody else with that track record and has been through every World Cup is the only country that has done that. So yeah.

Jeffery:
A lot of skill there. No, I’m a big fan there. They always produce a great football team. So okay. Favorite movie and the character that you would play in the movie.

Amit:
Oh, boy. Do you have to pick one?

Jeffery:
Yeah. Whatever. Works, but movie and character.

Amit:
I seem to like trilogies, Star Wars and Indiana Jones and Back to the Future. And, many of these are movies I grew up with in the eighties and nineties. So, they are very popular choices. Also, I am sure many other folks would rate these movies pretty high up, Matrix. Whether there’s a single character I would like to be. Ah, I don’t know if there’s a single one. Can I be Indiana Jones? And Jedi at the same time? Is that allowed?

Jeffery:
You just have to pick the movie. And the character, it all works. Yeah, we’ve had lots of- I’ve had some really abstract movies. I couldn’t even.. I had no idea. So I’ve got a whole list of movies I got to watch, but yeah, you pick the one that works best.

Amit:
Sure. And in Indiana Jones, it’s Jedi powers who can travel through time and can move objects with his mind. I guess that’s the Jedi power.

Jeffery:
Yep. Okay, so your Jedi. That’s good. Luke Skywalker, or what are you going for here?

Amit:
Luke is pretty high up, I think is pretty cool. I think Obi-Wan Kenobi in his younger days is pretty cool, too.

Jeffery:
Oh, yeah. He was pretty good. Yeah, I like it Obi-Wan.

Amit:
Yoda for his wisdom. Let’s throw that in.

Jeffery:
Ooh.. Actually, we had.. I did have one investor tell me that he was he’s like “Star Wars all the way.” I’m Yoda, and I was like, “All right, all right.” Very direct. I was like, “You look more like a Lando.” And he’s like, “No Yoda.” Oh, my God.

Amit:
(laughs)

Jeffery:
Done. So that’s good. Awesome. Well, again. And I want to thank you very much for your time today. I was awesome, as I always do. Lots of notes, man. Can’t even write fast enough to keep up, but I’m a note taker, so I gotta like, “Oh, my God. I gotta write this down.” But either way, it was fantastic. Love where we went. Thank you very much for all of that insight. I’m sure the community is gonna learn a ton from this. But the way we like to end our show is I like to give you the last word. So anything you want to share to investors and startups, the floor is yours. And again, thank you very much for your time today,

Amit:
JP, thank you very much. Thank you for everybody listening. It’s such a pleasure and an honor. JP told me that this eventually reaches 100,000 people. That’s crazy. What I did want to leave here is, if you are building a business, especially at the seed stage, and you are located in the US and Canada. Let us know about it. We do read through everything. We are not able to necessarily follow up with everyone, but we do check everything that everyone sends. Easiest ways, probably through LinkedIn. We like to see decks so if somebody sends us a little message saying, let’s get on a phone call and let’s talk more. If we don’t know them, we would like to first see the deck so we can qualify a little bit the fit. And in general, if you do take somebody’s time, we try to be as helpful as possible. The more time we take from somebody in the diligence, we try to do the more for them. So we end up making a few investments a year, but we in the process end up learning about a lot more companies, and we do something for everyone that we engage with. And, we are certainly, if anybody wants to invest in Tau Ventures, we’re certainly open to conversations. Also, all VC funds have to raise money. So, it’s, we are in a great place right now, but we were looking forward to building more relationships for the future.

Jeffery:
Awesome. Well, well said again. And Amit, thank you! That was awesome.

Amit:
Thank you!

Jeffery:
And we’ll let you know when everything gets all suited up and ready to be shipped out, and we’ll promote it and push it over. So you’ll be part of that. But again, thank you very much for taking the time today.

Amit:
Awesome. Thank you very much. I will log off here. Talk soon!

Jeffery:
You bet. Awesome. Well, that was fantastic. Again, man, so many good notes there. You talked about a lot of great things, and I really think that when you talk about and he really emphasized on creating those circles, the trust circle or that initial circle of people and building on that on each circle, it’s really about communicating and how there’s a startup build that network. And really, when you build the brand and are building all these people in, it’s not just the grouping that you’re going after to sell your product. It is the accountants. It’s the investors. There’s so much that gets tied into this, and you really showed a lot of great value and and how he broke that down personal product, influencers, how your advisors work across the business, signaling, you don’t want to do the bad signaling where you’re raising money, but you’re not connecting it to the right people. I think all of those things make a really big difference when you’re raising funds and these guys sit Tau Ventures. They know what they’re doing. They’ve been doing it for a while. And it’s been doing this for 20 years, so there’s a lot of insights there and certainly has done a lot of great things in the entrepreneurial space as well. So it was great to learn about how they built their company and where they’re going. So thank you very much and enjoy!

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